Housing:

Information on Defective Drywall

GAO-13-735R: Published: Jul 31, 2013. Publicly Released: Jul 31, 2013.

Additional Materials:

Contact:

Alicia P. Cackley
(202) 512-8678
cackleya@gao.gov

 

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What GAO Found

GAO found that numerous claims for damage have been addressed through legal settlements partly paid by commercial insurance reimbursements. Three of the four insurers with whom GAO spoke contributed to legal settlements by paying for CGL claims stemming from lawsuits against their policyholders, and one of these insurers also made payments for CGL claims separate from legal settlements. The legal settlements from defective drywall lawsuits involve hundreds of companies in the drywall supply chain (including importers, suppliers, and builders), and most of the lawsuits have been consolidated under multidistrict litigation in the United States District Court for the Eastern District of Louisiana. One of the legal settlements involves one of the two primary manufacturers of defective drywall and provides an uncapped amount of funds to address damage to affected homes, as well as $30 million for other expenses. This manufacturer's settlement is part of a group of settlements that guarantees more than $350 million to assist affected home owners, with the potential to increase.

Federal, state, and local governments have made a number of efforts to assist home owners who have experienced damage related to defective drywall. Federal efforts include, for example, a casualty loss tax deduction and mortgage forbearance. State and local efforts include, for example, reduced property tax assessments and legislation related to defective drywall, such as legislation prohibiting its use or sale. However, the extent to which home owners may have accessed or benefited from this assistance is unknown as data have not been collected to determine whether home owners sought assistance specifically because of defective drywall.

Why GAO Did This Study

The rebuilding of damaged homes following multiple hurricanes that struck the southeast and Gulf Coast regions of the United States from 2004 through 2008, combined with new home construction, led to a shortage of American-made gypsum wallboard (drywall). To satisfy demand, some companies involved with construction began importing drywall from foreign manufacturers. In 2008, the Consumer Product Safety Commission (CPSC)—the lead agency investigating this issue—was informed of high levels of hydrogen sulfide emissions in certain drywall imported from China. From 2008 through 2013, CPSC received over 4,000 complaints related to this defective drywall. Some home owners impacted by defective drywall filed insurance claims through their home owner’s insurance policies or sued foreign manufacturers and other companies responsible for the distribution or installation of the drywall. Settlements from litigation against parties other than the home owners’ insurance companies are in progress.

GAO was asked to review alternative methods of providing relief from damage associated with defective drywall. This report describes (1) what is known about reimbursements home owners have received from insurance companies for damage from defective drywall and (2) what other efforts have been undertaken to help address home owners’ damage associated with defective drywall. To address these objectives, GAO reviewed defective drywall settlement information, federal and state legislative efforts, and met with officials from select federal agencies, industry associations, state agencies, among others.

For information, contact Alicia Puente Cackley at (202) 512-8678 or cackleya@gao.gov

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