Welcome to our tainted drywall resource center, which contains a growing list of Marsh services and relevant information to assist organizations in remediating drywall issues.

During the protracted building boom after 2001, when the price of building materials soared and global demand was at an all time high, less expensive building products from numerous countries, including drywall imported from China, made their way into the U.S. supply chain. Now, plaintiffs' attorneys across several states have filed putative class action lawsuits alleging that this drywall imported from China contains toxic levels of sulfur and sulfide gases. These lawsuits name the manufacturers of the drywall products as well as the builders, contractors, and distributors who handled and installed the materials.

Plaintiffs claim that the contaminated drywall creates a "rotten egg-like" odor and that gases produced by the drywall corrode air conditioning and refrigeration coils, expedite deterioration of electrical wiring, and create an environment where extended exposure to the gases can cause adverse health conditions. Early estimates suggest that 300,000 or more homes may have been constructed using these materials and that costs to repair and remediate damages could exceed tens of millions of dollars.

In light of these lawsuits, the U.S. Senate and House of Representatives have introduced legislation that, among other things, calls on the U.S. Consumer Product Safety Commission (CPSC) to:

• initiate a formal proceeding to investigate drywall imported from China during the period from 2004 through 2007;
• prohibit the further importation of drywall and associated building products from China;
• order a recall of hazardous drywall manufactured in China; and
• seek civil penalties.

In addition, at least one of the bills would require the CPSC, the National Institute of Standards and Technology (NIST), and the Environmental Protection Agency (EPA) to conduct a study of various samples of the imported drywall used in residences in the United States. Depending on the outcomes of its investigation and following an adjudicatory hearing, the CPSC may determine that the drywall presents a substantial risk of injury to consumers and that remediation actions are necessary.

Insurance Coverage Issues
Due to the complexity of the insurance coverage issues, manufacturers, developers, contractors, and other parties faced with drywall-related claims may find difficulty in obtaining the full coverage to which they are entitled. Without the insurance expertise and resources needed to obtain a complete understanding of the various policies under which a company may be insured, or the numerous coverage issues and their impact on coverage rights, many with applicable coverage may not receive the full, if any, benefit.

Additionally, defendants need to explore if they may be entitled to coverage under policies issued to other parties under which they may be an additional insured. Furthermore, lawsuit allegations may not only trigger coverage under current coverage, but also under prior policies in effect from the time the drywall was installed until the problems manifested themselves. Finally, as the burden of proof with respect to applicable coverage will be on defendants, companies must identify precedents that could affect recovery, anticipate insurers’ responses, and develop appropriate recovery strategies.

Marsh Services to Manage and Mitigate Tainted Drywall Issues
Resolving tainted drywall claims and related risk issues may cost affected companies millions of dollars. Drywall litigation will likely not only be an issue of claims defense or insurance recovery but also could affect a company’s day-to-day operations and reputation.

The wide array of expertise and solutions provided by the Marsh Construction Practice and Marsh Risk Consulting can help with every aspect of managing the drywall crisis. Marsh can provide a range of integrated services or services on an as-needed basis, depending on the extent of the claims being faced. Our experts can also assist with regulatory issues, insurance recovery, dispute resolution, claims management, supplier verification and viability, as well as crisis management.

Marsh can support organizations facing trained drywall issues with:

• Regulatory compliance and product recall services
• Insurance policy reviews and identification of relevant coverage
• Crisis management services
• Measurement of economic claims and losses
• Scoping of necessary remediation and repairs
• Supply chain vulnerability and viability analyses

Given the pace at which tainted drywall lawsuits and regulatory action are progressing, affected organizations should seek to consider how this issue will impact their business as soon as possible.

We will continue to regularly update information about tainted drywall with input from subject matter experts across Marsh.

If you have any questions or concerns about this issue, please contact us at .

Contacts

Katherine A. Cahill
Global Product Risk Practice Leader, Marsh Risk Consulting
212-345-3036

Michael M. Feigin
Construction Industry Practice Leader, Marsh USA, Inc.
212-345-1867

Related Information

Article: Industry Readies for Potential Tainted Drywall Fallout

Governmental, Industry, Association, and Other Relevant Tainted Drywall Links

Listen to a July 7, 2009 BestDay Insurance podcast featuring Marsh's Katherine Cahill on the drywall issue.

Learn about the tainted drywall issue and the solutions Marsh provides.

Read the press release about the establishment of Marsh's Tainted Drywall Response Team.

Read an article in the The Update about the Marsh team's visit to Capitol Hill to discuss drywall issues.

Conference on November 11, 2009: Chinese Drywall Litigation & Insurance Coverage Update (live webcast available)

Conference on June 26, 2010: Construction Financial Management Association Annual Conference