Chinese Drywall

November 26, 2013

Absolute pollution exclusion does not unambiguously exclude coverage for Chinese Drywall claims under Massachusetts law

Source: http://www.lexology.com, October 31, 2013
Bby: Jan A. Larson, Jenner & Block

A Colorado state court applying Massachusetts law recently denied an insurer’s motion for summary judgment, holding that its absolute pollution exclusion and the term “pollutant” are ambiguous as applied to Chinese Drywall and should be construed in favor of coverage for the insured. ProBuild Holdings, Inc. v. Travelers Prop. Cas. Co. of America, No. 10-0378 (Colo. Dist. Ct. Oct. 4, 2013). In general, Massachusetts looks to the reasonable expectations of the insured in determining coverage, and has refused to apply the absolute pollution exclusion to activities that arise in the course of normal activities simply because the accident happens to involve a “discharge, dispersal, release or escape of an irritant or contaminant,” as those terms commonly appear in an insurance policy’s exclusionary language. Appreciating the nuances of Massachusetts law, the court distinguished external environmental contamination from internal property damage and personal injury, even where caused by the same substance. The court noted that “context is key” and held that the term “pollutants” is ambiguous as applied to any substances potentially emitted from Chinese Drywall installed in a residential home. In so holding, the court distinguished a contrary, unpublished decision from the Eleventh Circuit interpreting Massachusetts law – Granite State Ins. Co. v. American Building Materials, Inc., 504 F. App’x 815 (11th Cir. 2013).

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October 18, 2013

Mississippi Court holds pollution exclusion applicable to Chinese drywall claim

Source: http://www.lexology.com, October 15, 2013
By: Brian Margolies, Traub Lieberman Straus & Shrewsberry LLP

In its recent decision in Prestige Properties, Inc. v. National Builders and Contractors Ins. Co., 2013 U.S. Dist. LEXIS 146738 (S.D. Miss. Oct. 10, 2013), the United States District Court for the Southern District of Mississippi had occasion to consider the application of a total pollution exclusion in a general liability policy to underlying claims involving Chinese-manufactured drywall.

The insured, Prestige Properties, was a Mississippi contractor hired to perform repairs on a client’s home that had been damaged as a result of Hurricane Katrina. Part of these repairs involved replacing damaged drywall. Prestige later was named as a defendant in the Chinese drywall multidistrict litigation pending in the Eastern District of Louisiana. Prestige’s client alleged that Prestige had used defective Chinese manufactured drywall in their home and that the drywall resulted in bodily injury (eye irritation, nausea, respiratory ailments, etc.) and property damage (corrosion and damage to appliances, wiring and object with metal surfaces).…

October 16, 2013

United States: Is The Absolute Pollution Exclusion Absolute? It Depends On Which State Answers The Question

Source: http://www.mondaq.com, October 14, 2013
By: Robert S. Sanoff, Foley Hoag LLP

The battle over the scope of the absolute pollution exclusion in general liability policies continues to be fought in the context of defective drywall manufactured in China. An earlier blog entry discussed a Virginia court that had concluded that there was no coverage for defective drywall claims, rejecting decisions from a number of states that had ruled that the absolute pollution exclusion should be limited to industrial pollution claims, particularly Superfund claims.

In Probuild Holdings, Inc. v. Travelers Property Casualty Company of America, a Colorado court relying on Massachusetts and Florida law recently took the other side from the Virginia court. The Colorado court denied a summary judgment motion by an insurer in a defective drywall claim. Citing the Massachusetts case that suggested that the absolute pollution exclusion should be limited to industrial pollution claims, particularly Superfund claims, and not defective product claims involving residential properties, the court concluded that the meaning of the exclusion was at best ambiguous and ambiguity would typically be construed against the insurer. Although suggesting that the policyholder appeared at summary judgment to have the stronger position, the Colorado court left for trial the final resolution.

For the moment at least, the scope of the absolute pollution exclusion depends on which jurisdiction’s law applies.

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January 15, 2013

Virginia Supreme Court construes four exclusions as barring coverage in first-party Chinese drywall claim

Source: http://www.lexology.com, January 7, 2013
By: John David Dickenson and Matthew Criscuolo, Edwards Wildman Palmer LLP

On November 1, 2012, the Virginia Supreme Court issued its opinion in TravCo Insurance Company v. Ward,1 and became the first state high court to determine that several exclusions contained within a homeowners’ insurance policy were applicable and barred coverage for damages associated with Chinese Drywall. Specifically, the Court considered whether damages allegedly caused by Chinese Drywall fell within one or more of the following policy exclusions: (i) latent defect; (ii) faulty, inadequate, or defective materials; (iii) rust or corrosion; or (iv) pollutants. Applying traditional contract principles as well as those doctrines particular to insurance policies, the Court held that all four exclusions applied to bar coverage under a homeowners’ insurance policy.

Factual Background

Like many Americans during the recent housing boom, in May 2007, Larry Ward purchased a newly constructed home in Virginia Beach built using drywall imported from China. Mr. Ward purchased a homeowners’ insurance policy through TravCo Insurance Company, and renewed the policy for the next two years. About two years after he bought the home, beginning in May 2009, Mr. Ward and his family began to experience problems, including health issues and property damage.2 Mr. Ward hired an expert, Zdemek Hejzlar, Ph.D., who determined the home’s Chinese Drywall was to blame.3 Dr. Hejzlar has a doctorate in Occupational Safety and Health Engineering and has investigated hundreds of homes and condominiums reporting problems associated with Chinese Drywall.4 Armed with the results of Dr. Hejzlar’s findings, Mr. Ward commenced a lawsuit in Virginia state court against the developer, builder and drywall contractor for his home, alleging claims for breach of contract, breach of warranties, negligence, unjust enrichment, nuisance, and other counts claiming that his home “was built with defective drywall.”5…

July 23, 2010

Initial Testing Confirms Suspect Material in Chinese-Made Drywall

The Environmental Protection Agency has found that Chinese-made drywall, suspected of causing serious problems in homes in Florida, Louisiana and several other states, contains three materials not found in US-manufactured wallboard. The testing was done at the request of Senators from Florida and Louisiana, where investigations have been launched into complaints from homeowners whose drywall smells like rotten eggs, is causing corrosion of household appliances and wiring, and is believed to be creating health problems like asthma, headaches and insomnia. The EPA insists that further tests are needed to confirm whether the
Chinese-manufactured drywall is indeed the cause of these issues. The potential scope of the problem is significant. An estimated 36,000 homes in Florida are believed to contain the problematic material, with as many as an additional 100,000 homes nationwide impacted. In addition, much of the drywall used in post-Katrina construction in Louisiana was Chinese-made.…