Pollution Exclusions Bar Coverage for $4.9 Million Arbitration Award, Judge Rules

NORFOLK, Va. - A federal judge in Virginia has ruled that pollution exclusions contained in policies issued by two insurers contain unambiguous language barring coverage for a $4.9 million arbitration award against a Chinese drywall installer. Dragas Management Corp. v. Hanover Insurance Co., et al., No. 10-547 (E.D. Va.).

Judge Rebecca Beach Smith of the U.S. District Court for the Eastern District of Virginia ruled Aug. 8 that drywall-related damage in two housing developments constructed by Dragas Management Corp. was caused by the dispersal of reduced sulfur gases, which clearly qualify as pollutants under applicable insurance policies.

The decision came …