Va. court: Insurance doesn’t cover drywall damages

By Sarah Kleiner Varble, The Virginian-Pilot – 11/2/2012

The state Supreme Court handed down a decision Thursday that legal experts say closes the door on Virginia homeowners’ attempts to obtain payments from their insurance companies for damages caused by defective Chinese drywall.

The court agreed with an earlier ruling that damage caused by drywall in Larry Ward’s Virginia Beach home was not covered because of several exclusions in Ward’s policy with TravCo Insurance Co.

Legal experts said the decision in TravCo v. Ward probably will prevent hundreds of homeowners from receiving payments from their insurance companies.

“To me, what these kind of cases illustrate is the Swiss cheese nature of homeowners’ insurance policies,” said Tom Baker, a law professor at the University of Pennsylvania. “There are all these different exclusions that exclude things that people really need insurance for.”

Ward bought a new home in Virginia Beach in 2007 built with defective Chinese drywall, which emits noxious odors and corrodes household appliances and equipment. He filed a claim with TravCo in 2009, but the company denied it and then sought a judgment from courts.

A lower court ruled in TravCo’s favor in 2010, and Ward appealed.

The Supreme Court of Virginia ruled Thursday that the drywall was not covered because Ward’s policy contained four exclusions: latent defects; faulty, inadequate or defective materials; rust or corrosion; and pollutants, which include gaseous irritants or contaminants.

Richard Serpe, Ward’s Norfolk-based attorney, said the decision could affect a few hundred Virginia homeowners whose policies probably are similar to Ward’s.

“I can’t imagine any significant number of situations where any homeowner’s insurance company will pay for Chinese drywall,” Serpe said.

L. Steven Emmert, a Virginia Beach attorney who tracks Supreme Court decisions, said excluding the drywall as a “latent defect” could have sweeping consequences in Virginia. He expects insurance companies to latch onto the phrase and use it to deny a host of claims.

“It provides insurers with the very valuable tool,” Emmert said.

A spokeswoman who answered the phone Thursday at Hartford, Conn.-based TravCo said she did not know the details of the case.

Homeowners who were affected by defective Chinese drywall were awarded some compensation through a class-action settlement reached earlier this year with companies that imported and sold the product, as well as numerous other companies involved in the cases.

Serpe said he plans to continue seeking money for his clients from Chinese manufacturers and builders who installed the drywall.

“There’s still quite a few homeowners who, if they’re going to recover from this catastrophe, will need to get additional compensation,” he said.