Louisiana Senate Passes Ban on Insurance Cancellations Due to Drywall

April 28, 2010

The Louisiana Senate has passed a measure that would ban against property insurers dropping or changing coverage for homes or businesses that contain Chinese-made drywall, which has been blamed for home corrosion and health concerns.

The bill by Sen. Julie Quinn, R-Metairie, would prohibit property insurers from canceling, refusing to renew, or increasing premiums or deductibles because of Chinese drywall at a property.

The Senate approved the measure in a 38-0 vote. No one debated the bill.

People who rebuilt their south Louisiana homes after Hurricane Katrina claim the imported drywall emits sulfur, methane and other chemical compounds that have ruined homes and appliances and harmed residents’ health. The contaminated wallboard is costly to replace, but homeowners plagued with the faulty wallboard have been advised by federal safety officials to gut their homes.

The insurance industry argued the bill would violate existing insurance contracts and could force up insurance rates statewide.

“While not surprised with the passage of SB 595, we remain concerned that it sends the wrong message regarding how to address problems associated with Chinese drywall. It is understandable that lawmakers would like to help consumers who are dealing with these issues, but it is important to not impose legislative “fixes” that could be harmful to the insurance marketplace for all consumers,” said Greg LaCost assistant vice president state government affairs for the Property Casualty Insurers Association of America (PCI).

“Existing state laws and regulations are more than adequate for addressing any insurance concerns associated with Chinese drywall. There have not been problems with wholesale cancellation and non-renewal of homeowners policies on homes containing Chinese drywall. In those situations where a homeowner moves out, leaving the home vacant for an extended period of time, there is a process in place to address that circumstance. Traditionally, insurers can non-renew policies if a dwelling is unoccupied because the risk of loss is demonstrably higher when a home is not occupied. However, insurers, working with consumers, builders, financial institutions and regulators can address this situation without the need for new legislation.”

Quinn’s proposal only deals with drywall that was imported from or manufactured in China before Dec. 31, 2009. Anyone found in violation would face a penalty up to half the insured value of the home or property, plus all court costs and attorney fees.

About 2,100 claims have been filed in federal court over the drywall. Louisiana Attorney General Buddy Caldwell is suing drywall manufacturers and developers on behalf of state and local governments.

Senate Bill 595 can be found at www.legis.state.la.us

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