Sulfide Gases From Chinese Drywall Deemed Pollution for Which There Is No Coverage

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The court in Nationwide Mutual Ins. Co. v. Overlook, LLC, ___ F. Supp.2d ___, 2011 WL 1988396 (E.D. Va. May 13, 2011) ruled that a pollution exclusion barred coverage for a lawsuit arising from a developer’s installation of defective Chinese drywall at a townhouse complex.

At issue were 26 insurance policies written by various Nationwide entities, including property, liability, and excess liability policies. Nationwide, which had been providing a defense to the developer subject to a reservation of rights, filed an action for a declaratory judgment that it had no duty to defend or indemnify the developer because the pollution exclusions in each of the policies barred coverage for losses associated with defective Chinese drywall.

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