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Home insurance companies win in Chinese drywall dispute
By Insure.com staff

Insurers don't have to pay home owners for claims due to faulty Chinese-manufactured drywall, a federal judge ruled Dec. 16.

U.S. District Court Judge Eldon Fallon in New Orleans granted the 10 motions of nine insurance companies to dismiss consolidated lawsuits against them concerning losses from the faulty drywall.

The home owner plaintiffs, who are also suing manufacturers, distributors, sellers and installers of Chinese drywall, say the drywall emits foul odors and damages metal, electronics and appliances in their homes. Last year, the U.S. Consumer Product Safety Commission released a study showing a link between Chinese drywall and metal corrosion. Insurers denied the claims when home owners sought coverage for losses under their home insurance policies.

The policies at issue were "all-risk" policies, meaning they covered all risks unless specifically excluded. Insurers argued they should not have to cover the losses from the drywall because they came under several policy exclusions, and the judge agreed that the claims fell under two exclusions--"faulty materials" and "corrosion." The judge determined that "latent defect" and "pollution or contamination" exclusions did not apply.

In reaching his decision, the judge cited dictionary definitions for terms when they were not spelled out in insurance contracts or Louisiana state law. He referred to Louisiana Supreme Court guidance stating that words and phrases in an insurance policy should be construed "using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning."

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