Louisiana Bills Would Ban Insurance Cancellations from Drywall

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Two bills that would prohibit property insurance companies from canceling policies or raising rates on homeowners who make damage claims stemming from corrosive Chinese drywall were proposed in Louisiana in advance of the state’s 2010 legislative session.

Senate Bill 595 by state Sen. Julie Quinn, R-Metairie, and House Bill 668 by Rep. Walt Leger III, D-New Orleans, would provide some protection to homeowners who are among about 3,000 nationwide complaining of damage from the drywall.

Both bills also would prohibit rate increases or cancellations of coverage if a house is found by an insurer to have Chinese drywall, regardless of whether a claim is filed or not.

Quinn’s bill offers the same protection to commercial property owners.

In a report issued in November, the Consumer Product Safety Commission said it found a “strong association” between the Chinese drywall and corrosion in homes. The agency also found a possible link between health problems and high levels of hydrogen sulfide gas emitted from the wallboard, coupled with formaldehyde, which is commonly found in new houses.

The availability and cost of property insurance has been a consumer concern in Louisiana since the 2005 storms. Despite a drop over the past few years, about 131,000 residential and commercial properties are still covered by the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp.

Quinn’s bill calls for a $1,000 penalty against insurers for each violation. Leger’s bill does not contain a specific penalty clause.

State Insurance Commissioner Jim Donelon said he has not run into any consumer complaints about drywall-related cancellations. Donelon said that although claims can affect a company’s decision to cancel a policy, companies in Louisiana can cancel any property owner — without stating a reason — if the owner has not been with the company for at least three years.

Donelon also said his agency had ordered Louisiana Citizens to create a hybrid policy for its property owners facing Chinese drywall problems.

U.S. Congressman Charlie Melancon of Louisiana has introduced federal legislation that would prevent insurance companies from cancelling or failing to renew homeowners’ policies as the result of Chinese drywall in their homes.