Subcontractor Insurers’ Attempt To Dismiss Chinese Drywall Cases Fails

NU Online News Service, Feb. 15, 3:07 p.m. EST

A federal judge in New Orleans has denied requests by more than a half dozen insurers to have Chinese drywall litigation against them rejected.

Judge Eldon E. Fallon of the U.S. District Court for the Eastern District of Louisiana, who is presiding over multidistrict litigation (MDL) on Chinese drywall, has ruled that subcontractors do not need to be a part of the lawsuits.

One of the cases at issue is Pate vs. American International Specialty Lines, et al., filed in December 2009 by a trustee for the WCI Chinese Drywall Trust against WCI, a Florida contractor.

Subcontractors installed the drywall for WCI and took out insurance policies naming WCI as an additional insured. Insurers of the subcontractors tried to tell the court that the case should be dismissed because the subcontractors were not required to be there.

Related: CDC Finds No Link Between 11 Deaths And Chinese Drywall

The insurers argued that subcontractors should have had an interest in being present for the case since their insurance funds could be paid out to the plaintiffs, leaving them with little or no money for future defense.

Robert M. Horkovich, an attorney with New York-based law firm Anderson Kill & Olick, who is representing the WCI trustee, said the motions to dismiss were attempts by the insurers to stay out of the MDL and out of Louisiana, known for its pro-policyholder stance on the pollution exclusion. In contrast, Florida rulings have gone pro-insurer, he said.

Insurers have stood behind the exclusion to avoid coverage obligations.

“When WCI was added as a named insured, it was WCI’s insurance,” Mr. Horkovich said. “We didn’t need the subcontractors there to determine that.”

Judge Fallon agreed. He said the best course was to present the cases without the subcontractors and that the “court sees no reason to impose the burden of litigation on the subcontractors, nor does it find dismissal of the present cases from the MDL warranted…”

Mr. Horkovich said the next move is to request a summary judgment from Judge Fallon on the pollution exclusion issue for third-party claims.

The other cases implicated by the ruling are Centerline Homes Construction Inc. vs. Mid-Continent Casualty Co. and Northstar Holdings Inc. vs. General Fidelity Insurance Co.

The insurers that looked to have the cases dismissed were American Guarantee & Liability Insurance, Amerisure Mutual Insurance, Chartis, FCCI Commercial Insurance, Landmark American Insurance, Mid-Continent Casualty, National Union Insurance Co. of Pittsburgh, and NGM Insurance. 

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