{"id":900209,"date":"2022-08-03T14:07:58","date_gmt":"2022-08-03T20:07:58","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=900209"},"modified":"2022-08-03T14:08:03","modified_gmt":"2022-08-03T20:08:03","slug":"ensuing-loss-exception-casual-distinction","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/ensuing-loss-exception-casual-distinction\/","title":{"rendered":"Fifth Circuit Requires Causal Distinction for Ensuing Loss Exception to Faulty Work Exclusion"},"content":{"rendered":"\n<p>Avery J. Cantor and William S. Bennett | <a href=\"https:\/\/www.sdvlaw.com\/insights_view.asp?key=14401\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Saxe Doernberger &amp; Vita<\/a><\/p>\n\n\n\n<p>In\u00a0Balfour Beatty v. Liberty Mutual Ins. Co., the 5th Circuit Court of Appeals provided valuable insight on coverage available through <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-exclusion-carve-out\/\" target=\"_blank\" rel=\"noreferrer noopener\">ensuing loss exceptions<\/a> to faulty work and design exclusions in builder\u2019s risk insurance policies. In\u00a0Balfour Beatty,\u00a0the Court held that, in order to establish coverage through an ensuing loss exception, the ensuing loss must be causally distinct from the original excluded loss.<sup>1<\/sup><br><br>Balfour Beatty, serving as general contractor for construction of a commercial office building in Houston, Texas, subcontracted with Milestone for steelwork on the project. As part of this work, Milestone welded a 2-inch metal plate to external tubing on the eighteenth floor of the building. While welding the plate in place, welding slag fell down the side of the building, damaging exterior glass windows on the floors below.<\/p>\n\n\n\n<p>Balfour Beatty and Milestone, along with the developer, sought coverage for the damage to the windows under their builder\u2019s risk policy, issued by Liberty Mutual. Liberty Mutual denied coverage, claiming that the damage was excluded by the policy\u2019s \u201cDefects, Errors, and Omissions\u201d exclusion. The insureds sued, arguing that the ensuing loss exception to this exclusion would carve back coverage because the damage to the windows constituted an \u201censuing loss.\u201d<\/p>\n\n\n\n<p>The Court interpreted the policy to exclude damage \u201ccaused by\u201d or \u201cresulting from &#8230; act[s] &#8230; relating to &#8230; construction.\u201d However, coverage would apply for any loss caused by \u201can act, defect, error, or omission\u201d that \u201cresults in a covered peril.\u201d The parties agreed that the exclusion barred coverage, except to the extent the exception applied. Accordingly, the Court\u2019s analysis focused on whether Milestone\u2019s welding operations was a separable resulting \u201ccovered peril,\u201d distinct from the welding operations.<\/p>\n\n\n\n<p>The Court characterized the falling slag as the damage resulting from the welding operations and, on that basis, held that the falling slag did not constitute a separate event resulting in a covered peril. In effect, the Court interpreted the language of the exception to require that there be a second, entirely distinct, loss event \u2013 one of which is an excluded peril and a second, which is the resulting covered peril. In this case, the Court determined that the damage to the windows directly resulted from the falling slag, which itself directly resulted from the subcontractor\u2019s faulty work, rather than from a separate event resulting in a covered peril. Based on this analysis, the Court held that the damage to the windows was not an ensuing loss.<\/p>\n\n\n\n<p>It is important to consider this case in context. Case law addressing faulty work exclusions, including the LEG forms<sup>2\u00a0<\/sup>and others, is relatively uncommon. Where guidance does exist, it tends to be piecemeal and underdeveloped in any one particular jurisdiction. This can give outsized consideration to cases from outside of the jurisdiction where your particular dispute occurs. For that reason, all cases addressing these issues should be carefully considered and should be on contractors\u2019 radar. Understanding this function of your builder\u2019s risk policy can be one of the most important aspects of the program, as terms can differ significantly. Where deficiencies potentially exist, contractors should consider whether they have options to enhance that aspect of their program or supplement the program with other lines of coverage that can potentially respond in situations like the one in\u00a0Balfour Beatty.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Avery J. Cantor and William S. Bennett | Saxe Doernberger &amp; Vita In\u00a0Balfour Beatty v. Liberty Mutual Ins. Co., the 5th Circuit Court of Appeals provided valuable insight on coverage available through ensuing loss exceptions to faulty work and design exclusions in builder\u2019s risk insurance policies. In\u00a0Balfour Beatty,\u00a0the Court held that, in order to establish&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/ensuing-loss-exception-casual-distinction\/\">Continue reading <span class=\"screen-reader-text\">Fifth Circuit Requires Causal Distinction for Ensuing Loss Exception to Faulty Work Exclusion<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[11092],"tags":[9895,9968,10289],"class_list":["post-900209","post","type-post","status-publish","format-standard","hentry","category-faulty-workmanship","tag-advise-consult","tag-ensuing-loss-provision","tag-faulty-workmanship-exclusions","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Fifth Circuit Requires Causal Distinction for Ensuing Loss Exception to Faulty Work Exclusion - Advise &amp; 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