Human Resource Strategist@Net-Speed: Judge rules insurance should pay in Chinese drywall case

TAMPA --
In a ruling that could have widespread implications on Florida's insurance industry, a Hillsborough County Circuit Court judge says an Odessa homeowner's damage from toxic, Chinese-made drywall is covered by his homeowner's insurance policy.
Judge Robert Foster said the gas emanating from the drywall was an "unforeseen occurrence" which caused a "chemical reaction." He said he found no exclusion in the Springfield, Illinois-based Teachers Insurance Co.'s policy that should keep the company from paying to fix Craig and Melissa Walker's Odessa home.
"These (gases) then circulated throughout the house causing an odor, damage to the components within the home and creating an irritant and hazard to human beings," Foster said in his order.
Foster's ruling is particularly noteworthy because it's the first-known ruling in Florida, and perhaps in the nation, in which a judge ruled a homeowner's insurance policy covers Chinese drywall.
Thousands of homeowners have the bad drywall, and most of them are in Florida. The drywall emits a gas that corrodes metal, destroys appliances and, some owners, say, makes people sick. The only way to remediate a home is to gut it down to the studs and rebuild, the federal government has said. This typically costs a whopping $100,000 – even more depending on square footage.
Some builders have done this, but others either won't or have gone out of business. Insurance companies have said their policies typically don't cover defective drywall. Many homeowners have been stuck with uninhabitable homes or have been forced to make the costly repairs themselves.
The Walkers went to their insurance company for help.
"They didn't even send anybody out," Craig Walker said. "They just immediately told us, 'We don't cover that.'"
Lynne McChristian, the Florida representative for the New York-based Insurance Information Institute, said companies have various ways of wording what they cover in policies.
"Homeowner's insurance policies were never designed to cover defective materials and defective building," McChristian said.
Most policies have exclusions that pertain to defects, she said, and that's why many insurance companies have denied Chinese drywall claims.
"Coverage would depend on the interpretation of that language," McChristian said.
That's the case in the Walker's lawsuit. The homeowners sued the insurance company for not covering their damages.
"Our clients paid for insurance and had loss," said Anthony Martino Sr., a Tampa lawyer who represented the homeowners. "This is no different that any other unexpected loss and should be treated no differently than other losses, like lightening or fire."
The Tampa lawyer representing Teachers Insurance Co. argued that a "wear and tear" exclusion and a defective material exclusion pertained to the corrosion of the drywall.
But Judge Foster disagreed. He said the drywall was not defective because it "serves its purpose and functions as drywall." But, he said, the drywall also does something else; it emits a corrosive gas.
Scott Frank, the lawyer for the insurance company, declined to comment for this story.
Foster said the Walker's policy should also cover damage to personal belongings. The policy specifically covered smoke damage, and he interpreted smoke to be the same as gas.
"The court finds that the ordinary meaning as found in a Merriam-Webster dictionary, defines 'smoke' as a 'suspension of particles in a gas.'" Foster wrote in his order. "The court has applied the definition that allows coverage, which is at least as reasonable as the definition that might exclude coverage.
Foster did not determine how much money the policy should pay out to the Walkers. That will be determined by a jury. A trial date has not yet been set.
The Walkers lived in their home for two years before moving out two years ago. All this time, they say they paid their mortgage in addition to rent for another house for their three children.
"I hate that we have to keep waiting," Walker said. "But I feel a lot better now that we have this judge's decision."
Reporter Shannon Behnken can be reached at (813) 259-7804 or sbehnken@tampatrib.com. Follow her on Twitter @TBORealtyCheck.