Insurance Law Hawaii

Is There Direct Physical Loss Under A Property Policy When Cornavirus is Present?

    Most property policies provide coverage for property damage only when there is "direct physical loss" to covered property. Early indications are that the coronavirus remains on surfaces. The duration can last from a few hours to three weeks, depending on the type of surface material. If an employee is infected and the store or restaurant must closed because the virus may rest on surfaces within the building, is there direct physical loss, even though the building structure itself is unharmed?

    To answer this question, cases from jurisdictions outside Hawaii may provide guidance. In a case from Louisiana, the homeowner had to move out of her home when excessive levels of organic lead were discovered in the kitchen, living room, master bedroom, and attic. Widder v. La. Citizens Prop. Ins. Corp., 82 So. 3d 294 (La. Ct. App. 2011). The insurer denied coverage because there was no direct physical loss. The trial court agreed; since the home was still intact, no direct physical loss had occurred, so there was no coverage under the policy. The appellate court reversed. It compared the presence of inorganic lead in the home to cases that found a direct physical loss from the existence of Chinese drywall, from which gaseous fumes were released, rendering the home unusable or uninhabitable. Physical damage was not necessary.

    What if smoke from a nearby wildfire fills an outdoor theater, forcing cancellation of performances and loss of business income? This was the situation in Oregon Shakespeare Festival Ass'n v. Great Am. Inc. Co., 2016 U.S. DIst. LEXIS 74450 (D. Ore. Jun 7, 2016). Wildfires in the area caused smoke, soot, and ash to accumulate on the surface of seats and concrete ground of the open-air theater. The air quality was poor, but no federal, state or local agency ordered cancellation of the performances. Further, the theater did not suffer any permanent or structural damage to its property. The insurer denied coverage, contending that the loss or damage must be structural to the building itself. After all, the smoke in the air at the theater did not require any repairs to the structure of the property. The court disagreed. The theater sustained "physical loss or damage to property" when the wildfire smoke infiltrated the theater and rendered it unusable for its intended purpose. The decision in  Oregon Shakespeare Festival was eventually vacated by a joint stipulation of the parties. Oregon Shakespeare Festival Ass'n v. Great Am. Ins.Co., 2017 U.S. Dist. LEXIS 33208 (D. Ore. March 6, 2017), but the reasoning is still sound. 

    The Oregon Shakespeare Festival case cited several cases to support its view.  A pervasive odor in a home caused by a subtenant's illegal methamphetamine operation was considered a "direct physical loss." The court concluded that odor was "physical" because it damaged the house. Farmers Ins. Co. of Oregon v. Trutanich, 858 P.2d 1332 (Ore. Ct. App. 1993).

    An accidental release of ammonia into a packaging facility caused the facility to shutdown for one week while the ammonia dissipated. The court noted that while structural alteration provided the most obvious sign of physical damage, property can sustain physical loss or damage without experiencing structural alteration. The release of ammonia into the building, rendering the building unfit for occupancy, constituted "physical loss or damage."  Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of Am., 2014 U.S. Dist. LEXIS 165232 (D. N.J. Nov. 25, 2014). 

    Where gasoline vapors penetrated the foundation of the insured church and accumulated, rendering the building uninhabitable, the property was held to have suffered a "direct, physical loss." Western Fire Ins. Co. v. First Presbyterian Church, 437 P. 2d 52 (Colo. 1968). Carbon monoxide levels in an apartment building sufficient to render the building uninhabitable was a "direct, physical loss." Matzner v. Seaco Ins. Co., 1998 Mass. Super. LEXIS 407 (Mass. Super. 1998).

    Finally, contamination due to microscopic asbestos fibers was found to be contamination causing the physical loss or damage required to trigger coverage under a property policy.  United Stat Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill. 2d 64 (1991). 

    Based upon these cases, a building in which the virus is located may well present "direct physical loss" under a property policy. Of course, exclusions will also have to be considered to determine whether coverage exists. 

No Coverage For Damage Caused by Chinese Drywall

   The Florida Court of Appeals determined that there was no coverage for damage to the insured's home caused by the installation of Chinese drywall. Peek v. Am. Integrity Ins. Co., 2015 Fla. App. LEXIS 14147 (Fla. Ct. App. Sept. 25, 2015).

