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Chinese Drywall is causing problems. And insurance is being pulled on those homes.

In West Palm Beach Florida - a couple recently discovered that their relaxing retirement was put on hold when they discovered their new home had been built with Chinese drywall that emits sulfuric fumes and corrodes pipes. It got worse when they asked their insurer for help -- and not only was their claim denied, but they've been told their entire policy won't be renewed.

Thousands of homeowners nationwide who bought new houses constructed from the defective building materials are finding their hopes dashed, their lives in limbo.

Insurers drop policies or send notices of non-renewal based on the presence of the Chinese drywall.

At least three insurers have already canceled or refused to renew policies after homeowners sought their help replacing the bad wallboard. Because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations.

During the height of the U.S. housing boom, with building materials in short supply, American construction companies imported millions of pounds of Chinese-made drywall because it was abundant and cheap.

An Associated Press analysis of shipping records found that more than 500 million pounds of Chinese gypsum board was imported between 2004 and 2008 -- enough to have built tens of thousands of homes. Shipments were heavily concentrated in the Southeast, especially Florida.

The defective materials have been found to emit "volatile sulfur compounds," and contain traces of strontium sulfide, which can produce a rotten-egg odor, along with organic compounds not found in American-made drywall.

Homeowners complain the fumes are corroding copper pipes, destroying TVs and air conditioners, and blackening jewelry and silverware. Some believe the wallboard is also making them ill.

The federal government is studying the problem and considering some sort of relief for homeowners.

Homeowners have little recourse since neither the Chinese manufacturers nor the Chinese government are likely to respond to any lawsuits or reimburse them for the defective drywall.

Insurers learn of the drywall through a claim filed by the homeowner seeking financial help with its removal.

Insurance companies consider the drywall a pre-existing condition that could lead to future damage, which is why the company won't renew the policy unless the problem is fixed.

Even if a homeowner does not file a claim over the drywall and remains covered, they could later be denied a claim for a fire or another calamity if insurance investigators determine the home contained undisclosed Chinese drywall.

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Posted by Rick Hauser, ABR, CNE, GRI Exclusive Buyer Agent - 100% Buyers on 10/15/2009 02:08 PM

Comments (43)

chinese drywall is causing problems and insurance is being pulled on those homes

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43 Comments on Chinese Drywall is causing problems. And insurance is being pulled on those homes.

OCT

There is actually supposed to be a solution I don't know too much about it

http://www.builderonline.com/drywall/gassing-the-chinese-drywall-problem.aspx?rssLink=Gassing+the+Chinese+Drywall+Problem

This is so infuriating. Drywall manufacturers in the U.S. have to meet certain standards for safety, as do toy manufacturers. Yet, when we import a product, it doesn't. There's something wrong with this system.

One thing I learned years ago, if at all feasible, do not, do not make an insurance claim for anything, ever.

I think the bigger issue is that US exported more and more our manufacturing, service jobs overseas, to save a buck to help the bottom line. Now we would love to have those jobs back. To save a buck, we gave up quality and government oversight.

There was an in -depth article in the New York Times last week on this. As if Florida didn't have enough economic problems...

I would think that the builder would be the liable party for a defective building. In many cases, newly constructed properties come with some form of warranty - worth looking into.

The warranty insurance industry has been limiting builder liability at every opportunity leaving the consumer exposed further. They even conduct seminars on "Managing (liability) Risks" instead of trying to build it right the first time. I call these "quality avoidance" seminars.

I saw a related article being covered on www.hadd.com entitled: "Not All Bad Drywall Comes from China-Maybe"

Sub-standard materials are only a small part of the defective housing pandemic across North America.

The use of building codes which are decades old, is also at the root of the problem. Working to a minimum standard is an antiquated system and yet the industry can't even achieve these standards.

This is exacerbated by inappropriate design, the widespread use of unskilled labour, lack of professional peer review, failure of professionals to fulfill their consumer prrotection obligations, lack of inspection and enforcement, and all this in full view of our government bureaucracies and elected officials.

How silly of me, I had thought we elected politicians to protect the people.

