Claims And Issues

FLORIDA COURT CONFUSES ALL RISKS POLICY WITH NAMED PERIL POLICY …

Cites "efficient proximate cause doctrine."

In a recent and as-yet officially unpublished opinion, a panel of Florida's Second District Court of Appeal apparently reached a correct result for the wrong reasons.  The panel said that "[b]ecause the [policyholders] failed to establish below that their loss was covered by a peril caused by their [all-risk] insurance policy, we affirm."  Peek v. American Integrity Insurance Co. of Florida, No. 2D14-780, 2015 WL 5616294, *1 (Fla. 2d DCA September 25, 2015)(stated not released for publication in permanent law reports and subject to revision or withdrawal).  Actually, the record quoted by the panel establishes both that the policyholders in this case met their all-risks burden of proof and that the insurance carrier also met its burden to prove that an exclusion applied to bar coverage for claimed loss resulting from Chinese Drywall.

"At trial, the [policyholders] established through their own testimony and that of a representative of [the insurance carrier] that they suffered a loss to their property within the insurance policy period."  Peek v. American Integrity Insurance Co. of Florida, 2D14-780, 2015 WL 5616294, *1 (Fla. 2d DCA September 25, 2015).  A policyholder claiming coverage under an all-risks policy has the burden of proof on the initial issues of coverage that the policyholder's property suffered a loss during the policy period, as the panel recognized.  Peek v. American Integrity Insurance Co. of Florida, 2D14-780, 2015 WL 5616294, *3 (Fla. 2d DCA September 25, 2015).  Therefore, as the panel opinion confirms, in this case the record establishes that the policyholders met their initial burden of proving coverage.  Simply put, an all-risk insurance policy basically covers all risks unless specifically excluded.

In this case the record also clearly establishes that the insurance carrier also met its own burden, which was to prove the applicability of one or more exclusions.  The carrier denied coverage on the bases of "policy exclusions for latent defects, corrosion, pollutants, and faulty, inadequate, or defective construction materials and contended that the Chinese drywall fit the definitions of all of these exclusions."  It introduced the testimony of an expert botanist that the Chinese Drywall used in the construction of the policyholders' home, and damages resulting from it for which the policyholders claimed coverage here, "that it was a faulty, inadequate, or defective construction material."  He further testified that the Chinese Drywall emitted gases which caused the corrosion damage complained of by the policyholders here, and "that the Chinese drywall itself was a pollutant due to its emission of noxious and destructive gases."  The policyholders did not put on any evidence to rebut this testimony.  Peek v. American Integrity Insurance Co. of Florida, 2D14-780, 2015 WL 5616294, *1-*2 (Fla. 2d DCA September 25, 2015).

On this record, the trial court granted the carrier's motion for directed verdict and entered judgment that the carrier did not breach the all-risks insurance contract.  The Second District panel affirmed.  Despite some regrettably loose language, the panel clearly affirmed on the basis that the carrier had proven that the exclusions on which it relied to deny coverage, applied to the policyholders' claimed loss in this particular case as a matter of applying the all-risks contract language to the record evidence -- and regardless of any confusion about the "efficient proximate cause doctrine" here.  In reaching its contract conclusion, the Florida appellate court panel joined the majority of U.S. Courts which have addressed the question.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, co-author of Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters including § 7:12, Faulty Workmanship/Materials (Thomson Reuters West May 2015).  All rights reserved.  

Florida Chinese Drywall Damage Claims: Defend G.C., New York Law.

    In Great American Fidelity Ins. Co. v. JWR Construction Serv's, Inc., 2012 WL 1193848 (S.D. Fla. April 9, 2012), Download Great Am. Fid. Ins. Co. v. JWR Construction Serv's, Inc. (S.D. Fla. No. 10.61423, Order Filed April 9, 2012) PUBLIC ACCESS, a Florida Judge was confronted with the issue of whether there is a Duty to Defend underlying Chinese Drywall Damages claims under environmental liability insurance policies.  The Court in that case held that the Liability Insurer which issued the environmental liability insurance policies to the General Contractor at bar, owed a Duty to Defend Chinese Drywall Damages Claims in Florida under New York Law.

    The first of two Exclusions relied on by the carrier in this case, "the Faulty Workmanship / Own Work Exclusion," was held inapplicable first.  Id., 2012 WL 1193843 at *11-*15.  Great American relied apparently on the Florida rule governing the determination of a Duty to Defend, which is to compare the allegations in the underlying complaint against the Policyholder or other Insured, with the provisions of the Liability Policy.  However, this case as noted was determined by New York Law instead.  "New York law does not limit itself only to the four corners of the underlying complaint."  The carrier produced no evidence concerning key factual issues raised by the underlying complaint with respect to the Duty to Defend issue.  The Federal Court held that the carrier failed to meet its burden in moving for Summary Judgment and its motion was denied.  Id. at *15-*16.