   Chinese drywall was installed in the Peek's new home. After moving in, the Peeks reported to American Integrity a sulfur odor caused by the Chinese drywall. The odor caused the Peeks to vacate their home. The Peeks also claimed corrosion and deterioration of copper coils in the air conditioning system were caused by the Chinese drywall. 

   American Integrity denied coverage based upon policy exclusions for latent defects, corrosion, pollutants, and faulty, inadequate or defective constrution materials. The Peeks sued American Integrity. 

   To prevail at trial, the Peeks had to prove that a covered peril at least contributed to the cause of the loss under the concurrent cause rule. The Peeks proved that they suffered a loss within the policy period. The Peeks, however, did not present any expert testimony or other evidence as to the cause of loss. American Integrity's expert, Dr. Ralph Moon, a botanist, opined that the Chinese drywall was emitting destructive gases at the moment they were manufacutred, prior to its installation in the Peeks' home. He therefore concluded that it was a faulty, inadequate, or defective construction material. 

   On cross-examination, the Peeks' counsel tried to prove that Florida's high humidity was a concurrent cause that acted in concert with the sulfur gases to cause the loss to their home. Dr. Moon conceded that humidity could accelerate the emission of the sulfur gases. He qualified this statement, however, by stating that this was based upon an assumption that the Peeks did not use air conditioning in their home during times of high humidity. There was no evidence, however, that the Peeks did not use air conditioning during such periods. Both parties moved for a directed verdict.

   Before the court could rule on the motions, the Florida Court of Appeals issued a decision in Am. Home Assurance Co. v. Sebo,141 So.3d 195 (Fl. Ct. App. 2013). In Sebo, the court determined that in deciding coverage under first party claims, the efficient proximate cause test should be used, not the concurrent causation test. Therefore, if the efficient proximate cause of the loss was a covered peril, the loss was covered; if it was an excluded peril, the loss was not covered. 

   The Peeks did not request to reopen the case to address the new causation doctrine, nor did they move for a mistrial. Therefore, the court entered a directed verdict for American Integrity. The Chinese drywall was the proximate efficient cause for the loss and there were no ensuing losses because all of the losses occurred as a direct and continuous result of the corrosive Chinese drywall. 

   The appellate court affirmed. The Peeks' evidence was insufficient to establish that humidity contributed to the loss. Dr. Moon testified that the Chinese drywall would produce the destructive gases in any climate. The Peeks did not present an expert witness to contradict this testimony. Therefore, the uncontradicted evidence was that humidity was not a peril that caused the loss, nor was it the efficient proximate cause of the loss.

    Nor was there an ensuing loss. The sulfur gases and the corrosion caused by the chemicals released by the sulfur gases eminated from the Chinese drywall. Thus, the losses were not "ensuing." Further, the claimed ensuing losses were excluded by the policy because an excluded cause of loss - defective Chinese drywall - led directly to another set of exclusions - pollution and corrosion. 

   

Allegations of Ensuing Loss Insufficient to Survive Motion to Dismiss

   The court considered whether damages to the plaintiffs' home caused by Chinese drywall were covered under their homeowners policy. Dupuy v. USAA Cas. Ins. Co., 2012 U.S. Dist. LEXIS 31890 (M.D. La. March 9, 2012).

   The plaintiffs' complaint alleged that the Chinese drywall "emits odorous gases that cause damage to air-conditioner and refrigerator coils, copper tubing, electrical wiring, computer wiring, and other household items." Plaintiffs claimed damage to insulation, trimwork, floors, cabinets, carpet, and other items.

   The court first determined that the direct, phyiscal loss fell within the policy's "property damage" definition. The inherent qualities of the Chinese drywall required removal and replacement due to a direct, physical loss.

   The court next considered exclusions in the policy. Loss due to faulty, negligent, inadequate or defective materials were excluded. However, the policy covered "any loss that ensues from the such [damage], that is not otherwise excluded or excepted . . . ." The plain text of this exclusion meant the drywall itself was not covered.

   Further, the corrosion exclusion barred covering "loss . . . caused by or consisting of . . . smog, rust, or other corrosion, mold, wet or dry rot . . . ." Plaintiffs simplistically pled that the damage was not caused by corrosion, but by the drywall itself. Plaintiffs failed to explain how the noxious gasses from the Chinese drywall caused damage to the coils, wiring, and other metallic items. Instead, they hoped the ambiguous allegations would be resolved in their favor. This effort failed and did not get plaintiffs around the corrosion exclusion.

