EIFS Homeowner Claims For Failure Of EIFS Systems
PRESENTATION ON LEGAL ASPECTS OF EIFS CLAIMS
TO THE CHARLOTTE CHAPTER OF THE
AMERICAN SOCIETY OF HOME INSPECTORS
MORRISON REGIONAL LIBRARY
JUNE 13, 2000
The acronym "EIFS" is shorthand for the exterior cladding system known as "exterior installation and finish system." EIFS was widely used in residential construction in the southeastern part of the United States beginning in the mid-1980's and through the late 1990's. The exterior finishes and colorations have made EIFS an attractive finish system for homes, including many upscale residences. However, problems with moisture retention behind EIFS have now been well documented and are widespread throughout EIFS clad homes in North Carolina.
Much debate still exists as to the nature and causes of moisture retention behind EIFS. The EIFS material itself is waterproof EIFS. EIFS normally does not include a secondary drainage system behind it to allow for moisture to escape once moisture intrudes behind the EIFS coating. Some experts, therefore, conclude that EIFS is itself a defective product. EIFS manufacturers blame improper installation and sealing, failure of roofers to install kick out flashing and window failures as causes for moisture intrusion behind EIFS systems. These competing claims regarding EIFS are usually advanced in each individual case brought by homeowners. Obviously, this can result in very extensive litigation. The extent of the litigation is offset to some degree by recent settlements of the class action pending in North Carolina and the developing practice by EIFS insurers of EIFS builders and installers to attempt settlement of EIFS homeowner claims at mediation.
However, it is important for homeowners to understand some essential information regarding the current status of the settlement of the EIFS class action as well as matters pertaining to the statute of limitations and statute of repose, which can drastically affect a homeowner's rights.
1. THE STATUTE OF REPOSE
Homeowners with EIFS cladding should be keenly aware of the operation of the statute of repose and statute of limitations in North Carolina. In general, the Statute of Repose in North Carolina for improvements to real property is six (6) years. N.C.G.S. §1-50A(5)(a). The Statute of Repose is the absolute cut off for claims. Some recent case law suggests the Statute of Repose begins to run with the issuance of the Certificate of Occupancy. A separate three year Statute of Limitations also applies to physical damage to property measured from when the physical damage to the property become apparent or ought to reasonably have become apparent to the claimant, whichever occurs first. N.C.G.S. §1-52(16). Therefore, debates can occur as to when the homeowner should have known of the damage.
2. EFFECT OF SETTLEMENT OF CLASS ACTION
Settlement recently was approved on the 5th day of April, 2000 by Judge Tennille of the Special Business Court in North Carolina in the class action brought against the manufacturers Dryvit, Sto, Parex, Bonsal, and Continental. There are several important features of the class action that homeowners should understand.
First, the amounts agreed to be paid by the manufacturers in the class action will not make homeowners whole. The amounts range from an uncertain amount to be paid by the Sto Corporation to up to $6.00 per foot to be paid by certain manufacturers, such as Parex and Dryvit. In most settlements, the amounts to be paid is based upon the square footage of EIFS on the house. Assuming a house has some 3,000 square feet of EIFS, then the amount that would be paid by a manufacturer such as Parex or Dryvit would be at most $18,000. Considering typical recladding with hard coat stucco might range in the $60,000 - $85,000 range for such a house, obviously the homeowners will not be made whole through the class action settlement. Homeowners will have to rely upon their additional rights to pursue the builder, and possibly as well as others, such as the installer, roofers, etc.
Secondly, in the case of Sto Corporation, claims are required to be filed by June 30, 2000. Other significant restrictions exist including the requirement that homeowners permit an inspection by the Claims Administrator prior to commencement of any repairs. I have appended a copy of the Claims Form adopted by the class action to be utilized.
Another interesting feature of the class action is the clause in many of the class action agreements deeming the homeowner to have accepted a credit in a case that the homeowner might bring against the builder and/or installer, roofers, etc. for an amount by the court to be the fair contribution of the manufacturer in such case, whether or not this is equal to the amount the manufacturer has paid to the homeowner under the class action settlement. The effect of this clause is not clear, but gives the builder and other defendants the potential right to assert a credit against the homeowners' claims.
3. SUMMARY
In short, the class action will not begin to make homeowners whole. This is demonstrated when the amount of homeowners' claim is measured against the expense of replacement of cladding with hard coat stucco or more expensive brick cladding. In many cases, foundation modifications may be required to install brick so that the expense of recladding would be significantly greater than hard coat stucco. Homeowners should, therefore, seek counsel to determine their courses of action. In many cases homeowners must act promptly to avoid the loss of rights as a result of the applicable Statute of Repose or Statute of Limitations.