    The carrier relied on one other Exclusion in its environmental liability insurance policies to defeat its Duty to Defend, its "Products Liability Exclusion".  The Federal Court held that this Exclusion did not apply in this posture, either.   Id. at *16-*20.

    And the Court did more in this decision.  The Court granted the Insureds' Motion for Summary Judgment and affirmatively declared that the carrier in this case owes a Duty to Defend the underlying claims including the claims alleged for Chinese Drywall Damages.  Id. at *20.

    Even more.  As  noted, the Court determined that Florida's choice-of-law rules require that New York Law be applied to Great American's Motion for Summary Judgment in this decision.  Nonetheless, the Federal Court in Florida had no trouble applying Florida's Statute on Attorney's Fees to be awarded to a Policyholder or other Insured which successfully contests Insurance Coverage:

In addition, the Court orders that Great American must immediately reimburse JWR for its defense costs thus far incurred in the underlying suits, establish a continual defense fund to provide for JWR's future defense costs, and pay attorney's fees for this action to JWR pursuant to Section 627.428, Florida Statutes. Furthermore, these proceedings shall be stayed until an underlying judgment or settlement has occurred.

Id. at *20.

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Insurance Companies Pay Chinese Drywall Settlement for Florida Homes.

   Reportedly, Insurance Companies are paying a $54,000,000.00 settlement for alleged Chinese Drywall Damages:

   Lawyers for consumers and Banner Supply [alleged seller] said today four insurers would be paying the settlement of the drywall cases, which covers as many as 700 Florida homeowners.

Phil Milford & Allen Johnson Jr., "Chinese Drywall Supplier to Pay $54 Million to Settle Homeowners' Claims" (Bloomberg.com, Tuesday, June 14, 2011).

   The reported settlement comes as something of a surprise.  The Insurance Companies for Homeowners-Plaintiffs and for Defendants in the Chinese Drywall litigation had received some favorable rulings fairly recently.  See, e.g., Download In re Chinese Manufactured Drywall Products Liability Litigation (E.D. La. No. MDL 2047, Order and Reasons Filed December 16, 2010) PUBLIC ACCESS,  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" Third Edition West Publishing 2011, § 3:112, "Chinese Drywall Damages:  Some Third-Party, Liability Insurance Coverage Issues,", and § 9:31, "Chinese Drywall Damages Claims and Property Insurance Coverage Issues and Exclusions".

   The identities of the four settling Insurance Companies have not been publicly reported.

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Chinese Drywall: Homeowner's Insurance Coverage But For Two Exclusions.

   In a ground-breaking decision, a Federal Judge in Louisiana has held that there is Insurance Coverage for the Chinese Drywall Damages alleged, under the Insuring Agreements of at least two of the many Homeowner's Insurance Policies at issue in In re Chinese Manufactured Drywall Products Liability Litigation, Download In re Chinese Manufactured Drywall Prod. Liab. Litigation (E.D. La. MDL 2047, Order and Reasons Filed December 16, 2010) PUBLIC ACCESS, also published as 2010 WL 5288032 *8 (E.D. La. December 16, 2010)(Multi-District Litigation, Louisiana substantive law; authorized password required to access Westlaw).  Under the ASI Lloyds and Allstate Homeowner's Policies at issue there, the Chinese Drywall Damages alleged in that case constitute "covered 'accidental, sudden,' 'physical,' 'loss.'  These Plaintiffs' allegations indicate that the damage caused by the Chinese drywall was 'unexpected,' 'unknown,' and 'unusual.'  The Court must accept these allegations as true for purposes of the present issue [presented by 8 Motions to Dismiss and 2 Motions for Judgment on the Pleadings]."  In re Chinese Manufactured Drywall Products Liability Litigation, 2010 WL 5288032 at *8.  There was a big "but," however.

   The many Homeowner's Insurance Policies in that case also contained "faulty materials" Exclusions and "corrosion" Exclusions, which barred all Coverage for the Chinese Drywall Damages alleged.  Id. at *17-*21.

   On the other hand, the Federal Court held in that case that three Exclusions did not apply under Louisiana substantive law, and that the "ensuing loss" exemption (or Exclusion, depending on one's viewpoint and the wording of a particular Policy) did not apply under Louisiana substantive law, either:

1.  Not the Policies' Latent Defect Exclusions, id. at *12;

2.  Not the Policies' Pollution or Contaminant Exclusions, id. at *15;

3.  Not the Exclusion for Dampness or Temperature contained in one of the Homeowner's Insurance Policies at issue, id. at *17; and

4.  Not the "ensuing loss" provision found in the Homeowner's Insurance Policies at issue.  Id. at *24-*25.

Exclusions for similar Catastrophe Claims are addressed by Dennis J. Wall in Chapter 2 of "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters West 2010 Supplements).

