As the number of claims mount, insurers are in a scramble to manage risk management issues surrounding property/casualty coverage of faulty Chinese drywall. Yesterday, Louisiana became the first state to openly challenge insurers, passing a bill stopping insurers from increasing premiums or canceling homeowners and commercial property coverage because of such claims.
 
The legislation, SB 595, sponsored by Senator Julie Quinn, R-Metairie, passed the Louisiana State Senate unanimously on Monday and now goes to the House Insurance Committee.

Insurers, meanwhile, are not sitting idly by. In a statement, Greg LaCost, AVP, state government affairs for the Property Casualty Insurers Association of America (PCI), said he was not surprised that the bill passed, but believes it “sends the wrong message” about how parties should proceed when addressing issues concerning Chinese drywall.

Arguing that the potential legislative action could harm the insurance industry at large, LaCost said, “Existing state laws and regulations are more than adequate for addressing any insurance concerns associated with Chinese drywall.”  Further, LaCost recommended insurers work with policyholders, regulators and other stakeholders to address the situation.

The Louisiana Senate’s action occurred a day before U.S. District Judge Eldon Fallon awarded $164,000 to a family in New Orleans that had claimed the Chinese-manufactured drywall ruined their entire home. The judge also ordered that the drywall must be removed and electrical wiring, plumbing components, the heating and air conditioning system and appliances must be replaced. Manufacturer Knauf Plasterboard Tianjin Co. argued the family's home can be repaired for less than $59,000.

Earlier last month, Fallon awarded $2.6 million to seven Virginia families affected by the drywall. Experts say this ruling is the first in a growing stream of federal lawsuits over drywall-tainted structures.

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