A manufacturing company is in the process of launching civil action against the federal government over its failed home insulation scheme, it's been revealed.
The news comes with a group of installation companies already suing over the millions they lost when the $2.5 billion scheme was scrapped in 2010.
Four men died installing the insulation, which was introduced as part of the first Rudd government's stimulus package to counter the global financial crisis.
More than 200 house fires were also linked to the program which has been the subject of numerous inquiries.
The Knauf Insulation company says that left it with tens of millions of dollars worth of insulation sitting in warehouses.
The company's Australia and New Zealand managing director Stuart Dunbar says it also gave insulation a bad reputation, destroying the industry's business in the country.
"The market for insulation was decimated and it's only starting to recover now," he told AAP on Friday.
Knauf Insulation makes so-called glass wool - a type of insulation made from glass.
"Our product can't catch on fire or conduct electricity," Mr Dunbar said.
"That is well known by builders but not general consumers and because this scheme was rushed out with no assurances that the correct product was being used, and that it was being safely installed, people now associate all insulation as being hazardous."
He said lawyers had been engaged and legal action was expected to be launched against the federal government soon.
How much compensation the company would seek is yet to be determined, he said.
