No Coverage for Damages or Losses Resulting from Chinese Drywall

January 19, 2011
Tred R. Eyerly - Insurance Law Hawaii

In this multi-district litigation, the court considered the insurers’ motions to dismiss plaintiffs’ suits for alleged property damage caused by Chinese drywall. In Re: Chinese Manufacture Drywall Products Liability Litigation, 2010 U.S. Dist. LEXIS 133497 (E.D. La. Dec. 16, 2010). After determining there was coverage, the court considered several exclusions and the ensuing loss provisions in the various policies. Ultimately, the court found no coverage and granted the motions to dismiss. Plaintiffs filed suit against the manufacturers, distributors, sellers and installers of Chinese drywall and their insurers. Plaintiffs alleged the drywall emitted foul odors, and damaged metal and electronic elements and devices in their homes. Considering the insurers’ motions to dismiss and for judgment on the pleadings filed by several of the insurers, the court initially noted that the policies all defined "property damage" to include loss of use of tangible property. Therefore, the damage caused by the Chinese drywall constituted a covered physical loss since the drywall prevented the Plaintiffs from fully using and enjoying their homes. The Court then turned to the policies’ exclusions. First, the insurers failed to meet their burden to demonstrate that the damage caused by the Chinese drywall was a latent defect. Second, the pollution and/or contamination exclusion was not applicable. The Chinese drywall was not environmental pollution as contemplated by the Louisiana Supreme Court’s analysis of the Read Full Story...



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