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Chinese Drywall Excluded from Insurance Coverage

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If you have a possible Chinese Drywall claim against you insurance carrier, and you have a pollution exclusion provision in your policy, you don’t want to litigation in the Norfolk Division of the United States District Court for the Eastern District of Virginia. In a recent decision, Judge Smith ruled in Dragas Management Corp. v. Hanover Insurance Co., No. 2:10cv547, Aug. 8, 2011, that Dragas’ pollution exclusion was unambiguous and so barred coverage.

Judge Smith found that the focus should be on the sulfur gases that came from the drywall and caused the damages, and that since they were pollutants, they therefore came within the exclusion. So she granted judgment for the insurance carriers. This probably isn’t good news for anyone. Without insurance coverage, this leaves monetary responsibility with developers, contractors, and suppliers, who may not be able to sustain those losses. This in turn could leave injured parties without a remedy. We’ll have to see how it continues to shake out.

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