Chinese Drywall Update
October saw a new twist in the defective Chinese-drywall saga, as some homeowners discovered that filing a homeowner's insurance claim for drywall damage could result not just in denial of the claim, but in the loss of all insurance coverage for the home. In one widely-reported case, Citizens Property Insurance Corp., a state-backed insurer of last resort for Florida homeowners, dropped homeowners James and Maria Ivory's policy after the couple filed a claim for damage caused by the drywall's sulfuric gas emissions, reported the Associated Press (" Chinese drywall claims causing insurers to drop policies," by Brian Skoloff). At least three different insurers have cancelled policies, or refused to renew them, after homeowners filed drywall claims, the AP reported. Worse yet, "because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations."
Florida Senator Bill Nelson went public with harsh criticism of the insurers, reported the Sarasota Herald-Tribune (" Nelson blasts firms axing home policies," by Aaron Kessler). Calling the decisions "deeply troubling," Nelson wrote letters to several companies demanding a written explanation of their policies with respect to the Chinese drywall issue.
After several days, Citizens Insurance reconsidered its decision to drop the Ivory family's policy, citing a re-inspection that the company said had revealed the problem to be less severe than thought, the Associated Press reported (" Fla. insurer renews policy despite Chinese drywall," by Brian Skoloff). But Citizens still refused to honor the original damage claim — arguing, as company spokesman John Kuczwanski put it, "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? We provide insurance, not warranty service."
Other insurers, however, have not reversed themselves, and it seems likely that more homeowners will face policy cancellations as the drywall saga drags on. The situation leaves homeowners facing a dilemma — whether to file a claim in order to establish documentation of the problem, or keep quiet in order to preserve their coverage. When loss of insurance could easily lead to foreclosure, some attorneys are advising clients to keep mum, says the Herald-Tribune. But that strategy also could be risky, reported Aaron Kessler: "Even if a homeowner does not file a claim over the drywall and remains covered, they could later be denied a claim for a fire or another calamity if insurance investigators determine the home contained undisclosed Chinese drywall."