The shares of Lumber Liquidators Holdings are trading lower due to the report that the company’s insurance carriers are refusing to provide coverage related to allegations/investigations that some of its products have high levels of formaldehyde.
The stock price of Lumber Liquidators is down nearly 5% to $26.71 per share at the time of this writing, around 11:17 A.M. in New York. Over the past 52 weeks, the shares of the hardwood flooring retailer traded between $25.81 and $86.45 per share. The company lost almost 60% of its stock value year-to-date.
Lumber Liquidators files lawsuit against insurance carriers
Lumber Liquidators filed a lawsuit against nine insurance carriers at the Dane County Court in Madison, Wisconsin. The company alleged that the insurance carriers “wrongfully refused to defend (Lumber Liquidators) in accordance with the terms of commercial liability insurance policies they issued.”
In the lawsuit, Lumber Liquidators said it is facing substantial uncertainty in determining its entitlement to a defense or indemnification for any judgments of settlements under the policies due to the disagreements with the insurance carriers.
Lumber Liquidator claimed that the dispute damaged its efforts to address the problems related to the formaldehyde allegations. The company asked the court to order the insurance carriers to provide coverage. It was also seeking unspecified damages.
Lumber Liquidators halted sales of laminate flooring from China
Last week, Lumber Liquidators decided to stop the sales of all laminate flooring from China. The company said its special committee composed of independent directors with the assistance of third party advisors has been conducting a comprehensive review of its sourcing compliance program and related policies. The comprehensive review is ongoing and the findings are preliminary.
It appears that its Chinese laminate flooring suppliers sold products to Lumber Liquidators that were certified and labeled as compliant with California formaldehyde standards based on the special committee’s review to date. The company said it is reviewing further the underlying certification and labelling processes and practices of its suppliers.
“Despite the initial positive air quality testing results we have received, we believe it is the right decision to suspend the sale of these products. We will work diligently to meet the needs of our customers and to ensure their satisfaction,” said Lumber Liquidators CEO Robert Lynch in a recent statement.