The Chinese Manufactured Drywall Products Liability Mutli-District Litigation Case was posted for its Bad Faith features on Thursday, December 30, 2010 on Insurance Claims Bad Faith Law Blog.

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Washington State First-Party "Occurrence" Defined; Fact Question in Case.

   "The Court defines 'occurrence' to mean something that takes place or comes about, which is synonymous with an event or incident."   The Court defined "occurrence" three times in these identical words in Western & Clay, LLC v. Landmark American Insurance Co., Download Western & Clay, LLC v. Landmark Am. Ins. Co. (W.D. Wash. Case No. C09.1423, Order on Cross Motions for Summary Judgment, Filed Nov. 22, 2010) PUBLIC ACCESS also published as 2010 WL 4855879 *3, *4 (W.D. Wash. November 22, 2010)(authorized Westlaw password required to access Westlaw).

   This case presented "an open question" under Washington State Insurance Law:  "what the term 'occurrence' means in a first-party insurance policy where there is no definition of the term."  Western & Clay, LLC v. Landmark American Insurance Co., 2010 WL 4855879 at *2.  The answer involved high stakes in that case.

   Western & Clay and the other Plaintiffs took the position that "the weather in the 2006-2007 winter," including wind and rain storms which resulted in damage claimed by Western & Clay under Policies issued by Landmark and by Axis Surplus Insurance Company, constituted a single occurrence.  If one "occurrence" was found, then "the claimed loss would be subject to only one deductible and one 30-day waiting period."  Id. at *1.  The Insurance Companies took a single, opposite position that their policies, which the Court identified only as "first-party policies," instead applied to require multiple occurrences in that case.

   After defining "occurrence" in the First-Party Policies at issue under Washington State Law, the Federal Court declined to apply the definition to the record facts of that Case.  Rather, the Court found that there was a question of material fact as to the "number of occurrences" which would have to be resolved in that Case by a Jury.

   "Occurrence" Definitions in various contexts are given a close look in Section 3:107, "Chinese Drywall Damages:  Some Third-Party, Liability Insurance Coverage Issues" by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition, West Publishing Co. 2010 Supplement).

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Limited Relief for Chinese Drywall Damages Claims, Insurance Coverage Difficult.

   In a consolidated lawsuit pending in New Orleans, 5,600 Homeowners are suing 1,600 Defendants over alleged Chinese Drywall Damages.   The Defendants include "manufacturers, builders, installers and insurers" and the lawsuit is expected to take a long time to reach any resolution.  See Andrew Martin, "Drywall Flaws:  Owners Gain Limited Relief/Chinese Product Forces Many From Homes" p. A1, col. 1 (New York Times Nat'l ed., Saturday, September 18, 2010).  The first Jury Award of Chinese Drywall Damages seems to have come from Florida, and it was addressed in a post here on June 21, 2010.

   Insurance Coverage Issues have not been fully addressed under all types of Insurance Policies perhaps, but the first Insurance Coverage Case to be resolved was not very favorable to the Policyholders' positions.  See the post which analyzed that decision here, on June 16, 2010.  See in addition the April 15, 2010 post on Insurance Claims and Bad Faith Law Blog.

   General principles of Insurance Coverage govern the outcome in the absence of decided cases, of course.  They were first addressed here in a post going back to August 24, 2009.  The Insurance Coverage outlook simply does not look favorable for Coverage under Insurance Policies of various kinds for Chinese Drywall Damages Claims.

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Florida Jury Awards First Chinese Drywall Damages.

   A copyrighted Associated Press report published in the South Florida (Ft. Lauderdale) Sun-Sentinel on Saturday, June 19, 2010 announces what is described as the results of the first Jury Trial in the U.S. involving Chinese Drywall:  an award of $2,400,000.000 to Mr. and Mrs. Armin and Lisa Seifart, Plaintiffs, against Banner Supply Co., Defendant.  The bare outlines of the sketchy report do not reflect other parties.  See Curt Anderson, "Coconut Grove Couple Awarded $2.4 Million in First Chinese Drywall Trial" (South Florida Sun-Sentinel.com).

   According to this report, the damages award breaks down into three parts:

1.  Costs of removing the Chinese Drywall and repairing the residence;

2.  Loss of enjoyment, reportedly $1,600,000.00; and

3.  Reduction in resale value of the house.

   Indemnity claims under various Insurance Policies should be anticipated.

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Chinese Drywall Damages Alleged, Excluded From Homeowner's Policy Coverage.

  In the first ruling of its kind, a Federal Court applying Virginia law has held that the damages claimed in that case as a result of Chinese Drywall, would be covered but are excluded under at least four (4) Exclusions in the Homeowner's Insurance Policy at issue.  The case is Travco Insurance Co. v. Ward, Download Travco Insurance Co. v. Ward (E.D. Va. Case No. 2.10cv14, Order and Opinion on Motion for Summary Judgment Filed June 3, 2010) also published as 2010 WL 2222255 (E.D Va. June 3, 2010)(Westlaw subscription required to access Westlaw).

