NU Online News Service, Jan. 6, 3:58 p.m.EST

A trust formed to handle Chinese drywall damage claims for over700 homeowners has filed a federal lawsuit against 14 insurers,seeking indemnification for their losses.

New York-based law firm Anderson Kill & Olick, P.C.–whoseattorney Robert M. Horkovich represents the plaintiff, Robert C.Pate, a trustee of the WCI Chinese Drywall Trust–said bankrupthomebuilder WCI Communities Inc., its subsidiaries andsubcontractors purchased insurance policies with aggregate limitsof over $200 million during the policy periods triggered by Chinesedrywall claims, which began in 2006.

Drywall building material is also called wallboard, gypsum boardand plasterboard.

Government agencies, collectively called the "InteragencyDrywall Task Force," have been studying homes containing Chinesedrywall after homeowners reported health problems and structuraldegradation after living in homes that used Chinese drywall from2004-2007, when domestic drywall was in short supply.

According to the complaint, filed in New Orleans U.S. DistrictCourt, the plaintiffs seek "a declaratory judgment that theinsurance companies and the subcontractor insurance companies areobligated to indemnify the WCI Chinese Drywall Trust for lossesarising from claims against WCI Communities Inc. and certain of itssubsidiaries for the development and sale of homes allegedlycontaining defective Chinese manufactured drywall."

WCI Communities Inc and its subsidiaries contracted to buildhomes and residential communities in states such as Florida, NewYork, New Jersey, Virginia, Maryland and Connecticut, but wentbankrupt. The WCI Drywall Trust was formed in July 2009, AndersonKill said, to assume liability for the claims.

Those claims, which began in 2006, the complaint notes, were fordamages to homes WCI sold in Florida. The alleged damages includedincreased rates of corrosion of soft metal materials throughout thehouses, various health issues allegedly arising from the drywall,and tarnishing of silver and soft metal within the homes.

In response to WCI's claims, the complaint states, "Theinsurance companies and the subcontractor insurance companies haveeither denied coverage, reserved their rights, failed to reply toWCI's notice letters, or otherwise failed to acknowledgecoverage."

The insurance companies involved are American InternationalSpecialty Lines Insurance Company; American Guarantee and LiabilityInsurance Company; Amerisure Insurance Company, and AmerisureMutual Insurance Company; Auto-Owners Insurance Company; FCCICommercial Insurance Company, and FCCI Insurance Company; HermitageInsurance Company; Illinois Union Insurance Company; LandmarkAmerican Insurance Company; Lexington Insurance Company;Mid-Continent Casualty Company; National Union Fire InsuranceCompany of Pittsburgh, Pa.; Old Republic Insurance Company;Scottsdale Insurance Company; and Steadfast Insurance Company.

The complaint seeks damages in an amount to be determined attrial, pre- and post-judgment interest, attorneys' fees, costs, andany other further relief the court deems proper.

The Interagency Drywall Task Force has released two studies sofar regarding the Chinese drywall complaints. The first found nodirect linkage between the drywall and the reported health problemsand/or degradation.

But the second study, released in Nov. 2009, found a linkagebetween the Chinese drywall, the level of hydrogen sulfide in homeswith the drywall, and the corrosion of metal components in thehomes.

The task force's investigations are ongoing.