[Alpha Biz= Kim Jisun] Seoul, Korea – LX Hausys, a leading producer of engineered stone (artificial marble) primarily manufactured and sold in North America, is facing significant legal and business risks after being caught up in multiple lawsuits over health issues caused by silica exposure.
The fine dust produced during the manufacturing process of the material has been linked to severe diseases such as silicosis and lung cancer, raising concerns about legal liability, regulatory tightening, and potential reductions in insurance coverage.
According to industry sources on the 11th, workers involved in countertop production and installation in the U.S. who have been diagnosed with silicosis are expanding their lawsuits against manufacturers. A total of 122 lawsuits have been filed against approximately 6,800 companies related to silica exposure, with a combined lawsuit value exceeding 6 trillion KRW.
LX Hausys' U.S. subsidiary is also facing lawsuits related to silica exposure, and it has set up provisions for some of these claims.
Engineered stone is a high-strength artificial marble made by mixing quartz powder and resin, which is widely used for kitchen countertops, bathroom surfaces, and more. In North America, demand for engineered stone is high due to the preference for large homes and durable, luxurious materials. While demand for engineered stone is growing in South Korea as well, the market size remains relatively small.
To capture the North American market, LX Hausys established a factory in Calhoun, Georgia, in 2011. Due to increasing local demand, the company added a third production line by 2020. However, the current silica controversy is now posing a significant challenge to the business.
In the second quarter of this year, LX Hausys reported an operating profit of 12.8 billion KRW, marking a 66.2% drop compared to the same period last year. Sales fell by 13%, and the company experienced a net loss, leading to a shift into the red. Specifically, the building materials division reported a meager operating profit of just 800 million KRW.
Recently, insurance risks related to silica have also emerged. Liberty Mutual, which has a contract with LX Hausys, filed a lawsuit on the 5th in the U.S. Central District Court of California, claiming it has no responsibility to provide compensation. Liberty Mutual argues that, based on an "exclusion clause for contamination," silica dust is considered a "contaminant," and therefore, LX Hausys is automatically liable for compensation due to its use of the material.
Industry experts believe this lawsuit could trigger major changes in the engineered stone business in the U.S. The California Division of Occupational Safety and Health (Cal/OSHA) is tightening safety standards for engineered stone processing, and discussions are underway regarding restrictions or even a ban on silica use.
The insurance industry is also expanding exclusions in commercial general liability (CGL) policies due to concerns over long-term liability risks.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