This is not just a Florida problem! I have had this on my blog for several months and have been involved with several cases on homes that have this drywall. It has also been reported that this is not just a problem from China. Tainted drywall has reportedly been found from a Canadian source and maybe a US source as well.

They are performing some test down in FL on a few homes to see if the problem can be neutralized with a form of chlorine gas. The home is tented the gas pumped in and it is suppose to neutralize it. It is too early to tell if it will work. The FL AG's office was spearheading this program.

Why would you think insurance would help? If it is defective obviously your insurance will not cover it and they've given them a tip off to be cancelled. 'Organic compounds' is another catch all word for who knows what's in there. It is a terrible situation, don't get me wrong, I am sympathetic, just why is it your insurance carriers fault?

Echoing Lenn's sentiment, I made two minor claims because a ton homeowners, including myself, had pinhole leaks in old copper piping and the MAJOR insurance company did not renew my insurance after 15 years of no claims. I will never file another claim unless it's beyond major.

How silly. People pay for insurance because they may actually need it some day, and when they use it, their policy gets cancelled.

Infuriating.

Rich

Once again, someone didn't do their job properly - the drywall should have never been allowed into our country - why wasn't it inspected properly from the beginning? Regarding homes owners insurance - isn't this why we have it? Isn't it suppose to take care of problems with our home or disasters to our homes - this is certainly a disaster. It seems the average joe home owner is getting it right now from all sides, in addition to trying to keep or find a new job, and on and on. I could rant on this one for awhile...

Chinese Drywall, tainted dog food, toothpaste with plastic in it. Will it never end? The Chinese are doing things that would send American company executives to jail. When is our government going to do something about this?

Are there any insurance providers who will cover this? I haven't heard of chinese drywall in our area, but maybe that's because no one is aware of it or no one has reported it.

Once again another inferior, if not toxic, Chinese product.

Lyn: "If it is defective obviously your insurance will not cover it" - New home warranty insurance coverage and regulation varies in different jurisdictions, but generally defective workmanship and materials related to a home's systems and components are included.

Granted, a home warranty is more of a service agreement than insurance. So the message is if you have a warranty, protect yourself by understanding exactly what defects it does and doesn't cover. Also, make sure to document all defects when making the warranty insurance claim.

It's easy for all of us to just add commentary but it's too bad more REALTORS® don't get actively involved in homeowner protection. Taking up local homeowner issues is a great way for REALTORS® to differentiate themselves, and maybe a good cause for Active Rain to champion.

If it's corroding copper pipe and blackening jewelry, how could it NOT be harmful to people? Scary.

I hope this does not become the next big thing for buyers to freek out on.

That's a good point. Will we have to include testing for Chinese drywall in our inspections in the future?

Cutting corners rarely produces a "win - win" outcome !!! I feel for folks who assumed they were paying for a quality product !!!

Rick- I just wrote a post about this issue last weekend. It is a huge problem here in Florida. Insurance does not cover defects in building materials or for contamination. So they are denying the claims. Homeowners need to understand that if they make a claim the take a chance of their insurance not being renewable unless they take care of all the issues surrounding their particular chinese drywall situation. That is usually expensive.

Here in Florida Lennar homes and GL homes are putting the homeowners affected in homes at the builders' expense, then repairing and replacing the chinese drywall. Florida has a chinese drywall addendum allowing a buyer to do an inspection and if they find it they can withdraw their offer if they check off that box. Katerina

How can we identify this wallboard? Do we just assume that a home built after 2004 may contain it? This sounds like the next disclosure we will need - added to lead, asbestos, radon, and mold. Someone cuts corners and we all pay.

Rick...

I see lots of litigation down the road. This is a very bad situation, and I hope someone will figure out how to make everyone happy!

Even if the insurance companies paid damages; even if the builder or homeowner "fixes" the problem and even if there is an accepted protocal that is proven work; any home that is suspected of ever having chinese drywall, will , I suspect, carry a stigma making it almost impossible to sell for years to come. Homeowners with mortages will walk away from their properties leaving the problem with the banks. I think the ultimate solution will be a bull-dozer.

