14 insurance companies sued in Chinese drywall case

NEW ORLEANS—The trustee for homebuilder WCI Communities L.L.C. has sued 14 insurance companies seeking indemnification for more than $200 million in losses related to claims from homes allegedly containing contaminated Chinese drywall.

The suit, filed Jan. 4 in U.S. District Court for the Eastern District of Louisiana, takes aim at several insurers that include Chartis Inc. subsidiary Lexington Insurance Co. The suit accuses the insurers of improperly denying coverage, reserving their rights, failing to reply to WCI or failing to acknowledge coverage of claims WCI made concerning the defective drywall.

Bonita Springs, Fla.-based WCI formed the WCI Drywall Trust in July 2009 after homebuilder WCI Communities and its subsidiaries entered bankruptcy to assume liability for claims alleging property damage or bodily injury from exposure to drywall made in China that was installed in homes built by WCI.

According to the lawsuit, WCI started receiving homeowner complaints in 2006 in areas of Florida including Fort Lauderdale, Fort Myers and Bradenton. Homeowner damage claims included corrosion of soft metal materials in air conditioners and appliances as well as health issues.

Nearly 700 homeowners may seek recovery through the WCI Trust.

In the New Orleans lawsuit, WCI is seeking declaratory judgment to cover the claims and damages for breach of contract.

“A prompt and thorough insurance recovery is vital to enabling homeowners suffering from the effects of defective wallboard to remediate their homes and recover their losses,” Robert M. Horkovich of New York-based Anderson Kill & Olick P.C. and lead counsel to Robert C. Pate, the trustee for the WCI Chinese Drywall Trust, said in a statement.

Aside from Lexington, other insurers named in the suit include American International Specialty Lines Insurance Co., another unit of American International Group Inc.; Old Republic Insurance Co.; Steadfast Insurance Co.; and Illinois Union Insurance Co., a unit of ACE Group of Cos.