   Here is a concise summary of the major holdings of the Court in that case:

First, winning the battle but losing the war.

   1.  The Chinese Drywall Damages alleged in that case constituted "direct physical loss" as required for Coverage under the Homeowner's Policy.  Travco Insurance Co. v. Ward, 2010 WL 2222255 *8 (E.D. Va. June 3, 2010).

Second, winning one battle but still losing the war.

   2.  The Homeowner's Policy contained several standard Exclusions reviewed by the Court.  The first of these was a "latent defect" Exclusion.  The Court applied a legal rule that a latent defect under this Exclusion must be an integral part of the damaged property because of its own design, manufacture or construction.  This requirement is "intrinsic" to the latent defect Exclusion, the Court held.  For that reason, "it is clear that the damage to Defendant's air conditioner and the damage to his garage door were not caused by a latent defect."  Accordingly, such damage was not excluded by the latent defect Exclusion (although the Court would hold that such damage is excluded by other Exclusions).  However, the damage to the residence itself was an excluded loss caused by a latent defect, the Court held.  Id. at *11.

Third and long:  Losing the war.  Period.

   3.  The "faulty materials" Exclusion applied to exclude the Chinese Drywall Damages alleged.  This Exclusion "can apply even when the property in question may be serving its intended purpose."  Id. at *13.

   4.  The Homeowner's Policy's "corrosion" Exclusion also applied to exclude the Chinese Drywall Damages alleged.  Any contact with a corrosive agent is ordinarily enough for this Exclusion to be applied by the Courts, the Travco Court held.  "Based on the foregoing, the Court finds that the claimed losses to the structural, mechanical, and plumbing components of the Wqrd Residence to be excluded by the corrosion exclusion."  Id. at *14-*15.

   5.  An apparently "Total" Pollution Exclusion, reproduced on page *15, was also applied by the Court.  "Although the Drywall itself may not be a pollutant, the gases it releases are.  There is no dispute that the Chinese Drywall has released sulfur gases into the Ward Residence....  Both state and federal authorities recognize reduced sulfur gases as pollutants."  Id. at 18.

   6.  Finally, there was no covered "ensuing loss" under the Homeowner's Policy on the Damages Claims alleged in this case.  The Court held:

   The ensuing loss provisions in the Policy only provide coverage for a loss if three conditions are met.  First, the loss must be "ensuing."  Second, the loss cannot be "excluded by any other provision" in the Policy.  Finally, if the loss ensues from an original loss excluded by the latent defect, corrosion, or pollutant exclusion, the loss must be a loss to "property described in Coverages A and B."   Applying the language of the Policy to the facts at hand, the Court finds that the ensuing loss provisions are not applicable ....

Id. at *19.

   Following these holdings, the Federal Court granted the Homeowner's Insurance Company's motion for summary judgment, in part, and entered a Final Declaratory Judgment accordingly.

   More decisions can be expected shortly.

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Florida Governor Vetoes Property Insurance Bill, Signs Chinese Drywall Legislation.

   Reportedly citing concerns about possibly generating greater increases in Florida Property Insurance Premiums, Florida Governor Charlie Crist vetoed a pending Property Insurance Bill on June 1, 2010.  The Governor's statement does not appear to be available online, but newspapers and journals are full of the report about what the Governor has to say.  Here is the Insurance Journal story for example.

   On June 1, 2010, Florida Governor Crist also signed into law pending legislation affecting Property Owners afflicted with Chinese Drywall concerns.  Here is the Memorandum of reasons for signing that legislation which was issued by the Florida Governor's Office online:  Download Florida Governor Charlie Crist MEMORANDUM Governor Crist's Bill Actions Today, June 1, 2010.

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Costs of Remediating Chinese Drywall: Who Pays UPDATE.

      **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**     

   At least one Member of Congress, from Florida, one of the States hit the hardest by Chinese Drywall Damages Claims, has  "called on insurers to honor claims by affected families."  Javier C. Hernandez, "U.S. Urges Homeowners to Remove Chinese Drywall" p. B3, col. 1 (New YorkTimes Nat'l ed., Saturday, April 3, 2010).  On  Friday, April 2, 2010, the Consumer Product Safety Commission and the Department of Housing and Urban Development issued a joint Press Release "on Repairing Homes With Problem Drywall," in which the two Federal organizations tried very hard to have it both ways.  Download 04.02.10.Press Release. HUD and CPSC Issue Guidance on Repairing Homes With Problem [Chinese] Drywall.

First, they announced that they were issuing guidance "in recognition that many homeowners want to begin remediating their homes and offers a next step to homeowners whose homes have been determined to have problem drywall."  Small wonder that many  homeowners want to begin remediating their homes, although they will be the ones to initially pay for the costs of remediation, "which builders estimate at more than $100,000 a home."  Javier C. Hernandez, New York Times, supra.