   While the policy could conceivably provide coverage under the ensuing loss provision, plaintiffs avoided certain factual allegations they were required to make under Twombly and Iqbal. To pursue claims under the ensuing loss provision, plaintiffs had to plead facts instead of conclusory allegations. At the very least, plaintiffs had to allege how the drywall caused damage to the trimwork, carpet, etc., not simply that it did so.

   Accordingly, USAA's motion to dismiss was granted.

Homeowner's Policy Excludes Coverage for Loss Caused by Chinese Drywall

   Exclusions barred the homeowners from recovering for losses caused by Chinese drywall in their home. Ross v. C. Adams Const. & Design, L.L.C., 2011 La. App. LEXIS 769 (La. Ct. App., released for publication Oct. 5, 2011).

   Two years after purchasing their home, the Rosses began experiencing chronic malfunctions in the heating, ventilation and air conditioning system. After discovering the presence of gypsum drywall, or "Chinese drywall", the submitted a claim to their insurer, Louisiana Citizens Property Insurance Company, for damages caused by the Chinese drywall. Louisiana Citizens denied the claim.

   The Rosses sued. The trial court granted summary judgment to Louisiana Citizens based upon exclusions in the policy.

   On appeal, the appellate court first agreed the Rosses had sustained a direct physical loss. The inherent qualities of the Chinese drywall created a physical loss to the home and the drywall had to be removed and replaced.

   The court then turned to the various exclusions relied upon by Louisiana Citizens. First, the policy excluded loss caused by faulty, inadequate or defective materials used in repair. The Rosses argued the Chinese drywall was not faulty, inadequate, or defective because it functioned as drywall and served its intended purpose. The court disagreed. The plain meaning of "faulty, inadequate or defective" material led to a conclusion that the drywall was a faulty, inadequate or defective material and was specifically excluded by the policy.

   Next, the court agreed with Louisiana Citizens that the Chinese drywall was a latent defect that was hidden and unknown for two years. Therefore, the exclusion for latent defects was applicable.

   The policy also excluded loss caused by corrosion. Allegations in the Ross' petition that the emission of gases from the drywall caused corrosion of the components in their home made this exclusion applicable.

   Finally, the pollution exclusion barred coverage. The sulfuric gas emitted from the drywall qualified as a pollutant under the policy's definition.

   The Rosses also sought damaged for various contents of their home allegedly damaged by the Chinese drywall. The policy only covered loss to personal property when one of the sixteen specified perils listed in the policy existed. The emission of sulfuric gases from the drywall was not one of the listed perils.

   Therefore, the claims submitted by the Rosses were not covered under the policy.

No Coverage For Damage Caused by Chinese Drywall

   The pollution exclusion barred coverage for alleged property damage and bodily injury in Evanston Ins. Co. v. Harbor Walk Dev., LLC, No. 2:10cv312 (E.D. Va. Sept. 9, 2011) [Evanston Decision here].

   Homeowners sued the insured, Harbor Walk, in three lawsuits, alleging the Chinese drywall installed in their homes emitted sulfides and other noxious gases. This caused corrosion and damage to the air-conditioning and ventilation units, refrigeration coils, copper tubing, faucets, metal surfaces, electrical appliances and other personal items. The homeowners also alleged the compounds emitted by the drywall caused bodily injury, such as allergic reactions, headaches, etc.

   Harbor Walk's insurer, Evanston, filed for a declaratory judgment that the pollution exclusion precluded coverage. The exclusion stated there was no coverage for "bodily injury" or "property damage" that would not have occurred but for the discharge, dispersal, release or escape of pollutants. Pollutants included solid, liquid gaseous or thermal irritant or contaminant, chemicals, etc.

   The homeowners argued the use of environmental terms in the exclusion meant it was limited to excluding damages caused by "traditional pollution events," and not the emission of gas from building material occurring inside a home. Because their reading of the exclusion was reasonable, the exclusion was ambiguous. After surveying case law in Virginia, however, the court disagreed. The pollution exclusion unambiguously applied to injuries caused by both traditional and non-traditional pollution.

   Further, each of the causes of action (including negligence, breach of express and/or implied warranties, breach of contract, private nuisance, unjust enrichment, etc.) implicated the emission of sulfides and noxious gases from the Chinese drywall as either the basis for the claim, or the cause of the resulting damage. Thus, every cause of action fell within the reach of the pollution exclusion, barring all claims made by the homeowners. Consequently, Evanston was entitled to summary judgment.

