Is My Drywall Chinese? - HB Litigation Conferences

significant indemnification or contribution rights against others in the chain of distribution that
are more responsible. Manufacturers and distributors of plumbing, electrical or air conditioning
components that have failed or have been alleged by customers to be defective should also
consider whether it is possible that defective drywall is the true reason for the problem.
Liability may also fall on the design, construction and inspection teams, based on breach-ofwarranty
claims. The American Institute of Architects ("AIA") and the Associated General
Contractors of America ("AGC") provide standard form contracts widely used in construction
transactions. These contracts contain the typical express warranty clauses given by many
contractors, including that all work will be of good quality, free from faults and defects and
conform to the contract documents. Builders of new homes also implicitly warrant to the owner
that the homes will be completed in a workmanlike manner and will be suitable for habitation.
Some limits on the extension of the warranties exist. For example, the defect complained of must
have been latent—undiscoverable despite reasonable inspection—or the warranty does not
survive. When a home or building is not suitable for its intended purpose because of substandard
or defective materials, builders may be also liable of misrepresentation, unfair business practices
or negligence, depending on the governing law.
Issues regarding insurance coverage are also likely to be important. Insurance policies, which
often are written with broad pollution exclusions, may offer no legal defense for building
industry companies faced with lawsuits because drywall is allegedly emitting toxic gas inside
homes and walls that may be deemed "pollution." Companies may want to seek counsel
regarding whether to put their insurance companies on notice of potential issues. Companies
should also review their contracts, subcontracts, warranties and insurance policies to analyze
their liability and their ability to satisfy potential compensatory damages. Government
Regulatory Responses Federal and state agencies are also investigating drywall products
imported from China. U.S. Sen. Bill Nelson (D-Fla.) has asked the U.S. Environmental
Protection Agency ("EPA") and the U.S. Consumer Product Safety Commission ("CPSC") to
investigate whether Chinese-manufactured drywall is toxic. U.S. Rep. Vern Buchanan (R-Fla.)
has also written the Federal Trade Commission and the Office of the U.S. Trade Representative,
asking them to take corrective steps.
The CPSC has responded by focusing on whether the sulfur-based gases emitted from the
drywall are corroding household wiring and whether these gases pose a potential safety hazard.
If the commission determines there is a safety hazard, it could order a halt in further sales of
certain drywall products. The CPSC has been asked to prepare drywall safety standards. To the
extent that potential CPSC regulatory action could impact business operations, concerned parties
may want to seek counsel about providing input during this phase of the regulatory process.
Carbon disulfide, carbonyl sulfide and dimethyl sulfide have been found in air samples of some
of the affected homes. If inhaled in large quantities, carbon disulfide can affect a person's
nervous system and can be life threatening in high levels, according to the U.S. Department of
Health and Human Services. As for carbonyl sulfide (another potential byproduct), some states
have established health criteria regarding the permissible levels. Accordingly, a manufacturer's
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