Insurance Companies Favored in Chinese Drywall Decision

Louisiana homeowners harboring dangerous Chinese drywall in their homes received a disappointing blow last week when a federal judge overseeing litigation in New Orleans dismissed their claims against 10 insurance companies. While the judge found in favor of homeowners on some issues, overall it was determined the cases pursued against the companies would be dismissed.

The Chinese Drywall Issue

Well over a year ago, homeowners in Louisiana began to complain of rotten egg smells coming from the walls, corroding pipes and even ill family members as a result of defective Chinese drywall that needed to be removed.

Homeowners began to contact their companies and make home insurance claims only to be turned down, or worse, dropped from their companies for making claims that could cost tens of thousands of dollars.

A group of homeowners later came together to file against companies that refused to pay for drywall replacement and time lost in homes. The year-long fight has resulted in U.S. District Court Judge Eldon E. Fallon’s decision last week to find in favor of the insurance companies.

Why Insurance Companies Were Favored

In the lawsuit, home insurance companies attempted to argue they had numerous exclusions in their policies ranging from dealing with pollution to relating to dampness. They expressed Chinese drywall fit into their list of exclusions and therefore, they were not liable for paying claims.

Though attorneys for the homeowners asserted the exclusions had nothing to do with the drywall–and the judge agreed the drywall was causing physical loss in affected homes–Fallon ultimately found in favor of the companies by agreeing that the drywall issue related to corrosion and faulty materials.

While Fallon determined the insurers are not responsible for the claims, all is not lost for homeowners. He expressed his plans to leave the door open for future home insurance claims, especially if the Chinese drywall resulted in a second accident like a fire.