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How Do You Know When Your Loss Ensues?

By Benjamin Fleischner, Ann Marie Petrey and Eric Leibowitz
June 02, 2015

This two-part article provides an overall review of ensuing loss provisions and their application by courts across the United States. In Part One, we discussed, among other things, Specific Exclusions. This month, we continue the discussion about Faulty Workmanship Exclusions.

Faulty Workmanship Exclusions

In Swire Pacific Holdings v. Zurich Insurance Company, 845 So. 2d 161 (Fla. 2003), demolition of non-defective portions of a building was required in order to correct design defects. The court ruled that it was not an ensuing loss, but rather an excluded loss caused by the defective design. Swire owned a high-rise condominium building. Zurich issued a builder's risk policy covering the project. In the course of construction, the City of Miami halted issuance of the Certificate of Occupancy based on numerous design defects and failure to comply with appropriate governmental building codes and ordinances. As a result of the design defects, Swire altered the plans for construction to bring the building into compliance, and incurred about $4.5 million in costs to correct the structural deficiencies. Zurich denied coverage on the ground the claim dealt with the cost of correcting a design defect and there was no physical loss or damage resulting from the defect.

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