Devon

March 15, 2013

United States: Pennsylvania Makes Its Mark On National Chinese Drywall Coverage Dispute With "One Occurrence" Decision

Source: http://www.mondaq.com, March 12, 2013
By: Andrea Cortland, Cozen O’Connor

On February 15, 2013 a Pennsylvania federal district court held that the shipment of defective drywall from China to the United States constituted one “occurrence” for purposes of insurance coverage, and the occurrence took place when the damage caused by the drywall manifested itself in the residences or buildings of the underlying plaintiffs. With this ruling, Pennsylvania joins Virginia as one of the few states to opine regarding the number of occurrences in the Chinese drywall context.

Devon International, Devon International Industries, and Devon International Group (collectively, Devon), imported a single order of drywall from China to Pensacola, Fla. Unbeknownst to Devon, the drywall was defective, as it contained an inordinately high amount of sulfur, and a few years after selling the drywall to distributors in the United States, Devon was hit with a multitude of Chinese drywall lawsuits in various jurisdictions.

As is common with Chinese drywall cases, the plaintiffs in the underlying lawsuits generally alleged the sulfur emitted by the drywall damaged their real and personal property. Faced with these lawsuits, Devon turned to its liability insurer, Cincinnati Insurance Company (Cincinnati) to defend and indemnify it under the liability policies issued to it by Cincinnati for two consecutive policy periods. Although Cincinnati accepted Devon’s tender, the parties disagreed as to whether the underlying claims against Devon arose out of a single occurrence or multiple occurrences. Litigation between Devon and Cincinnati ensued.…

February 22, 2013

Pennsylvania court holds drywall claims arose out of single occurrence

Source: http://www.lexology.com, February 19, 2013
By: Brian Margolies, Traub Lieberman Straus & Shrewsberry LLP

In its recent decision in Cincinnati Ins. Co. v. Devon International, 2013 U.S. Dist. LEXIS 20659 (E.D. Pa. Feb. 15, 2013), the United States District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, had occasion to consider whether a series of Chinese drywall-related claims, arising out of the insured’s importation of a single batch of defective drywall, were properly considered a single occurrence, or multiple occurrences.

The insured, Devon, was a U.S.-based sourcing agent for Chinese manufactured products. In 2006, it was retained to procure drywall manufactured in China. Devon subsequently made a single purchase of drywall from Shandong – a Chinese manufacturer – and then shipped the drywall to Florida for use in construction. The majority of the drywall was shipped to Devon’s initial customer; however, Devon also sold a portion of the drywall to other individuals and entities in Florida for use in construction. In 2009, Devon received a letter from its initial customer seeking a defense and indemnification in connection with a “multitude” of Chinese drywall claims filed in several jurisdictions. These underlying plaintiffs alleged damage in late 2008 and throughout 2009.

Cincinnati Insurance Company insured Devon under consecutive general liability policies, the first of which was issued for the period November 20, 2008 to November 20, 2009, and the second for the period November 20, 2009 to November 20, 2010. The policies provided coverage for property damage arising out of an occurrence, but only to the extent the property damage occurred during the policy period. Cincinnati and Devon disputed whether the underlying claims should be considered multiple occurrences, thus potentially triggering coverage under both of Cincinnati’s policies, or a single occurrence triggering coverage only under one of the policies.…