Is My Drywall Chinese? - HB Litigation Conferences

Other states follow the “significant contacts” test. This is an even more diffuse test in
which a court attempts to discern the state with the most significant interest in resolution of
the coverage dispute. Factors that the courts consider in doing so include (i) the place where
the insurance policy was executed, (ii) the place where the policy was negotiated, (iii) the
place where the policy was to be performed, (iv) the location of the insured risk, and (v) the
location of the parties. The location of the insured risk may not be the state in which the
affected homes are located but rather the state in which the contractor performs most of its
work.
Among the states in which Chinese drywall has been discovered, states following the
“place of contracting” test include Alabama, Louisiana, Georgia, South Carolina, and
Virginia. States following the “significant contacts” test include Texas and Mississippi. A
Texas statute, however, requires that Texas law be applied if the policyholder is a citizen or
inhabitant of Texas (in the case of a corporation, meaning incorporated under the laws of
Texas), and if the policy was issued by an insurer doing business in Texas in the course of
the insurer’s business in Texas. A North Carolina statute requires that North Carolina courts
apply North Carolina law to all insurance policies made within the state, applied for in the
state, or that cover property in the state. The choice of law rule in Florida is unsettled, and
the issue is currently pending before the Florida Supreme Court. See USF&G v. Liberty
Surplus Ins. Corp., 550 F.3d 1031, 1033-35 (11th Cir. 2008) (certifying to Florida Supreme
Court question of whether Florida would apply place of contracting or significant contacts
test to determine the law applicable to insurance coverage for construction defect claim
against contractor).
Regardless of which “choice of law” rule is applied by the court hearing the insurance
coverage suit, the court could decide that the law of a state other than the state in which the
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