TOM S. LEE, District Judge.
This cause is before the court on the motion of defendant Alfa Mutual Insurance Company (Alfa) for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiffs Brian Bishop and Rachel Bishop have responded to the motion and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes that the motion is well taken and should be granted.
On February 26, 2010, plaintiffs Brian Bishop and Rachel Bishop filed suit in the Circuit Court of Wayne County, Mississippi, against Arthur Sturdivant and Alfa Mutual Insurance Company (Alfa), seeking damages from Sturdivant for alleged negligence and breach of contract, and benefits under their homeowners' insurance policy with Alfa for damages in and to their home caused by Chinese-manufactured drywall which Sturdivant, a home builder, had used in the construction of their home. In their complaint, the Bishops allege that in April 2008, they purchased and took possession of a home in Waynesboro, Mississippi that had been newly constructed in 2007 by home builder Arthur Sturdivant. Subsequently, in 2009, the Bishops began noticing unexplained noxious odors, damage to appliances and damage to exposed metals in the house. They also began experiencing adverse health effects, which forced them and their two minor children to move out of the home and into a camper on the property. Although plaintiffs initially were unaware of the cause of the problems they were experiencing, at some point, they learned that the home "had been constructed with defective Chinese manufactured drywall that was causing all of the problems in the home, the unexplained adverse health effects, and causing the home to be uninhabitable."
In its present motion, Alfa asserts it is entitled to summary judgment declaring that its policy affords no coverage for the Bishops' claims. Alfa contends there is no coverage in effect for any of the Bishops' claimed losses, which include damage to the home's HVAC system, discoloration of the electrical wiring and the copper lines on the hot water heater, damaged personal property including a television and direct TV converter, respiratory illness and severe headaches experienced by family members, and the purchase of a travel trailer in late June 2009 when the home became uninhabitable.
As is relevant here, Section I of Alfa's policy provides coverage for "accidental direct physical loss" to "the dwelling used principally as a private residence on the residence premises" (Coverage A); for "direct physical loss" to the insured's personal property where such loss is caused by any one of certain specifically listed perils (Coverage B); and for loss of use of the premises, if a covered loss under Section I makes the residence uninhabitable (Coverage D).
The policy contains exclusions under Coverages A and B for "any loss to the property ... which is directly or indirectly caused by one or more of (certain listed) perils, including, in pertinent part:
As to these exclusions, there is an "ensuing loss" provision which states:
The policy additionally excludes coverage for "any loss directly or indirectly caused by ... defect, weakness, inadequacy, fault or unsoundness in ... materials used in construction or repair." There is also an "ensuing loss" exception with regard to this exclusion, which states:
Alfa contends the Bishops' claim for recovery for damage to items of personal property is not covered since there was no direct physical loss to such property from a named peril; that losses for damage to the dwelling, including damage to wiring, appliances and the HVAC system, fall
Under the policy, there is no coverage for direct physical loss to personal property unless the loss is caused by any of sixteen perils listed in the policy.
Clearly, however, while a television and direct television converter do fall with the types of items listed in this peril, under its plain wording, this paragraph extends coverage only when the damage is sudden and accidental and caused by "an increase or decrease of artificially generated electrical current." As Alfa correctly points out, Chinese drywall and its off-gassing tendencies are not "an increase or decrease of artificially generated electrical current," and there is consequently no coverage for the Bishops' claimed personal property loss.
Alfa does not dispute that the Bishops have sustained "accidental direct physical loss" to their home caused by the Chinese drywall, but it contends that all the claimed losses fall within one or more of the referenced policy exclusions. For the reasons that follow, while the court is unable to conclude that the "latent defect" exclusion applies, and the court is of the opinion that the "inherent vice" exclusion is inapplicable, the court does find that the exclusions for losses from faulty materials, contamination and corrosion apply to preclude coverage for any of the Bishops' claimed losses.
The policy excludes from coverage losses caused by "latent defect" but does not define the term, and there are no Mississippi cases which define the term. However, as this is a standard exclusion in a homeowners' policy, it is not difficult to find cases that have addressed its meaning, including cases involving Chinese drywall.
