NU Online News Service, March 29, 2:46 p.m. EDT

DENVER–The National Association of Insurance Commissioners (NAIC) plans to release a draft white paper on Chinese drywall problems by the summer, the association's Catastrophe Insurance Working Group was told.

Homeowners have inundated insurers with lawsuits over claims they have mostly denied, alleging that certain wallboard products caused respiratory ailments, headaches, coughing and fatigue as well as creating foul odors; corrosion of pipes and wiring; and damage to furniture, fixtures and jewelry.

Florida Insurance Commissioner Kevin McCarty had announced his intention to develop a white paper on the issue in Dec. 2009 during a hearing held by the working group.

But Eric Nordman, director of the NAIC's Regulatory Services Division, said during the NAIC's Spring National Meeting held here that there is currently so much speculation, and it is so early in the process, that information on the outcome is still premature. As such, he said the white paper is currently just a "sketchy outline."

Ray Spudeck, chief economist at the Florida Office of Insurance Regulation (OIR), who chaired the working group for Commissioner McCarty, also spoke to the early stage of the process, noting that the science to determine causes of problems associated with the drywall can only progress so fast.

He did note that the Consumer Products Safety Commission (CPSC), which is leading the efforts to understand the science, has conducted tests showing issues with U.S. drywall similar to the problems seen in Chinese drywall, prompting some to now use the term "defective drywall" rather than "Chinese drywall."

He also said the problems associated with this drywall have spread outside of the traditional Southeastern problem areas, with over 35 states now receiving complaints.

Bob Detlefsen, vice president of public policy at the National Association of Mutual Insurance Companies (NAMIC), asked Mr. Nordman what shape the NAIC white paper would take. He noted that the working group's last white paper, "National Catastrophe Risk–Creating a National Plan," created controversy because it was developed as a position paper rather than an informational paper.

That white paper, Mr. Detlefsen noted, went through 13 revisions and ran into obstacles once reported out of the working group. The end result, he said, was a white paper that was a "hodgepodge of different points of view" and that was loaded with disclaimers.

He said it ended up being a paper on creating a national plan that did not endorse creating any particular national plan.

He said, with respect to Chinese drywall, that there are some proposed solutions to settle claims, including the creation of a master settlement fund where all parties, including insurers, would have to contribute funds. And he expressed concern that the NAIC may endorse this or some other proposal in its white paper.

Mr. Nordman said the paper will likely discuss possible solutions, but the early drafts make no recommendations.

Special Reports /

NAIC To Study Drywall Problems

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