Chinese Drywall Insurance Questions

Chinese drywall ruling does not settle insurance questions

Bradenton Herald
By Duane Marsteller
June 9, 2010

MANATEE - A federal judge has ruled that a Virginia homeowner's insurance policy doesn't cover damages caused by corrosive Chinese drywall, but legal observers disagreed Tuesday on its significance.

U.S. District Judge Robert Doumar ruled last week that TravCo Insurance Co.'s policy on Larry Ward's home excluded coverage for televisions, air conditioning equipment and other items that Ward says were damaged by the drywall's sulfur gas emissions.

The judge also ruled the insurer did not have to pay for replacing the drywall in the Virginia Beach home.

Thousands of U.S. homeowners, including many from Florida, contend the drywall emits sulfuric gases that corrode metal and make them sick.

Many have sought relief under their homeowner insurance policies but insurers routinely have denied such claims, saying they fall under pollution, defective product or other policy exclusions. That has prompted several lawsuits.

Doumar's 37-page ruling is among the first to address insurance coverage involving the problematic drywall. The ruling will be carefully vetted in legal and insurance circles, an observer said.

"This case coming down from Virginia is the most significant so far because it's more detailed," said Randy Maniloff, a Philadelphia lawyer who has represented insurance companies and has been following the drywall insurance litigation. "This is an evolving issue and the first big, comprehensive decision carries a lot of weight going forward."

But Tom Baker, an insurance law professor at the University of Pennsylvania, was skeptical. Doumar's ruling was a small victory for insurers as a whole because it was based on state law, which governs insurance contracts, he said.

"This is ultimately a question of state law, and the courts that ultimately matter in the long run are state courts," Baker said.

Doumar acknowledged his ruling would be limited. "The Court emphasizes the narrowness of its holding," he wrote in his opinion, issued last Thursday. He also wrote that courts have long disagreed over what falls under those policy exclusions, despite being the subject of numerous cases.

That includes a Louisiana state judge's March 22 decision that an insurance company could not invoke the exclusions in defending against a Chinese drywall lawsuit filed by a homeowner.

http://www.bradenton.com/2010/06/09/2346766/chinese-drywall-ruling-does-not.html