Monday, 7 November 2011

Building Insurance

There is clearly a distinction between a building component wearing out naturally and failure due to a defect.  When seeking insurance cover it is necessary to be clear which eventualities are to be covered.

Several USA school roofs failed in sub-zero temperatures within two or three years of the expiration of the ten-year warranty period.  The contractor had assured his client that the roofs had service lives of 15-20 years.
The roofing was in pvc sheets, which shattered in sub-zero temperatures.  Pvc roofing contains plasticizer, as otherwise it would be rigid and lack the elasticity and plasticity required to accommodate movement without fracture. 
Plasticized pvc, to retain its flexibility, needs stabilisers and inhibitors – otherwise the volatile plasticizers will gradually be lost.  These roofs failed after the expiration of the warranty period but sooner than expected, due to gradual plasticizer loss.
The school board sought to recover from their insurers.  The insurers accepted liability for consequential damage but not for the cost of replacing the defective roofs themselves, arguing that the loss did not arise from a fortuitous incident.[1]  The insurers contended that the failure was inevitable at the time of construction, and therefore not covered by the policy. 
It was found, as a matter of fact, that failure was not inevitable – two such roofs having survived.  Further, the terms of the policy did not expressly exclude liability in these circumstances.

[1] A loss is ‘fortuitous’ if it happens by chance or accident, occurring unexpectedly or without known cause.

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