Chinese Drywall Losses Continue for Policyholders

The federal court in Norfolk, Va., continues to serve as the epicenter of insurance coverage cases involving Chinese drywall – and not for the benefit of policyholders. Judge Robert Doumar recently issued a ruling that will make the fight for insurance coverage harder for policyholders. See Travco Insurance Co. v. Ward, Case No. 2:10-cv-14 (U.S. District Court for the Eastern District of Virginia, Norfolk Division). While Travco involves a first-party homeowner's policy, its implications are much broader.

In the ruling, Judge Doumar held that installation of defective drywall was a "direct physical loss" under terms of the insurance contract. The loss is covered. However, he further found that several exclusions apply to ultimately nix coverage for the drywall.