Opinion ID: 75785
Heading Depth: 2
Heading Rank: 1

Heading: the design defect exclusion clause

Text: 18 The policy's Design Defect Exclusion Clause excludes coverage for [l]oss or damage caused by fault, defect, error, or omission in design, plan or specification. Part of that clause, however, is the ensuing loss provision, which states that physical loss or damage resulting from such fault, defect, error or omission in design, plan or specification is covered under the policy. Swire asserts that the Design Defect Exclusion Clause considered as a whole is ambiguous and therefore should be construed against Zurich, the insurer and drafter. The district court rejected Swire's argument that the clause is ambiguous and held that Swire's loss fell within the exclusion for [l]oss or damage caused by [a] ... defect and not within the ensuing loss provision. That conclusion was based upon the undisputed fact that the building had not collapsed at the time of the repairs. 19 Several decisions support the district court's holding that the Design Defect Exclusion Clause is not ambiguous and that the loss at issue — the cost of correcting of design defects — cannot constitute physical loss under the ensuing loss provision because it was incurred to correct an excluded peril. See Laquila Constr., Inc. v. Travelers Indem. Co., 66 F.Supp.2d 543, 544-45 (S.D.N.Y.1999) (where builder's risk policy contained an exclusion for the cost of making good faulty workmanship but had an ensuing loss provision for physical damage resulting from such faulty workmanship, a claim for cost of repairing defective concrete fell squarely into the exclusion clause), aff'd, 216 F.3d 1072 (2d Cir.2000) (unpublished); Schloss v. Cincinnati Ins. Co., 54 F.Supp.2d 1090, 1094-96 (M.D.Ala.1999) (where homeowner's insurance policy contained an exclusion for loss caused by rot, and the exclusion was subject to an ensuing loss provision, the costs associated with repairing rot damage were excluded and did not fall under the ensuing loss provision), aff'd, 211 F.3d 131 (11th Cir.2000) (unpublished); Allianz Ins. Co. v. Impero, 654 F.Supp. 16, 17-18 (E.D.Wash.1986) (where builder's risk policy contained an exclusion for cost of making good faulty workmanship and had an ensuing loss provision, losses incurred in repairing a defectively erected concrete wall were not covered). But those decisions did not involve Florida law, and the parties have not cited, nor have we found, a decision applying Florida law to this issue.