Lumber Liquidators sues insurers balking at Chinese flooring claims

Flooring retailer Lumber Liquidators Inc., which faces more than 100 lawsuits for allegedly selling Chinese-manufactured laminated flooring that contained unsafe levels of formaldehyde, has filed suit against several of its insurers for their alleged refusal to defend and indemnify the company.

The lawsuit, which was filed in state court in Madison, Wisconsin, on April 27, but publicized this week, also charges that one of its insurers, a unit of Boston-based Liberty Mutual Insurance Group, is “perversely” charging it with a retrospective premium of $2,535 per plaintiff, and billed it for $174,000 in April.

According to the lawsuit, claimants began filing lawsuits against Toano, Virginia-based Lumber Liquidators in connection with the flooring in mid-2014.

But the number of lawsuits increased “dramatically” following a March 1, 2015, broadcast of a segment of CBS News’ “60 Minutes,” that reported on an investigation of its Chinese-made flooring products, which the retailer has now stopped selling.

In addition to Liberty Mutual, insurers named as defendants in the lawsuit, are units of the Zurich Insurance Group Ltd., Chubb Corp., Travelers Corp, and CNA Financial Corp.

The insurers had issued commercial general liability, commercial excess and umbrella liability policies to Lumber Liquidators over a period ranging from 2006 through June 1, 2015, according to the lawsuit.

The lawsuit charges breach of contract and bad faith, and seeks compensatory and punitive damages and attorneys’ fees and costs as well as declaration of the defendants’ obligations under the policies.

Insurers either could not immediately be reached, or had no comment.

Lumber said in a statement it is “asking the courts to make these insurers live up to their promises. We believe the insurers’ oversimplified interpretation and application of exclusions contained in their policies is flawed and denies Lumber Liquidators benefits and protections to which we are entitled.”

Separately, Lumber Liquidators, which has 355 locations, issued a statement last week in which it said that initial results of an indoor air quality testing program for certain laminate flooring customers, conducted by independent, accredited laboratories, indicate that more than 97% of customers’ homes were within the protective guidelines established by the World Health Organization for formaldehyde levels in indoor air.