Chinese Drywall Homeowners’ Insurance Policies Don’t Cover Damage: Judge

A federal judge has ordered that Chinese drywall lawsuits filed against 10 homeowners’ insurance companies be dismissed after determining that some provisions in their policies allowed them to avoid covering damages caused by the toxic drywall. 

On Friday, U.S. District Judge Eldon Fallon ruled that provisions in insurance policies that state they will not cover damage caused by faulty or defective materials used in the home’s construction can be applied to Chinese drywall, which has caused thousands of homes to be infused with a sulfuric smell, corroded wiring and damaged appliances.

While Judge Fallon sided with homeowners on a number of provisions the insurance companies tried to use to get out of paying for damages to homes, they only needed one provision to stick to have the cases dismissed.

Homeowners also tried to argue that even if the provisions in their policies prevented coverage of damaged drywall, the insurance companies should still have to cover “ensuing losses” like corrosion and odors. However, Judge Fallon rejected that argument as well.

The drywall lawsuits were brought against the companies by Louisiana homeowners who felt that the damage done to their homes by drywall used in their construction should be covered, at least in part, by homeowner’s insurance.

The U.S. Consumer Products Safety Commission (CPSC) has received thousands of complaints from across the United States from homeowners who say that the toxic Chinese wallboard releases sulfuric odors that corrode wiring throughout the home, damage appliances and may cause various health problems. Many of the problems with the Chinese drywall have been confirmed by laboratory testing.

Millions of sheets of the toxic drywall were imported from China into the United States due to a domestic shortage caused by a housing boom and construction following a series of hurricanes that struck the southeastern United States.

Homeowners throughout the United States have filed lawsuits over Chinese drywall, naming manufacturers, distributors and builders. In June 2009, all of the federal drywall litigation was consolidated and centralized in an MDL, or Multidistrict Litigation, in New Orleans under Judge Fallon.

A Chinese drywall settlement with one manufacturer, German-based Knauf Plasterboard Tianjin (KPT), has resulted in hundreds of homes undergoing repairs at the company’s expense, and is likely to be increased to thousands. However, the settlement only applies to those who can confirm that their drywall was made by KPT. Other Chinese drywall importers, particularly those based in China, have refused to even answer court summons or acknowledge the lawsuits.