A recent class action settlement brought successful closure to a problem with drastic effects on the lives of thousands of Indiana families represented by Plews Shadley Racher & Braun. The families bought homes built by Trinity Homes, LLC ("Trinity") in Indiana between June 1, 1998, and October 31, 2002. Most of these homes are located in Hamilton County, Boone County, and Marion County.
The homes had a common construction defect. Trinity failed to include a moisture barrier within the exterior brick walls of these homes and failed to ensure the presence of a consistent one-inch air space between the brick veneer on the outsides of the houses and the exterior wall sheathing. Both steps are required by industry standards that are incorporated by the Indiana Building Code. This allowed water to collect within the exterior walls. Water damage to the exterior walls and in some cases to interior portions of the affected houses allowed mold and mildew to develop.
The problems became the subject of numerous lawsuits against Trinity, including a class action in the Hamilton County Court. Trinity and its parent company Beazer Homes Investment Corp. ("Beazer") were the defendants in the class action. Plews Shadley Racher & Braun together with the Indianapolis law firm of Cohen & Malad, LLP, represent the homeowners in the case.
The settlement requires Trinity and Beazer to investigate each home in the class to identify ongoing water intrusion resulting from construction defects, including defects that do not relate to the homes’ brick veneer. Where ongoing water intrusion due to construction defects is found, the source must be addressed and the affected area must be repaired and if necessary remediated. Trinity and Beazer must follow specific assessment and remediation protocols. A construction management firm selected by the class counsel will observe the assessment, repair, and remediation processes and will advise the homeowners on their sufficiency. Trinity and Beazer will pay for this service. If disputes arise during the assessment, repair and remedial activities, they will be resolved by a panel of three professional engineers. One of these engineers was selected by Trinity and Beazer, one was selected by the class counsel, and the third was selected by the parties’ selected engineers. Trinity and Beazer will bear the bulk of the cost of this alternative dispute-resolution process. Remediation construction performed pursuant to the class action settlement will receive a new warranty which will commence when the work is finished. Trinity and Beazer must complete its assessments and its repair and remedial work on a minimum of 216 homes per six-month period. Remediation construction must be completed within 16 weeks after the repair and remediation activities at that house commence.
Beazer’s SEC filing for the first quarter of 2004, before the settlement agreement was presented to the Hamilton County Court, indicated that Beazer had set aside warranty reserves of $24 million to address the water damage and mold-related problems that had arisen with respect to homes built by Trinity in Indiana. Class counsel believe that is a low estimate of Trinity’s and Beazer’s actual costs to fulfill their obligations under the class-action settlement. The terms of the settlement were very well received by the class members during the court-approval process for the settlement. Only eight class members, out of 2,085, submitted objections to the Hamilton County Court. Some of the objectors felt that the settlement should include damages for bodily injuries and for the diminution of value of the affected houses. The vast majority of affected families placed a higher priority on having their homes fixed, at no cost to them, on an enforceable time-table and with outside supervision, than in further litigation to obtain damages for personal injuries or diminution in property value.
Builders and consumers have much to learn from this case. From the builder’s perspective, the importance of measures that ensure compliance with building codes cannot be overstated. This includes involvement of and supervision by qualified personnel at all stages of the design and construction process. An ounce of prevention truly is worth a pound of cure. From the consumer’s perspective, awareness of possible water intrusion problems and/or mold problems is key during construction or in the purchase of an already-constructed home or commercial building. If a water intrusion problem exists, common sense and good engineering practices frequently can solve the problem. Where an extensive mold infestation has developed, the services of an industrial hygienist may assist in identifying whether remediation is required and, if so, how the remediation can be most cost-effectively performed. At a minimum, prompt attention to water intrusion and mold problems often will limit damage to property and perhaps more importantly can minimize the exposure of a building’s inhabitants to air-borne mold spores and by-products which can make them sick. If left unchecked, unhealthful conditions resulting from water intrusion and mold can expose builders and contractors to damages much higher than the cost of addressing the water intrusion and mold problems.
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