Louisiana homeowners how are facing dire economic times, in light of the Chinese drywall crisis (following the heels of Hurricane Katrina, and in the wake of the ongoing oil disaster, mind you) and many hope for relief in the insurance arena, from the Louisiana House of Representatives.

A bill that would prevent insurance companies from failing to renew or canceling clients who file Chinese drywall-related claims has progressed to the full House.

As reported by ifawebnews, (read source article here), The Louisiana Senate approved the original bill last month.  (SB 595).  The House Insurance Committee then rewrote it.  Thus, the bill will go back to the Senate if the above-mentioned House of Representatives approves it.  While complicated as it may seem, the process is underway and the bill is looking good.

The article cites the New Orleans Times-Picayune as reporting that some insurers have tried to amend the bill.  One such amendment sought to strike a portion of the bill that would require reinstatement of dropped policyholders within 30 days at the same level of service, or “condition,” as existed before the client faced termination.

At the present time, the bill would prevent insurers from canceling or failing to renew with regard to one factor: the presence of drywall from China, installed before December 31, 2009.  Insurance companies should not fret or panic, as the bill would not cause them financial ruin.  The current bill’s terms would expire in mid-2013; thus the bill is seemingly designed to remedy the problems homeowners are currently facing, as opposed to focusing its aim on Chinese drywall broadly (as in, Chinese drywall installed at any date).

It can be said that Louisiana has seen its share of issues, upon reflecting on the last decade.  First it was Hurricane Katrina that devastated New Orleans, then the Chinese drywall crisis became apparent, as its cumulative effect has affected thousands of homeowners across the country.  Now with the BP oil spill, the region’s economy, homeowners, and residents are suffering.

The Chinese drywall crisis – while stemming from the Hurricane season of 2004 and 2005 (and primarily causing a drywall shortage from the massive Hurricane Katrina) – has affected homeowners across the country.  Florida has also been a state where much concern has been raised about toxic drywall from China, and recently a Miami-Dade Circuit Judge approved class-action status for a case brought by a couple who purchased their home in 2008.

The first class action lawsuit regarding Chinese drywall is reported by the Miami Herald (click here for source article), to include up to 152 families, from three (3) Homestead neighborhoods.  The class-action status decision.

Class-action status is significant legally, in that plaintiffs (those who suffered harm) can benefit by being considered a “class” or a group rather than having to file a lawsuit for each home affected.  This “class-action” status obviously alleviates administrative burdens on the court system as well.

Homeowners will receive a notice in the mail, pursuant to the rules of the court system, regarding whether they would like to join the suit.

Still other communities exist across the country where neighborhoods may deserve class-action status.  How those situations play out, and how the judges will rule in those scenarios, will be reported on as soon as developments are available.

In a pivotal development,  a Chinese manufacturer has settled its first suit – Knauf Plasterboard Tianjin Co. settled just days ago, on Friday.  Read the source article, from CBS, here.

The settlement was reached with a homebuilder in Atlanta, Beazer Homes USA, inc.  The settlement was reportedly first made known from an email sent by the law firm representing Knauf.  The article from CBS states that more information will be released to the public in coming days.

Knauf is facing numerous lawsuits from homeowners that claim the drywall installed within their home is defective.  Allegedly, the drywall causes corrosion, foul odors, and other issues including potentially health-related symptoms.  But Knauf is not the only company that has faced allegations of dealing in defective drywall.  Other businesses have been scrutinized (and will continue to be so), such as importers, exporters, builders, and so on.  The magnitude of the issue, monetarily speaking, is enormous.  The potential devastation to an already thrashed housing market is a scary thought.

Thechinesedrywalllawyer.com has been covering the multidistrict litigation taking place in New Orleans, as well as developments as they have become available.  One of the primary federal agencies addressing the defective drywall issue is the Consumer Product Safety Commission, which has received over 3,000 complaints to date.

Thus far, plaintiffs have been relatively successful in court. Judge Eldon Fallon ruled that Knauf must pay damages just over $160,000 to one family in Louisiana.  In addition, the same court held that seven Virginia homeowners were entitled to a combined total of over $2.6 million.

According to CBS, the email from Knauf lawyer included the statement, “the settlement with Beazer is part of [Knauf's] effort to get this issue behind them and move forward.”  The settlement shows at least some willingness to correct problems, which can provide at least some hope that other Chinese manufacturers will cooperate in future proceedings.

