Released: November 23, 2009

Commissioner of Insurance Jim Donelon held a press conference today to announce help for Homeowners whose properties are contaminated with defective Chinese drywall. Donelon said many Homeowners in Louisiana are vacating their homes after reporting foul smells, health problems and the corrosion of wiring and appliances due to drywall imported from China that contains higher than normal levels of the hazardous chemicals strontium and sulfur. Some insurance companies are canceling these policyholders, citing vacancy or failure to maintain the home in insurable condition.

Once again policyholders are protected by a consumer protection law unique to Louisiana, according to Commissioner Donelon. Policyholders who have been covered for more than three years by their homeowners insurer have the right to continue their coverage while vacating and remediating their home of defective Chinese drywall, even if the defective drywall constitutes a “material change in the risk,” as long as the homeowner reports the issue to the insurer. “Notification to your insurance company cannot be used against you and your premiums cannot and will not be raised by your insurer for such a report,” Commissioner Donelon added. “I am here to make sure that insurance companies do the right thing and abide by our state’s three year protection rule and all other consumer protection laws on our books,” Donelon said.

Donelon said there is a second important area of assistance available to policyholders whose properties have been vacated or deemed to be in an uninsurable condition caused by defective Chinese drywall. After making a request to the management of the Louisiana Citizens Property Insurance Corporation (Citizens), Donelon said Citizens will now offer coverage for these unoccupied homes with its Builders Risk Renovation policy. Homeowners who purchase this type of insurance from Citizens may pay less because it should be cheaper than the cost of a full homeowners policy.

Commissioner Donelon said he believes Louisiana’s defective Chinese drywall problem is only going to get worse, necessitating the immediate action he has undertaken. “Following Hurricanes Katrina and Rita, it’s believed that thousands of homes were rebuilt using drywall manufactured in China. The number of new or renovated homes containing defective Chinese drywall is unknown,” Donelon added. “It’s a tragedy that many of our citizens who were forced to rebuild their lives and their homes after the hurricanes of 2005 have become victims of circumstance yet again,” Donelon said.

Other measures taken by Commissioner Donelon include:

• The formation of a Drywall Task Force within the Department of Insurance. As members of the task force, Department staff will monitor the issue, answer consumer inquiries and meet weekly with the Commissioner to discuss new developments.

• The appointment of an investigator at the Department to receive, track and follow up on consumer allegations of unfair insurance policy cancellations due to defective Chinese drywall issues.

• Continued participation at the multi-state level in meetings and hearings on the implications to state regulators and insurers regarding defective Chinese drywall. Commissioner Donelon has met with insurance commissioners from Mississippi and Florida on the issue and will participate in a public hearing hosted by the National Association of Insurance Commissioners at their next national meeting on December 7.

• Calling on the Legislature, Congress and the Louisiana Recovery Authority to help consumers by implementing the assistance program that to date has been funded to the extent of $5 million under the “Road Home” Program. Far more funding is necessary by Congress to assist Homeowners, particularly in Louisiana, Mississippi and Florida, who were first victimized by the hurricanes of 2004 and 2005 and are now being victimized by the importation of this defective Chinese drywall. Such measures being proposed include Act 487 of the 2009 Regular Session of the Louisiana Legislature by Senator Gray Evans and House Concurrent Resolution No. 185 by Representative Burns charging the Department of Health and Hospitals and the Department of Insurance, in consultation with the Louisiana State Licensing Board for Contractors, to investigate the health risks associated with living in homes containing Chinese drywall and to make recommendations to the Legislature prior to the 2010 Session relative to insurance coverage issues.

Commissioner Donelon said consumers who need assistance with any insurance issues should call the Department of Insurance at 1-800-259-5300.

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