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Florida court upholds Chinese drywall insurance claim denial

Mon Oct 19th, 2015 on     Insurance Claims,    

The Florida 2nd District Court of Appeal decided a case in September that illustrates just how tough it can be to fight an insurance company. It also shows that Chinese drywall complaints are still working their ways through insurance companies and the courts, but the insurance companies have taken steps to avoid paying homeowners’ claims.

The plaintiffs are a couple from Tampa who built their home in 2008 using the defective construction materials. They noticed the telltale sulfur odor almost as soon as they moved in during January 2009. Soon, the odor was so bad that the couple was forced to move out. They timely filed a claim with their homeowners insurance company.

The insurance company denied the claim. The policy, the insurer argued, did not cover pollutants or defective materials. Because the drywall was certainly a defective material, and the drywall was the source of the odor, the couple’s insurance did not cover their loss.

The trial court agreed, and the couple appealed. The appellate court, however, came down on the insurance company’s side: The terms of the insurance policy were clear, and damage from defective materials was not covered.

The couple made an interesting argument in their appeal. They said that the drywall may have contained the toxic substances, but it was the humidity that caused the odor. That, they said, would be covered under their policy.

Not so, the appeals court said. The humidity may have exacerbated or even triggered the smell, but it was the drywall, not the humidity, that smelled bad enough to drive them from their home. The policy actually excluded the claim from two different angles.

First, it was the sulfur in the drywall that caused the odor, and the sulfur qualified as a “latent defect,” or a defect that goes undetected during a reasonable inspection. The policy explicitly excludes latent defects in construction materials.

Second, if the odor caused the damage, it was excluded in the policy’s pollution and contamination provision. The insurance company had thought of everything.

There may still be a way for the couple to prevail: They could take their case to the state Supreme Court. We’ll just have to wait and see.

Source: Westlaw Daily Insurance Briefing, “Chinese drywall an ‘excluded peril’ under all-risk policy, Florida panel says (Fla.App. 2 Dist.),” Sept. 29, 2015

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