The proposed settlement agreement with Knauf filed with the Court last week is a complicated document and many people are asking a number of questions about it. A majority of the questions I have been asked deal with the so-called “cash out option” from the uncapped fund.
The cash out option will not be determined by dollar-per-square foot. The homeowner will need estimates for remediation of their home. One will be done by Xactimate and the other by another contractor which can be Moss. Xactimate is basically a computer program where the contractor will plug in certain information particular to that home. They will put in bids for the home and the homeowner will be able to view the bids online. The homeowner can take the higher of the two bids or 65% of the Xactimate bid. Typically Xactimate is a much higher bid than the regular bid. The homeowner will get a cash out equivalent to the bid he chooses minus $4.50 per square foot. This subtraction is roughly the difference in the $8.50 per square foot move out lump sum for homeowners in the pilot program because the homeowners who select the "cash out" poption are not moving out to have their home remediated.
There are some requirements for the cash out option. One, there cannot be a mortgage on the home or if there is, the homeowner must provide a release by the mortgagee or lien holder. Second, the homeowner must record the existence of reactive CDW in the local property clerks’ office, if permitted by local law. Third, the homeowner must covenant to inform subsequent purchasers of the home of the presence of KPT drywall. There is specific language in the settlement agreement that they must state under oath.
As far as an approved remediation plan, that information is located in Exhibit F, starting at page 179 of the agreement, found here: http://www.laed.uscourts.gov/Drywall/12-21-11.kpt.global.settlement.pdf
It is almost exactly the same as the pilot program remediation plan (which is a somewhat different plan than the plan laid out in the Hernandez decision). The main difference between this plan and the pilot program plan is that all appliances in homes under 3500 square feet are automatically replaced. For homes greater than 3500 square feet, appliances are replaced if signs of corrosion are found. The theory is that homes over 3500 square have higher-end appliances such as Vikings, and the cost to replace these items is significant if they are not damaged or appear compromised by CDW. This really comes into effect when getting a bid for the self-remediation aspect of the settlement and does not truly effect the protocol for remediating a home.
It is unclear right now what to do about homes that have KPT drywall on only one floor or in an added bathroom, bedroom, expanded kitchen, etc. That scenario is not clearly addressed by the proposed settlement agreement. I would suspect that the homeowner would have to get a bid to replace only those areas affected by KPT drywall and can get an approved contractor to do the work.
