Articles Posted in Builder’s Risk

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The London Engineering Group’s LEG 3 exclusion—one of three standard form provisions issued by the London Engineering Group addressing coverage arising from construction or design defects—is an increasingly common defects exclusion found in Builder’s Risk and other policies covering projects under construction. LEG 3 is popular due to its reputation in the industry as providing the broadest form of cover available and excluding only “improvements.” Insureds typically accept additional premiums and/or higher deductibles in order to obtain this provision in their policies.

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Loyal readers of this blog may recall our recent analysis of Norwegian Hull Club v. North Star Fishing Co., an insurance coverage dispute that appeared likely to turn on the meaning of a blank space in a very large builder’s risk policy. After bench trial, U.S. District Judge Robert L. Hinkle has filled that gap—giving the policyholders most, but not all, of the coverage that they sought. Under the judge’s decision, based upon industry custom and practice, that blank space provided the policyholder with nearly $20 million in extra coverage.

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Insurance coverage disputes often turn on the meaning of the specific words used in a policy. Norwegian Hull Club v. North Star Fishing Co., currently pending in the U.S. District Court for the Northern District of Florida, presents a twist—it turns on the meaning of a blank space.

Last month, U.S. District Judge Robert L. Hinkle ruled that neither the policyholder nor the insurer was entitled to summary judgment regarding the interpretation of a critical policy provision, reasoning that an empty field rendered the clause ambiguous. But as the case now proceeds to trial, the most interesting part of the district court’s opinion might be its own blank space: contra proferentem, the argument it doesn’t address.

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