Until recently, the list of what would be covered or excluded in a typical builders risk insurance policy was often a cut-and-dried affair. But these days, many construction and engineering companies are seeking a more flexible range of exclusions that had been used mostly on energy and industrial projects.

To meet the demand, insurers are writing policies that adopt language published by the London Engineering Group (LEG), an association that supports engineering, energy and construction liability underwriting markets. Of the three significant builders risk-related LEG defect-exclusion wordings, LEG 3 policy language is most frequently used in the U.S. Whether this exclusion finds a permanent, widespread place in U.S. construction risk management remains to be seen.

Builders risk insurance has a long history and covers losses or damage during the construction process. The basic policy usually includes fire and lasts at least a year or until the project is completed. While coverage can be expanded with endorsements to cover all kinds of risks, such as damage to equipment, defects in workmanship are generally excluded.

第3圈的重新点燃的兴趣是对建筑公司提供的所有保险的一般性重新评估和重塑的一部分，因为服务交付和风险景观的变化。盟军世界北美伤亡部总裁约瑟夫·塞罗拉（Joseph Cellura）表示，一直在推动重新评估伤亡保险的排除，这涉及责任承保范围。他说，在某些情况下，建造者的腿3级危险涵盖了伤亡政策中的修改。盟军世界内陆海洋部高级副总裁Kris Feuerbacher撰写了“建筑商风险保险”，他说，他的公司愿意在其建筑商风险政策中额外承保。他说，这始终是基于与经纪人的合作，承包商的承销并考虑到美国判例法，这主要是按州确定的。

In contrast to typical builders risk policies, the three available LEG exclusions allow a range and can be narrower. LEG 3 is the narrowest and will allow the builders risk policy to cover the damage caused by faulty workmanship, materials or design errors but also the cost of accessing and correcting the defect itself. LEG 3 won’t cover the cost of improving the defective workmanship itself, however.

不过,政策与腿3规定可以携带μch steeper premiums, and the jury is out over whether they are always truly cost-effective compared to standard builders risk policies. In addition, the LEG 3 approach to insuring major projects is relatively untested in the U.S. legal system, making them somewhat of an unknown quantity should a policy with a LEG exclusion land in court. Some U.S. insurers are wary for that reason and wonder if London-based insurers are as mindful of the individual state law and labor conditions in the U.S. It has been suggested that, in principle, insuring defective workmanship is not a good idea in that it undercuts incentives for contractors to improve their quality control.

limiting Litigation

Nevertheless, some insurance experts say adding a LEG exclusion to a builders risk policy can help to cut back on unnecessary and costly litigation sparked by differing interpretations over what is covered. “What LEG policies bring is a little more certainty to what’s covered and what’s not covered,” said Steven Coombs, a principal at LaGrange Park, Ill.-based risk management and commercial insurance consulting firm Risk Resources and co-author of a book on builders risk policies published in 2010 by the International Risk Management Institute. “Builders risk policies should be as broad as you can negotiate them,” said Coombs. If there is a loss, “the stakeholders don’t have the luxury of time to sit around and point fingers and litigate. They need to rebuild as fast as possible.”

The London Engineering Group was launched in the 1990s as a consultative organization by insurers and re-insurers active in the engineering market and, in particular, energy and operational power. Since then, the LEG approach to exclusions has become standard in both the U.K. and Europe.

The first experience U.S. insurers had with LEG exclusions were through policies written for global contractors and engineering companies working on projects in various cities and states across the country, noted Mark Katz, a New York City-based attorney. That has begun to change. More U.S. insurers are beginning to incorporate LEG 3 provisions into their policies to the point where contractors and engineering and design firms can probably get them by asking their brokers.

But it is hard to quantify how often these exclusions are used in the U.S. insurance market. For U.S. risks, they are more prevalent in policies issued by domestic insurers or domestic divisions of foreign insurers, Katz said. And LEG provisions are becoming fairly common in some U.S. sectors in projects over $100 million, such as the energy industry and, increasingly, in commercial real estate, said Risk Resources’ Coombs. But they are not very common in the $50-million to $100-million project range and still very rare on anything below $50 million, he said.