In TRAVCO Insurance Co. v. Ward, 715 F.Supp.2d 699 (E.D.Va.2010), the court held that losses to the insured home from defective Chinese Drywall fit squarely within Virginia's definition of "latent defect," as "flaws in property that are undetectable, and hence unexpected," id. at 710 (citing Glens Falls Ins. Co. v. Long, 195 Va. 117, 77 S.E.2d 457, 459 (1953), which defined "latent defect" as "defect which reasonably careful inspection will not reveal"), and which are "`integral to the damaged property by reason of its design or manufacture or construction,'" id. (quoting U.S. West v. Aetna Cas. & Sur. Co., 117 F.3d 1415 (4th Cir.1997)). However, while the court held that damage to the house itself was excluded, it held that the exclusion did not apply to damage to the home's air conditioner and garage door, reasoning that "[t]he Chinese Drywall in the Ward Residence is not integral to the damaged air conditioner or garage door. To the contrary, there is no indication that the air conditioner or the garage door were manufactured or constructed in a defective manner." Id. at 711.
The court in In re Chinese Manufactured Drywall Products Liability Litigation (In re Chinese Drywall Litigation), 759 F.Supp.2d 822 (E.D.La.2010), concluded that the analysis in TRAVCO, while thorough and sound, could not be given much weight in a case involving Louisiana law, since Louisiana has a different definition of "latent defect" than Virginia: "The definition of latent defect under Louisiana law requires that the defect be hidden and not discoverable upon a reasonable, customary inspection or test." Id. at 836 (citing Nida v. State Farm Fire & Cas. Co., 454 So.2d 328, 335 (La.App. 3 Cir.1984)). The court considered it a "close call" whether the latent defect exclusion applied to the losses from the Chinese drywall, noting that while the insureds "were not aware that their homes contained Chinese-manufactured drywall and the damages to their homes were caused by this drywall until they learned of the problem through the media or otherwise," they "were aware before the media reports that their homes contained a foul odor, their electrical wires and components were blackened, and their electrical devices and appliances were failing." Id. at 838. It was unclear to the court "whether the latent defect exclusion is avoided through knowledge or discoverability of the specific cause of defects in an insured property or simply by the knowledge of the defects themselves," and ultimately, being "unable to make a definitive determination as to whether the damage caused by the Chinese drywall in the Plaintiffs' homes constitutes a latent defect," the court concluded the insurers had failed to meet their burden to prove applicability of the latent defect exclusion. Id. at 838-39.
More recently, in Ross v. C. Adams Construction & Design, L.L.C., 70 So.3d 949, 2011 WL 2328271 (La.App. 5 Cir. June 14, 2011), the court, applying an identical Louisiana definition of "latent defect," found a "latent defect" where the Chinese drywall that caused the damages sustained by homeowners "was hidden and unknown for two years." 70 So.3d at 954, 2011 WL 2328271.
The "latent defect" definition cited in In re Chinese Drywall Litigation and Ross, i.e., as "a defect that is hidden or concealed from knowledge, as well as from
The Chinese drywall in the Bishops' home was defective from the time it was initially installed, although the defect did not manifest itself until some time after they had begun living in the home. Even then, the Bishops were unaware initially that the cause of the problems they were experiencing with their home was the Chinese drywall (there is nothing to indicate they were aware their home had been constructed with Chinese drywall); and they allegedly only discovered through media reports and subsequent investigation that Chinese drywall was the likely culprit. These facts would certainly tend to suggest the defect was latent. However, as the court recognized in In re Chinese Drywall Litigation, it is Alfa's burden to prove that the exclusion applies, see Commercial Union Ins. Co. v. Byrne, 248 So.2d 777, 782 (Miss.1971), and while Alfa has plausibly argued that the Chinese drywall was a "latent defect," it has not actually proven that the defective drywall could not have been discovered by any known and customary test. The court therefore is unable to conclude on the present motion that the "latent defect" exclusion applies.
