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Court Issues First LEG3 Defects Exclusion Decision

Introduction In a case of first impression, the United States District Court for the District of Columbia (applying Illinois law) rejected a LEG3 exclusion as ambiguous.  See S. Capitol Bridgebuilders “SCB” v. Lexington Ins. Co., 2023 U.S. Dist. LEXIS 176573 (D.D.C. Sep. 29, 2023).  The London Engineering Group (“LEG”) is a consultative body for insurers of engineering class risks.  Nearly 30 years ago, LEG introduced a series of defects exclusions, including LEG1, LEG2, and LEG3 (which was revised in 2006).  Each provides increasing levels of coverage, with LEG3 being the broadest.  Generally, while preserving some coverage, LEG3 purports to exclude costs incurred to improve defects of “material workmanship, design, plan, or specification.”  Until now, despite frequent usage in builder’s risk

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Southern District of Texas Holds that Appraisal Award is Inconclusive of Whether a Loss is Covered

The Southern District of Texas recently held that an appraisal award did not establish liability for a covered loss under the policy. In Hoff v. Meridian Sec. Ins. Co., 2023 WL 5192013 (S.D. Tex. Aug. 11, 2023), Meridian Security Insurance (“Meridian”) insured Flemming Hoff (“Hoff”). After filing suit, Hoff requested an appraisal pursuant to the following policy language: If you [Hoff] and we [Meridian] disagree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or

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About The Property Insurance Law Observer

For more than five decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.

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