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Florida Insurance Commissioner Says Chinese Drywall Not Covered Under Homeowners' Policies

Nov 11, 2009 | Parker Waichman LLP

Chinese drywall is not a covered peril under homeowners' insurance polices, according to the Florida Insurance Commissioner.  Speaking to state legislators, Kevin McCarty warned that insurers have no obligation to cover defective Chinese drywall.

The U.S. Consumer Products Safety Commission (CPSC) has received about 1,897 reports from residents in 30 states, the District of Columbia, and Puerto Rico concerning Chinese drywall. Gases emitted from Chinese drywall are being blamed for significant property damage, including damage to HVAC systems, smoke detectors, electrical wiring, metal plumbing components, and other household appliances. These gases also produce a sulfurous odor that permeates homes, and cause metals, including air conditioning coils and even jewelry, to corrode.

People living with Chinese drywall have also suffered eye, respiratory and sinus problems that may be linked to the gases. The drywall problems have forced many people out of their homes, and some families are dealing with the heavy financial burden of paying both rent and mortgage payments. Those unable to afford additional rent have no choice but to stay in their smelly – and possibly hazardous – homes.

Florida has long been deemed "ground zero" in the drywall disaster.  More than 1,300 reports to the CPSC have come from that state, and it is estimated that as many as 35,000 Florida homes could be impacted.  

According to McCarty,  having Chinese drywall in a home is "a malfunction based upon a defective material that was installed in the building. And that historically has been excluded from a homeowner's policy."  He also warned that homeowners could lose coverage altogether if they move out of their homes for extended periods of time under an "underwriting standard" that allows companies to drop coverage of unoccupied dwellings.

In McCarty's view, drywall manufacturers are liable to the damage their wallboard has done to homes in Florida.  Hundreds of Chinese drywall homeowners in the U.S. have already  filed lawsuits hoping to recover restitution from Chinese manufacturers for the damage done to their homes, but the process is proving difficult.

For instance, one of the companies suspected of manufacturing tainted drywall, Taishan Gypsum Co. Ltd., is controlled by the Chinese government. As we reported previously, Taishan was recently hit with a default judgment by U.S. District Court Justice Eldon E. Fallon, who is overseeing the massive Chinese drywall litigation in federal court in Louisiana, for failing to respond to lawsuits.

Recently, another Chinese firm, Knauf Plasterboard (Tianjin) Co., Ltd., offered to waive its rights under The Hague Convention for the Service of Process Abroad for homeowners who sign on to an omnibus class action lawsuit against the firm by December 2, 2009. The Hague Convention for the Service of Process Abroad requires claimants to pay approximately $15,000 per lawsuit, which allows for the translation of legal documents into Chinese and to have them presented to the appropriate authorities in China to obtain service on the Chinese drywall manufacturers. These requirements were a huge obstacle to claimants, and Knauf’s offer to waive them will greatly streamline the litigation process for plaintiffs who make the deadline.

To be eligible for the omnibus lawsuit, claimants must submit pictures or other proof that they have wallboard made by Knauf Plasterboard in their homes by December 2, 2009. Any Chinese drywall homeowner interested in becoming a party to this lawsuit must start now by contacting an attorney and arranging to have their home inspected.

Parker Waichman LLP, the first law firm to file a federal Chinese drywall lawsuit, is offering assistance to any homeowner interested in joining the Knauf Plasterboard lawsuit. Free consultations are available through the firm’s website at www.yourlawyer.com, or by calling 1-800-YOURLAWYER (1-800-968-7529).

The offer applies only to the consolidated federal litigation, not individual cases. The December 2 deadline is a hard deadline, and the omnibus complaint will not be amended at a later date to add more people. Claimants will also face a second deadline – December 14 – by which time they must have filled out a profile form.


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