EIFS - Ministry Advantage

Background
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EXTERIOR INSULATION & FINISH SYSTEMS (EIFS)
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Philadelphia Insurance Companies (PIC) primary exposures to Exterior Insulation & Finish Systems (EIFS) are related to
construction defect liability claims (i.e. products liability or completed operations). Construction contractors often tender
construction defect claims to their insurance company under the general liability policy in an attempt to obtain insurance
coverage for their construction defect liabilities. Manufactures also tender products liability claims for similar reasons.
Research on this topic indicates that the major causes of loss for EIFS are reportedly caused by two hazards: improper
installation by the applicator contractors resulting in future building deterioration, and poor product design by the EIFS
manufacturers. Property coverage’s are primarily unaffected as deterioration is typically excluded in Homeowners and
Commercial Property Policies; however, the crucial question is what causal event will be held legally accountable for the
water-related deterioration loss.
Standard
Corporate Underwriting should be contacted prior to writing a manufacturer or applicator of EIFS. PIC' stance is that only
EIFS Industry Members Association (EIMA) manufacturers and installers/applicators/contractors qualify for insurance
coverage. Membership information can be obtained by accessing the Internet page:
http://www.eifsfacts.com/eima/members.htm
EIMA is a non-profit trade association comprised of 434 of the industry’s leading manufacturers, suppliers, distributors and
applicators. This association consists of 12 manufacturing members (listed at the end of this document) and 146 applicator
contractors.
Insurance coverage is only contingent upon a loss control report that rates the insured as “Good” or better.
Loss Control Responsibility
Loss Control shall complete a survey and report providing a complete investigation of the residential/commercial builder,
EIFS manufacturer, or exterior finish contractor-requesting coverage. This report shall provide the underwriter with a
complete description of the manufacturer’s/contractor’s recall practices, log of complaints, past and present litigation
information, product complaint handling procedures, a list of approved contractors/installers who use their product, and a
description of legal contracts (hold-harmless and indemnity), etc.
Loss control will provide an overall rating of the insured based on the review of the above information. If all pertinent
information related to the EIFS is not obtained, the risk shall be classified as “Poor”.
Loss Control shall not conduct any EIFS site surveys or inspections. If an EIFS Moisture Intrusion test is warranted or
recommended, an inspector certified by the Council of American Building Official’s (CABO) must be used. CABO writes
building codes for residential construction in the United States. These codes have been adopted into law by many states.
EIFS Moisture Intrusion Testing Specialists use a combination of non-intrusive moisture detectors and intrusive moisture
detectors to identify areas of the home that have moisture damage. The testing for homes generally runs anywhere from
$600 to $1,600 depending on the size of the home. Larger structures will be considerably more depending upon the
number of EIFS wall structures, entryways, windows, etc. Testing can identify the need for small maintenance and sealing
improvements and/or the need for major EIFS and structural repairs.
What is EIFS
Exterior Insulation and Finish Systems (EIFS), also known as synthetic stucco or Dryvit Board, are multi-layered exterior
wall systems that are used on both commercial buildings and homes.
Developed in Europe in the 1950s, EIFS were introduced in the U.S. almost 30 years ago. They were first used on
IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

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commercial buildings (shopping centers, condominium complexes, and office buildings). Use of the product in the
residential industry began in the 1980’s as it was seen as an excellent insulator and it was easily molded into fancy
architectural flourishes seen in mid to higher priced houses. In general, they provide superior energy efficiency and offer
much greater design flexibility than other cladding products.
Today, EIFS account for 17% of the U.S. commercial exterior wall market and about 3.5% of the residential wall market.
Growth is strong in both sectors, especially in the residential area, where sales are increasing at the rate of 12 - 18% per
year. It is estimated that several hundred thousand homes throughout the U.S. are now partially or totally clad with
synthetic stucco. While the cost an EIFS is approximately three times the price of vinyl siding, it’s less expensive than stone
or brick. The synthetic stucco’s components together cost builders about $5.50 to $6.50 a square foot. Traditional stucco
costs about $3.50 per square foot, but has much less design flexibility.
EIFS usage in commercial buildings zoomed from 115 million sq. ft. in 1989 to 175 million sq. ft. by 1995 (21 %
of the total). The industry said 1997's total would be 300 million sq. ft. There also appears to be strong growth in
the home market, which is about 30 percent of sales for some EIFS manufacturers.
EIFS typically consist of the following components:
• Insulation board, made of polystyrene or polyisocyanurate foam, which is secured to the exterior wall surface with a
specially formulated adhesive and/or mechanical attachment.
• A durable, water-resistant base coat, which is applied on top of the insulation and reinforced with fiberglass mesh for
added strength.
• A durable finish coat — typically using acrylic co-polymer technology — that is both colorfast and crack-resistant.
IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

