Insurers begin canceling policies of homeowners with Chinese drywall

Very unsettling news emerged early this week that insurers within Louisiana were canceling policies of those homeowners with Chinese drywall. While this had been hinted at in Florida, some insurers eventually backed down. This does not seem to be the case in Louisiana, though. The Times-Picayune reports

In August, Tamara Thomas filed a claim with her homeowners insurance company after discovering that her air conditioning and other appliances had failed because her three-year-old home was filled with defective drywall made in China.
But before the Hanover Insurance Group even denied the claim, as most insurers have been doing with claims for Chinese drywall damage, it canceled her policy, effective Nov. 19.

The Massachusetts company said there had been a “substantial change in risk” because the home was no longer occupied since Thomas and her family had begun staying in the guest room at her parents’ house out of concerns over how the drywall was affecting their health.

Thomas was outraged at the cancellation. Adding insult to injury, the claim denial letter that arrived a few days later said Hanover’s tests revealed that the walls of the house were emitting sulfur gases that “may pose health risks.”

So far, most insurance policy cancellations have been taking place in Florida. In Louisiana, insurers were universally denying claims, but it was believed that a state law making it difficult for insurers to drop coverage for homeowners who have been customers for at least three years would largely keep policies in place. But advocates for Chinese drywall victims have reported that in the past few weeks, a wave of cancellations has begun to unfold in Louisiana, even with people like Thomas, who had insurance on her home with Hanover for just over three years.

There will obviously be a lot of attention given to this issue as the state law will be brought into question and various rights groups will assail the insurance companies for dropping coverage. The outcome, though, remains to be seen. Any developments on the issue will be posted on this blog.