In the ongoing litigation – known as “The Chinese-Manufactured Drywall Products Liability Litigation” which is taking place in the U.S. District Court in the Eastern District of Louisiana – an important decision has been handed down.  You can access it here, courtesty of chinesedrywall.com

The latest case: Hernandez v. Knauf Gips KG, et. al., case no. 09-6050 – has resulted in a victory for the plaintiff.

You may recall the plaintiff’s victory in a recently reported and related case – the Germano decision.  In that case, Taishan (Chinese manufacturer) did not participate.  Judge Eldon Fallon ruled in favor of seven Virginia homeowner plaintiffs over two and a half million dollars.

In Hernandez, the defendant participated and defended the case from start to finish.  This is an interesting point to note, in that the previous case did not involve a participating defendant.  Nonetheless, Knauf was ordered to pay one family from Louisiana a total of $164,049.64.  The cost was calculated as remediation totaling $136,940.46 ($81 per square foot) plus the cost of damages on personal property.  As we have reported on this site, the Chinese drywall lawyer, personal property items have been widely reported as susceptible to the toxic reach of defective Chinese drywall.  In Hernandez, the personal property items that sustained damages included mattresses and clothing.

While most personal property items that sustain damages contain metals (the metal corrodes from toxic compounds present in the air), clothing is now an item of concern for homeowners seeking remedies for their losses.  The reason clothing can be considered a damaged item due to defective drywall, is that the sulfuric odor in some cases can not be removed – the clothing is thus useless.

Senator Julie Quinn of Louisiana proposed a  bill that was approved today by the La. Senate Insurance Committee, and will now be sent to the full Senate for consideration.

The New York Times reported that the bill ”would bar property insurers from canceling, refusing to renew, or increasing premiums or deductibles because of Chinese drywall at a property”.

Senator Quinn has received numerous complaints from homeowners about these issues.  Homeowners are nervous that they will lose their insurance for filing a claim related to the defective Chinese drywall or that they are afraid they will be dropped for even reporting a problem related to Chinese drywall. 

There were some objections to the bill by lobbyists for the Property and Causalty Insuerers Associaaion.  They argued that this could cause insurance rates to increase statewide. ”If you can’t adjust your premiums to a particular risk, you’re going to be causing a situation where you have to spread that risk to everyone else,” said Chuck McMains.

New York Times – La. Bill Would Ban Chinese Drywall Cancellations
Insurance & Financial Advisor News – Louisiana weighs bill banning Chinese drywall insurance cancellations

The recent ruling by Judge Eldon Fallon, who is overseeing the Chinese drywall multi-district litigation process in the Eastern District of Louisiana, awarded $2,609,129.99 for seven families affected by tainted drywall manufactured by the Chinese-controlled company – Taishan.  If you missed that article, view it here.   The lengthy issuance by Judge Fallon outlined how the amount of damages was derived.

Judge Fallon awarded damages based upon the relatively expensive and wide scope of remediation.  The process outlined below, as reported by chinesedrywall.com, details the components that must be removed, the cleansing process, and the final safety certification inspection.

-          Removal and Replacement of:

• drywall in the home;
• entire HVAC unit;
• Insulation;
• appliances (not all, but most…including refrigerators);
• electrical wiring;
• electronics including TV’s and computers
• copper pipes
• carpeting
• vinyl flooring
• hardwood flooring
• tile flooring (if can not be protected during)
• cabinets, crown molding, baseboards, countertops, trimming
• fixtures in the bathroom

-          After all the above components and drywall have been removed, the property must be cleansed:

• A device known as a “HEPA” vacuum must be used to clean the home, it must be power washed, or “wet-wiped.”
• The home must be vacated and allowed to “air out” for a period of around 2 to 4 weeks (15-30 days).

-          Once all the potentially affected components have been removed and the house has been aired out and cleansed, the property is subject to certification.  An engineering company must certify the home is habitable.

An upcoming case, Hernandez v. Knauf, will also inquire into the issue of property damages that Chinese drywall has allegedly caused to the plaintiff in that case.  These initial cases are vital to the development of how the courts will view Chinese drywall victims.

A Chinese drywall ruling was made on Thursday, April 8, by U.S. District Judge Eldon E. Fallon in New Orleans, awarding seven Virginia homeowners $2.6 million in damages. 

The seven Virginia homeowners were chosen as representatives of homes affected by the toxic Chinese drywall across the country- one Virginia Beach family, two in Newport News, and four in Williamsburg.

The Virginian Pilot reports that his ruling stated all of the drywall within the homes must be removed, including materials that were corroded due to the Chinese drywall, as well as anything damaged during the removal process.

The damages awarded also include costs to relocate the families while the remediation work is in process, and other expenses such as bankruptcy or foreclosure caused by the drywall.  Judge Fallon also awarded damages for the loss of use of the properties, according to the Virginian Pilot.

