Participants in a March 11 NAHB webinar discussed some of the ways that builders can identify the presence of corrosive Chinese drywall in their homes and address the problem if they find it.
The speakers were from Marsh USA, Inc., a risk management company, and The NMAS Group, which were hired by NAHB to provide their expertise in responding to the unfolding crisis.
Barbara Manis, MD, chief medical officer for The NMAS Group, said that to date more than 2,900 home owners have reported drywall problems in 37 states, the District of Columbia and Puerto Rico. Florida accounts for 60% of the reports and Louisiana 11%, with cases also concentrated in Alabama, Mississippi and Virginia.
But occurrences have been “widespread across the country,” she said.
An estimated total of 550 million pounds — or seven million sheets of drywall — were imported from China in 2000 and 2001, said Manis, and in the period of 2004 to 2007 when those imports increased rapidly in the face of escalating demand from hurricane recovery needs in the Gulf Coast and the housing boom.
The imports from China provided enough drywall for 40,000 2,000-square-foot homes, she said, but a mix of Chinese and domestic gypsum board in many homes “could increase the number of homes affected markedly.” However, not all drywall imported from China is corrosive; consequently, the number might be much smaller.
Studying Indoor Air
A recent indoor air study by the Consumer Product Safety Commission (CPSC) of 41 homes whose owners had reported a drywall problem and 10 control homes — all built about the same time and located in the top five states for complaints — found that sulfur within the gypsum core of the problem drywall can produce hydrogen sulfide gas that corrodes exposed copper wiring and natural gas tubing, she said.
The corrosion is indicated by a distinctive black, sooty coating that can be found on un-insulated copper pipe leading to the air handling unit present in the garage or mechanical closet of the home, or on the ground wire of an electrical outlet.
The study also found corrosion present on copper air conditioning evaporative coils. Other metal was also corroded where there was moisture from condensation.
CPSC interviews with occupants in the study also identified health complaints such as irritation in the upper airways, and nose and throat air passages; burning or stinging eyes and a running nose. Non-specific complaints such as headache, fatigue, coughing and a general feeling of illness were also found in the study, she said, although these are “common complaints occurring in anyone in any circumstances and can have many causes.”
“In homes with corrosion unaccompanied by any [sulfuric] odor, health complaints were much fewer or not existent,” she added.
Interim protocols for proving that drywall in a home is corrosive were published by the CPSC in January. While this procedure is helpful in filing insurance claims or mitigation, “it is not an inexpensive guidance to follow.”
Trained professionals are required at some point, and there are two laboratory tests. In the first, a piece of drywall from the home is placed in a small chamber to look for emissions of sulfide compounds. The second test places the drywall with copper in the chamber; the copper is allowed to corrode and then tested to see if sulfur is present.
Manis suggested that alternative visual testing methodologies that have been used by NASA for years might be more appropriate “if you build four to six homes a year and a home may potentially have drywall in it.” Odors, corrosion on metal surfaces, finding a Chinese label on the drywall and ruling out other possible sources of corrosion are included in this screening method.
Addressing the Problem
In fixing homes that have been damaged by corrosive drywall, “neither exotic nor extreme measures are called for,” said Bruce Hallock, vice president of Marsh’s Construction Consulting Practice. However, cleaning up the damage and restoring the home — one option for remediation and a process that typically involves relocating residents until the work is done — can average about 50% to 55% of the cost of building new, he said, depending on the level of finishes in the home and its location.
While some have recommended teardowns to repair damage from corrosive drywall, Hallock said that complete demolition is unnecessary. “We all have the skills to remodel and deal with the removal of corrosive drywall,” he said.
The remediation process involves good communication with the residents about the scope of the work that will be done, he said, and builders who decide to replace drywall will need to protect the interiors of the home and return the home as they found it.
For their personal protection and safety, workers remediating the home should follow the same procedures as those on any other home building site. Moon suits and full-face respirators “are not required and we discourage their use,” he said.
Hallock also described procedures that builders can follow to document and save drywall samples and damaged items in the home in case they need to provide evidence for insurance or other purposes.
Although builders can reasonably expect the new drywall that is delivered not to be corrosive, they should take samples of each batch and preserve them so they can be tested later if it becomes necessary, he added.
Government Reactions
Conceding that it is “a little bit late in the game now,” Alan Schoem, senior vice president, Global Product Risk Practice for Marsh, said that the Consumer Product Safety Commission does have the power to recall drywall that it can prove is defective and presents a substantial risk of injury to the public.
The CPSC hasn’t given any indication that it intends to pursue a recall, he said. It is more likely that the agency will decide to regulate the product so that it can be tracked by the name of the manufacturer, its product of origin and the date it was manufactured.
The commission has been working most closely with the Department of Housing and Urban Development to line up some financial relief for home owners, Schoem said. HUD has indicated that it would make Community Development Block Grant funds available for this purpose, although no money has been dispensed yet.
Also, at the end of last year, the Federal Housing Administration announced a program that would enable FHA borrowers to temporarily suspend or reduce payments on their mortgage in order to have the additional cash flow they might need to deal with drywall mitigation issues.
On the state level, Louisiana has approved a plan to reserve $5 million of its hurricane recovery program to provide property tax relief for home owners with corrosive drywall.
Home owners with corrosive drywall may also be able to qualify for special tax deductions for their losses, he said.
Looking at Insurance Provisions
What builders can expect from their insurance companies is fairly complex and a better understanding of how the courts view the issue will become clearer as pending cases on insurance coverage are decided in various jurisdictions, said John Denton, senior vice president of Marsh’s Mass Tort and Complex Liability Practice.
Meanwhile, the first order of business for builders who have encountered this problem is to “identify all the potential applicable insurance policies and put carriers on notice and keep them apprised of what you are doing with the claims you are receiving,” he said.
Builders should look not only at their own policy but should gather information on all potentially applicable policies issued by the general contractors and subs they have worked with under which they might be entitled to recover, Denton said.
A “major battleground” involves the pollution exclusion, he said, which most carriers are using as a basis for denying coverage for drywall claims. How courts have interpreted this exclusion varies by jurisdiction, but in Florida, where the majority of the drywall claims have occurred, the courts have consistently enforced it, finding that it applies to any type of internal vapors or odors.
Denton said that it is likely the courts in Florida will determine that the pollution exclusion bars coverage of losses from corrosive drywall, but the size of the problem in the state is so considerable that it could have some influence on the outcome.
Home owners may be able to cover some of their losses, he said. Even though their property insurance policies will have exclusions for defective work and products, they do have ensuing loss provisions that would cover the ensuing loss to the air conditioning system, for example, even if they don’t provide coverage for the drywall.
Protecting Your Brand
Catherine Cahill, global managing director and leader of Marsh’s Global Product Risk Practice, acknowledged that builders can suffer a serious blow to their business reputation if they don’t take steps to protect their brand and its promise of quality and integrity in the homes they build.
The best protection, she suggested, is “open, honest and direct communication with your home owner.” Even in a situation where it is possible that the owner will decide to go forward with litigation and become an adversary, or a small builder doesn’t have the resources to correct the problem, “don’t stop talking with them,” she said. “This is an exercise in protecting the safety and security of people who trusted you in building them a safe home.”
Most affected builders feel that they themselves have become a victim of the corrosive drywall problem. But “the true victim here is the home owner, the family that can no longer live in their home. When you start to deal with these deep emotional issues, that’s probably the best way to protect your brand,” she said.