The Alfa policy excludes coverage for an "inherent vice," but it does not define "inherent vice," and neither does Mississippi law. Other courts have defined "inherent vice" as "any existing defects, diseases, decay or the inherent nature of the commodity which will cause it to deteriorate with a lapse of time," or "as a cause of loss not covered by the policy, does not relate to an extraneous cause but to a loss entirely from internal decomposition or some quality which brings about its own injury or destruction. The vice must be inherent in the property for which recovery is sought." GTE Corp. v. Allendale Mutual Ins. Co., 372 F.3d 598, 611 (3d Cir.2004) (internal quotations and citations omitted). As the Bishops note, in Finger v. Audubon Insurance Co., 2010 WL 1222273 (La.Civ.D.Ct. March 22, 2010), the court applied a similar definition under Louisiana law, i.e., the "inherent vice ... exclusion applies to a loss due to any quality in property that causes property to damage or destroy itself that results from something within the property itself as opposed to some outside force," id. at 6-7 (citation omitted), noting that "[f]irst party policies typically exclude damages due to an inherent vice . . . in order to prevent the insurer from having to compensate the insured for property that has its own shelf life and will eventually wear out or break down because of intrinsic quality or nature," id. at 7.
Alfa's policy also excludes damages for losses caused by "contamination." Both TRAVCO and In re Chinese Drywall Litigation considered exclusions for losses caused by contaminants, but they did so in the context of traditional pollution exclusions, which defined "pollutants" to include "contaminants." The court in In re Chinese Drywall Litigation concluded the pollution exclusion did not apply to the losses from the Chinese-manufactured drywall since Louisiana law interprets such pollution exclusions to apply only to traditional industrial environmental pollution claims. In re Chinese Drywall Litigation, 759 F.Supp.2d at 841.
Id. at 715.
Since the contamination exclusion in Alfa's policy does not appear in the context of a pollution exclusion, a determination of the applicability of the exclusion does not depend on whether Mississippi broadly or narrowly interprets pollution exclusions. However, the court's conclusion in TRAVCO is relevant and persuasive. The court noted in TRAVCO that "contaminant," as the term is used in insurance contracts, has been defined as a "substance that, because of its nature and under the particular circumstances, was not generally supposed to be where it was located and caused injurious or harmful effects to people, property, or the environment." Id. at 718 n. 9 (quoting Hastings Mut. Ins. Co. v. Safety King, Inc., 286 Mich.App. 287, 778 N.W.2d 275 (2009)); see also Hastings Mut. Ins. Co., 778 N.W.2d at 280 ("contaminate" means "to make impure or unsuitable by contact or mixture with something unclean, bad, etc.," and "something that contaminates or carries contamination")(quoting Random House Webster's College Dictionary (1997)); American Cas. Co. of Reading, Pa. v. Myrick, 304 F.2d 179, 183 (5th Cir.1962) (finding definition of "contamination" as the "`state of being contaminated; an impurity; that which contaminates; to make inferior or impure by mixture; an
The TRAVCO court concluded that "[t]he sulfur gas in the Ward Residence clearly fits within this definition, because it was not `supposed to be' in the Residence and it has harmed Defendant and the components of his home." 715 F.Supp.2d at 718 n. 9. Other cases have found a contamination exclusion unambiguous, and applicable in analogous circumstances on the basis of the same or similar definitions of "contamination." See, e.g., Conde v. State Farm Fire & Cas. Co., 43 F.3d 1471, 1994 WL 705073, *2 (6th Cir.1994)(Table) (applying Webster's Third International Dictionary's definition of contamination as "unfit for use by the introduction of unwholesome or undesirable elements" to find that insured's home was "contaminated" where it had been negligently treated for termites with chlordane, resulting in adverse health effects and forced insureds to move from home); Hartory v. State Auto. Mut. Ins. Co., 50 Ohio App.3d 1, 552 N.E.2d 223 (1988) (applying Webster's definition and holding that contamination exclusion precluded coverage for damages resulting when methane gas from a neighboring landfill penetrated the plaintiffs' home forcing them to evacuate); Auten v. Employers Nat. Ins. Co., 722 S.W.2d 468 (Tex.App.-Dallas 1986) (holding that insureds' loss resulting from exterminator's misapplication of pesticides which rendered their home uninhabitable, was caused, as matter of law, by contamination and, thus, was excluded under terms of all-risks homeowners' policy); St. Mary's Area Water Auth. v. St. Paul Fire & Marine Ins. Co., 464 F.Supp.2d 397, 415 (M.D.Pa.2006) (finding that escape of chlorine gas resulting in the cloud of hydrochloric and hypochlorous acids that settled on equipment throughout the insured premises met definition of "contamination," as "it rendered the covered property unfit for use by the introduction of unwholesome or undesirable elements by entering into or coming in contact with the covered property"), vacated on other grounds, 472 F.Supp.2d 630 (M.D.Pa.2007). The same analysis applies here, and leads the court to conclude that the contamination exclusion in Alfa's policy applies to preclude coverage for the Bishops' claimed losses.
