Is My Drywall Chinese? - HB Litigation Conferences

exclusion are not met because the “pollutants” from Chinese drywall continue to be released
long after the contractor has ceased “performing operations.”
Hence, in order for the December 2004 absolute pollution exclusion to apply -- even
in those states that interpret the exclusion literally -- the requirements of subpart f.(1)(a) of
the exclusion must be met. This subpart provides that the exclusion applies only to the
release of “pollutants” “at or from any premises, site or location which is or was at any time
owned or occupied by, or rented or loaned to, any insured.” This requirements for
application of the pollution exclusion may or may not be satisfied by particular contractors:
A high production builder may meet this requirement if the builder or another
insured on the builder’s policy took title to the house prior to sale. The
requirement would not be met, however, if title to the house were in an
affiliate of the builder which was not an insured under the same policy as the
builder.
A custom builder who builds houses on lots owned by the homeowner is
unlikely to have ever owned the house and hence would not meet this
requirement for application of the absolute pollution exclusion.
A remodeler doing work on a preexisting home would not have owned the
house and hence would not meet this requirement for application of the
absolute pollution exclusion.
A subcontractor would not have owned the house and hence would not meet
this requirement for application of the absolute pollution exclusion. 3
In short, under the law of states interpreting the absolute pollution exclusion literally,
the subcontractor may be in a better position than many general contractors to avoid the
December 2004 version of the absolute pollution exclusion and obtain insurance coverage for
the cost of repairing Chinese drywall.
3 The general contractor may be an insured on the subcontractor’s policy, and the
general contractor may own the house during construction. This should not defeat coverage
for the subcontractor, however, because subpart f.(1)(a)(ii) of the exclusion provides an
exception if the “owner” of the house has been added to the subcontractor’s policy as an
additional insured and the house is not and never was owned by any other insured.
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