The insurer sought to avoid coverage for claims against its insured, a supplier of Chinese drywall. The court ruled, however that the exclusions relied upon by the insurer did not bar coverage. See Auto-Owners Ins. Co. v. Am. Building Materials, Inc., 2011 U.S. Dist. LEXIS 52837 (M.D. Fla. May 17, 2011).

   The insured, American Building Materials, Inc., was a supplier of drywall and other building materials. ABM supplied Chinese drywall to KM Home, a builder who install the drywall in numerous homes it was building. The homeowners complained of emissions of smelly gasses, the corrosion and blackening of metal wiring, surfaces and objects, and the failure of HVAC units and appliances. Numerous lawsuits were filed against KB Home.

   KB Home, in turn, filed suit against ABM, seeking to recover damages suffered by KM Home arising out the defective drywall supplied by ABM. ABM sought coverage under its CGL policy. The insurer filed for a declaratory judgment that it had no duty to defend or indemnify, relying on various exclusions in its policy.

   The insurer first relied on the pollution exclusion, which provided an exclusion for,

(1) . . . "[P]roperty damage" arising out of the actual alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:

    (i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor.

    The court determined the pollution exclusion was not applicable. ABM, as a material supplier, completed its "operations" when the materials were delivered to the job site. The property damage allegedly arising from completed installation of drywall was not while ABM was performing operations, and, therefore, was not excluded under the pollution exclusion.

   Next, the insurer relied upon the "sistership" exclusion, Exclusion 2.n. This exclusion barred coverage for any expense incurred for the loss of use, recall, inspection, removal, etc.,of an insured's product if such product was "withdrawn or recalled from the market . . . because of a known or suspected defect . . . ." Here, there was no allegation that the Chinese drywall had been recalled from the market.

   Finally, the insurer relied upon the "your products" exclusion. The policy excluded coverage for "'property damage' to 'your product' arising out of it or any part of it." The policy defined "your product" as "any goods or products, other than real property." Under Florida law, improvements to real property were included in the definition of real property. Because the drywall became "real property" once it was installed, it was not within the definition of "your product" under the policy.