The Bishops allege the sulphurous gases released by the Chinese drywall in their home resulted in "corrosion to HVAC coils, and refrigerator units, household appliances, wires, tubes and pipes. . . ." Alfa contends the Bishops' claims for coverage relating to corrosion fall within the exclusion for "any loss to the property ... which is directly or indirectly caused by... corrosion." The Bishops, citing Finger and Trus Joist Macmillan v. Neeb Kearney & Co., No. Civ.A.99-2964, 2000 WL 306654 (E.D.La. Mar. 23, 2000), respond that the corrosion exclusion is inapplicable since their loss is not "caused by corrosion" but rather is the corrosion. See Finger, 2010 WL 1222273, 6 (holding that corrosion exclusion did not bar coverage for corrosion resulting from Chinese drywall, because "[t]he exclusion is intended to apply where corrosion, rust or the like is the cause of the property damage; it is not designed to preclude coverage when the rust or corrosion is the damage itself."); Trus Joist, 2000 WL 306654, *2 (holding that "the exclusion is designed to apply where corrosion, rust, or the like is the cause of property damage. It is not designed to preclude coverage when rust is the damage itself, as opposed to the cause of the damage.").
TRAVCO, 715 F.Supp.2d at 714 (quoting 11 Couch on Ins. § 153:80). The court agreed with this view for two reasons:
Id. at 714-15.
The court in In re Chinese Drywall Litigation also found the Bettigole court's observation sound, and further finding Louisiana law to hold that corrosion-related loss triggers the corrosion exclusion, the court "decline[d] to create a distinction between corrosion as a loss and corrosion as a cause of the loss for purposes of the corrosion exclusion." 759 F.Supp.2d at 848. The court considered that exclusion of corrosion-related losses was "consistent with the ordinary meaning of corrosion which is expansive, encompassing the action, process, effect and product of corroding."
While Alfa's policy excludes coverage for loss or damage caused by "any defect, inadequacy, fault, unsoundness or weakness in material used in construction," i.e. the "faulty materials" exclusion, the policy itself does not define "defect" or "fault," and no Mississippi case defines these terms in the context of a defect or faulty materials exclusion in a homeowners' policy. The Bishops note that in
Three courts have considered and rejected this very argument. As here, the insurer in TRAVCO argued that the exclusion for "loss caused by ... [f]aulty, inadequate or defective ... [m]aterials used in... construction ... of part or all of the property" applied "to preclude coverage of all damage resulting from the defect in the drywall," whereas the insured contended the exclusion did not apply because the Chinese Drywall "[was] serving its normal function and purpose and has not caused damage to itself." 715 F.Supp.2d at 712. The court was skeptical of the argument that the drywall was "serving its intended purpose":
Id. at 712-713. It noted, moreover, that in his state court lawsuit, the insured had himself repeatedly described the drywall as "defective"; and while this was not determinative, the court considered that "in the absence of some evidence that the parties intended to assign a specialized meaning to the word `defective' in the Policy, the fact that Defendant himself described the Drywall as `defective' certainly weighs in favor of the application of the exclusion." Id. at 713.
As in TRAVCO, Judge Fallon in In re Chinese Drywall Litigation found that Chinese-manufactured drywall was subject to the "faulty materials" exclusion in the plaintiffs' homeowners' policies, and that the loss resulting therefrom was excluded from coverage. 759 F.Supp.2d at 845. The court likened the drywall to materials containing asbestos and lead in buildings, which had been found to trigger the "faulty materials" exclusion, and to radioactive table bases which in Falcon Products, Inc. v. Insurance Co. of the State of Pennsylvania, 615 F.Supp. 37 (E.D.Mo. 1985), had been found to fall within the "faulty materials" exclusion because, while they could serve their intended purpose as table bases, they were "unusable" because of the contaminated materials used in constructing them. Id. at 845. The court observed that
759 F.Supp.2d at 845-46. The court opined that
Id. at 846.