The stakeholders don’t have the luxury of time to sit around and point fingers and litigate. They need to rebuild as fast as possible.
——史蒂文•库姆斯校长,资源风险urces

库姆斯说：“我认为这本身并不来自保险公司。”“他们正在对利益相关者在建设项目中的需求增加做出反应。”新利18备用网址

The broader coverage offered by the LEG policy approach to coverage is a big reason for its growing use in the U.S. market, according to insurance experts. A recent International Risk Management Institute (IRMI) conference in Orlando, Fla., featured a presentation that compared LEG 3 coverage with traditional builders risk policies.

传统的建筑商风险政策涵盖了“事故或机会，而不是通过设计”发生的损失，苏黎世北美国家建筑物业总监洛里·蒙托亚（Lori Montoya）在其IRMI演讲中表示。其次，必须触发覆盖范围，必须有身体上的损害。

The only way builders risk policies have covered damage caused by faulty workmanship, materials or design is through an exception to the general exclusion for damage caused by the defect. Known as the “ensuing loss provision,” the exception spells out the potential fault or defect and “restores coverage for losses arising from the excluded peril [i.e., defect] if caused by a separate and independent peril,” Montoya wrote in her PowerPoint presentation.

Example No. 1: Defective Concrete

蒙托亚提供了一些例子，说明何时建造者风险政策在使整个项目所有者和承包商中都缺乏。在一个困扰有缺陷的混凝土困扰的项目中，修复基金会的成本被“有缺陷或有缺陷的做工或物质排斥”所排除，其中“没有发生单独的身体损失或损害”。在另一种情况下，由于排除相同的排除，因此未覆盖墙壁塌陷，因为它不会造成任何单独的损坏或身体损失。

By contrast, LEG 3, the broadest form of LEG coverage, pays to repair both the damage due to defective workmanship or design flaws as well as the cost of correcting the original source of the problem. It does not include coverage for costs to improve the original design, plan, specification, workmanship or material. The LEG3 extension is where “coverage is extensive,” says one insurance executive. That’s why it is requested.

Example No. 2: Bolt Failure

根据蒙托亚（Montoya）的演讲，在一个涉及工业大楼的案例中，设计师“误认为将屋顶梁的螺栓压力估计了”。螺栓失败，导致屋顶面板被安装在一起时倒塌，并损坏了“现场另一个单位”。

Under a LEG 3 policy exclusion, the insurer would cover the damage caused by the defects, including “property supported” by the defect and “loss, damage or costs incurred to access defective part,” Montoya noted.

Coombs offered another way to look at the difference: If a defective beam on a construction project causes a collapse, most U.S. builders risk policies would cover the “ensuing damage” but not the beam. A policy with LEG 3 language would cover both.

Still, with its much narrower exclusions, LEG 3 does provide broader coverage. Whether it always provides a better financial outcome for the policy-holding contractor or designer is not a settled point.

保险专家说，腿3下的更广泛的承保范围也以更高的保费和更高的自付额为代价。库姆斯说，大型项目的3腿3政策的保费可能高达25万美元，而建造者风险政策则为100,000美元。

As a result, there is no simple answer as to whether LEG 3 coverage always will provide a better financial outcome for a contractor or engineering firm compared to a traditional builders risk policy. While LEG 3 policies are seen by some as being less prone to litigation, there are also concerns about how LEG 3 policies will hold up in the U.S. court system. Further, there is the nagging question of whether indemnifying work defects removes incentives for contractors to improve.

By covering more, a LEG 3 policy removes some of the issues that typically spur litigation. And since exclusion for defective materials, design and workmanship is the “most litigated exclusion,” according to Risk Resources’ Coombs, eliminating lawsuits would be a worthy accomplishment.