759 F. Supp. 2d 822
E.D. La.2010Background
- MDL involves Chinese-manufactured drywall in homes; insurers move to dismiss/limit coverage under homeowners' policies.
- Plaintiffs claim drywall causes physical loss and property damage via corrosion and odors; insurers dispute coverage under exclusions.
- Court applies Louisiana contract interpretation and all-risk policy framework, with policy language interpreted in light of the whole policy.
- Policies are Louisiana-sited and all-risk, placing burden on insured to show coverage and burden on insurer to prove exclusions.
- Court considers do Doerr-style pollution/contamination exclusions, latent defect exclusions, and ensuing loss provisions under Doerr and related Louisiana authorities.
- Decision resolves ten insurer motions by ruling on covered losses, exclusions, and whether ensuing losses or other losses are recoverable under the policies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chinese drywall causes a covered direct physical loss to homes | Plaintiffs allege physical loss via odor and corrosion enabling loss of use | Insurers contend loss is not physical loss or is excluded | Yes, covered direct physical loss exists under several policies |
| Do latent defect exclusions bar coverage for drywall damage | Latent defect exclusion should not apply to drywall | Latent defect exclusion should bar coverage | Latent defect exclusion does not apply |
| Whether pollution/contamination exclusions apply to drywall-related damage | Exclusions do not apply to drywall as non-environmental pollutant | Exclusion should bar coverage for contaminants/pollutants | Pollution/contamination exclusions do not apply |
| Whether ensuing loss provisions resurrect coverage for excluded damages | Ensuing losses cover damage caused by drywall | No ensuing losses alleged or covered | No ensuing losses; claims for covered ensuing losses rejected |
| Whether faulty materials exclusions apply to drywall | Drywall still serves its intended purpose; exclusion should not apply | Drywall constitutes faulty materials; exclusion applies | Drywall constitutes faulty materials; exclusion applies |
Key Cases Cited
- Trinity Indus., Inc. v. Insurance Co. of N. Am., 916 F.2d 267 (5th Cir. 1990) (physical loss narrowly defined; distinguishes initial unsatisfactory state)
- Doerr v. Mobil Oil Corp., 774 So.2d 119 (La. 2000) (pollution/contamination exclusions construed for environmental pollution; set analytical framework)
- Central Louisiana Elec. Co. v. Westinghouse Electric Corp., 579 So.2d 981 (La. 1991) (corrosion exclusion guiding interpretation under Louisiana law)
- Dawson Farms, LLC v. Millers Mutual Fire Insurance Co., 794 So.2d 949 (La.App. 2 Cir. 2001) (enforcing ensuing loss concepts in Louisiana appellate law)
- Alton Ochsner Med. Found. v. Allendale Mut. Ins. Co., 219 F.3d 501 (5th Cir. 2000) (enforcing ensuing loss framework; exclusions vs. ensuing coverage)
- Finger v. Audubon Ins. Co., U.S. , 2010 WL 1222274 (La. Civ. Dist. Ct. 2010) (la. latent/other exclusions; Doerr guidance applied)