Chinese Drywall Coverage Denied in Virginia
Virginia Court Denies Coverage for Chinese Drywall Claims
Carrie P. Appler
September 15, 2011
A federal judge in Virginia ruled last week that claims arising from the incorporation of Chinese drywall into homeowners’ residences are not covered by the contractor’s liability policies because they are subject to the policies’ pollution exclusion.
Several homeowners filed suit against Harbor Walk Development to recover damages for injury and damage allegedly caused by Harbor’s installation of Chinese drywall in their homes. Evanston had issued three commercial general liability insurance policies to Harbor that contained language obligating Evanston to defend and indemnify Harbor from lawsuits if certain conditions were met. The policies provided coverage for injury or damage caused by Harbor’s accidental conduct, but excluded coverage for injury or damage that “would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.”
Evanston filed a declaratory judgment action, seeking a declaration that it was not obligated to defend or indemnify Harbor in the underlying lawsuits because the pollution exclusion applied. The homeowners, in contrast, argued that the pollution exclusion was ambiguous because it was unclear whether it applied to traditional pollution or non-traditional pollution. As a result, the homeowners argued that the exclusion should be construed against Evanston and, therefore, found inapplicable.
The court granted Evanston’s motion for summary judgment. In so doing, the court noted that nothing in the language of the pollution exclusion suggested that the parties intended only traditional or outdoor pollution scenarios to be excluded from coverage. Rather, the court stated that the pollution exclusion clearly and unambiguously applied to injuries caused by both traditional and non-traditional pollution. The court then opined that the pollution exclusion barred coverage for the homeowners’ claims because the sulfides and noxious gases alleged in the underlying lawsuits amounted to “pollutants” within the meaning of the policy and that the underlying complaints alleged movement of the gases that fell within the scope of the pollution exclusion.
www.lexology.com