One of the Chinese companies that manufactured drywall used to rebuild homes around the Gulf Coast after Hurricane Katrina has agreed to help pay for the repair of 300 homes. The legal agreement, which establishes a pilot program in four states, results from claims that the drywall emitted substances that corroded and destroyed pipes, wiring, and alarm systems.

Hurricane Katrina struck several Gulf Coast states on Aug. 29, 2005. According to the National Hurricane Center, Katrina was the most economically devastating hurricane to hit the U.S., costing more than $81 billion. There was a massive rebuilding effort in the states most directly impacted by Katrina – Louisiana, Mississippi, Alabama, and Florida.

Many homeowners who rebuilt during this time have reported problems with extensive corrosion of heating and cooling, electrical, and plumbing systems. In some cases, the corrosion problems were so severe that residents experienced health problems, and rebuilt homes had to be extensively renovated or abandoned. Investigations into the causes of the corrosion have highlighted problems with Chinese-made drywall imported to meet the demands of rebuilding after Katrina.

According to the Consumer Product Safety Commission's (CPSC) monthly report for August, as of Aug. 20, 2010, there had been approximately 6,300 complaints about drywall problems; 3,526 of those complaints from 38 states were filed with CPSC. About 90 percent of those complaints have come from five states, four of which are those states most directly impacted by Katrina. CPSC's investigation into the drywall problems has been the largest investigation in the agency's history, costing more than $5 million.

In May, CPSC released the results of tests it had commissioned on drywall samples emitting high levels of hydrogen sulfide. (Sulfur compounds can corrode metal.) Of the ten most highly emitting samples, all were made in China. "Some of the Chinese drywall had emission rates of hydrogen sulfide 100 times greater than non-Chinese drywall samples," according to the report.

The manufacturing company that topped CPSC's most-emitting list was Knauf Plasterboard, the company that has agreed to pay for repairing the homes in the newly created pilot program. According to an Oct. 14 Associated Press (AP) article, Knauf, building suppliers, builders, and insurance companies have agreed to fix 300 homes in Louisiana, Mississippi, Alabama, and Florida that had been damaged by the corrosion. An attorney for a Louisiana building materials supplier said that his client and multiple insurance companies and builders will pay for the repairs. Knauf will help select which homes are repaired, according to the AP article.

Although there are thousands of drywall claims against Chinese manufacturers, this is the first settlement reached. The pilot program could start the process of helping to resolve almost 3,000 claims against Knauf if the program is extended.

The Chinese manufacturers of the defective drywall are not subject to U.S. courts. U.S. and Chinese officials have held high-level diplomatic meetings to help involve Chinese manufacturers in the process of repairing damaged homes, according to CPSC's press release announcing the May drywall test results. Knauf is the only manufacturer to submit to the court's proceedings.

The judge overseeing the consolidated claims, U.S. District Judge Eldon Fallon, has already made awards to families with homes ruined by defective drywall. The AP reports that these claims deal only with property damage. Medical claims will be taken up by the court in separate cases.

Related bad news for homeowners has hit as insurance companies have refused to pay claims and have canceled insurance policies, according an Oct.17 Washington Post article. As homeowners have learned that their homes contain defective drywall, they have filed claims with their insurance companies, only to have those claims denied and their policies either not renewed or canceled. Lawyers have begun to tell their clients not to make claims with insurance companies for fear that the homeowners will lose their insurance and possibly their homes.

According to the Post, "Robert Hartwig, president of the Insurance Information Institute, said that homeowners policies were never meant to cover 'faulty, inadequate or defective' workmanship, construction or materials." Not telling insurance companies of problems, however, may not protect the homeowner in future claims if the insurer learns the home was built with Chinese drywall, according to a lawyer quoted in the Post article. In other words, the insurance companies are not bound to cover problems resulting from the defective materials, but they can use the defective materials as an excuse to deny coverage for claims.

Image in teaser by flickr user Moosicorn, used under a Creative Commons license.