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

A trust formed to handle Chinese drywall damage claims for over 700 homeowners has filed a federal lawsuit against 14 insurers, seeking indemnification for their losses.

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

Drywall building material is also called wallboard, gypsum board and plasterboard.

Government agencies, collectively called the "Interagency Drywall Task Force," have been studying homes containing Chinese drywall after homeowners reported health problems and structural degradation after living in homes that used Chinese drywall from 2004-2007, when domestic drywall was in short supply.

According to the complaint, filed in New Orleans U.S. District Court, the plaintiffs seek "a declaratory judgment that the insurance companies and the subcontractor insurance companies are obligated to indemnify the WCI Chinese Drywall Trust for losses arising from claims against WCI Communities Inc. and certain of its subsidiaries for the development and sale of homes allegedly containing defective Chinese manufactured drywall."

WCI Communities Inc and its subsidiaries contracted to build homes and residential communities in states such as Florida, New York, New Jersey, Virginia, Maryland and Connecticut, but went bankrupt. The WCI Drywall Trust was formed in July 2009, Anderson Kill said, to assume liability for the claims.

Those claims, which began in 2006, the complaint notes, were for damages to homes WCI sold in Florida. The alleged damages included increased rates of corrosion of soft metal materials throughout the houses, 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, "The insurance companies and the subcontractor insurance companies have either denied coverage, reserved their rights, failed to reply to WCI's notice letters, or otherwise failed to acknowledge coverage."

The insurance companies involved are American International Specialty Lines Insurance Company; American Guarantee and Liability Insurance Company; Amerisure Insurance Company, and Amerisure Mutual Insurance Company; Auto-Owners Insurance Company; FCCI Commercial Insurance Company, and FCCI Insurance Company; Hermitage Insurance Company; Illinois Union Insurance Company; Landmark American Insurance Company; Lexington Insurance Company; Mid-Continent Casualty Company; National Union Fire Insurance Company of Pittsburgh, Pa.; Old Republic Insurance Company; Scottsdale Insurance Company; and Steadfast Insurance Company.

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

The Interagency Drywall Task Force has released two studies so far regarding the Chinese drywall complaints. The first found no direct linkage between the drywall and the reported health problems and/or degradation.

But the second study, released in Nov. 2009, found a linkage between the Chinese drywall, the level of hydrogen sulfide in homes with the drywall, and the corrosion of metal components in the homes.

The task force's investigations are ongoing.

Special Reports /

14 Insurers Sued Over Chinese Drywall Losses

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