Having lived through and written about the Great Mold Crisis and other scares, I’m watching with interest the development of another potentially hazardous-to-your-health building issue: Chinese drywall.

You’ve probably already seen the reports: Material shortages after Hurricane Katrina caused U.S. builders to start using drywall imported from China, which allegedly emits sulphurous vapors that corrode metal and could adversely affect health. In common use since 2008, it’s estimated that enough of the drywall has been used to construct 60,000 houses of 3,000 square feet each.

At this point, the issue is still just a blip on the radar, with little or no insurer reaction in the form of policy changes or exclusions. Most insurers seem to be taking a wait-and-see attitude to determine the exact trigger of the problem (some say moisture activates the nasty fumes) and whether the threat is real or exaggerated.

Policy maven and all-around cool guy Chris Amrhein reports that at this point the threat may be primarily in the minds of hungry class-action attorneys. “I haven’t heard a word on the insurance side of the room,” Chris says. “All of the smoke and fire seems to be coming from Congress and Florida/Louisiana homeowners, who obviously hate the smell of rotten eggs coming from this allegedly Chinese drywall.” In fact, the Florida Health Department, which is currently studying the drywall, recently observed that there is no “specific” health hazard arising from its use, and that its sometimes rotton-egg odor is caused by strontium sulfide, a material absent from good old American-made drywall (there doesn’t seem to be a consensus about the damage to pipes or property).

If it turns out that the drywall is causing a real problem, resulting in homeowner reimbursement from the manufacturers and distributors–and ultimately their insurance carriers–there appears to be no coverage provided. “From a purely coverage form standpoint, the industry response will no doubt include the total pollution exclusion and any number of variables on the EFIS endorsements,” Chris says.

You’d think that Congress has enough to worry about right now, but some sources I spoke with say they wouldn’t be surprised to see the issue escalate to federal attention. Chris took me down Memory Lane by naming some scares of the past, including overhead electrical wire radiation, silicone implants, Alar-treated apples, and of course, witches–all of which got their share of official political attention.

Good advice in the meantime? Advise your homebuilder customers to review their policies and their liability limits–and maybe consider using greener products in their buildings.

The global economy may be going to “hell in handbasket” (what a great old-lady phrase, as my teenage daughter would say), but for us ordinary folks, life goes on. We still have to pay bills, do our jobs, satisfy our clients and keep our businesses running as profitably as we can.

That lesson hit home last week at the annual PIIAI meeting for Illinois agents in Springfield. It was a beautiful fall day, so I made the three-hour drive to check out the scenery.

Although national politics was on display–a panel moderated by Bob Rusbuldt featured media savants Paul Begala and Tucker Carlson posturing about the upcoming presidential election–it was the “smaller” issues that dominated the day.

Like every other entrepreneurial business today, Illinois agents are focused on survival. Their numbers are steadily shrinking through M&As and simple attrition. When they can take time away from regular business to attend an event like this, they want to get something out of it that they can bring back to their offices and put into immediate use. So although the undercurrent of national politics, the AIG fiasco and the big federal bailout was there, breakout sessions focused on workaday stuff: med mal insurance, how to hire good people, service fees and premium fund trust accounts (we cover a couple of these on our Web site — check it out at http://www.agentandbroker.com/ME2/dirmod.asp?sid=&nm=Articles&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=3&Tier4=Web+Exclusive).

However, several issues of national scope are on the radar. PIIAI government relation guy Phil Lackman ticked off the most onerous. Topping the list is controversy surrounding certificates of insurance — a big national concern and a major problem within the producer community.

According to Phil, problems arising from misuse involving the issuance of certificates of insurance — such as client requests to add or change coverage on the certificate — accounted for the largest portion of E&O claims for Illinois agents: 7 percent last year, and as high as 12 percent in other years. Our own beloved Chris Amrhein has written extensively about the problem of relying on certificates of insurance instead of examining the actual policy language. And there’s lots of information on Big I’s educational site at http://www.iiaba.net/eprise/main/VU/NonMember/Certificates.htm

Although some states have passed legislation addressing the issue, most have not been successful, Lackman said. In Illinois, PIIAI got the DOI involved in clarifying that certificates of insurance are evidence of coverage, not coverage itself — and that policyholders can’t add coverage or endorsements through certificates.

I’d be interested in hearing if any of you have run into any “certified lunacy” horror stories involving your clients and certificates of insurance. Feel free to share here!

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