Installation of Chinese Drywall Constitutes Separate Occurrence in Each Home

   Coverage for damage caused by the installation of Chinese drywall was the issue in Dragas Mgt. Corp. v. Hanover Ins. Co., 2011 U.S. Dist. LEXIS 80178 (E.D. Va. July 21, 2011).

   Dragas built housing developments. Dragas hired Porter-Blaine Corp. to supply and install drywall for the homes in two of its developments. Porter-Blaine installed defective Chinese drywall in seventy-four of the homes in the two developments. A high level of elemental sulfur contained in the Chinese drywall caused property damage in the homes, including corroding of HVAC coils, damaging wiring, tarnishing or corroding metal objects and causing bad odor.

   When Porter-Blaine refused to remove and replace the drywall, Dragas remediated the problem by having the homeowners temporarily move, tearing out the drywall, replacing it, and repairing the other property damage caused by the drywall, all at its own cost. Dragas then invoked the arbitration clause in its subcontract with Porter-Blaine and was awarded $4.9 million in damages. The award was converted into a judgment.

   Dragas sued Porter-Blaines' insurers to enforce the arbitration award. Citizens Insurance Co. of America had issued CGL policies to Porter-Blaine. Porter-Blaine also had an umbrella excess liability policy with The Hanover Insurance Company.

   Dragas moved for partial summary judgment on the Citizens' CGL policies. It first argued that the installation of and damage caused by the defective drywall constituted an occurrence. The court held that the replacement of the defective drywall was not an occurrence. However, any repair or replacement of non-defective components of the homes constituted an occurrence under the policies.

   Next, Dragas argued that each installation of the defective drywall constituted a separate occurrence because the introduction of the drywall was the cause of the resulting damage. Citizens argued that the damage had a single cause, the purchase of the defective Chinese drywall by Porter-Blaine. Following Virginia law, the court looked to the cause of the injury in deciding the number of occurrences. The court determined that each installation of the defective drywall constituted a separate occurrence. It was the act of installing the drywall in each home which set the chain of events culminating in the damage to that home. Thus, there were seventy-four occurrences, one for each affected home.

   Finally, Dragas argued that the "your work" exclusion did not bar coverage because Porter-Blaine used subcontractors to install the drywall in each of the homes. The court held that summary judgment on the "your work" exclusion was premature because it was unclear whether Porter-Blaine used subcontractors.

Exclusions Bar Coverage for Damage Caused by Chinese Drywall

   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.

Insurer Must Defend Claims Against Supplier of Chinese Drywall

   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.

No Coverage for Damages or Losses Resulting from Chinese Drywall

   In this multi-district litigation, the court considered the insurers' motions to dismiss plaintiffs' suits for alleged property damage caused by Chinese drywall.  In Re: Chinese Manufacture Drywall Products Liability Litigation, 2010 U.S. Dist. LEXIS 133497 (E.D. La. Dec. 16, 2010).  After determining there was coverage, the court considered several exclusions and the ensuing loss provisions in the various policies.  Ultimately, the court found no coverage and granted the motions to dismiss.

   Plaintiffs filed suit against the manufacturers, distributors, sellers and installers of Chinese drywall and their insurers.  Plaintiffs alleged the drywall emitted foul odors, and damaged metal and electronic elements and devices in their homes.     

   Considering the insurers' motions to dismiss and for judgment on the pleadings filed by several of the insurers, the court initially noted that the policies all defined "property damage" to include loss of use of tangible property.  Therefore, the damage caused by the Chinese drywall constituted a covered physical loss since the drywall prevented the Plaintiffs from fully using and enjoying their homes. 

   The Court then turned to the policies' exclusions.  First, the insurers failed to meet their burden to demonstrate that the damage caused by the Chinese drywall was a latent defect.  Second, the pollution and/or contamination exclusion was not applicable.  The Chinese drywall was not environmental pollution as contemplated by the Louisiana Supreme Court's analysis of the exclusion.  Moreover, the Plaintiff homeowners were not the typical polluters to whom the exclusion was intended to be directed.

   However, the court ruled that two exclusions were applicable.  First, damages were excluded because the Chinese drywall was faulty material.  The court found that "faulty material" constitutes a physical thing tainted by imperfection or impairment.  The court further noted that it was inconsistent to argue that Plaintiffs had suffered a loss due to the Chinese drywall, but that the drywall was not in any way faulty. The whole basis of the Plaintiffs' claims was that the Chinese drywall was faulty and rendered the homes unlivable.

