Construction Company's Claim Fell Into Exclusion When It Sought Recovery Under a Builder's Risk Policy

In Laquila Construction, Inc. v. Travelers Indemnity Co. of Illinois, 66 F. Supp. 2d 543 (S.D.N.Y. 1999), a construction company sought recovery under a builder's risk policy where improper concrete had been used in the construction of a high-rise building. See id. at 544. As a result, it was necessary to replace the concrete, and further, certain fixtures, such as heating and cooling ducts and plumbing units, required removal and later reinstallation. See id. The insurance policy contained a clause excluding the "[c]ost of making good faulty or defective workmanship or material." Id. However, the construction company asserted that the expenses incurred in replacing the improper concrete were within the second prong of the clause which provided: "But this exclusion shall not apply to physical damage resulting from such faulty or defective workmanship or material." Id. The court rejected the insured's position and determined that the construction company's claim fell "squarely into the exclusion clause simply as a cost incurred to make good the defective concrete." Id. at 545. The court held that the claim was nothing more than an attempt to recover for the excluded expenses of repairing its defective workmanship. See id. at 546. The court noted that an exception to an exclusion should not be construed, interpreted, or applied so broadly that it would essentially swallow the exclusion, see id. at 545, and that the construction company's interpretation would result in coverage for virtually all instances of defective workmanship. See id. at 546; See also Allianz Ins. Co. v. Impero, 654 F. Supp. 16 (E.D. Wash. 1986) (holding ensuing loss provision was not applicable because claim was solely for cost of correcting deficiencies in construction not covered under exclusionary clause).