Consider the multi-million-dollar settlements for stucco claims in recent memory from homebuilders such as DR Horton, Pulte Group, and KB Home. Claim value, claim frequency, and settlement demands around stucco continue to rise—it is now more commonplace to see new homeowner/condominium associations or newly constructed buildings have multi-million-dollar construction-defect claims for stucco damage and repairs.
And it would appear, at least in how we talk about stucco claims and litigation, that there must be something different about Florida stucco compared with just about everywhere else. Stucco design and installation has evolved through the years, but the requirements have been in the Florida Building Code for decades. By now, it is reasonable to think that most designers and contractors know the nuances of stucco design and installation methods, yet the construction-defect claims and litigation continue.
The following general requirements are included within the International Building Code (IBC), which is the model building code for the U.S. and many other countries. The same general requirements are included within the IBC and the Florida Building Code (FBC), as well as in their residential counterparts.
- Providing a weather-resistant exterior wall envelope.
- Stucco installation to be compliant with ASTM C926 and ASTM C1063.
- Two or three coats of stucco depending on substrate.
- Metal, lath, and attachments comprised of corrosion-resistant material.
- Approval process for other materials and alternatives.
The building codes remain largely consistent across the country, with the same general requirements governing stucco installation from California, to New Mexico, to Florida. Notably, the stucco provisions in the FBC and the IBC are generally the same, often verbatim copies of one another. Moreover, allegations of stucco defects are comparable in these states. So, what makes stucco construction-defect claims so popular in Florida?
One differentiator between Florida and other states is the environment. Although stucco is also extremely popular outside of Florida, including in the Southwest and western United States, Florida generally averages more precipitation. Orlando, Florida averages approximately 54 inches of precipitation per year compared with average precipitation in exemplar cities, including Los Angeles (18 inches), Denver (15 inches), Albuquerque, New Mexico (nine inches) and Phoenix (eight inches).
Notably, the levels of humidity in these areas as compared with Florida reflect the drier climates. Stucco has been shown to perform well in hot and dry environments, with a reduced severity of resultant damage to underlying structural framing and interior finishes resulting from moisture. A blocked weep screed, reverse-lapped flashing, or deficiently placed scratch coat is more prone to result in damage to underlying components in a wet environment like Florida. With more moisture comes more opportunities for more moisture intrusion. Moisture stains on drywall and suspected fungal growth (mold) are easily identified by homeowners and plaintiffs; identification of the problem sets the litigation in motion.
Lawsuits, and Attorneys, Oh My
History has shown there is a larger number of higher-valued stucco claims in Florida compared to the rest of the country. Environmental conditions may be contributory, however the litigious environment may also be driving the trends. Stucco claims have been, and continue to be, a primary culprit for construction-defect claims in Florida. The industry recognizes Florida as a state known for its large number of lawsuits and large settlements, often with such cases later presented within the industry for discussion purposes. Examples include:
- A $9.6 million verdict was awarded in the case of D.R. Horton v Heron’s Landing Condo Association in 2016, and upheld in 2020, in part due to alleged stucco deficiencies [266 So. 3d 1201, 1208 (Fla. 1st DCA 2018)].
- A Stipulated Consent Decree and Final Judgement was issued in November 2015, in which KB Home agreed to pay $94.5 million for repair, upgraded materials, improved construction techniques, additional training, and monetary payment. This sum included $71 million in stucco repair work that had previously been performed in the Waterford, Willowbrook, and Palm River communities (2016-CA-300).
- PulteGroup, Inc. entered a Stipulated Consent Decree and Final Judgement in December 2018 for $78.7 million including $64 million previously spent to repair homes in the Berkshire Park, Berkshire Place, and Legacy Park communities involving alleged stucco defects (2018-CA-2723).
Large awards and settlements are commonplace in cases involving homeowner/condominium associations when there are hundreds (or thousands) of buildings grouped together. The volume of buildings allows for greater investment by the plaintiffs with an inferred end goal of a significantly higher settlement. Moreover, when the owners are part of an association, the association’s board of directors generally has the ability to speak for all of the owners, instead of the attorney needing to seek permission and written authorization from each owner, as is the case in locales outside of Florida.
Florida’s construction market continues to be one of the strongest in the nation, with single-family and multi-family residences continuing to be built at a fast pace. In February 2020, statistics presented by Associated Builders and Contractors indicated Florida had the lowest unemployment rate nationwide in the construction industry.
Prior to the COVID-19 pandemic that struck the U.S. in the spring of 2020, Florida saw new residential construction annual increases between two and 14 percent year over year. Through three quarters of 2020, even with the ongoing pandemic, Florida saw year-over-year growth in residential construction of 12 percent. Similar growth rates are anticipated throughout 2021. A high growth rate of construction, combined with a low unemployment rate, creates an environment prone to tight schedules, poor workmanship, and subpar quality control and quality assurance.
Ultimately, there is little difference between stucco construction in Florida as compared with other regions in the United States. The real variance driving stucco construction-defect claims in Florida can be attributed to the environment, the real estate market, and the general litigious nature of the state. Perhaps it is just a matter of time until other contentious and highly litigated states catch up in frequency and value.