Faulty Or Improper Material, Workmanship, And Design – Interpreting The Exclusion Clause In Construction Insurance Policies

Builder's risk (also known as course of construction) insurance policies almost always contain some form of exclusion relating to the cost of repairing or replacing faulty or improper material, workmanship, and design. This exclusion is usually qualified by an exception to the exclusion, or 're-inclusion', for "resultant damage" to insured property. The application of this exclusion is a frequent source of disagreement as between insurers and insureds on construction projects.

The typical wording for this exclusion is:

This Form does not insure:

(a) the cost of making good

(i) faulty or improper material;

(ii) faulty or improper workmanship;

(iii) faulty or improper design;