Homeowners stricken with Chinese drywall now face new threat of losing insurance policies

WEST PALM BEACH, Fla. - James and Maria Ivory's dreams of a relaxing retirement on Florida's Gulf Coast were put on hold when they discovered their new home had been built with Chinese drywall that emits sulfuric fumes and corrodes pipes. It got worse when they asked their insurer for help - and not only was their claim denied, but they've been told their entire policy won't be renewed.

Thousands of homeowners nationwide who bought new houses constructed from the defective building materials are finding their hopes dashed, their lives in limbo.

And experts warn that cases like the Ivorys', in which insurers drop policies or send notices of non-renewal based on the presence of the Chinese drywall, will become rampant as insurance companies process the hundreds of claims currently in the pipeline.

At least three insurers have already cancelled or refused to renew policies after homeowners sought their help replacing the bad wallboard. Because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations.

"This is like the small wave that's out on the horizon that's going to continue to grow and grow until it becomes a tsunami," said Florida attorney David Durkee, who represents hundreds of homeowners who are suing builders, suppliers and manufacturers over the drywall. "This is going to become critical mass very shortly."

During the height of the U.S. housing boom, with building materials in short supply, American construction companies imported millions of pounds of Chinese-made drywall because it was abundant and cheap. An Associated Press analysis of shipping records found that more than 500 million pounds of Chinese gypsum board was imported between 2004 and 2008 - enough to have built tens of thousands of homes. They are heavily concentrated in the U.S. Southeast, especially Florida.

The defective materials have since been found by state and federal agencies to emit "volatile sulfur compounds," and contain traces of strontium sulfide, which can produce a rotten-egg odourless, along with organic compounds not found in American-made drywall. Homeowners complain the fumes are corroding copper pipes, destroying TVs and air conditioners, and blackening jewelry and silverware. Some believe the wallboard is also making them ill.

The federal government is studying the problem and considering some sort of relief for homeowners.

Meanwhile, the AP interviewed several homeowners who, like the Ivorys, were unlucky enough to purchase properties built with Chinese drywall, and are now being hit with a second and third wave of bad news: Their insurers are declining to fill their claims, then cancelling the policy or issuing notices that policies won't be renewed until the problem is fixed. The homeowners have little recourse since neither the Chinese manufacturers nor the Chinese government are likely to respond to any lawsuits or reimburse them for the defective drywall.

In each instance, the insurer learned of the drywall through a claim filed by the homeowner seeking financial help with its removal.

The Ivorys have sued, but it could take months for their case and hundreds like it to work their way through the courts. In the meantime, they have moved back to Colorado because their three-bedroom ranch home two miles from the Gulf of Mexico is unlivable and soon will be uninsured.