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EIFS – Willing the War

Canvassing 21 contractors around the country for their take on what 2003 will bring for EIFS shows the troops are unhappy, many having died of insurance failure and public lack of confidence, and many others struggling to keep their spirits up against the propaganda from the media and the threat of legal assaults on their flanks. What began as a rout in the Carolinas residential market has impacted troops around the country, including commercial divisions. But as often happens when things look bleak, the arrival of reinforcements in the form of improved EIF systems and a basically strong confidence among commercial owners and architects, who understand faulty application, not the system, to be at fault, means there is plenty of fight left in the industry.



As a contractor from Washington stated, “The manufacturers have too much invested in EIFS to let it go away,” and “Dryvit and Sto aren’t going to go away,” (Oregon)> As the same two Northwestern contractors also pointed out, “The new designs the manufacturers have put into play for EIFS make it a good product – principally the drainage systems and moisture barriers that were not in place when the systems that are failing now, were installed. I don’t anticipate these new systems failing,” (Washington) and “EIFS is a product that lends itself to many different types of applications, and I am sure we will find a way
to use it” (Oregon).



Of those consulted, four were even
upbeat about the commercial market in
2003. “We continue to see a lot of EIFS
in Arkansas, even with the bad publicity
in the Carolinas and the lawsuits, so
I reckon EIFS will continue to be
applied in more volume here.”



“I am sure EIFS will be used a lot more,”
states a Georgian, “as it is so easy to work
into a design for many different looks.
The bad press isn’t going to cut across it,
but the insurance is impacting the
industry, although not so badly in my
area. We only do commercial, but if we
were doing residential, we would be
hurting because of the public perception
of the product following the bad pubcity.”



“We will see more EIFS than ever before
because of its versatility,” agrees an Illinois
man. “It’s only the people here with
bad records who are being targeted by
the insurance companies. We are strict commercial, and we’d be having a
rough time if we were in residential
because it is not regulated or monitored
for quality in the same way as commer cial.
But I am still upbeat about EIFS.
There is still a demand. We deal with
Senergy mostly, and they keep an eye on
us now, sniffing around a little more
than they used to the reps are actually
doing the quality control they should
have been doing all along.”



“Commercial EIFS will grow in leaps
and bounds,” asserts a Tennessee contractor. “We have not seen the problems
on commercial projects that some of our
national media folks are trying to create
for us. Residentially, it is a different story,
with the market in decline for five
years. When that EIFS market dried up,
a lot of people went to stucco, but as we
are one of only three companies that
does stucco in our area, we have even
benefited from that decline.”



And another three contractors felt that
although 2003 would show no real
improvement and their own EIFS work
had all but disappeared currently, the
market would rebound in a few years,
when the insurance companies lose their
jitters.



“We are doing EIFS on a very limited
basis,” confirms an Alabaman, “until this
all shakes through the industry it’ll take
several years before the insurance industry will come back around, as they realize
the new products overcome the difficulties
that EIFS had, and as training is
improved and people become more qualified, such as through AWCI’s programs.
The insurers will insure on a limited basis
at first and then once again, broadly.
“I think the insurance people will come
back into it,” agrees an Oregonian, “and
I wouldn’t be surprised if we do, too,
when we can buy insurance for a reasonable
amount again.”



Another Oregonian is of the same mind:
“EIFS may start to turn around, but not
until people become comfortable with
the drainage systems. When that happens,
it will take five years before the
insurance companies figure out that the
liability has gone by and the future looks
good they always look in the rearview
mirror, not through the windshield.
At that point, we may get back
into EIFS.”



When Insurance Isn’t





There is no question that the lack of
insurance for EIFS is pulling the rug out
from under contractors (see the table on
page 53). “EIFS is a good product,”
insists a Floridian, expressing the opinion
of most EIFS applicators surveyed.
“I can install a system and it will perform
without problem, as it has for 20
years now since we started. The only
problem with EIFS is termination
points. If you don’t treat them, they will
let water into the system. The commercial
EIFS industry has gotten a bad rap
from the residential market, but it’s the
insurance world that is holding up the
EIFS industry right now.”



Pinpointing why the insurance companies
are running scared, but challenging
the logic of their actions, an Arkansan
complains, “Lawsuits have resulted in
insurance companies gouging contractors our general liability insurance two
years ago was $5,000. It jumped last year
to $25,000 and this year is up at
$67,000. Now, no doubt the insurance
companies were out money in the Carolinas
as a result of pickup truck contractors
doing shoddy work, but in our
area, we don’t have that problem. In our
case, we built our company’s reputation
on quality work and are here for the long haul. We were the first Dryvit applicator in the state back in 1979, and we do everything right, checking flashings and
caulking are applied properly and everything else that one needs to do to make
sure the builders are doing right. So it’s
unfair that we have been hit so hard by
the insurance companies.” He goes on
to say that although he has heard many
contractors say they are no longer able
to do EIFS, the ones who can afford to
do so are the larger companies who were
doing it right all along.





“EIFS is going to cut back because of all
the scare tactics by the insurance companies,”
agrees an Indianan. “Premiums
have doubled, and in our area, we have
only found two insurance companies
that will even give us insurance for EIFS,
even though we have never had any
claims.”



A California contractor feels the same
way about the future of EIFS: “EIFS has
a long struggle ahead, as it is up against
a weak economy that has stressed the
insurance companies, so they have
become more conservative. Construction defect litigation has become more
predominant, so EIFS has a long way to
go. We have been hammered pretty hard
with EIFS insurance issues, and we have
a lot of people who, if they can get insurance
for EIFS, don’t want to pay the
high deductible. If a contractor had a
$25,000 deductible per claim a year ago,
now it is up to $50,000 per claim, but
if they take EIFS off the plate and it goes
back to $25,000, then EIFS is the first
to go.”



