During the housing boom from 2004 to 2009, approximately 309 million sq. ft of Chinese drywall was imported into the
Claims involving Chinese drywall typically are product defect claims. The claims allege that drywall was defectively manufactured as opposed to improperly installed. Initially, claims focused on the drywall manufacturers with homebuilders getting a pass. This trend has changed and suits against homebuilders have become common. Builders therefore must be prepared for the possibility of litigation and should take measures to reduce their exposure.
How successfully builders will be in quickly recovering repair costs, among other costs, from insurance carriers will depend in part on the law of the state in which the insurance policy is construed. Insurers in some jurisdictions are relying on their policies’ pollution exclusion in refusing to extend coverage for losses incurred as a result of Chinese drywall. The pollution exclusion, contained in most commercial general liability policies, typically provides that bodily injury or property damage caused by the discharge, dispersal, seepage, migration, release or escape” of a “pollutant” is not covered. The term “pollutant” is generally defined as “any solid, liquid, gaseous or thermal irritant or contaminate, including smoke, vapor, suit, fumes, acids, alkaloids, chemicals and wastes.”
The primary issue in obtaining coverage in face of such an exclusion is whether the alleged contaminate constitutes a “pollutant” as contemplated by the policy.
Judge Fallon, with the help of plaintiff and defense steering committees, is selecting five (5) test cases to be tried by year end. This accelerated time table undoubtedly will encourage settlement, as the outcome of these five cases will in large measure define the results of all others.