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Chinese drywall coverage, take two

In late March, Norfolk U.S. District Judge Rebecca Beach Smith dismissed a builder’s suit seeking insurance coverage for its proactive efforts to remediate the noxious effects of Chinese drywall in homes it built.

Smith said that builder Dragas Management Corporation, who voluntarily fixed drywall-related problems in customers’ homes, was not entitled to reimbursement from its insurer because the builder was not faced with a “legal obligation” to pay “damages.”

Dragas’s amended claim passed muster with Smith on July 15. This time around, Dragas detailed the verbal and written demands of homeowners, many of whom had lawyers, and alleged specific threats of litigation. The threat alone did not make for a “legal obligation” to pay damages, Smith said, but Dragas cleared the hurdle that prompted the earlier dismissal.

The judge also said Dragas adequately alleged that the insurance company waived its “Voluntary Payment” provision and “No Action” clause, and allowed Dragas to pursue discovery on its bad faith claim.
By Deborah Elkins


  1. How about that. Builders everywhere rejoice that they cannot be put into a gordian knot.

  2. And how! Good to hear there’s a bit of sanity.

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