Exterior Insulation and Finish System Product (“EIFS”), also known as “synthetic stucco”, became popular in the mid-70s with contractors use of EIFS on commercial buildings. EIFS also found new life as an exterior finish for residences, and homebuilders began to incorporate EIFS into the design of their homes.
Homeowners with EIFS cladding began to experience moisture intrusion in the exterior walls of their homes, because water was being trapped behind the EIFS causing such moisture intrusion. Controversy also surrounded the manufacturer’s application instructions, the manufacturer’s application methods and the manufacturer’s training of the applicators. Lawsuits were filed against homebuilders which resulted in losses the homebuilders were often times unable to recoup. On August 20, 2010, the Texas Supreme Court handed down their ruling that may have an impact on a homebuilders’ right to recovery for a product defect loss.
In Fresh Coat, Inc. v. K2, Inc.,* the Texas Supreme Court found that synthetic stucco components – EIFS – are a “product” and that the builder that installs it on a house is a “seller”. This is a Texas statutory indemnity case of first impression involving THE RIGHT TO indemnity FOR products liability in the residential construction industry. Of significant importance to the building industry is that the component parts that become integrated into a home, for example, to form a wall, are a product. Whether the courts will extend this definition beyond the context of Texas’ indemnity statute is yet to be seen.
What this case may mean for you as a homebuilder or contractor is that if you sustained a loss based on the use of EIFS you may have a right to recover that loss from the manufacturer of the component parts of the EIFS. Whether you can recover anything is subject to a number of factors which should be reviewed by an attorney soon to avoid the claim being barred by the passage of time.
*Supreme Court of Texas, No. 08-0592, Fresh Coat, Inc. v. K-2, Inc., August 20, 2010.