EIFS Manufacturers
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There are between 30 to 40 manufacturers of EIFS in the U.S. Eight (8) of these manufacturers are members of the EIFS
Members Association (EIMA). The list of manufacturers who are members are listed at the end of this Loss Control
Technical Standard. Dryvit Systems is the nations largest manufacturer of the siding system.
Installation/ Application
EIFS are definitely not do-it-yourself wall claddings. They should be installed only by experienced applicators who have
completed an EIFS manufacturer’s training program.
The 8 approved manufacturers of the EIFS Members Association (EIMA) provide extensive specifications for all applicators
using their products. EIMA also offers EIFS training manuals and training programs.
The installation process begins with the preparation of the gypsum board/plywood attached to the metal/wood studs to the
frame of the house. A 1inch thick sheet of polystyrene insulation is placed on top of this gypsum board/plywood by way of
either gluing or using mechanical fasteners. A cement base is applied to the polystyrene with a fiberglass mesh then
embedded in the cement. A final layer of acrylic finish is added in various thicknesses, which aids in either providing a
coarse or smooth finish. The most critical part of the process is the assurance that the flashing is properly applied
around windows and doorframes and that caulking is properly applied and maintained.
To ensure long-term performance of EIFS, EIMA recommends that the following steps be taken on all EIFS jobs:
• Selection of an EIMA member manufacturer who can provide technical support, documented product and system test
results, as well as building code compliance information.
• Selection of a knowledgeable, experienced applicator who has current approval of the manufacturer.
• Verification from the manufacturer that the project plans and specs contain sufficient information and details to provide a
weather-tight building envelope.
• Verification that all components are supplied and/or approved by one manufacturer.
• A review by the EIFS manufacturer of any unusual project details or conditions before work commences.
• Verification that the proper materials (with identification and labels intact) were shipped and stored in accordance with
the manufacturer’s requirements.
• A complete review of the sequencing & scheduling with all subcontractors, prior to the start of the project.
• A review of the scope of the work, project and site conditions, sequencing, and other matters, with the EIFS applicator,
prior to the start of the project.
• Examination of the substrate for proper tolerances, cleanliness, etc.
• Periodic inspection of the application of EIFS components to ensure that the manufacturer’s recommended procedures
are being followed.
• Verification that critical related items are being properly installed, especially quality windows and doors, flashing and
sealants.
The Issue/Problem
The issue is that the barrier EIFS does not account for the fact that moisture can and will penetrate the exterior wall surface.
Once moisture penetrates a barrier EIFS wall, it remains trapped inside the wall cavity, where it eventually rots water
sensitive wood sheathings and framing.
A barrier EIFS wall does not allow water penetration, however, water does intrude the system through a variety of means,
including:
IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

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1) Windows (via gaps in joined multiple windows through improper construction and maintenance of sealants
around cladding/window intersections, and through penetrations in window joints which drain water behind
the system at the sill).
2) Wall/roof intersections (via inadequate flashing details).
3) Wall penetrations (via improper construction and maintenance of sealants around electrical and plumbing services).
The problem encountered to this point has been primarily associated with residential construction as opposed to
commercial. Several reasons exist in drawing conclusion to these circumstances, including:
1) Commercial sites may be better supervised ensuring that the detailing such as backer rods and sealants are properly
installed and maintained.
2) Window construction in commercial buildings generally feature fixed windows which are less prone to moisture
infiltration.
3) Roof construction on commercial building projects often do not feature complex roof slopes and valley and wall/roof
intersections found on residential construction.
The Results
The problem has come to prominence within the past two years due to the large number of homeowner claims filed in North
Carolina. Repairs from damage to EIFS homes range from $1,000 to $200,000. Typical repairs are from $18,000 to
$50,000.
Some states, including the Carolinas, are requiring sellers to disclose whether their house contains synthetic stucco, even if
it’s performing properly.
Bankers and insurance companies have taken a hard line as well. Some banks won’t give building loans for EIFS houses.
In the fall of 1996, Maryland Casualty Company, the largest insurer of builders in the country, made an underwriting
decision to stop writing liability insurance for EIFS contractors. Maryland Casualty was the first, but other insurance
companies are also moving in that direction. Presently, State Farm, after reviewing all of the data, does not have an
underwriting concern.
Since the problem has arisen, at least 12 class action lawsuits, brought on behalf of homeowners nationwide whose houses
were sided with EIFS manufactured by the defendants, have been filed against the EIFS manufacturers. The lawsuits
allege that the claddings trap moisture in the wall cavities of homes, causing damage to the wood sheathing.
IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

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IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

