Chinese Drywall Update:

Nearly three years after complaints about contaminated Chinese-made drywall first surfaced in Florida, a court-ordered pilot remediation program for homes built with the defective material is about to get underway in Florida, Alabama, Mississippi, and Louisiana, according to press reports. When work crews showed up Monday to start removing the Chinese drywall from Eleanor Aguilars three-story Lauderhill townhouse, the South Florida Sun-Sentinel reported, she insisted on swinging the first sledgehammer. (Lauderhill home first in nation to get drywall fix as part of pilot program, by Paul Owers) Fort Lauderdale general contractor Moss Associates, Floridas seventh-largest construction firm, was selected in October, 2010, to oversee the gut-and-replacement work on the 300 houses enrolled in the pilot program. According to a report in the South Florida Business Journal, Moss expects to hire dozens of subcontractors to perform the work ( Moss hiring subcontractors for Chinese drywall work, by Paul Brinkmann). The companys formal contract is only for the 300-home pilot program, the Business Journal reports, but Moss is already gearing up for the possibility of completing thousands of home repairs. In related news, Federal Judge Eldon Fallon has denied a motion by several insurance companies to dismiss the Chinese drywall cases against them in the Multi-District Litigation proceedings in New Orleans federal court. Business Insurance has that story ( Insurers motions for dismissal in Chinese drywall litigation denied, by Jeff Casale). Insurance companies had argued to be let off the hook for two different reasons: One, that subcontractors had not been joined to the cases; and two, that a New Orleans court should not have jurisdiction because the companies were not doing business in Louisiana. Fallon did allow one insurance company out of the case because of the jurisdictional issue, but on the question of the subcontractors, Fallon ruled against the insurers. Fallons Order and Reasons on the jurisdiction issue ( Document 7356), and his Order and Reasons on the subcontractor issue ( Document 7357) are posted online.

The subcontractor insurance issue, in particular, could end up being important both to homeowners and to builders. Unlike Knauf Tianjin, which is participating in the 300-home pilot remediation and will probably end up paying to remediate all the homes containing its product, some all-Chinese companies have refused to honor the U.S. courts jurisdiction at all. For homeowners whose houses contain those products, turning to the builders and the subcontractors could be their only recourse. And subcontractor insurance policies may be easier to tap than builder liability policies meaning that subcontractor insurers might end up being the last deep-pocket defendant left on the hook when its time to pay for repairs.