In the next breath of the same Press Release, HUD and the CPSC tell affected homeowners that they should remove the tainted drywall:

   Based on scientific study of the problem to date, HUD and CPSC recommend consumers remove all possible problem drywall from their homes, and replace electrical components and wiring, gas service piping, fire suppression sprinkler systems, smoke alarms and carbon monoxide alarms.  Taking these steps should help both the source of the problem drywall and corrosion-damaged components that might cause a safety problem to the home.

HUD and CPSC April 2, 2010 Press Release, at unnumbered fourth paragraph on page 1.  [Emphasis added.]  The "Interim Remediation Guidance" which was also issued jointly by the CPSC and HUD on April 2, 2010, "calls for the replacement of:

1.   all possible problem drywall;

2.   all fire safety alarm devices (including smoke alarms and carbon monoxide alarms);

3.   all electrical components and wiring (including outlets, switches and circuit breakers); and

4.   all gas service piping and fire suppression sprinkler systems."

HUD and CPSC, "Interim Remediation Guidance for Homes With Corrosion From Problem Drywall" April 2, 2010, at 1.  [Emphasis in this "staff document" in original.]  Download Interim Remediation Guidance for Homes With Corrosion From Problem [Chinese] Drywall.CPSC and HUD.04.02.10.

   It is clear that the costs of remediation of the drywall itself are not likely to be borne by liability insurance, since it is the -- generally -- excluded work of the general contractor, or of the subcontractor, which carries the liability insurance.  The costs of repair of items and materials damaged by the drywall may be a different story, however, as they are arguably the damages caused by that work or product -- costs of repair now recommended by the United States Government.

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Florida Tells FEMA No Florida Chinese Drywall Homeowner's Coverage.

      **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.** 

   Florida's Division of Emergency Management has told the Federal Emergency Management Agency (FEMA) that Florida Homeowners faced with Chinese Drywall Damages Claims desperately need FEMA's assistance.  In a letter dated 03.10.10, Florida's DEM told the Federals' FEMA that this need is so desperate in part because there is no Homeowner's Insurance Coverage for Chinese Drywall Claims:

   According to Florida's Office of Insurance Regulation, homeowner's insurance does not cover the damages caused by the Chinese drywall. 

Download 03.10.10.LetterFlaDEMtoFEMA, at page 2.  The fact of this letter, without much detail, was briefly posted by Paul Owens on March 11, 2010 in House Keys Blog on the Ft. Lauderdale, Florida Sun-Sentinel.com web site.

Construction Defect Claims Handling is examined in a new article co-authored by Dennis J. Wall, who is the author of this web log, and Michael Latzo of Generali USA, "Construction-Defect Claims, A Step-By-Step Guide for Handling a Typical Loss" published in Claims Magazine in March, 2010.

Happy St. Patrick's Day!

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Chinese Drywall Claims: Casualty Deductions, DOMESTIC Drywall Damages Possible.

   The General Counsel of the U.S. Consumer Product Safety Commission has addressed "Chinese drywall and the casualty loss deduction available to taxpayers under section 165 of the Internal Revenue Code."  It is fair to say that the General Counsel has left open that possibility at this time.  11.23.09 Letter from Cheryl A. Falvey, General Counsel, U.S. Consumer Products Safety Commission, to Senators Bill Nelson, Mark Warner, and Jim Webb, and Member of Congress Glenn Nye.

   Further, it appears that a small number of Claims based on Damages allegedly caused by DOMESTIC Drywall can also now be expected.  According to Mr. Scott Wolfson handling Press Relations for the CPSC, about 25 Homeowners out of 2,100 who filed complaints about Drywall with the CPSC have reported "issues with American wallboard".  Associated Press Copyrighted Story, "U.S.-made Drywall Now Under Scrutiny" (Washington Post Online, Thursday, November 26, 2009).

   Whether any of these Drywall Claims will be covered under any Policy of Insurance remains to be determined, of course.  Based on general principles, including those which have been and continue to be reviewed in this space, the likelihood of Coverage for Drywall Claims does not appear to be great.

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CPSC Report Revealed.

   Following up further on Monday's post here, and on yesterday's post now, too, here is a pdf copy of the current CPSC report.   The CPSC has labeled it a draft, tentative report and it runs for 190 pages.  Its main statements were summarized in Monday's post.

   Happy Thanksgiving!

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Federal Consumer Product Safety Commission Report on Chinese Drywall Claims.

   Following up on yesterday's post, here is the CPSC press release summarizing its report on investigating Chinese Drywall Claims to date, which the CPSC released earlier this week.

   I am still on an internet hunt for the report itself.  When I locate it, I will post it here too.

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Chinese Drywall and the CPSC: "Strong Association," "Could Possibly Contribute".