Attorney Richard Serpe of Norfolk,Virginia who represented these seven homeowners states, “The judge went right down the line in adopting the scope of remediation and loss of property.  We think it was a sober and fair decision.” 

The ruling was against the Chinese manufacturer Taishan Gypsum Co. Ltd., who did not respond to the lawsuit forcing Judge Fallon to enter into a default judgement.  Unfortunately, this ruling means little, as far as compensation, if Taishan ignores the judgement. 

“Serpe plans to ask Fallon for a judgement against Taishan for more than 80 other clients in Hampton Roads whose properties were built with Chinese-made drywall.  Serpe is also representing local homeowners in Norfolk Circuit Court cases against the construction supplier, Norfolk-based Venture Supply, Inc., and against multiple builders and subcontractors.”

The New York Times: Judge Awards Families $2.6M Over Chinese Drywall
WSJ: Judge Awards Families $2.6 Million in Chinese Drywall Case

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The Associated Press, as reported by theadvertiser.com, reviewed some of the hundreds (and reaching into the thousands) of bills.

Some key bills that will be considered starting Monday include the following Bills that may be of significance to those following the Chinese drywall crisis.

Notable Bills (related to Chinese drywall):

House Bill 668 and Senate Bill 595:

-          What the Bills would seek to accomplish:

• These Bills would forbid property insurance companies from canceling policies, or hiking up rates for homeowners claiming Chinese drywall related damages.

-          Why the Bill would be helpful:

• Homeowners and families residing in houses or residences containing defective Chinese drywall, they face both health and financial strains.  When a home becomes uninhabitable (due to the emission of sulfuric compounds among others), families have had to obtain 2^nd mortgages and/or rental costs.  When the cancellation of insurance policies is added to the mix of homeowner woes, the situation becomes even graver.

House Bill 1175:

-          What the Bill would seek to accomplish:

• This Bill would seek to “rework” spending programs and systems associated with hurricane relief efforts.  The goal is to shift available federal aid from state to local control.

-          Why the Bill would be helpful:

• The bill would give more control to those closes to the problems many localities are facing.  The mayors and local city leaders of heavily-affected areas have the greatest sense of what is needed in their own community.

Other bills address more remote issues not directly related to Chinese drywall, but readers are encouraged to review the list especially if they are residents of Louisiana.

As of late, home insurance companies have been making it a habit to cancel policies on those who have had issues related to Chinese drywall. If not cancel coverage, at the very least they are increasing rates. Under two proposed laws in Louisiana, this would no longer be allowed.

The bills come from Rep. Walt Leger III and Sen. Julie Quinn. These bills would provide some protection to the hundreds of homeowners in the state who have are victims of Chinese drywall. Both bills are meant to prohibit the insurance company from canceling coverage or increasing rates related to Chinese drywall – even if a claim has been filed.

Leger said, “’I want to encourage people who have legitimate claims to make those claims. That’s what they pay premiums for.” In other words, there are homeowners out there who may be afraid to make Chinese drywall related claims because they are worried about what their insurer will do.

Louisiana has been hit hard by Chinese drywall. There are more than 2,100 claims filed in federal court, and many of them have originated in Louisiana. Hopefully these laws will be passed so those dealing with Chinese drywall can receive some relief.

U.S. District Court Judge Eldon Fallon will make a critical decision that will have far reaching impacts upon the homeowners facing defective drywall problems (the number of reported afflicted homeowners is in the thousands).

The Herald Tribune described the broad testimony that Fallon heard in recent days.  The focus of this article is on a case known as “The Bellwether Trial.”  The decision in that case will revolve around the needs of a Louisiana home.  Lilke other recent trials, this trial’s results will provide guidance for other affected families, homeowners, and persons following the developments.

One thing is for sure: Judge Fallon is doing his best to reach conclusions efficiently.  According to the source, Herald Tribune noted above, Judge Fallon said last Friday, “The time for a decision is now…[the drywall effects are] going to get worse [over time]…further meandering cannot stand.”

Other noteworthy comments from Fallon were made as well.  Fallon said “It’s one thing to theoretically analyze a case, but there’s nothing like putting it before a court….I think after you do that, both sides need to take a look at this matter and see whether you’ve learned enough from this experience to take a global look at the problem.”

The “global” look that Fallon is referring to may be a glimpse at the problem America is facing on a broader level; a problem centering around defective imports from China and safety measures that U.S. businesses instill (or should instill) as a result of the Chinese drywall crisis.