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GAO-13-735R 1 (2013-07-31)

handle is hein.gao/gaobaahep0001 and id is 1 raw text is: GAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 July 31, 2013 Congressional Requesters Subject: Information on Defective Drywall 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-better known as drywall.1 To satisfy demand, some companies involved with construction began importing drywall from foreign manufacturers. In 2008, the Consumer Product Safety Commission (CPSC) was informed of high levels of hydrogen sulfide emissions (referred to as offgassing) in certain drywall imported from China.2 CPSC performed testing and found the level of hydrogen sulfide emissions in several brands of drywall manufactured in China to be 100 times that of drywall that was manufactured in other countries. For the purposes of this report, we refer to drywall with these high levels of hydrogen sulfide emissions as defective drywall.3 Home owners have expressed concerns about property damage, including corrosion of copper pipes and electrical wiring, failure of air conditioning equipment, damage to light fixtures and electronic equipment, and some have complained of a rotten egg smell in their homes as a result of this drywall. Some home owners have also reported potential health concerns such as headaches, respiratory problems, and nosebleeds. Some home owners impacted by the use of this defective drywall filed insurance claims through their home owners' insurance policies.4 However, the extent to which coverage for conditions such as defective drywall is available through such policies is the subject of litigation in multiple states. Additionally, some home owners sued foreign manufacturers and other companies responsible for the distribution or installation of the defective drywall.5 Settlements from litigation 1Hurricanes during this time period included Ivan, Katrina, and Rita. 2Hydrogen sulfide is a flammable, colorless gas with a characteristic odor of rotten eggs. 3See GAO, Consumer Product Safety Commission: Agency Faces Challenges in Responding to New Product Risks, GAO-1 3-150 (Washington, D.C.: Dec. 20, 2012). The use of the term defective drywall throughout this report is intended to reflect the term as commonly used by the public and many stakeholders involved in this issue. The use of this term does not, however, constitute a GAO, CPSC, or other government agency finding of a product defect, safety hazard, substantial product hazard, an unreasonable risk of serious injury or death, a hazardous substance as defined under applicable federal statutes or any other similar legal authority, regulation, or other proceeding. 4Home owners' insurance is a package insurance policy providing property and liability coverage tailored to the needs of most home owners, condominium owners, and apartment tenants. We have ongoing work looking at the perils covered by standard home owners' insurance policies. 5Enforcing product safety standards on foreign manufacturers through an adjudicative proceeding could theoretically pose practical challenges. For example, one important prerequisite to maintaining an action against any defendant in a U.S. state, federal, or administrative court is that the court must have the ability to exert personal jurisdiction over that party. A court's exercise of personal jurisdiction over a party must satisfy the fundamental notions of fairness mandated by the Due Process Clause of the Fifth or Fourteenth Amendments. In the case of a defendant physically located outside the territorial jurisdiction, such as a foreign manufacturer, personal jurisdiction can be established if sufficient contacts exist between a defendant and the territorial jurisdiction where the court sits, and the defendant receives fair notice of the suit. Both requirements are fact-specific and must ultimately be decided by a court, if challenged by the defendant. See GAO, Consumer Safety: Better Information and Planning Would Strengthen CPSC's Oversight of Imported Products, GAO-09-803 (Washington, D.C.: Aug. 14, 2009). GAO-13-735R Information on Defective Drywall Page 1

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