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Chinese drywall and toxic drywall © Corbis

The Basics

Toxic drywall? Goodbye, homeowners insurance

Some buyers are finding their homes were built with tainted materials from China. Yet when they turn to their insurers, they get dumped -- and could face foreclosure.

By The Associated Press

James and Maria Ivory's dreams of a relaxing retirement on Florida's Gulf Coast were put on hold when they discovered their new home had been built with Chinese drywall that emits sulfuric fumes and corrodes pipes. It got worse when they asked their insurer for help. Not only was their claim denied, but they've been told their entire policy won't be renewed.

Thousands of homeowners nationwide who have bought new houses made with defective building materials are finding their hopes dashed and their lives in limbo. Experts warn that cases like the Ivorys', in which insurers drop policies or send notices of nonrenewal because of tainted Chinese drywall, will become rampant as insurance companies work their way through the hundreds of claims currently in the pipeline.

At least three insurers already have canceled or refused to renew policies after homeowners sought help replacing the bad materials. Because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations.

"This is like the small wave that's out on the horizon that's going to continue to grow and grow until it becomes a tsunami," said Florida attorney David Durkee, who represents hundreds of homeowners who are suing builders, suppliers and manufacturers over the drywall.

During the height of the U.S. housing boom, with building materials in short supply, U.S. construction companies turned to Chinese-made drywall because it was abundant and cheap. An Associated Press analysis of shipping records found that more than 500 million pounds of Chinese gypsum board was imported from 2004 to 2008 -- enough to have built tens of thousands of homes. The materials are heavily concentrated in the Southeast, especially in Florida and areas of Louisiana and Mississippi hit hard by Hurricane Katrina.

The defective materials have been found by state and federal agencies to emit "volatile sulfur compounds" and contain traces of strontium sulfide, which can produce a rotten-egg odor, along with organic compounds not found in U.S.-made drywall. Homeowners complain the fumes are corroding copper pipes, destroying TVs and air conditioners, and blackening jewelry and silverware. Some believe the wallboard is also making residents ill.

The federal government is studying the problem and considering some sort of relief for homeowners.

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The Associated Press interviewed several homeowners who, like the Ivorys, were unlucky enough to purchase properties built with Chinese drywall. Those homeowners are now being hit with a second wave of bad news: Their insurers are declining to fill their claims, then canceling the policies or issuing notices that they won't be renewed until the problem is fixed.

The homebuyers have little recourse against the Chinese manufacturers; the companies and the Beijing government are not likely to respond to any lawsuits or reimburse them for the defective materials.

In each instance, the insurer learned of the drywall through a claim filed by the homeowner seeking financial help with its removal.

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The Ivorys have sued their builder, but it could take months for their case and hundreds like it to work their way through the courts. In the meantime, the Ivorys have moved back to Colorado because their three-bedroom ranch home two miles from the Gulf of Mexico is unlivable and soon will be uninsured.

"It's been an emotional roller coaster," said James Ivory, who is still making mortgage payments on the Florida house. "It was all in our heads -- nice weather down there, calm life, beaches. Now I don't know what to do."

Continued: 'We provide insurance, not warranty service'

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