Is My Drywall Chinese? - HB Litigation Conferences

homes containing Chinese drywall are located should apply to the insurance coverage
dispute. For example, under the place of contracting test, a Florida builder of homes in
Florida may have purchased its CGL policy from an insurer in New York; the policy may
have been countersigned by the insurer in New York; and the policy may provide that it is
not effective until countersigned by the insurer. Such a builder would have a strong
argument that the law of New York should be applied by the Florida court to interpret the
policy. By the same token, if the court were to apply a “significant contacts” test to the same
Florida builder, the court could also decide that the law of a state other than Florida should
apply to the insurance coverage suit. That law could be the law of the state where the
insurance policy was finally entered into, or it could be the state which is the principal
location of the risk, i.e. where the greatest number of the builder’s homes were built. See,
e.g., St. Paul Fire and Marine Ins. Co. v. Building Construction Enterprises, Inc., 526 F.3d
1166, 1168-69 (8th Cir. 2008) (applying Missouri’s significant contacts test, court applies
Missouri law to a coverage dispute over a construction defect claim involving a military base
in Kansas because the insured was located in Missouri, the insurance contract was entered
into in Missouri, and only 10% of the insured’s work was performed in Kansas); Terminal
Freezers Inc. v. U.S. Fire Ins., 2008 WL 2544898, at *3-*5 (W.D. Wash. June 23, 2008)
(applying significant contacts test, court held that insured owner’s property insurance policy
was governed by law of Washington, where the insured was located, rather than by the law of
California, where the damaged building was located, in part to avoid the inconsistencies
resulting from applying the law of the state in which the loss occurred).
VII. Practical Advice for Contractors
Contractors who learn that they may be affected by Chinese drywall should promptly
ask their insurance broker to give the contractor’s primary and excess CGL insurers notice
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