$13M settlement reached in RetroFoam insulation lawsuit

Retrofoam insulation is seen in this undated image taken from video.

A class-action lawsuit by homeowners against RetroFoam of Canada Inc., installers and suppliers of the product, and the Canadian government has been settled for $13 million.

Under the settlement, each of the approximately 770 members of the suit gets roughly $10,000.

Justice Terrence Patterson says, "[The settlement] was hard work. This was hard fought, in an honourable way."

The lawsuit was launched in 2009, after Health Canada ordered the company to stop selling the insulation, due to the fact that urea formaldehyde foam insulation (UFFI) had been banned since 1980 under the Hazardous Products Act.

Health Canada states, "The use of a urea formaldehyde-based resin in the manufacture of UFFI can lead to the release of formaldehyde gas during the curing process and afterwards. Health Canada has concerns about the health of people exposed to formaldehyde. Formaldehyde emissions decrease over time."

But RetroFoam insulation had already been installed in hundreds of homes, mostly in southern Ontario, because homeowners believed it was approved.

In part, the suit against 17 companies and individuals, claims the federal government was negligent in allowing the product to be installed.

Patterson says the settlement is fair, and is largely based on the negative stigma caused by UFFI, and the ensuing loss of resale value homeowners will experience because of the product.

Under the settlement, Windsor law firm Sutts, Strosberg LLP will collect 30 per cent of the settlement - $3.9 million - plus taxes of $500,000 and disbursements of $800,000.

Sharon Strosberg says, "This case was settled based on the stigma. In Ontario and Canada, houses with UFFI, are stigmatized, you're required to disclose, before you selll a house, you have to disclose."

Lawyers say the settlement is a compromise - nowhere near the original $500 million settlement being sought - but helps all parties avoid going to trial.

Still, Stan Lawton, one of the plaintiffs in the case, says, "It's a fair judgement, considering the circumstances. If we didn't settle it would be another five years, chances are nobody would get anything."

RetroFoam Canada and its subsidiaries declared bankruptcy five months after the lawsuit was filed, and defence lawyers would  not comment after Wednesday's decision.

How the defendants will divide payment of the settlement fees is unclear.