Will Courts Enforce “Excluded Risk” Clauses in “All-Risk” Property Insurance Policies?
Chinese-made drywall has been the source of class action litigation in many southern states, notably Florida, Mississippi and Louisiana, where there was extensive rebuilding after Hurricane Katrina and other storms. Thousands of plaintiffs received approximately $1.3 billion in a series of settlements designed to end the complex litigation. Homeowners received either cash or remediation to remove building materials that they claimed were toxic and corrosive.
But American Integrity Insurance Co. of Florida will not have to pay a property insurance claim related to defective drywall in the home of the William and Stacey Peek.
Chinese drywall had been used to build their new Tampa home, which was covered by an “all-risk” policy with American Integrity. After they moved in in 2009, they detected a sulfurous odor. Over the course of the year, the odor worsened to the point where they had to vacate the house.
They filed a claim with American Integrity, noting that the odor had driven them from their home and also claiming that there had been corrosion of the copper in their home’s air-conditioning and electrical components.
American Integrity refused to pay, saying that their all-risk policy did not cover problems related to Chinese drywall. They noted that their policy expressly excluded latent defects, including corrosion, pollutants, and faulty, inadequate, or defective construction materials. According to the company, all of these terms applied to the Chinese drywall. When the insurer rejected their claim, the couple filed a breach of contract lawsuit.
The trial judge gave the American Integrity a “directed verdict” – an instruction to the jury to reach a specific result. This usually happens only when the judge decides that, after looking at the evidence, no jury could reasonably reach a different conclusion. The appellate court agreed, noting that the damage involved in the claim all seemed to stem from a clearly excluded risk. Florida’s highest court has now finally weighed in, refusing even to hear the case.
The nuances of insurance contracts can mean large claims for some victims and nothing for others. An expert in complex insurance litigation can advise you on the strength of your claim, whether you should sue, and what the best trial strategy would be.