Wade Clark Mulcahy LLP

<p style="text-align: justify;">Plaintiff’s house was covered by an all-risk homeowner’s insurance policy issued by defendant. During renovations of the house, a leak occurred. Plaintiff reported the loss, and an engineer retained by defendant concluded that the leak was caused due to the plumbers using the wrong adhesion material for a water-pipe connection. The connection failed, which caused the flood. Defendant disclaimed coverage due to the “faulty workmanship” exclusion.</p>
<p style="text-align: justify;">However, plaintiff argued that the “ensuing loss” exception to the “faulty workmanship” exclusion provides coverage when, as a result to an excluded period, a covered peril arises and causes damages.</p>
<p style="text-align: justify;">The <a href="https://www.wcmlaw.com/wp-content/uploads/2023/03/New-York.pdf">New York</a> Appellate Court reversed the lower court’s decision and agreed with plaintiff that there was coverage due to the ensuing loss exception. The ensuing loss exception provides coverage in this case because as a result of an excluded peril (faulty workmanship), a covered peril arose (water discharge from a plumbing system) and caused other harm (water damage) to separate property (areas throughout the house). The court further held that the plaintiffs were not trying to fix the faulty workmanship, meaning the plumbing itself, but instead were seeking to repair the house as a result of the leak.</p>
<p style="text-align: justify;">When considering coverage in respect to the ensuing loss exception insurers will have to consider what the excluded peril is, the covered peril, the harm, and damage the insurer is seeking to fix.</p>
<p style="text-align: justify;">Thanks to Jennifer Tuz for her contribution to this post. Please contact <a href="haquino@wcmlaw.com">Heather Aquino</a> with any questions.</p>