Defective Chinese drywall is a huge problem.  Not only does it stink, but it also causes other parts of the home to corrode.  What is covered, and what is not?

It appears that any damage to the home resulting from the Chinese drywall should be covered.  Chinese drywall causes many of the components of the home to corrode and deteriorate.  Resulting damages include corrosion to metal studs, metal lath, nails and screws, air-conditioning equipment, pipes, coils, wiring, furniture, fixture, and jewelry.  Those "ensuing losses" should be covered, even if the policy does not provide coverage for the tearing out and replacing the defective drywall.

If an insurer alleges that the policy excludes corrosion or deterioration, keep in mind that that exclusion only applies to a losses that are due to a quality in the product that causes the property to damage or destroy "itself."  It does not apply to deterioration or corrosion that is caused to another item.  In the context of Chinese drywall, the drywall is not destroying itself, but is destroying other items. 

Whether or not losses due to the fumes from the Chinese Drywall would be excluded under a pollution exclusion will be addressed in a forthcoming blog.