Publications

Phillip C. Querin
Partner - Portland, Oregon Office

philquerin@dwt.com
(503) 241-2300

The Dryvit “EIFS” Stucco Class Action Settlement
[May 2003]

As most Realtors® know, many homes clad with synthetic stucco have been the subject of litigation for the last several years. On November 14, 2000, a class action was filed against Dryvit Systems, Inc., one of the primary manufacturers of synthetic stucco in the United States. According to the website, Dryvit EIFS “…is a multi-layered exterior wall system consisting of a finish coat, a base coat, reinforcing mesh, adhesive and insulation board, all of which are secured on some form of substrate.” The product was sold under the trade names of Dryvit Outsulation® and Dryvit Sprint®. Over the years, a multiplicity of claims and lawsuits arose against Dryvit, alleging that the product was defective and resulted in moisture intrusion causing dry rot, mold and other water related damage. Since the damage was below the exterior surface, it was difficult to detect through visual observation alone. Today, most Realtors® recommend that their buyer-clients require as a part of the inspection contingency, that moisture readings be taken with a probe that is inserted through the surface of the exterior cladding.

A settlement was reached after more than two years of intensive litigation, and on April 8, 2002, it was preliminarily approved by the Jefferson County Court, in Tennessee, where the case was filed. As with all class actions, a “fairness hearing” needed to be held to determine whether the terms of settlement were fair, reasonable and adequate for the class members. On January 14, 2003, the Court entered an Order and Judgment granting final approval of the settlement. Here are some of the relevant provisions of that settlement:

1. A Claims Forms Package may be obtained through the website at www.stuccosettlement.com, or by calling the Claims Administrator at 1-800-320-9415. The Claims Administrator should also be contacted if someone has a specific question that cannot be answered after reviewing the Claims Form Package or the website. Claims will be processed in the order received.
   
   
2. After a claim is filed, it is necessary to determine whether the home is clad with Dryvit EIFS. Once that has been verified, an independent inspector will be sent out to determine if repairs are necessary. It will take about 8 weeks to obtain the inspection report. The inspectors do not determine the cost of repair. Rather, they report their findings to Dryvit who then makes that determination.
   
   
3. The cost of repairs is initially paid by the class member (i.e. the homeowner) but is subject to reimbursement of at least 40% of the estimated repair costs.
   
   
4. If repair or replacement is determined to be necessary, in most cases the homeowner is not required to have Dryvit EIFS installed again.
   
   
5. Once repairs have occurred, there is a second inspection to determine its adequacy. If the repairs are determined to be adequate, a Moisture Free Warranty is issued to the homeowner. This warranty will be issued even if it is determined that repairs are not necessary. The warranty will pay for repairs to prevent excessive moisture intrusion behind the cladding. The limits are $10,000 per year up to a total of $30,000.
   
   
6. Claim Forms must be postmarked on or before June 5, 2004.¹ The failure to file a claim by the deadline will result in the homeowner’s claims against Dryvit being automatically released. This is a very short time frame. Therefore, everyone whose home is clad with Dryvit today should file a claim in order to obtain the free inspection – since it is the inspection that will actually determine whether there is a problem. If a home is clad in a synthetic stucco, but the owner does not know the name of the manufacturer, it is still prudent to file a claim in order to meet the June 5, 2004 deadline.
   
   
7. Homeowners who have Dryvit on their home as of June 5, 2002 are automatically members of the settlement class. However, persons purchasing a home after June 5, 2002, or installing a Dryvit product after that date are not members of the settlement class, nor are they eligible for any benefits under the settlement. For this reason, a buyer of a Dryvit clad home today should ask their seller several questions: (1) Was the seller the owner of the home on June 5, 2002? (2) Did the home have (in whole or in part) any Dryvit cladding as of June 5, 2002? (3) Was a claim ever filed to determine if the product was Dryvit and if there was damage? (4) Was the damage, if any, repaired and reinspected? (5) If a claim was filed did the seller obtain a Moisture Free Warranty?
   
   
8. Homeowners are not eligible for participation if they have already entered into a settlement releasing claims against the company prior to June 5, 2002, or a judgment has been entered for or against Dryvit in an EIFS claim. This means that going forward, actually pursuing a claim against Dryvit may be risky if there is a significant chance of losing, since one cannot go back and take advantage of the settlement.
   
   
9. The settlement applies to one and two-family residential dwellings or townhomes in any State other than North Carolina. The date of installation of the Dryvit must have been after January 1, 1989.
   
   
10. Persons (and Realtors®) in the process of selling a home they believe is clad, in whole or in part, by Dryvit should contact the Claims Administrator in order to have the claim expedited.
    
    
11. In order to verify whether a claim was previously filed on a home, the current owner must write a letter to the Claims Administrator requesting this information and provide proof of current ownership. The address is: Stucco Settlement Claims Administrator, PO Box 1626 Faribault, MN 55021-1626.
    
    
12. The 3-year Moisture Free Warranty is transferable. However, in speaking with the Claims Administrator’s office, I was unable to find out whether the transfer was automatic (i.e. whether the new owner of a home for which the warranty had been issued automatically receives the benefit of the warranty, or whether some affirmative transfer or assignment of warranty language must be included in the sale documents.) Until this issue is clarified, Realtors® would be well-advised to include a provision in the Sale Agreement to the effect that all Dryvit claim information, including all rights under the Moisture Free Warranty, will be transferred and assigned to buyer upon closing.
    

FOOTNOTES

1 Some of the Dryvit website information currently states that the deadline for filing is December 5, 2003. My information from the Claims Administrator’s office is that this date has been changed to add an additional 6 months, i.e. June 5, 2004.

© Copyright 2003. Phillip C. Querin, Davis Wright Tremaine. No part may be reproduced without the author’s express written consent.