The Controversy and Uncertainty
This much is clear: it is not certain how the courts will interpret insurance policies and insurance policy exclusions, as they apply to Chinese Drywall claims.
Many predict that the insurance industry will rely on what is called a “pollution exclusion” to deny Chinese Drywall insurance claims.
Most contractor General Liability insurance policies contain the Total Pollution Exclusion. All claims adjusters who have been interviewed will take the position that the sulfur dioxide fumes released by the defective Chinese drywall are ‘pollution’ and as a result all legal defense and damages under the General Liability policy will be denied.
While the press release largely discussed builder general liability policies, the same controversy exists for homeowners insurance policies.
Further, the controversy and predication are proving to be true, as across the country there are already suits on the issue.
As already reported on the Chinese Drywall Blog, in Baker v. American Home Insurance Company, a homeowner sued their insurance carrier claiming coverage for Chinese Drywall claims. In Builders Mutual v. The Dragas Company, a builder’s general liability insurer brought a declaratory judgment action to have a judge declare that Chinese Drywall damage was not insured.
The claimed exclusion: Pollution.
Both suits are very important to homeowners with Chinese Drywall claims. But for Louisiana homeowners….how will the issue be resolved?
Why Louisiana Is Different
Unlike in South Carolina and most other states, Louisiana has very narrowly interpreted the pollution exclusion. We reviewed the applicability of the pollution exclusion to Louisiana insurance claims in a previous blog post here: Home Builders v. Insurance Pollution Exclusion.
There, we quoted the seminal case in Louisiana on this subject titled Doerr v. Mobil Oil Corp. The long and short of things: “Using the Doerr analysis, it seems that builders or suppliers would not be considered a “polluter” within the meaning of the exclusion” in Chinese Drywall claims.
For homeowners with Chinese Drywall, and builders with potential exposure, this is welcome news. While the issue remains unresolved, the Doerr decision at least gives homeowners and homebuilders hope that Chinese Drywall losses may be insured, and therefore, within reach.
The problem now? Getting homeowners and home builders to timely make claims and pursue recovery.