A settlement has been reached with Interior/Exterior Building Supply LP, the New Orleans company that distributed the Knauf-brand imported Chinese drywall from Texas to Alabama, and its insurers, potentially putting money in the hands of beleaguered homeowners.

Under the deal, which is still subject to court approval, Interior/Exterior's two primary insurers will put up the $8 million limit of their insurance policies to compensate homeowners. Later this year, the plaintiffs will proceed to trial against Interior/Exterior's excess insurers, who have another $72 million in coverage.

Drywall was imported from China from 2004 to 2008 because the domestic drywall industry couldn't keep up with the demands of the housing boom and massive rebuilding efforts in the Gulf South after the 2004 and 2005 hurricane season. The drywall releases sulfuric gases that corrode metal appliances and components in homes, and residents of homes with problem drywall complain that it gives them headaches and respiratory ailments. They have been stuck living in houses they can't afford to fix and are unable to sell because many of the foreign manufacturers are beyond the reach of the law, insurers won't cover it, and home builders say they're victims, too.

The settlement builds upon a deal that was reached in October with Knauf Plasterboard Tianjin, a Chinese manufacturing unit of the German company Knauf Gips. Knauf and other entities that dealt with the problem drywall, including Interior/Exterior, agreed to pay for a pilot program to remediate 300 homes with Knauf-brand drywall in Louisiana, Mississippi, Alabama and Florida. The program launched in February with homes in Florida, and in March with homes in Louisiana. Moss & Associates, the Florida contractor hired to run the program, has said that all 300 homes should be enrolled in the program by the end of June, and all work should be completed by the end of the year.

The goal of the program was to get a more realistic sense of what it costs to repair a home with bad drywall, and use it to confect a larger settlement.

But it only touches 300 homes in four states, while the U.S. Consumer Product Safety Commission has received complaints from about 6,300 homeowners in 38 states, and some estimates say tens of thousands of homes are affected. Louisiana has the second highest number of complaints on file at the CPSC, behind Florida.

Although there are scores of companies that manufactured bad drywall, Knauf is believed to be the largest player, and it is the only manufacturer that has voluntarily stepped up to try to resolve problems. Interior/Exterior, based on South Cortez Street in Mid-City, is Knauf's primary distributor in the region.

No details are available yet on how and when money could be distributed to eligible homeowners.

Rebecca Mowbray can be reached at rmowbray@timespicayune.com or 504-826-3417.
Times Picayune- New Orleans, La.
April 26, 2011