Today the Virginia Supreme Court, in answering a certified question from the federal Fourth Circuit, held unanimously that a homeowners’ insurance policy did not provide coverage for a loss caused by Chinese-made drywall. In TravCo Insurance Company v. Ward, Record No. 120347, slip op. (Va. Nov. 1, 2012), the court was asked to interpret exclusions for loss caused by: (1) latent defect; (2) faulty, inadequate, or defective materials; (3) rust or other corrosion; and (4) pollutants, defined to include any gaseous irritant or contaminant. The court held that “each of the four exclusions is unambiguous and reasonable in its form, scope and application and excludes damage resulting from the Chinese drywall from coverage.” Id. at 4. Here are a few quotes from the opinion:

  • Latent defect exclusion: “Although, as Ward argues, the sulfuric content of the drywall was potentially discoverable through testing after the product was manufactured, the actual defect is the release of sulfuric gases by the drywall. The future release of gas by the drywall was not discoverable. Ward lived in his home for approximately two years before discovering a problem with the drywall; the defect was ‘hidden or concealed, and not visible or apparent.’” Id. at 9-10.
  • Faulty, inadequate or defective materials exclusion: “[T]he drywall at issue in this case could not reasonably be said to perform its function; its sulfuric gases rendered Ward’s home uninhabitable. Further, the drywall is clearly defective.” Id. at 12.
  • Corrosion exclusion: “[Dictionary] definitions and the logical, common understanding of the term ‘corrosion’ do not draw a distinction between ‘naturally occurring’ and other corrosion. There is similarly no basis for reading a temporal element into the instant corrosion exclusion; the plain language of the policy and commonly understood definition of corrosion do not warrant such an interpretation. . . . Ward’s argument that the damage ‘was not caused by corrosion’ because the ‘damage was the corrosion itself’ is without merit. Such a construction would render this and similar corrosion exclusions meaningless, as the district court noted.” Id. at 15-16 (footnote omitted).
  • Pollution exclusion: “[T]he pollution exclusion could not reasonably be argued to invalidate coverage for ‘almost any condition or function’ in the Ward home. The pollution exclusion in the TravCo policy is not overbroad or unreasonable, and should be construed according to its plain language. . . .As for the nature of the sulfuric gases, Ward asserted the presence of ‘odorous fumes in the residence,’ described the gas as ‘toxic,’ and alleged that it caused ‘skin rashes,’ ‘lesions’ ‘sinus congestion,’ and ‘nosebleeds.’ These properties plainly place the sulfuric gases from the residence within the definition of ‘irritant or contaminant’ contemplated by the policy and commonly understood. . . . [I]t is difficult to envision how the sulfuric gases reached the air of the Ward home if not by the means encompassed by the ordinary meaning of ‘[d]ischarge, dispersal, seepage, migration, release or escape.” Id. at 20-21 (citation omitted).

Stephen Goldman of Robinson & Cole LLP argued this case on behalf of TravCo Insurance Company in the Virginia Supreme Court, and the briefs were prepared by Stephen Goldman, Wystan Ackerman and Daniel Sullivan of Robinson & Cole LLP.

SPECIAL DISCLAIMER: Because the Ward case is one in which Robinson & Cole LLP briefed and argued, we reiterate that the intent of this blog is to serve as an informational resource, not advertising for our legal services. Every case is different and the result achieved in the case described above may differ from the result in some other case, which may involve different facts, different applicable law or a different jurisdiction. Past results do not guarantee future results, and you should always consult your own lawyer about your own case.