Michael Hamilton, partner and chair of the firm's national coverage group, predicted "there will be actions filed directly against insurance companies," drawing an analogy to after-market parts type litigation in the auto insurance arena.

"We haven't seen these yet, but [we] reasonably expect there [are] going to be [cases] where liability is based on specification of defective drywall" in repair estimates for properties damaged by hurricanes, Mr. Hamilton said.

In the wake of Hurricane Katrina in 2005 and the storms that preceded it in 2004, there was a shortage of domestic drywall, fueling a market for imported substitutes from China, Mr. Horst said, estimating, based on his firm's research, that roughly 555 million pounds of Chinese drywall was imported between 2004 and 2008.

In moist and hot climates like Florida and other parts of the southeastern United States, the drywall is giving off what people generally refer to as "a rotten egg smell," and houses that have the drywall have seen corrosion in electrical wiring, air conditioning components and other appliances, Mr. Horst reported. In addition, homeowners are alleging health issues like nosebleeds and respiratory problems.

Commenting on the potential for litigation to be brought directly against insurers, Mr. Hamilton said "the types of damages we might see are specification damages and installation damages," describing "specification damages" as the actual specification of Chinese drywall on repair estimates and the "installation damages" as the cost of removing the defective drywall.

While the science is still in its infancy, the Florida Department of Health has posted conclusions of a hygienist's initial report on its Web site stating that there is a "distinct difference" between Chinese and U.S. drywall, and that the Chinese drywall has a distinct sulfur odor when exposed to extreme heat and moisture.

The report, however, noted that both the drywall outer paper and the gypsum core released sulfur compounds upon testing, so there are potential causes of the observed aftereffects aside from the drywall itself. These include the treatment of the drywall or the outer paper with an insecticide before it entered the United States or contaminants in the adhesive that binds the paper to the drywall.

Under property policies, individual state laws will differ on the treatment of concurrent causation if indeed weather is a contributing factor to the emission of gases from the drywall, Mr. Hamilton said during the webinar.

With respect to third-partly liability issues, Mr. Hamilton told NU in a follow-up interview that he believes pollution exclusions will carry some weight.

"The application of the pollution exclusion will be a huge issue here," but early reports about what litigation is all about"–the emissions from the drywall–suggest "the insurance industry has a potentially good argument for that exclusion to apply."

In the webinar and in the interview, however, Mr. Hamilton did note that some courts will continue to hold that the exclusion applies only to traditional environmental losses, like Superfund sites and spills, rather than indoor pollution.

While Mr. Horst pointed out that overall litigation explosion over Chinese drywall is only in the beginning phase–the lawyers have counted up 25 lawsuits so far–both lawyers agreed Chinese drywall is not the next asbestos.

"For the insurance industry, this is unlike mold or asbestos…where you realize years later there are health problems" and exposure goes back for decades, he said. "While I'm not suggesting that for Chinese drywall there will be a short period of litigation, there is a limited window of time when most of the drywall was imported into the United States," he said, contrasting the more uncertain lifespan of asbestos claims.