United States District Court for the Southern District of Florida Denies Coverage for Chinese Drywall Claims under Commercial General Liability Policies

United States District Judge, K. Michael Moore, of the Southern District of Florida granted summary judgment in favor of General Fidelity Insurance Company (“GFIC”) in a suit involving Chinese drywall claims. General Fidelity Ins. Co. v. Katherine L. Foster, et al., Case No. 09-80743-CIV-MOORE/SIMONTON (S.D. Fla. March 24, 2011). GFIC sought a declaratory judgment to determine whether, pursuant to commercial general liability (“CGL”) policies issued by GFIC to three Northstar Homes entities (“Northstar”), it had a duty to defend Northstar against Ms. Foster’s Chinese drywall claims.  

The Court, applying Florida law, held that GFIC was not obligated to defend the Northstar entities under the CGL policies, because of the “Florida Total Pollution Exclusion Endorsement.” Judge Moore found that the excessive sulfur and strontium in the drywall were “pollutants” because they were “irritants,” as defined by Webster’s Dictionary. The Court also noted that the total pollution exclusion was clear and not ambiguous. Ms. Foster has filed a notice of appeal of the Court’s order.

The GFIC holding is contrary to another Florida case, Walker v. Teachers Insurance Co., Case No. 09-17303 in the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida (March 2, 2011), where a Hillsborough County circuit court judge held that the off-gassing from Chinese Drywall constituted a sudden and accidental occurrence involving “smoke.” That court found that the damage caused by the drywall did not fall under the “wear and tear” or the “errors, omissions, and defects” exclusions because the drywall functioned properly. However, the Walker case involved an all-risk (premises) and a specified risk (personalty) policy, and did not appear to address a pollution exclusion. The Walker case is currently set for trial on the issue of damages and likely will be appealed at the conclusion of the case.

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