The insured homeowners were unsuccessful in arguing around the policy's exclusions when seeking coverage for damage caused by Chinese drywall. Ross v. C. Adams. Constr. & Design, L.L.C., 2011 La. App. LEXIS 769 (La. Ct. App. June 14, 2011).
Before the insureds purchased and moved into their home, it was renovated. After moving in, the insures discovered foreign gypsum drywall, or Chinese drywall. The insureds submitted a claim to Louisiana Citizens Property Insurance Company. In an investigation, the insurer confirmed the presence of Chinese drywall and damage to the metal surfaces caused by corrosion. Louisiana Citizens refused coverage and the insureds sued. The trial court denied the insured's motion for summary judgment and granted summary judgment to Louisiana Citizens.
The court of appeal affirmed. Initially, the court determined the insureds sustaned a direct physical loss. The inherent qualities of the Chinese drywall created a physical loss to the home and required that the drywall be removed and replaced.
Four exclusions, however, barred coverage. First, damages due to faulty or defective materials were excluded from coverage. The Chinese drywall emitted high levels of sulfuric gas which caused the damage to the insured's plumbing, electrical wiring and metal components.
Second, the Chinese drywall was a latent defect. Although it was visibly undamaged, the Chinese drywall emitted gases and caused damage. The insureds did not notice this damage until two years after purchasing the home.
Next, damage caused by corrosion was excluded. The insureds contended that the damages sustained were not caused by corrosion, but the damages sustained were the actual corrosion itself. The insureds' complaint, however, specifically alleged that the emission of the gases from the drywall caused corrosion of the components in their home and they sought damages for this corrosion.
Fourth, the pollution exclusion, which did not cover loss from the discharge of pollutants, including any gaseous irritant or contaminant, barred coverage. The sulfuric gas emitted from the drywall qualified as a pollutant pursuant to the definition in the policy.
Finally, the insureds sought damages for various contents in their home allegedly damaged by the Chinese drywall. Louisiana Citizens argued personal property was covered only when one of the sixteen specified perils listed in the policy existed. The insureds argued that one of the perils listed in the policy, smoke, existed since it was defined as the gaseous products of burning carbonaceous materials. The court rejected this argument because the emission of sulfuric gasses from the drywall did not constitute smoke pursuant to the definition provided in the policy.
