Insurance dropped on homes with Chinese drywall damage

http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/01/citizens_drops_insurance_cover.html

Citizens Property Insurance, like many private insurers, is dropping some policies on homes with damage from Chinese drywall.

State-backed Citizens first drew fire in 2009 over the issue from critics who said the insurer exists to provide coverage when no one else will.

Citizens Spokeswoman Christine Ashburn said in a statement Tuesday that the insurer hasn’t changed its position since reports surfaced in 2009 linking drywall from China to corroded pipes and other damage. “The mere fact that a covered property may have Chinese drywall does not mean that coverage will be cancelled,” she wrote.

But extensive damage from the drywall that homeowners don’t plan to fix themselves could disqualify a home from coverage. Citizens, Florida’s largest property insurer, is reviewing such policies on a case-by-case basis, Ashburn said.

David Durkee, who represents 300 owners of homes with Chinese drywall who are mostly covered by Citizens, said he wants to help stop the insurer from dropping any more policies.

Since homeowners with mortgages are required to have insurance, Durkee said his clients are worried they’ll lose their homes through the foreclosure process before they have a chance to fight Citizen’s decision in court. “That’s why we’re ringing the alarm bell” now, he said.

A Citizens official told Durkee’s clients, James and Maria Ivory of Punta Gorda, in 2009 that the insurer reversed a decision to drop their policy because damage from the drywall wasn’t as bad as expected after an inspection, according to a letter from the official.

Durkee said that’s why it was odd when the Ivorys, whose home was built in 2006, received a letter late last year saying they will be dropped after all due to damage that hasn’t been repaired.

“Nothing has changed” since then, Durkee said. “They have not been out to inspect this house again.”

As of Oct. 22, 2009, Citizens knew of at least 24 policyholders with damage from Chinese drywall because the policyholders had filed claims. By filing claims, the policyholders effectively flagged Citizens of damage in their homes that may lead the insurer to drop them.

Most insurance companies, including Citizens, have fought paying homeowners’ claims for Chinese drywall, saying they are not responsible for covering the damage, said Tom Lynch, a
Citizens board member and president of Plastridge Insurance Agency.

And a federal judge in New Orleans issued a ruling on Dec. 16 agreeing with 10 insurers that took that position.

After Hurricanes Katrina and Wilma in 2005, there was a shortage of building materials so some contractors used Chinese drywall without knowing it, Lynch said. He said it’s not the type of damage that insurers typically cover and some insurance policies specifically exclude coverage for damage that is not “sudden and accidental.”

But some of the subcontractors who used the tainted drywall went out of business so it has been difficult to figure out who should be responsible, he said.