Citizens Property Insurance Corp., a state-created, nonprofit corporation that is also the largest home insurer in Florida, recently sent notices of non-renewal to policyholders who had filed claims for damage because of defective Chinese-made drywall in their homes.
The notices state policies won't be renewed if the damage isn't repaired within six months of the date of notice. However, the Florida Home Builders Association (FHBA) notes that neither the state of Florida nor any governmental entity to date has officially approved any remediation protocols. Most estimates for replacing drywall and corroded components in a 2,000-square-foot house range between $80,000 and $100,000.
Citizen’s Public Information Manager John Kuczwanski says the insurer must work within the confines of its stated policies. “For any of our policy holders, if there’s any known damage to a structure, we require proof the damage has been remediated. That could be anything related to the structure,” he says, noting that there are several minor differences with the drywall.
"Think about it in terms of roof repair or any other home repair. In this case, corrosion leads to a likely future claim for what is known as a ‘peril’, such as fire or a water leak. We consider the drywall issue to be a builder defect,” says Kuczwanski. “Citizens knows that it’s a very unfortunate situation. And people are attempting to find ways of becoming whole again. Unfortunately we have to work within the confines of our policies.”
Attorney Bob Fitzsimmons is a partner with the law firm Rumberger, Kirk & Caldwell in Florida. He is also a member of the MDL Chinese drywall committee that represents subcontractors who were named in various lawsuits across the nation. “We’re still arguing over proper procedures, so it’s a tough spot both the homeowners and insurance companies are in. I’m a subcontractor, so I look at it as, what do we need to do to prevent cross-contamination and keep costs down?” he says. “Will removing the drywall be enough or will we have to take everything down to the studs?"
“If we see multiple policy cancellations, I have a feeling there will be government intervention,” Fitzsimmons says. “I think there will somehow be away for the big insurance companies to amend their policies. But it’s been a perfect storm from (Hurricane) Katrina to the downturn to the drywall.”
Kuczwanski says not every situation is the same, and Citizens will review each policy on a case-by-case basis. “We are working with each of these policy holders. We inspect of each of these individually so homeowners can keep their coverage. Many people have been forced out of their homes on top of it all,” says Kuczwanski. “It’s a situation that no one would wish on anyone else. However, I do believe insurance should not take care of replacing the drywall. We’re doing everything in our power within the confines of the contract.”
The Chinese drywall, part of supplies of gypsum or wallboard, is under investigation by federal and state agencies in both the Gulf and surrounding states. The drywall reportedly emits sulfurous fumes suspected of causing corrosion of electrical wires and plumbing.
The Associated Press reported potentially more than 500 million pounds of the problematic wallboard entered the U.S. between 2004 and 2008, though some reports say the products have appeared in U.S. homes as early as 2002.
To date, at least 12 class action lawsuits involving this material have been filed in 33 states against builders, suppliers and manufacturers. As many as 36,000 homes in Florida and 100,000 nationwide are thought to contain the imported wallboard.
Tests conducted by the Environmental Protection Agency showed the imported drywall contained elevated levels of strontium sulfide, as well as several organic compounds associated with the production of acrylic paint. These compounds were not present in control samples of U.S.-made drywall. Homeowners who have defective drywall have reported health problems ranging from skin irritation to respiratory difficulties.