The Eighth U.S. Circuit Court of Appeals held that an insurance policy's faulty construction exclusion barred coverage for water damage sustained to insureds' home. Joseph and Carolyn Friedberg owned a home which was insured under a Chubb & Son Inc. 'masterpiece' policy, which covered 'all risk of physical loss' to their home 'unless stated otherwise or an exclusion applies'. The Friedbergs spotted a woodpecker hole in a vertical pillar supporting the home's light bridge and sought to have it repaired. The repairman responded to the call, but suspecting widespread damage to the home, recommended an inspection. A subsequent forensic investigation revealed extensive water damage to the house. The Friedbergs notified Chubb of the loss. Chubb sent an expert to inspect the home, who determined defective construction enabled water to enter the walls and beam system and that the damage had accumulated over several years. Chubb rejected the Friedbergs' claim pursuant to an exclusion in the insurance policy for 'faulty planning, construction or maintenance'. The Friedbergs sued Chubb for declaratory relief. The district court granted summary judgment in Chubb's favor, ruling that even under the Friedbergs' theory that the water entered through the roof, the water damage was a loss caused by faulty construction and was therefore excluded under the policy. The Friedbergs appealed. The Eighth Circuit affirmed the district court's judgment. In so ruling, the Eighth Circuit rejected the Friedbergs' argument that Minnesota's concurrent causation rule applied. The Friedbergs contended that since the loss resulted from both a covered peril and an excluded peril, coverage existed unless the excluded peril was the overriding cause of the loss. The Eighth Circuit found that the faulty construction of the insureds' house was the efficient and proximate cause of the loss. But for the faulty construction, the water damage would not have taken place. Although water intrusion played an essential role in the damage, it was not an independent and efficient cause of the loss.

Chubb & Son Inc. Presents at Captive Live USA 2011, Sep-27-2011 02:30 PM. Venue: The Hilton, 720 South Michigan Avenue, Chicago, United States. Speakers: Jonathon Fanti, AVP.