And most recently, in Ross, the court, citing TRAVCO, agreed with the insurer's position and found that "even if the drywall is still in place in the home, it is not truly serving its intended purpose as a component of a livable residence because of its inherent qualities of emitting the sulfuric gas." Ross, 70 So.3d at 953, 2011 WL 2328271, *3. This court concurs fully with the courts' reasoning and conclusion in these cases, and accordingly, concludes that the losses claimed by plaintiffs herein are subject to the "faulty materials" exclusion in Alfa's policy.
The Bishops' policy provides for coverage for ensuing losses from contamination and corrosion, providing that notwithstanding the exclusions, coverage is afforded "for any resulting loss ... provided that the loss itself is a loss insured by Section I." Similarly, the ensuing loss provision with respect to the faulty materials exclusion provides coverage "for any ensuing loss from [faulty materials] unless the ensuing loss is itself a loss not insured by Section I." These provisions extend coverage for ensuing or resulting losses which (1) constitute covered losses, (2) not excepted from coverage by any coverage exclusion. Again, the policy does not define "ensuing loss," and there are no Mississippi cases addressing an "ensuing loss" provision. Courts in this circuit have consistently held, however, that such provisions contemplate a separate and distinct loss which ensues or follows the first one, and which is "different in kind, not merely in degree." See, e.g., Aetna Cas. and Surety Co. v. Yates, 344 F.2d 939 (5th Cir.1965) (ensuing loss provision applies only where excluded loss and ensuing loss are "in some sense separable events"); Dillard Univ. v. Lexington Ins. Co., Civ. Action No. 06-4138, 2009 WL 1565943, *2 (E.D.La. June 3, 2009) (explaining that "[t]o meet the ensuing loss exception . . .
In both TRAVCO and In re Chinese Drywall Litigation, the courts found the ensuing loss provisions did not create coverage for the insureds' claimed losses relating to the Chinese drywall in their homes. In TRAVCO, the court wrote:
TRAVCO, 715 F.Supp.2d at 718-19. In In re Chinese Drywall Litigation, Judge Fallon noted that the insureds claimed damages from odors and corrosion of metal components and electrical wiring and devices from the emission of gases by the Chinese drywall in their homes. The court found the losses caused by the odors emitted by the Chinese drywall were not ensuing "because they [were] neither sufficiently different in kind from the losses caused by the Chinese drywall, nor the result of an extraneous event. The odors [were] inseparable from the drywall and are a continuous result of the drywall" and not the result of a second accident. 759 F.Supp.2d at 850-51. Presumably on the same reasoning, the court also found the corrosion-related losses caused by Chinese drywall did not constitute ensuing losses, though it held, alternatively, that even assuming for the sake of argument that these qualified as ensuing or resulting losses, they were still excluded losses because corrosion and corrosion-related losses were specifically excluded from coverage. Id. at 851 ("Whether the Chinese drywall in Plaintiffs' homes causes corrosion pitting or residue on a metal pipe, wire, or surface, or causes more extreme loss, such as the failure of a system, device, or appliance in which these metal components are located, because these losses are the result of corrosion, they are excluded from coverage."). This court can fathom no basis for a different result in the case at bar.
Alfa contends the policy does not provide coverage for the Bishops' alleged loss of use of their home resulting from the Chinese drywall for the reason that the policy's loss of use coverage is dependent on coverage of the underlying losses. The Bishops do not contend otherwise. As the court has concluded that coverage is not provided for the Bishops' underlying losses, so, too, there is no coverage for their claimed loss of use.
Alfa maintains its policy provides no coverage for the Bishops' alleged respiratory illnesses, severe headaches or any sickness,
Based on the foregoing, it is ordered that Alfa's motion for summary judgment is granted.
A separate judgment will be entered in accordance with Rule 58 of the Federal Rules of Civil Procedure.
SO ORDERED.
Id. As the court went on to explain, the Chinese-manufactured drywall at issue in these cases differs from typical, benign drywall for the following reasons:
Id. at 663-666.