We do have buyers here (sw Florida) buying these properties for the value of the land, making the bet that an economical solution will be developed one day

Well, this is the first I have heard of Chinese drywall. I hope this isn't something that will become a huge problem - Lord knows we have enough problems in the RE market without this!!!

This is the "new asbestos"... I am sure there will be a lot of lawsuit against the builders/developers etc. I am wondering if there is a way a home inspector can check to see if there is chinese drywall.

I agree - if it's corroding pipes it has to be horrible for the human body. I eventually see the government stepping in here at one point. Until they do, everyone is going to pass the buck....somebody is going to need to protect those families and its not going to be insurance, builders or the state.

It's really a shame that insurance companies are allowed to collect our insurance premiums and them cancel our policy and not even offer to return our money. This is why we pay for insurance to begin with... We pay in case we need to file a claim. They collect our money and hope never to pay, or find a way not to pay or just how little they can get away with paying.

Rick - am I just lucky or what because until today I had not heard anything about Chinese drywall. It sounds like I don't want to hear anything about it in the future either. Hopefully there isn't any of it in California.

OCT

This was not a known issue when I practiced in Florida, but I've been in California now for about two years. I read a comment that GL and Lennar were "taking the high road", and I'm glad to hear it as I recognize them as regularly reputable firms.

You get what you pay for. People wanted to use CHEAP . . . and now look. We had an issue over 10 years ago with LP Siding. There was a class action, and settlements and people were compensated. Deal with local builders, deal with national firms (Louisana-Pacific is still going strong even after our little SNAFU). As Vickie says above, some are taking the high road . . .

I have yet to hear of any of this Chinese Drywall showing up in our homes here in Idaho. If anyone knows of a builder that is confirmed to have used it in their homes here in the Boise area, please let me know.

In Illinois we just added another question to the Property Disclosure asking if the home has been used for the manufacture of methamphetamines. I guess we need a question for use of Chinese drywall in the home as well.

Linda Metallo, Re/max Impact, Lockport, Il.

Tell me again how this is the buyers fault? Where is consumer protectionism?

Along with radon in our granite countertops(!), we now have sulfuric acid fumes in Chinese drywall, corroding our homes in humid climates. Maybe we should all live in canvas tents! I hope you read the article on gassing homes with chlorine dioxide (essentially bleach fumes) to kill the fume-causing bacteria and neutralize the sulfuric acid. This is expensive and unproven technology under evaluation by various agencies. Who will pay for remediation? The insurance company, the consumer, the mortgage holder (bank) when the consumer goes into default, and finally the general society when we all pick up the cost to our communities? One more thing for us to be aware of for our clients! Have a good day.

There is a class action suit filed in New Orleans on Chinese drywall. I own two rental properties in Baton Rouge built in 2006 so I checked to see if this was used. Fortunately I didn't have it, but many did who invested there. A Louisiana Court just declared the Chinese company Taishan Gypsum in default in the class action. Stay tuned.

Rick - This Chinese drywall thing is going to be a big mess. I wonder if the builders are going to be held liable for installing the defective drywall.

Unfortunately, this is what happens when companies try to cut corners to save a few bucks! Quality was sacrificed!

Thanks for the great info Rick... What's in store for us next.

OCT

As if we didn't have enough obstacles. I did not think this was going to be a big problem in the beginning but I get asked frequently on newer homes if they have Chinese Drywall. How am I supposed to know? Do we add this to our very thick list of disclosures?

Isn't this like having your hospitalization cancelled if you dare to get admitted to the hospital?

Informative post! Thanks....

OCT

Defective and toxic drywall manufactured in and imported from China has forced thousands of Americans to leave their new homes. It has caused skin irritations and trouble breathing. As more time passes, more homes are being tested and eventually gutted of this serious health concern. No home is safer than another. If you live in new home, it is possible it was constructed using this inferior and dangerous product. New homes in Louisiana and Nevada to multi-million-dollar condos in Florida, where the problem started, are included. If you've been affected, or know someone who has or may be, please read this Web site for a complete dossier on the subject: http://chinesedrywall.org/

OCT

Here is the latest news article from the NY Times: Chinese Drywall Found to Differ Chemically

http://www.nytimes.com/2009/10/30/business/30drywall.html?_r=2

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