Just one month before the trial was about to commence, attorneys for both State Industries and the class-action plaintiffs signed a proposed settlement agreement that compensates owners of State's Duron electric water heaters.

Just one month before the trial, scheduled for April 10, was about to commence, attorneys for both State Industries and the class-action plaintiffs signed a proposed settlement agreement that compensates owners of State's Duron electric water heaters.

All of State's Duron electric water heaters that use a plastic or polymer inner lining and do not contain a sacrificial anode rod, and were purchased or accepted into ownership after Oct. 1, 1994, but before midnight, March 9, 2000, are covered under the agreement.

About 1.5 million of the water heaters were manufactured and sold during that time period, said Joe Hall, national spokesman for State Industries.

The water heaters are marketed under the trade name "Duron" but have also been sold under other names by certain retailers, such as Kenmore at Sears or Reliance at Home Depot. The settlement covers State's model water heaters CD, SD, TCL, TD, T6, SS8, SSX and PEX.

In the proposed settlement, State denies liability but says it has approved the agreement in an effort to avoid continued litigation.

"Even prior to this settlement we have honored claims by replacing parts and paying labor costs," Hall told Supply House Times. "We also have covered customers whose warranties had expired. We have been working all along to take care of customers who had problems with the Duron water heater. That's why we do not expect there will be many claims outstanding in the proposed settlement agreement."

The agreement recognizes three classes with different discounts or refunds:

• Class I members who purchased a Duron electric water heater (or bought a home in which such a water heater was installed) between Oct. 1, 1994, and the settlement date, will be issued a certificate good for a 10% discount (up to $20) on the retail price of any electric or gas State Industries water heater.

• Class II members who meet the purchase or ownership requirement of Class I but also experienced failures of heating elements within the specified period, will be entitled to free parts-and-labor replacement of the heating elements by an approved service representative of State Industries. Those who already paid for replacements within that time frame will be entitled to reimbursement of the cost of each element up to $15, and to reimbursement of labor costs up to $50 per service call.

• Class III members who meet the purchase or ownership requirement of the other classes but also experienced the failure of one or more Duron electric water heaters during the specified period, will be entitled to free parts-and-labor replacement of the water heater by an approved State Industries service representative. Those people who already replaced their water heaters within this time frame can be reimbursed the cost of the new water heater up to $150, and further reimbursed up to $150 per heater for labor costs.

All replacement purchases and claims must be made between the settlement date and Dec. 31, 2001. The settlement agreement also allows for a property damage subclass. State Industries agrees to pay all legally compensable property damages, subject to applicable defenses, caused by failures of tanks owned by members of Class III that failed prior to the settlement date. A cap of $75,000, exclusive of interest and costs, has been placed on those claims.

State further agrees in the settlement to provide a $15 million bond to secure its obligations and keep it in place until Dec. 31, 2001. The company also agrees to pay class counsel $10.6 million for its fees and costs.

Class members will be notified of the proposed settlement: by mail from State Industries; with two separate published notices in a nationally distributed newspaper; with notices published in the most widely circulated newspapers in each of the 10 metropolitan areas where Duron products have been most widely sold; and with a notice published in Supply House Times. In addition, a press release will be sent to major wire services and newspapers, and State Industries will include a summary of the action and settlement agreement, plus printable versions of the notice and claim forms, on its Web site. A toll-free number for class members -- 800/531-3079 -- will be listed on the notice.

Preliminary approval to the settlement was granted March 10, and a final hearing is scheduled for June 14.

"We are still manufacturing the Duron water heater," Hall said. "It amounts to about 25% of our overall water heater business. The polymer-lined water heater is very popular, particularly in areas where there is a higher sulfur content in the water, which can cause an odor in glass-lined heaters."