Court Agrees Pollution Exclusion Applies to Florida Chinese Drywall Claim

April 15, 2011

Damages and injuries from Chinese drywall fall under a pollution exclusion endorsement on a commercial general liability policy (CGL) and an insurance company has no duty to defend its insured homebuilder against such claims, a federal court in Florida has affirmed.
The United States District Court for the Southern District of Florida ruled in favor of the insurer, General Fidelity Insurance Co., granting a motion for summary judgment in the matter. The insurer successfully argued that it had no duty to defend its insured, Northstar Holdings, in a case brought by one of its customers who alleged she sustained bodily injury and property damage because the Chinese drywall used by Northstar in building her Boynton Beach home was defective.

In her April, 2009 lawsuit, Katherine Foster claimed that Northstar was negligent in installing the defective Chinese drywall and breached its duty to warn of its harmful effects.

Foster alleged the defective drywall contained “excessive amounts of elemental sulfur and strontium and as a result cause damage and corrosion…to home structure and mechanical systems.” Additionally, she alleged the excess sulfur caused a “rotten egg” smell…which is capable of …causing health problems.”Foster described her bodily injuries as “respiratory problems, sinus problems, and eye problems.”The CGL policy issued by General Fidelity contained a Florida Total Pollution Exclusion Endorsement that amended the general insuring agreement, creating a pollution exclusion.

Foster argued that the excessive amounts of elemental sulfur and strontium that compose the gypsum drywall are not “pollutants” and therefore General Fidelity should defend the action and eventually indemnify Northstar.

In its analysis of the allegations specified within the pleadings and the applicable policy language, the court found the compounds released by the elemental sulfur and strontium are pollutants as defined within the policy and that the pollution exclusion does apply.
The underlying action against Northstar is still pending.

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