The state’s insurer of last resort says it will not provide coverage for homes with extensive damage caused by tainted drywall from China.
Already, Citizens Property Insurance has dropped coverage on two homes that are vacant because of defective drywall, which corrodes metals, produces a foul smell and causes electrical and other problems. Late Wednesday, the company reversed its decision to drop coverage on a third, occupied house, saying it made a mistake.
Most of the 58 homes that filed claims for tainted drywall in the past 18 months have been reviewed and will continue to be insured, said Citizens spokeswoman Christine Ashburn. The damage was not considered extensive and the homes remain occupied.
Yet some homeowners with the defective drywall wonder what they’ll do about insurance. Fixing a home with defective drywall typically exceeds $100,000, and homeowners with mortgages could lose their homes if they can’t find coverage. Insurance companies have steadfastly denied claims caused by the drywall.
Citizens does not cover homes with existing damage, whether from tainted drywall, hurricanes or other problems that happened when it was not insuring the property.
“If a home has existing damage, we will not provide coverage for the property unless the damage is repaired, or we are provided with proof of intent to repair the property,” Ashburn said.
Late last year, Citizens notified James Ivory, a retired mechanic from Punta Gorda, that it planned to drop coverage of his house. Citizens said it retracted the decision late Wednesday, saying it was a computer-generated error.
“I don’t have any money to enjoy my retirement. This thing has got me down and out,” Ivory said Wednesday afternoon, before receiving word of the change.
Citizens made a similar mistake with Ivory before. In 2009, Citizens said his coverage would be canceled but rescinded the decision after criticism and after an inspection found the damage from drywall wasn’t that bad.
U.S. Sen. Bill Nelson , D-Fla., questioned Citizens President Scott Wallace in a letter on Tuesday about the decision to pull Ivory’s coverage.
“I am concerned about the effect of Citizens’ nonrenewal or cancellation decision on the tens of thousands of Floridians suffering through the nightmare of tainted drywall, especially those who are unable to find affordable coverage in the voluntary insurance market ,” Nelson wrote.
Most insurance companies, including Citizens, have fought paying homeowners’ claims for Chinese drywall, saying they are not responsible for covering the damage, said Tom Lynch, a Citizens board member and president of Plastridge Insurance Agency.
A federal judge in New Orleans issued a ruling on Dec. 16 agreeing with nine insurance companies taking that position.
After Hurricanes Katrina and Wilma in 2005, there was a shortage of building materials so some contractors used Chinese drywall, Lynch said. He said it’s not the type of damage that insurers typically cover, and some insurance policies specifically exclude coverage for damage that is not “sudden and accidental.”
Some builders have refused to pay for damage caused by their use of drywall, with some blaming subcontractors that have since gone out of business.