Drywall damage not covered for Va. Beach man

A federal judge's ruling that a Virginia Beach homeowner's insurance policy does not cover damage caused by tainted Chinese-made drywall was a small victory for insurers, but it's too early to tell whether it will affect other cases across the country, legal experts said Friday.

U.S. District Judge Robert G. Doumar ruled Thursday that the insurance policy between homeowner Larry Ward and TravCo Insurance Co. does not cover the lossesbecause of several exclusions written into the policy.

TravCo sued Ward in January after denying his claim. The homeowner had asked the insurance company to pay to replace the drywall as well as appliances and electronic equipment damaged by gases emitted from the wallboard.

The U.S. Consumer Product Safety Commission last fall found that the wallboard emits higher levels of volatile sulfur gases than typical U.S.-made drywall and probably is causing metal corrosion in homes. The commission recently advised homeowners to remove the drywall from their homes.

Ward is among scores of local homeowners who are suing the manufacturer, builders and distributors of the drywall. However, he is one of the only local homeowners involved in a lawsuit over whether homeowner s' insurance policies cover the drywall damage.

The case is drawing attention because such exclusions also are written into commercial liability insurance policies held by builders and drywall suppliers.

Legal experts said Doumar's decision is binding on only Ward's situation and that other courts may reach different conclusions on the insurance coverage of damage caused by the drywall.

"This thing isn't over," said Tom Baker, a law professor at the University of Pennsylvania who has written textbooks on insurance law. "This is just round one for insurance coverage in Virginia."

While insurance companies will be able to use the judge's decision for their own cases, Baker said, home-owners can point to a March ruling by a Louisiana judge, who came down on the home-owners' side. The judge found that, under Louisiana law, the exclusions were not intended to bar claims for products that themselves emit pollution.

Ward's policy included exclusions for pollution, latent defects, faulty materials and corrosion. As the basis for his ruling, Doumar cited a Virginia Supreme Court decision in a case between the city of Chesapeake and an insurer over contaminants in a water supply. The state's highest court ruled that the exclusion applied because the pollutants were the cause for the harm.

However, Doumar couched his opinion several times, stating that it did not prevent Ward from filing further claims. "The damage to defendant's property is extensive, and the secondary consequences may not be fully realized at this point," he wrote.

The judge also acknowledged that the exclusions used by the insurer to deny coverage had been the subject of numerous court cases and that different courts in different states had reached different conclusions.

"There exists not just a split of authority, but an absolute fragmentation of authority," Doumar wrote.

Richard Serpe, a Norfolk attorney who represented Ward, said he plans to appeal the decision.

"The language of these policies is so confusing that you're going to have a dozen judges going off in different directions," Serpe said. "Under Virginia law, an ambiguity goes in favor of the policy holder."

An attorney for the insurance company declined to comment Friday.

If the exclusions hold up for commercial policies in court, it could become a nightmare scenario for home-owners who are suing the builders and suppliers.

With no insurance to turn to if they're found liable, builders and drywall suppliers could shut down or file for bankruptcy, leaving homeowners with little or nothing.

"Nobody sues someone else for something unless the other person has money," Baker said. "And most of them don't have money. Liability insurance is really the backbone of civil justice in America. That should have some impact on what courts decide on this."

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com