A lot of insurance companies are not only denying claims, but are also cancelling policies on homes with toxic drywall and/or not renewing them.

http://articles.moneycentral.msn.com/Insurance/InsureYourHome/toxic-drywall-goodbye-insurance.aspx?gt1=33004

They don't want to pay to have the problems fixed, which could lead to more foreclosures from homeowners dumping or abandoning properties for lack of homeowners insurance.

One major problem for appraisers is, it is virtually impossible to know if the drywall in question has been used in the construction or not, without removing portions to see the manufacture info stamped on the underside.  The only other possible way to determine if it's present, is by any corrosion evidence or perhaps the smell.  Even home inspectors have a difficult time in determining its presense.

About all anyone can do, is add a statement to the possibility that Chinese drywall may be present for homes constructed between 2004 and 2008.  Similar to a statement that a property may be in a potential flood zone area, or in an area prone to ground fissures, or in proximity to an active fault line, etc., as an environmental concern.  I wonder how many deals will be deemed "killed by the appraiser" for such statements? - like checking the "declining market" box.

Sara  -  It is my understanding that homes built between 04 and 08 have been insured since their purchase date.  Most homeowners get homeowners insurance when they purchase a home to cover claims such as storm damage, flooding, theft/burglary, fire, etc.  But what I read, the insurance companies are flat out refusing to cover any claims for damage caused by the toxic (Chinese) drywall that was used during the construction. 

As a result, anyone filing a claim associated with the drywall are finding their carrier will not honor the claim and subsequently are cancelling the policy and/or will not renew the policy.  I'm sure those homeowners that are affected by the carrier's action will have difficulty obtaining insurance with another carrier.  Close knit corrupt industry if you know what I mean.  Much like real estate but with government backing in the form of laws requiring coverage.

The only recourse is to file a lawsuit against the builder, and/or sub-constractor, for damages and to fix the property, which could take months if not years to settle.  I'm sure many will decide to just walk away and let the property go into foreclosure.

Knowledge of the use of Chinese drywall has been around for a couple of years.  I first read about it's use around the end of 2007 and there have been quite a few articles about it back in March/April of this year.  From what I have read, it is showing up in most states in the continental US.  Mostly in the Gulf Coast states and Florida.  Other areas have been the Great Lakes region and Northwest.  Even in my area I have gone into some reo properties with a rotten egg smell.  The listing agents that provided me access claimed it was just stagnant water in the plumbing - yea right!! - I'm not a gullible buyer and I do keep up to date on real estate construction (costs, procedures, materials, etc).