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Giant Claim Against Chinese Appliance-Maker

LOS ANGELES (CN) — Four insurance companies filed a class action against a Chinese appliance-maker, claiming it sold 2.5 million fire-prone dehumidifiers in the United States, which could cause billions of dollars in damages.

More than 2.2 million of the dangerous appliances made by Gree Electric Appliances Inc. of Zhuhai are still in U.S. homes, bearing prominent brand names including Frigidaire, GE and Kenmore, the insurers say in the Sept. 8 lawsuit in Los Angeles Federal Court.

Only Gree and its subsidiaries are named as defendants.

Gree built the dehumidifiers with plastic parts that could not withstand the heat they put out, Homesite Insurance Company of the Midwest et al. say in the lawsuit.

Gree China promised its U.S. partners, including Gree USA, that its products met the safety standards of Underwriters Laboratories, including UL 94, which "requires that consumer electric products, including dehumidifiers, use plastics that have specific burn and flame rates in order to prevent, reduce and limit the risk of fire hazards," the complaint states.

The insurers say Gree knew its dehumidifiers would fail the standard but that UL had no way to test them on its own.

General Electric forced Gree China to upgrade the dehumidifiers bearing the GE brand in 2011, but Gree did not make the changes to the ones made for other brands and in 2012 Gree rejected safety concerns raised by another partner, the insurers say.

"Gree China, Gree Hong Kong, Gree USA and [US partner] MJC continued to sell their defective and unreasonably dangerous dehumidifiers until September of 2013, when the dehumidifiers were recalled pursuant to a voluntary recall program" with the Consumer Product Safety Commission, the insurers say.

Only that year and the next, under pressure from the CPSC, did Gree finally recall 2.5 million humidifiers. Even so, in March this year, the commission hit the three Gree companies with a record-setting $15.45 million civil penalty.

Despite the recalls, the insurers say, only 240,000 of the dangerous machines had been returned as of May 2015.

"Out of the 2,500,000 dehumidifiers with these common defects, approximately 2,260,000 of these defective dehumidifiers manufactured by Gree China remain in U.S. homes and residences, posing a serious risk to the life and property of US homeowners," the class action states.

In addition to fires, the appliances can cause smoke damage. Hundreds of insurance companies could be on the hook to thousands of policyholders, the insurers say. Citing data from the CPSC, they say insurance claims could cost an average of $37,000.

Suing for themselves and other underwriters, the insurers say Gree "knew or should have known that the dehumidifiers had defects that could cause catastrophic property damage, personal injury and/or death."

Mark C. Zebrowski of Morrison & Foerster in San Diego, who has represented Gree in other litigation over the dehumidifiers, declined to comment because he had not yet discussed the class action with company officials.

A representative of Gree USA did not return a call about the lawsuit Monday

The insurers seek subrogation rights to take over and enforce their injured policyholders' claims against the Gree defendants. The lawsuit identifies individual policyholders from Georgia, Wisconsin, Indiana and Minnesota, each of whom suffered at least $2,000 in property damages from burning dehumidifiers.

The insurers are represented by Nathan Dooley with of Cozen O'Connor, which has "the largest subrogation practice in the United States," according to the 36-page complaint. Neither he nor co-counsel at the firm could be reached for comment late Monday.

The insurers seek class certification, restitution, recalls and replacements, and punitive damages for negligence, product liability, deceptive trade and unfair competition.

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