Construction companies typically rely on “Builder’s Risk Insurance” to protect against the risk of damage during an ongoing construction project. This coverage is often written on an “all risk” basis, meaning that the insurance company agrees to provide coverage for all loss at a particular location, unless specifically excluded by the terms of the policy. Essentially, a builder’s risk insurance policy is “a form of property insurance that covers the interests of the owner, contractor, subcontractors, and others involved in the construction project, insuring them against risks of property damage to the project.”1

Not surprisingly, insurance companies often try to avert their coverage obligations for losses claimed under builder’s risk policies by relying on various exclusionary provisions and, in particular, the “Faulty Workmanship Exclusion.” A recent case decided by the U.S. District Court for the Southern District of New York, arising out of a tragic crane collapse on the Upper East Side of Manhattan in May 2008, examined the scope and limitations of the faulty workmanship exclusion. In 1765 First Associates, LLC v. Continental Casualty Co.,2 the district court held that the faulty workmanship exclusion excluded from coverage those damages arising from “problems with the property under construction itself, and not…losses incurred to ameliorate the effects of accidents during construction.”3

The Policy at Issue

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