   The Federal Consumer Product Safety Commission has reportedly issued a report on the results of its investigation into Chinese Drywall Claims to date:  Leslie Wayne, "Report Links Chinese Drywall to Home Problems" p. B6, col. 3 (New York Times Nat'l ed., "Business Day" Section, Tuesday, November 24, 2009).

   The CPSC apparently contains the statements that there is a "'strong association'" between Chinese Drywall and some forms of Damage, and that Chinese Drywall "'could possibly contribute'" to health problems.  Id.

   In addition, the CPSC reported that "not all Chinese-made drywall was tainted" in all of the estimated 60,000 homes in which it has been used so far.  Most of the homes in which Chinese Drywall has been used to date, have been constructed after Hurricanes.  Id.

When the CPSC report is located online, I will post it here.

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UPDATE: Alternative Restitution Sources for Chinese Drywall Claims -- Not Insurance Companies.

   Senator Bill Nelson (D-Fla.) reports that in his judgment, a source of payment for Chinese Drywall Damages Claims other than Insurance is:  The Chinese Government.  However, he also announced on Friday, November 6, 2009 that when he broached this idea to Chinese Government authorities, "They basically blew me off."  Janet Zink, "Nelson Says China Should Pay For Damage Caused by its Contaminated Drywall" (St. Petersburg Times Online, Friday, November 6, 2009).

This updates a post here on September 21, 2009.

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Chinese Drywall: "Not a Health Risk," Say Federal Agencies.

   In a new development possibly affecting pending and future Insurance Coverage Claims, the Federal Centers for Disease Control has concluded that, at this time, Chinese Drywall "does not pose a health risk."  See William E. Gibson and Paul Owers, "Evidence Lacking That Chinese Drywall Threatens Health, But More Tests Needed, Government Says" (South Florida Sun-Sentinel [Ft. Lauderdale], Thursday, October 29, 2009), a link which also includes a video feed from a television report of the news.

   In addition, the Federal Consumer Product Safety Commission has apparently come to the conclusion that the current evidence is insufficient for it to conclude that Chinese Drywall causes injuries.  Robert Trigaux's blog in the St. Petersburg Times Online has the story as of Friday, October 30, 2009.

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Chinese Drywall Insurance: Dropping Policyholders For Failure to Repair?

   The nightmare of Chinese Drywall Claims has gotten more nightmarish.  Homeowners have made Claims under their Homeowner's Insurance Policies.  Their Homeowner's Insurance Companies have denied the Claims, chiefly on the basis of Pollution Exclusions.

   Now, at least one Homeowner's Insurer is reportedly not renewing such Policies unless the Homeowners-Policyholders repair the damage caused by the Chinese Drywall, for which the Homeowners made Claims, which the Homeowner's Insurance Company denied.

   See Beatrice E. Garcia and Nirvi Shah, "Homeowners Could Lose Insurance Coverage Over Chinese-Drywall Woes" (Miami Herald Online, Thursday, October 8, 2009).

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Chinese Drywall: The NON-Insurance-Related Claims.

An interesting post on "Venture" Blog post by Robert Trigaux on St. Petersburg Times Online on August 12, 2009, "Tainted Chinese Drywall:  Regulators, Judges, Lawyers Moving Into Fast(er) Lane," points out several alternatives to Insurance that are being pursued at the present time.  Mr. Trigaux is the Times Business Columnist and Editor.

By way of brief background, the installation of Chinese Drywall in homes built in the United States has resulted in a flurry of reports and Claims arising out of its reportedly nasty smell of sulfur and corrosion of such things as "copper tubes in air conditioning."  Id.

The non-Insurance-related treatment of Claims arising out of the installation of Chinese Drywall includes:

1.  An investigation by the United States Consumer Product Safety Commission;

2.  Introduction in the U.S. Congress of the proposed Foreign Manufacturers Legal Accountability Act of 2009, which "could make it easier for homeowners with defective Chinese drywall" to sue the Chinese manufacturer(s) in U.S. Courts;

3.  Placing some 600 cases on "fast track" for Trial in Federal Court in New Orleans, Louisiana where the 600 cases have already been consolidated for pretrial discovery and  other issues; and

4.  Last but not least:  One person has telephoned the White House and left a message for the President of the United States describing the difficulties faced by homeowners with Chinese Drywall in their homes.

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More Insurance Issues and not-so-Great Drywall of China: ...

   ... Property Insurance Policies and Their Pollution Exclusions.

    As was the previously posted situation concerning Commercial General Liability ("CGL") Insurance Policies, no reported cases have been found involving Chinese Drywall and Property Insurance Policies.  Similarly, in the absence of decided cases, general principles of Insurance Law must provide the only available guidance to predict the outcomes of Property Insurance Coverage Claims involving Chinese Drywall.

