Dive Brief:
- The U.S. Fifth Circuit Court of Appeals in New Orleans has upheld a lower court's ruling that the builders risk policy secured for a 19-story high-rise project in Houston, Texas, does not cover $686,976 worth of subcontractor damage to the structure's windows.
- Attorneys for general contractor Balfour Beatty Construction and subcontractor Milestone Metals told the court that, as part of its normal course of work, Milestone welded a stabilizing metal plate on the 18th floor of the Energy Center 5 building. Despite Milestone's precautionary measures to protect the building, Milestone was informed months after completing the work that the slag from its operations had damaged the building's windows and that they needed to be replaced. Developer Trammell Crow, Balfour and Milestone submitted a claim against the builders risk policy, which was held by Liberty Mutual Fire Insurance Co., but the company denied the claim citing an exclusion for "acts, defects, errors or omissions."
- Although attorneys for Balfour Beatty and Milestone argued that the incident was covered through an exception to the policy's exclusion and that the damage to the windows was a covered peril, the court said that they failed to prove that to be the case and found in favor of Liberty.
Dive Insight:
Builders risk is a standard form of insurance coverage that protects a building under construction or renovation from various types of damage and losses, but, like any other insurance policy, it has a number of exclusions.
Typically, according to The Hartford insurance company, builders risk includes coverage for events such as third-party theft, hurricanes and fire, although coverage can vary from project to project and from insurer to insurer. Some common exclusions include employee theft, ordinary wear and tear and damages from faulty design and workmanship.
Builders risk coverage starts on the policy date and ends when the building is occupied or reaches some other milestone identified in the policy, like the securing of a Certificate of Occupancy from the local building department.
The fine print in insurance policies can be difficult to interpret, which is why those denied claims turn to the courts for relief. But the decisions don't always fall in favor of the insurance company.
Last month, the Michigan Supreme Court ruled in favor of Skanska USA Building Inc. when it determined that a subcontractor's unintentional defective work was an accident for purposes of coverage under the subcontractor's commercial general liability policy.
Subcontractor MAP Mechanical Contractors Inc. installed some expansion joints backward while working on an HVAC project for a Skanska medical center project. MAP's work led to $1.4 million in damage to the center's concrete, steel and heating system. MAP's insurance company Amerisure left the term "accident" undefined in its CGL policy, but the Michigan court applied the term to MAP's work for Skanska.
