Builders are feeling the pressure from homeowners on the Chinese Drywall situation.

Building firms are beginning to feel the pressure of homeowners making claims against them for the toxic Chinese drywall situation.  As is perfectly right, the first organization a homeowner turns to when they discover they have Chinese drywall is the builder who either built the house or did the renovation.

Homeowner insurance offers no protection in this instance because of the now infamous “pollution exclusion”  which allows insurers to shirk all responsibility for the claim.  Homeowners have no choice but to refer to the construction company to make good.  The exclusion is a pretty innocuous paragraph that in any other situation wouldn’t make the slightest difference to a homeowner.  It states “Pollutants are defined as any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

In the case of this toxic drywall the words acid and fumes are the important ones here as they are right in the middle of the exclusion.  But, for most homeowner insurance there is an exception to this exclusion which relates to products or completed work of an insured.  So this means if a homeowner had bought the house after the work had been done to it, or is the second owner from new they may still have a claim.

This may be a consolation for a few homeowners, but it still leaves the majority out in the cold.

Many builders are also finding their own insurers are also denying any claims on the same exclusion or a Total Pollution Exclusion included in their general liability insurance.  This clause allows the insurer to deny any claims that relate to Chinese drywall.  There are several suits filed with insurers who have denied claims due to this exclusion, so case law may have something to say about it.  With the first cases being heard in early 2010, there will be no quick answers here.

These builders are going to have to fund the repairs to homes out of their own profits or pockets which is going to ruin many of them.  Not all construction companies are of the size or scope to be able to handle multiple claims for remediation, and even some of the larger ones are going to struggle.  Some Florida construction firms have said they believe they have up to four hundred homes to remedy.  This kind of cost is going to run into the millions.

While individual suits will be heard in local courts, anyone that joined the various class-actions, builders or homeowners will now have their case heard under a Federal class action being heard in New Orleans.  The various suits were consolidated into one Federal case in order to efficiently try them in the most cost effective madder possible.  The hearing date has yet to be announced but is believed to be sometime next year.

The legal battles will be ongoing long after most of the homes have been remedied.  There will inevitably be those that depend on the suit in order to be able to afford to have their home repaired, of to afford to be able to repair them.