    In general terms, Property Insurance Policies are of two kinds.  By far the most prevalent is "all risks" Coverage.  It provides Coverage for "all risks" except to the extent that they are Excluded under the Policy.  The other type of Property Insurance Policy is "specified causes of loss" Coverage under which only specified causes of loss are covered.  The "specified causes of loss" Property Policy thus presents an additional set of Insurance Issues not present in cases involving "all risks" Coverage.  See generally Dennis J. Wall, "Property Insurance Coverage Issues:  Exclusions," Chapter 7 and in particular § 7:1 in "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008).  "All Risks" Policies were involved in all of the cases discussed in this post.

    After examining all of the available standard Exclusions in "all risks" Property Insurance Policies, the Pollution Exclusion stands out as the Exclusion most likely to be involved in Property Insurance Coverage Claims involving Chinese Drywall.

    The standard form of Pollution Exclusion in Property Insurance Policies which otherwise provide Coverage for "all risks," reads in pertinent part to exclude loss caused by:

    (e) discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape is itself caused by a Peril Insured Against under Coverage C of this policy.

(Despite the reference to "a Peril Insured Against," an "all risk" Policy has never been found which provides Coverage for specified "Perils" instead of "all risks".  Perhaps as a result, there is never a Policy Definition of "a Peril Insured Against" under an "all risk" Property Insurance Policy.)

    "Pollutants" and "contamination" may be terms defined in another form in the Property Insurance Policy, or one or both may be defined as a part of the Pollution Exclusion, usually in the following words or in words like these:

Pollutants mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

Pollution Exclusions and Policy Definitions from Property Insurance Policies can be found in many reported cases, including Arnold v. Cincinnati Insurance Co., 276 Wis. 2d 762, 787, 688 N.W.2d 708, 720 (Wis. Ct. App. 2004)(subscription required), link to Official Slipsheet Opinion here; and Yale University v. CIGNA Insurance Co., 224 F. Supp. 2d 402, 421 (D. Conn. 2002), case closed following settlement and dismissal.

    In evaluating the potential outcomes of Property Insurance Coverage Claims resulting from the use and installation of Chinese Drywall, then, it is important to focus on whether the Court is or is not likely to determine that the case involves "pollutants" and "contamination," and, if so, whether such pollutants and contamination were discharged, were dispersed, seeped, migrated, were released, or escaped before they caused the damage complained of. 

"Property Damage" and the Not-So-Great Drywall of China: ....

   ....  The Coverage Issues Continue.

   Commercial General Liability or "CGL" Insurance Policies are the main kind of Liability Insurance Policies issued to general contractors and to subcontractors on construction projects.  They are then the main kind of Liability Insurance Policies that are likely to be involved in Chinese Drywall Claims, if at all.

    "Property Damage" in or under a CGL Policy generally includes physical injury to tangible property.  It can also include resulting loss of use of that tangible property, in basic and general terms.

    Like "Bodily Injury" Liability Coverage, "Property Damage" Coverage is ordinarily limited in a CGL by a requirement that there be a covered "Occurrence" within the Policy Period.  That time is often held by the Courts to be when the Property Damage manifested itself.  Cf. Download Mancini v. Insurance Corporation of New York (S.D. Cal. Order of Stormes, United States Magistrate Judge, Filed June 18, 2009), attached Official Slipsheet Opinion at 7 (Interrogatories which inquired into types of Damages, and into types and costs of Repairs held relevant where stated legal standard of Insurance Coverage was manifestation of the Property Damage).

    An alternative measure of when the Property Damage first Occurred is when the injury happens, not when someone sees it.  As in the case of "'cracks in the walls and ceilings'" of a home in Texas that were "allegedly caused by the faulty foundation" at issue in Download Wilshire Insurance Co. v. RJT Construction, LLC (5th Cir. Opinion Filed August 26, 2009), attached Official Slipsheet Opinion at 3-4, which were the alleged Property Damage and "not merely a warning of prior undiscovered damage," so the chemical degrading of other work caused by the fumes of Chinese Drywall is arguably the Property Damage itself and not merely a warning of prior undiscovered damage, either.

    

Chinese Drywall Damages: Coverage Issues--PART TWO: "Bodily Injury" Liability.

  Part One of this post set the background behind CGL Insurance Coverage Issues for Chinese Drywall Claims.  The installation of Chinese Drywall in homes built in the United States has resulted in many Bodily Injury and Property Damage Claims arising out of its reportedly nasty smell of sulfur and corrosion of tangible property such as copper tubing in air conditioning systems.   It is an easy task to locate commentaries on whether the Courts will declare Insurance Coverage for Chinese Drywall Claims, or not.  There are no reported Cases on the Insurance Coverage Issues however.

    General principles of Insurance Law will guide predictions in specific Claims situations until there is a body of decided Case Law on the subject.  Commercial General Liability Policies extend several types of Liability Insurance Coverage.  "Bodily Injury" Liability Coverage exists, in basic terms, for a fairly uniform class of Claims which qualify as Claims for bodily injury, sickness or disease, including death resulting therefrom.  This uniform CGL Policy Definition of covered "Bodily Injury" has found its way, for example, into Statutes.   See, e.g., Fla. Stat. § 627.727(1).