Case #1:
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The Verdict
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RALEIGH, N.C. -- In a watershed victory for the Exterior Insulation and Finish Systems (EIFS) industry, the U.S. District
Court for the Eastern District of North Carolina has denied a motion to certify a class action suit directed at 11 EIFS
manufacturers, including members of the EIFS Industry Members Association (EIMA).
As a result of the ruling, only a handful of individually named plaintiffs can proceed with their suit against the manufacturers.
Other homeowners who contend their EIFS siding is defective will not be covered by the suit.
For their part, the manufacturers maintain that the moisture problems are caused by building professionals who fail to follow
sound construction practices, such as sealing and flashing around windows, doors, deck terminations and other potential
moisture entry points.
The court found that the proposed nationwide class of owners of EIFS homes did not meet the requirements for class
certification under federal law. The court determined that allocating responsibility for the moisture damage would be
impossible without also examining the role of homebuilders, window manufacturers and other parties.
In reaching its decision, the court held that the responsibility for moisture damage to EIFS-clad homes must be reviewed on
a case-by-case basis. It noted that assessing damage to an individual home would require a unique analysis of the type of
repairs needed, the cost of materials and labor required, the extent of the moisture problem and the building code under
which the home was built.
Stephan E. Klamke, Executive Director of EIMA, said the ruling represents a major victory for EIFS manufacturers and
affirms the industry’s position that one product cannot be viewed in isolation when determining the source of moisture
intrusion. “To focus only on EIFS without reviewing the entire wall system is to assume that each product in the wall
operates independently,” Klamke said. “In fact, there is a symbiotic relationship between products such as sheathing, EIFS,
windows, flashing and sealants, all of which must be properly installed for the wall system to function well. The court ruling
further erodes the credibility of those who have sought to undermine EIFS by misrepresenting the facts,” Klamke added.
Case #2:
A jury in Tacoma, Washington. In June 1997, sided with Sto Corporation in a civil case that pitted the Atlanta-based
manufacturer against two Tacoma area residents whose home allegedly was damaged by moisture intrusion. Several
expert witnesses for the homeowners presented arguments similar to those directed at EIFS manufacturers in pending class
action suits, but the arguments failed to sway the jury.
In their suit, the homeowners claimed that Sto’s system was defective and prone to trap water, resulting in rotting of the
home's wood framing. In vindicating Sto, the jury noted that the manufacturer provided a product that was reasonably safe
as designed, issued adequate instructions for use of the product, and did not violate the Washington Consumer Protection
Act.
IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

The Solution
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In cases where homes have been damaged, the problems have been traced to the use of poor quality (even leaky and/or
non code-compliant) windows and/or improper flashing and sealing. As a result, when building with EIFS, it is wise to use
quality windows which are code-compliant, and to make sure there is proper flashing and sealing around windows, doors,
roofs, deck-to-house attachments, and all other exterior wall penetrations.
Periodic maintenance should include thorough checking of the flashing and sealing to ensure that the building envelope
remains watertight. Damaged or missing flashing should be repaired or replaced immediately. Cracked or deteriorated
sealants should be immediately repaired, or removed and replaced as well.
The best way to assure a high quality EIFS job is to rely on members of the EIMA. EIFS manufactured by EIMA members
meet all appropriate building code testing requirements and industry performance standards. Furthermore, each
manufacturer conducts their own R&D to ensure optimal component compatibility; for that reason, it is important to specify
that the entire system be furnished by a single-source EIMA member manufacturer.
For additional information (including information on how to join EIMA), call the EIFS Industry Members Association at 1-800-
294-3462 or 1-770-968-7945 or contact the organization by fax at 1-770-968-5818. If you prefer to write, the address is
EIMA, 3000 Corporate Center Drive, Suite 270, Morrow, GA 30260.
EIFS Member Manufacturers
ACROCRETE, INC.
1259 NW 21st Street
Pompano Beach, FL 33069
(954) 917-7665
(800) 432-5097
FAX (954) 917-2775
DRYVIT SYSTEMS, INC.
One Energy Way
West Warwick, RI 02893
(401) 822-4100
(800) 556-7752
FAX (401) 822-4510
www.dryvit.com
OMEGA PRODUCTS INTERNATIONAL, INC.
P.O. Box 1869
Orange, CA 92856
(714) 935-0900
(800) 600-6634
FAX (714) 935-0800
www.omega-products.com
PAREX, INC.
P.O. Box 189
Redan, GA 30074
(770) 482-7872
(800) 537-2739
FAX: (770) 482-6878
www.parex.com
IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.

PLEKO SYSTEMS INT'L, INC.
P.O. Box 98360
Tacoma, WA 98498-0369
(866) 753-5648
(253) 473-5138
www.pleko.com
STO CORP
3800 Camp Creek Pkwy.
Bldg. 1400, STE 120
St. Atlanta, GA 30331
(404) 346-3666
(800) 221-2397
FAX (404) 344-3214
www.stocorp.com
TEC SPECIALTY PRODUCTS, INC.
315 South Hicks Road
Palatine, IL 60067
(847) 358-9500
(800) 323-7407
FAX (847) 776-4320
TEIFS WALL SYSTEMS
220 Burleson Street
San Antonio, TX 78202
(210) 472-2935
(800) 358-4785
FAX: (210) 472-2946
www.teifs.com
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IMPORTANT NOTICE - The information and suggestions presented by Philadelphia Indemnity Insurance Company in this Technical Bulletin are
for your consideration in your loss prevention efforts. They are not intended to be complete or definitive in identifying all hazards associated
with your business, preventing workplace accidents, or complying with any safety related, or other, laws or regulations. You are encouraged to
alter them to fit the specific hazards of your business and to have your legal counsel review all of your plans and company policies.