[StBernard] Toxic drywall? Goodbye, insurance

[Westley Annis]

Toxic drywall? Goodbye, insurance

Some buyers are finding their homes were built with tainted materials from
China. Yet when they turn to their insurers, they get dumped -- and could
face foreclosure. 

By The Associated Press
James and Maria Ivory's dreams of a relaxing retirement on Florida's Gulf
Coast were put on hold when they discovered their new home had been built
with Chinese drywall that emits sulfuric fumes and corrodes pipes. It got
worse when they asked their insurer for help. Not only was their claim
denied, but they've been told their entire policy won't be renewed. 


Thousands of homeowners nationwide who have bought new houses made with
defective building materials are finding their hopes dashed and their lives
in limbo. Experts warn that cases like the Ivorys', in which insurers drop
policies or send notices of nonrenewal because of tainted Chinese drywall,
will become rampant as insurance companies work their way through the
hundreds of claims currently in the pipeline.

At least three insurers already have canceled or refused to renew policies
after homeowners sought help replacing the bad materials. Because mortgage
companies require homeowners to insure their properties, they are then at
risk of foreclosure, yet no law prevents the cancellations.

"This is like the small wave that's out on the horizon that's going to
continue to grow and grow until it becomes a tsunami," said Florida attorney
David Durkee, who represents hundreds of homeowners who are suing builders,
suppliers and manufacturers over the drywall.

During the height of the U.S. housing boom, with building materials in short
supply, U.S. construction companies turned to Chinese-made drywall because
it was abundant and cheap. An Associated Press analysis of shipping records
found that more than 500 million pounds of Chinese gypsum board was imported
from 2004 to 2008 -- enough to have built tens of thousands of homes. The
materials are heavily concentrated in the Southeast, especially in Florida
and areas of Louisiana and Mississippi hit hard by Hurricane Katrina.The
defective materials have been found by state and federal agencies to emit
"volatile sulfur compounds" and contain traces of strontium sulfide, which
can produce a rotten-egg odor, along with organic compounds not found in
U.S.-made drywall. Homeowners complain the fumes are corroding copper pipes,
destroying TVs and air conditioners, and blackening jewelry and silverware.
Some believe the wallboard is also making residents ill.

The federal government is studying the problem and considering some sort of
relief for homeowners.

The Associated Press interviewed several homeowners who, like the Ivorys,
were unlucky enough to purchase properties built with Chinese drywall. Those
homeowners are now being hit with a second wave of bad news: Their insurers
are declining to fill their claims, then canceling the policies or issuing
notices that they won't be renewed until the problem is fixed. 

The homebuyers have little recourse against the Chinese manufacturers; the
companies and the Beijing government are not likely to respond to any
lawsuits or reimburse them for the defective materials.

In each instance, the insurer learned of the drywall through a claim filed
by the homeowner seeking financial help with its removal. 


The Ivorys have sued their builder, but it could take months for their case
and hundreds like it to work their way through the courts. In the meantime,
the Ivorys have moved back to Colorado because their three-bedroom ranch
home two miles from the Gulf of Mexico is unlivable and soon will be
uninsured.

"It's been an emotional roller coaster," said James Ivory, who is still
making mortgage payments on the Florida house. "It was all in our heads --
nice weather down there, calm life, beaches. Now I don't know what to do." 

John Kuczwanski, a spokesman for the Ivorys' insurer, Citizens Property
Insurance, said the family's claim was denied because the drywall is
considered a builder defect, which is not covered under the policy. Citizens
also considers the drywall a pre-existing condition that could lead to
future damage, so the company won't renew the policy unless the problem is
fixed. 


"If someone were to have bought a new car and there was a defective part,
would that person go to their auto insurance to get that fixed, or would
they go back to the manufacturer?" Kuczwanski asked. "We provide insurance,
not warranty service."

Citizens, a last-resort insurer backed by the state of Florida for people
who can't find affordable coverage elsewhere, has received 23 claims about
Chinese drywall and has denied five so far. Citizens could not immediately
say how many policies had been canceled or not renewed because of the
drywall.

Robert Hartwig, the president of the Insurance Information Institute, agreed
that homeowners policies were never meant to cover "faulty, inadequate or
defective" workmanship, construction or materials.

Tom Zutell, a spokesman for the Florida Office of Insurance Regulation, said
that while the cancellations may be troubling, they are legal. No law
prevents insurance companies from canceling policies because of Chinese
drywall.

"We are staying out of the fray at the moment," he said.

Yet staying mum doesn't guarantee coverage for homebuyers. Even if a
homeowner does not file a claim over the drywall and remains covered, he or
she could later be denied a claim for a fire or another calamity if
insurance investigators determine the home contained undisclosed Chinese
drywall.

"If you think that by not telling your insurance company about the drywall
that you're protected, you're sadly mistaken," Durkee said. A newly married
couple in Hallandale Beach, Fla., saved up for five years to buy their first
home only to discover that it had Chinese drywall. They filed a claim with
their insurer, Universal Insurance of North America, and were denied.

Universal then sent the couple a letter, stating their policy was being
dropped because "the dwelling was built with Chinese drywall."

The couple have since signed on with Citizens but haven't divulged the
drywall issue and haven't filed another claim. The 31-year-old man requested
anonymity because he's afraid of losing his insurance policy -- and thus his
home.

"I honestly don't know what I'd do if that happened," he said. "All this has
basically taken us back five years. We saved money to buy this home."

Universal did not respond to requests for comment.

Louisiana lawyer Daniel Becnel Jr., who represents more than 200 owners of
homes that contain Chinese drywall, is advising his clients to avoid filing
claims with their insurers lest they lose their houses.

"I really believe everybody should have an insurance claim with this,"
Becnel said. "But it's hard to tell somebody to go make a claim, then they
lose their policy. . . . This is a nightmare for people."

"I tell people flat out if you file, you may lose your insurance," said
Mississippi attorney Steve Mullins, who has about 100 clients with Chinese
drywall in their homes.

Chris Whitfield, a 29-year-old tire repairman, bought a house in Picayune,
Miss., after his home in Louisiana's St. Bernard Parish was destroyed by
Katrina. He soon discovered the new home was built with Chinese drywall, and
he moved out because it was making his family sick.


His claim was denied by his insurer, Nationwide, which followed up with a
notice that he would be dropped because his policy didn't cover unoccupied
dwellings.

Nationwide spokeswoman Liz Christopher declined to comment on Whitfield's
case and could not say how many drywall claims had been submitted or how
many policies had been canceled or not renewed. 

Whitfield offered to move back into the house, but he said he was told he'd
first have to replace the drywall.

"I don't know what I'm going to do," he said.