In 2009 Dragas Management Corp., a Hampton Roads builder, faced threats by angry homeowners in Chesapeake and Virginia Beach whose homes were damaged by Chinese drywall.  Some hired attorneys, while others wrote their own demand letters, urging the builder to fix their homes or buy them back.

Dragas first attempted to notify it's two insurance companies, but both denied coverage.  

So in good faith, Dragas signed remediation agreements with the homeowners to replace the drywall, damaged components, and to compensate them for relocation expenses. The agreement also stated that if the homeowner accepted the contract, they were to drop all property damage claims against the builder.

Dragas has been battling with their insurance companies over coverage ever since. Their first attempt to for a claim for coverage was dismissed, however they were allowed to refile the claim with more detail. After refiling they were granted permission for the case to move forward.

However, a summary judgment by the Norfolk U.S. District Court Judge Rebecca Beach Smith  was based on the following fact: "What the court finds decisive at this juncture in this case is that DMC [Dragas Management Corp.] had no 'legal obligation' to incur remediation costs 'as damages,' and this coverage is not available under any of the policies."

The insurance companies argued that Dragas did not meet the requirements for coverage because Dragas "was not legally obligated to pay remediation costs as damages as is required to trigger coverage." Instead coverage is meant to provide businesses against losses as a result of a legal liability and provides relief in the form of a legal defense to a lawsuit. 

• No CGL Coverage for Contractor's Repairs by Virginia Lawyers Weekly
• Builders Mutual Ins. Co. v. Dragas Mgmt. Corp. et al., 2:09-cv-185