FAULTY WORKMANSHIP EXCLUSION BARRED RECOVERY

This is an appeal of a trial court verdict against an insured who sought $900,000 damages from its Builders Risk insurer. That amount reflected the cost of materials and labor to replace a 240 feet high and 15 feet in diameter tower that it was building and which became deformed in the construction process. The policy insured against “all risks of physical loss or damage from any cause howsoever and wheresoever occurring” and was subject for various specific exclusions, including one for “loss or damage caused by or resulting from faulty workmanship.”

It was undisputed that the structural damage was caused by excessive and uneven heating in a stress-relieving process applied to the welding of thick steel plates. The tower developed a wrinkle and commenced to lean. It was necessary to rebuild it, the stress-relieving process being performed again, but in a manner to avoid the previous problems. The insured sought to recover its expenses.

The insured argued that the original stress-relieving process was not faulty workmanship because it was done outside the construction process and resulted in subsequent damage to the tower. The insurance company maintained that the stress-relieving operation was an integral part of the fabrication and construction of the tower. Therefore, the defective procedures were as much faulty workmanship as building the tower with defective welding.

The court was not convinced by the insured’s contention that the “faulty workmanship” exclusion was inapplicable. In its opinion, it “applies to defects actually built into the structure, but not to misjudgments or to negligent or ineffective procedures in doing the work that itself does not become part of the completed product.” It said that the insured’s own evidence unequivocally proved the conditions for the exclusion of coverage.

The court found that the policy exclusion applies, “since ‘faulty workmanship’ includes the defective handling of a heat treatment that is an integral part of the construction process of the insured property.” The trial court judgment in favor of the insurance company and against the insured was affirmed.

U.S. Industries, Incorporated, Et Al., Plaintiffs, Appellants V. Aetna Casualty & Surety Company Et Al., Defendants, Appellants. United States Court of Appeals for the Fifth Circuit. No. 82-3079. November 1, 1982. CCH 1983 Fire and Casualty Cases 460.