Unless otherwise noted, a subcontractor is responsible for the work he performs. He may not be responsible for the performance of the material if he did not supply the material. The installer/subcontractor is responsible for testing the product and checking the environment to ensure a successful installation. If the installer requested that you, as the general contractor, have the HVAC up and operational and you did not do it, then he should have not laid the floor OR obtained a release of liabilty/waiver from you.
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I offered to split the cost in half but was refused
I think, under the circumstances, this is a fair compromise. The only thing I would have added was you should have allowed the first contractor the opportunity to make the repairs. By hiring the work out to another, you may have voided the first contractor's liability. I'm no attorney so either speak with one or go the small claims route and let a judge decide. And BTW, you're meter #'s don't make sense.
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61% with 14 reading in the wood.
Is that 61% a relative humidity reading and the 14% a moisture content reading? Both are TOO high unless you live in the swamps of Louisiana.
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They hired an independent inspector. His report did not put fault on anyone but did say that if the floor was installed improperly the wood was buckle and not cup.
WRONG. Wood cups from absorbing more moisture on one side than another. Cupping is very common. It usually occurs when a subfloor, or the space below a subfloor, is at a higher moisture content than the wood. NOFMA recommends there should not be greater than 2% between plank flooring and subfloor MC. Cupping can occur over basements, crawl spaces, concrete slabs with engineered flooring, etc. Moisture testing is imperative to ensure a successful installation. Expansion space, while required, is not the CAUSE of cupping. It will not remedy it either. Excessive moisture is ALWAY the cause of cupping. Basically, in your case, the flooring was improperly acclimated (because no HVAC was on) and it does not appear any pre-installation moisture testing was done, as typically required for a successful installation.