“The big issue is insurance coverage for
both applicators and owners,” adds an
Idaho contractor. “Premiums have gone
up, a minimum of $25,000, with coverage
in the range of 15 percent of the
labor costs of the EIFS work we do and
a deductible of $10,000.”



This story is repeated around the country:
“We had to change the insurance
company we have been with for the last
40 years,” says a South Dakotan,
“because they were unable to get us EIFS insurance, even though
we’ve never had an EIFS claim
against us. Our liability insurance
has risen 20 percent, and
we are not being promised any
beyond this next year.”



“Premiums have doubled
every year for the last three
years and deductibles have
gone from $500 to $5,000”
(South Carolina). “Our insurance
rates went up 25 percent
this year because of the mold
factor as it relates not just to
EIFS but also drywall” (Illinois).



Naturally, for those still able to
stay in the business, the
increased costs are being passed
onto GCs, owners and, ultimately,
users. “Liability insurance
on EIFS is tough to get,”
reports a Tennessee contractor.
“Our premiums have increased
15 to 28 percent over the last
three years and, like the rest of
our competitors, we have just
passed these on to the customer
in increased prices per square
foot.”



“I don’t see EIFS in residential
at all,” predicts a Georgian,
“with the attorneys, insurance
companies and banks telling
contractors not to do it, and
contractors being at their mercy. In
commercial, EIFS will cost $9 a square
foot in this area, up from $5.



Owner insurance being hard to find in
the commercial sector represents another
angle on the same issue of lack of
insurance cutting across usage: “I am
getting resistance from owners about
insurers no longer covering EIFS commercial
applications,” complains a
Kansas contractor. “In fact, I have lost
jobs as a result. EIFS applications have
dropped 50 percent since all the negative
publicity began.”



I Quit


As reported already, there are those who
have been driven out of EIFS altogether
by the lack of insurance. A Californian
states, “Insurance companies won’t
give us coverage. Our deductible has
risen from half a million to a million
dollars. Sixty to 70 percent of subcontractors
that were selling EIFS are no
longer doing so, and I see EIFS becoming
close to nonexistent. Builders and
owners will get away from EIFS completely.”



An Alabaman reports, “We were with
Amerisure, who decided that when
EIFS policies expired, there would be no
renewals. The year before, we were being
given an upcharge because of the EIFS
work we did, 15 percent higher premium
just for that liability issue. There just
is no insurance now and the attorneys
have said we are fools if we do EIFS. We
used to do $2 million a year, or 25 percent
of our total volume, in EIFS.”



“We have pulled out of the EIFS market,”
reports an Oregonian, “because we
were asked to pay more for the insurance
than we did in EIFS volume in the last
year we installed it. Four years ago, EIFS
used to be a part of the regular liability
insurance, but now we are being quoted
an upcharge of $85,000.”


“We are not doing EIFS anymore as we
cannot get the insurance because none
of the standard markets in Oregon will
write EIFS,” adds a fellow Oregonian.



As the insurers fall for the bad press and
litigation fears, so falls the market. “I see
no indication EIFS will improve anytime
soon,” says an Idaho man, “as
bankers and insurance companies cannot
think for themselves about the
mechanics and technology behind the
issues, and so tar everyone with the same
brush they use for incompetent residential
contractors in humid parts of the
country”



“I see EIFS going downhill because of
the bad name it has acquired, not
because the product is no good,” adds a
Virginian. “The demand has dried up.”



“EIFS is going straight to hell because of
the bad press,” says a South Dakotan.



“I only see commercial EIFS in the
future, as residential has already disappeared
completely off the map,” reports
a contractor from South Carolina.
“There has been no new EIFS installed
on houses in four years. Consumer confidence
is so low, in fact, that you still
can’t sell a house with EIFS. Those who
have EIFS on their homes are still in sue
mode. In the commercial sector, we may
well maintain our market share, but it
won’t expand. When the lawyers get
through with the houses, they will most
probably move to commercial, condos,
etc.”



The Right Weapon?


In summary, as much as one can draw
conclusion based on the opinions and
observations of a handful of mostly
demoralized front line troops, it looks
like the great EIFS War will be won
through improved education and application,
along with drainage systems and
a variety of different materials but
only after a few years of hard fighting.



Two Californians are concerned, however,
that a weapon being counted upon
by the EIFS industry to win back lost
ground—one-coat EIFS—will in fact
turn out to be a liability: “The one-coat
system was originally designed with
foam as a substrate, 1-inch EPS, but
they have removed the foam in a lot of
the country when it was not designed to
work that way. It does not work very
well without foam, but a lot of EIFS
manufacturers have gone into one-coat.
They have to make a living, but they
didn’t learn from what they did in residential.”



“I never thought I’d see EIFS manufacturers
bastardizing their own systems to
come out with a competitive product. I
do a lot of construction defect investigation,
and I have been on many golf
courses where the golf balls have stuck in
the one-coat wall, because the applicator
did not adhere to the minimum thicknesses
or the proper proportioning of the
mixes, and the manufacturer had
removed many of the modifiers from
their mixes. All they are providing now
is fiber reinforced portland cement base
coat, which adds up to a built in weak
wall that will crack all to hell. Predictably
the masonry industry ran an ad showing
a wall with golf balls stuck in it with
the caption, “Show us a synthetic stucco
wall and we’ll show you a hole in one.”



Regardless of the type of system, it seems
like much of the trouble related to the
EIFS industry is not related to the system
at all. Training, education and time
are what’s needed to fur what appears to
be broken.



About the Author

Steven Ferry is a free lance writer based
in Dunedin, Fla.

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