In a multi-million dollar consumer settlement, a California court has approved a plan by which Weyerhaeuser Co. will pay what's likely to be hundreds of millions of dollars in claims against it for producing defective wood siding.

While the settlement of the class action lawsuit in San Francisco specifically covers California home owners, the decision is expected to be embraced by courts in Oregon, Texas, Iowa and South Carolina where similar class actions have been filed against the company.

The product also was used on homes in Colorado, Arizona and Washington state.

California home owners sued Weyerhaeuser for selling a wood-siding product made of compressed wood chips, fiber, resin and wax. Court documents indicate that on thousands of homes, apartments and other buildings where the siding was installed, the product experienced failure within a matter of months – becoming swollen, warped, splitting and rotting.

Documents showed that nearly 2 billion board-feet of siding was made at Weyerhaeuser's Klamath Falls, Ore., plant. The product was produced and sold from 1981 to 1999.

Under terms of the settlement, Weyerhaeuser will immediately set up an $82 million fund to pay claims. Insiders say, however, the amount of claims almost certainly will exceed that amount and more money will have to be added to the reserve.

“This is a claims-based settlement, which means that the claims will be paid as submitted over a nine-year period,” said Robert Dowdy, a Weyerhaeuser vice president and general counsel. “An independent adjuster will review each claim submitted and determine if it qualifies for payment under terms of the settlement agreement.”

Dowdy also said a small number of property owners with Weyerhaeuser siding have previously submitted claims under the company's warranty program.

The attorney said it felt the settlement would benefit the company by “ending the uncertainty and expense of defending class action litigation.”

“This has been a tremendously hard-fought battle fought over the past two years, but we are very pleased with the relief the agreement provides homeowners," said lead attorney Beth Terrell. “The settlement gives homeowners a way to promptly deal with problems the siding caused, without any of the uncertainly and delay that continued litigation would bring.”

According to court records, the company also will pay 11 law firms, who represented the homeowners, $18 million – about 15 percent of the first $120 million in claims it expects to receive. The lawyers will receive another $8.4 million on the next $70 million in claims made. The deadline for claims is 2009.

In a similar settlement three years ago, Louisiana-Pacific has paid out $475 million to consumers who used similar siding that also failed.