    It does not appear that many Chinese Drywall Claims involving sickness from inhaling whatever odors are perpetrated by Chinese Drywall will have a hard time qualifying as "Bodily Injury" under this definition.

    CGL Policies require more than that, however, in order for Bodily Injury Claims to be covered "Bodily injury".  CGL Policies also require an "Occurrence".  This is generally interpreted to mean an "accident".

    Exclusion a is a uniform Exclusion in CGL Policies.  It requires that the "occurrence" was neither expected nor intended from the standpoint of the insured.  Exclusion a almost always appears in the reported Case Law in conjunction with the Courts' finding that in a given Case there was, or was not, an "Occurrence" under a CGL Policy.  This happens so frequently that the Florida Supreme Court has held that an "Occurrence" under a standard CGL Policy means 'an accident neither expected nor intended from the standpoint of the insured.'  See State Farm Fire & Casualty Co. v. CTC Development Corp., 720 So. 2d 1072 (Fla. 1998), subscription required to Southern Second, or link to an unofficial copy of this Opinion made available through the efforts of Florida State University, here.

    The Florida Supreme Court has recently repeated its long-standing holding that the interpretation of an "Occurrence" under a CGL Policy is governed by the actual terms of the Policy and Florida Insurance Law.  Furthermore, an "Occurrence" under a particular CGL Policy can include a subcontractor's faulty workmanship that damages the Insured-General Contractor's own work.  United States Fire Insurance Co. v. J.S.U.B., Inc.,  979 So. 2d 871 (Fla. 2007), subscription required to Southern Second, or:  Download U.S. Fire Ins. Co. v. J.S.U.B., Inc. (Fla. Dec. 20, 2007).

    In the JSUB case, the Florida Supreme Court noted that the CGL Insurer in that case argued that there was no CGL Insurance Coverage for the cost of repairing structural damage to homes, "such as the damage to the foundations and drywall."

    It seems likely that, depending on the actual terms of the CGL Policy and local Insurance Law, an "Occurrence" under a particular CGL Policy can also be held by the Courts to include situations where a drywall subcontractor provides faulty materials (i.e., Chinese Drywall) that injure persons in the structure or building being built by the Insured-General Contractor in a given case.

Next:  "Property Damage" Liability Coverage, or Not, Under a CGL for Damage to Property Claims in Chinese Drywall Cases.

Please Read The Disclaimer. 

Chinese Drywall Damages: Some Insurance Coverage Issues--PART ONE.

    Commentators are easy to find on Insurance Coverage Issues surrounding Chinese Drywall Claims.  No reported Cases decided by Courts have been found, however.  Until actual Cases have been decided, general principles of Insurance Law must predict the outcome of Insurance Coverage for Chinese Drywall Claims as a result.

    Attorneys who may be involved in such Cases are requested to please send me the cites of their Cases.  When such decisions become available, they will be posted here.  On the other hand, if there are no future Comments from attorneys anxious to share their legal results, it will confirm that there are still no Cases at that time.

    The installation of Chinese Drywall in homes built in the United States has resulted in many Bodily Injury and Property Damage Claims arising out of its reportedly nasty smell of sulfur and corrosion of tangible property such as copper tubing in air conditioning systems.  The author of this post has drawn from the excellent summary of the damages caused by Chinese Drywall by M.P. McQueen, "The Prisoners of Drywall" p. D1, col. 2 (Wall Street Journal, "Personal Journal" Section, Thursday, August 6, 2009).

    However, this post is not intended to be a manual or how-to guide on recovery for persons injured or damaged by Chinese Drywall.  Other remedies besides Insurance may exist.  See Download XL Specialty Insurance Co. v. Interstate Industrial Corp., Interstate Drywall Corp., et al. (D.N.J. Opinion Filed August 18, 2009), attached Official Slipsheet Opinion at 1, 6 (denying motion to dismiss for failure to join party under Fed. R. Civ. P. 19; Defendants' Agreement of Indemnity contained "collateral security provision" requiring Defendants to deposit with Plaintiff Surety certain money, upon demand of the Plaintiff, for reserves "in an amount that is either the sum of all pending claims asserted against Plaintiff on a bond or the reserve Plaintiff established because it issued bonds on Interstate's behalf.").

    This extended post will address, in installments, whether there is or may be Insurance Coverage under standard Commercial General Liability Insurance and Homeowner's Insurance Policy provisions.  Not all forms of Liability Insurance or Property Insurance will be discussed here, at least at first.

    Next:  The Insurance Coverage Issues Surrounding "Bodily Injury" and "Property Damage" Coverage, or Not, Under Commercial General Liability Insurance Policies:  General Principles for a Specific Claim in the Absence of Decided Cases.

Please Read The Disclaimer.