   Second, the corrosion exclusion was applicable. Plaintiffs contended their loss was not caused by corrosion, but rather caused by the sulfur gases emitted by the Chinese drywall.  The court disagreed.  Plaintiffs' complaints alleged that the Chinese drywall released gases which caused corrosion to metallic and electrical components in their homes.  These allegations triggered the corrosion exclusion since the corrosion was responsible for the majority of losses suffered by Plaintiffs.

   Finally, the court turned to the ensuing loss provision.  The policies covered ensuing or resulting losses which (1) constitute covered losses, (2) were not excepted from coverage by any coverage exclusion.  Elsewhere, the court explained that the damage had to fall under the exclusion and the ensuing damage had to be a separable event, meaning the damage and the ensuing loss must be different in kind, not just degree.

   Here, Plaintiffs alleged that the gases emitted by the Chinese drywall caused (1) odors, and (2) corrosion of metal components and electrical wiring and devises.  The court found the odors were not ensuing because they were neither sufficiently different in kind from the losses caused by the Chinese drywall, nor the result of an extraneous event.  Further, the corrosion-related losses were not ensuing losses.  Even if the corrosion or corrosion-caused losses due to the Chinese drywall were ensuing or resulting losses, they would still not be covered because corrosion and corrosion-related losses were specifically excluded from coverage.

   Nevertheless, it was possible that in the future ensuing losses could occur.  Even the insurers conceded that if the corrosion caused by Chinese drywall resulted in a second accident, separable and different in kind, such as a fire, the losses therefrom would be covered as an ensuing loss.

Manifestation Trigger Rules in Florida

   When property damage manifests before the policy period, but continues over time and overlaps the  CGL's policy period, does the policy provide coverage?  Applying Florida law, the U.S. District Court determined that under the manifestation trigger, there was no coverage.  See Amerisure Ins. Co. v. Albanese Popkin The Oaks Development Group, L.P., 2010 U.S. Dist. LEXIS 125918 (S.D. Fla. Nov. 30, 2010). 

   The homeowners sued the insured developer for damages arising from the installation of Chinese drywall.  The homeowners purchased their home from the insured on November 23, 2004.  The homeowners moved into their home on October 6, 2006.  Their complaint against the insured alleged property damage was sustained within the building and caused by the release of fumes and vapors from the Chinese drywall.  The homeowners initially discovered the fumes and vapors in December 2006.  Further property damage to air handling units, electrical wiring, metals and plumbing fixtures was noticed as late as April and May 2009.  In September 2009, the homeowners discovered the cause of the property damage, the Chinese drywall. 

   Amerisure issued a CGL policy to the developer for the policy period January 16, 2008 to January 16, 2009.  The policy applied to property damage only if prior to the policy period, no insured knew that the property damage had occurred.  If an insured knew property damage had occurred prior to the policy period, then any continuation of property damage during or after the policy period would deemed to have been known prior to the policy period.

   Amerisure sought declaratory relief on its coverage obligations and moved for summary judgment.  The federal court noted that under Florida case law, the time of occurrence within the meaning of an "occurrence" policy was the time at which the injury first manifested itself.  The underlying complaint alleged that the homeowners first noticed damage and odor stemming from the Chinese drywall in 2006, prior to the Amerisure policy.  Throughout 2008 and into the summer of 2009, additional damage to the air handling units was observed.  Nevertheless, the homeowners admitted that they first noticed the damage prior to the policy period.

   Therefore, there was no property damage alleged during the policy period.  The fact that the damage was continuous in nature was irrelevant under the manifestation trigger.  Consequently, there was no coverage or duty to defend, and the motion for summary judgment was granted.

   Hawaii has adopted the injury-in-fact trigger, whereby coverage is triggered by the actual occurrence during the policy period of an injury-in-fact.  See Sentinel Ins. Co. v. First Ins. Co., 875 P.2d 894, 915 (Haw. 1994).  Under the injury-in-fact trigger, "an injury occurs whether detectable or not; in other words, an injury need not manifest itself during the policy period, as long as its existence during that period can be proven in retrospect."  Id.  Had the injury-in-fact trigger applied in Amerisure Ins. Co., there likely would have been coverage.