Wave Of Chinese Drywall-Related Homeowners' Insurance Cancellations Begins Hitting Louisiana; Homeowner Could Face Threat Of Foreclosure, Job Loss

In New Orleans, Louisiana, The Times Picayune reports:

• In August, Tamara Thomas filed a claim with her homeowners insurance company after discovering that her air conditioning and other appliances had failed because her three-year-old home was filled with defective drywall made in China. But before the Hanover Insurance Group even denied the claim, as most insurers have been doing with claims for Chinese drywall damage, it canceled her policy, effective Nov. 19. The Massachusetts company said there had been a "substantial change in risk" because the home was no longer occupied since Thomas and her family had begun staying in the guest room at her parents' house out of concerns over how the drywall was affecting their health.

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• So far, most insurance policy cancellations have been taking place in Florida. In Louisiana, insurers were universally denying claims, but it was believed that a state law making it difficult for insurers to drop coverage for homeowners who have been customers for at least three years would largely keep policies in place. But advocates for Chinese drywall victims have reported that in the past few weeks, a wave of cancellations has begun to unfold in Louisiana, even with people like Thomas, who had insurance on her home with Hanover for just over three years.(1)

• "I'm hearing it every day now," said state Sen. Julie Quinn, R-Metairie, who has been holding town hall meetings about Chinese drywall issues. In canceling policies, insurers often cite the failure to maintain the home in insurable condition, or vacancies, Quinn said.

For more, see Insurers have begun cancelling policies on Louisiana homes with tainted drywall.

(1) Reportedly, while investigations into Chinese-manufactured drywall continue, Thomas now finds herself in a string of no-win situations. Although Thomas' skin problems, her husband's nosebleeds and her daughters' respiratory ailments have improved since they began staying at her parents' house, the insurance cancellation has caused a new set of nightmares, the story states.

When she got the cancellation letter, Thomas immediately called her mortgage lender to tell the company about the situation. Her lender suggested that she contact the bank's force-placement insurance company to get coverage so that she would remain in compliance with the terms of her loan. But the force-placement company said that it couldn't bind coverage since she has an active problem at the house and has made a claim. She has since contacted Louisiana Citizens Property Insurance Corp., the state's insurer of last resort, but an agent with Citizens has advised her that it may not be able to write a policy for the same reason.

Failure to get new coverage in place by Nov. 19 will potentially put her in violation of the terms of her mortgage and at risk of foreclosure. If her loan goes into default, Thomas also risks losing her job, because, as a financial consultant, she is required by her employer to maintain perfect credit. "I have a $270,000 home that's worth zero dollars," Thomas said. "No one's going to insure me. My house could be foreclosed upon. I'm still paying my mortgage on a house I can't live in."