We buy homeowner’s insurance to protect our homes against perils. So, many homeowners are surprised to learn that their policies may exclude things that they believed were covered. For instance, many policies exclude water damage caused by defective construction. Such was the case in Friedberg v. Chubb & Son, Inc.
The Friedbergs’ home was covered by a Chubb policy. For the uninitiated, Chubb policies are considered the Cadillac of homeowner’s insurance (and, I assume this distinction comes from a time when Cadillacs were considered the Cadillac of cars). Yet, in the Friedberg case, Judge Doty found that the Cubb policy excluded all damage to the Friedbergs’ home caused by faulty construction.
Insurance Policies: They Give, Then Take Away, Then Give Again
Insurance policies are divided into roughly three parts (putting aside the all important declaration section).
The first part describes, in typically broad language, what the policy covers.
The next part, called the “Exclusions,” takes away what the first part gave. It says, “Notwithstanding all the stuff we cover, we don’t cover this or that or the other thing.” Well, thanks a bunch!
The third part gives a little back. It’s called the “Exception to an Exclusion.” It restores a bit of the coverage taken away by the Exclusion. It says something like, “That thing that we took away. Well it counts, but it doesn’t include this or that.” Usually the “this” or “that” are things that you would have been shocked to find excluded to begin with.
The Chubb Exclusion Doomed The Friedbergs’ Case
In the Friedberg case, Judge Doty goes through the three part (coverage, exclusion, exception) analysis described above. Here’s where he came out:
- The Friedbergs’ Chubb policy did cover the damage to their home. Indeed, the policy provided for “coverage against all risk of physical loss to your house.” Put a check down for coverage.
- But, an exclusion in the policy excluded “any loss caused by the faulty acts, errors or omissions of you or any other person in planning, construction or maintenance.” The policy defined “caused by” to mean “any loss that is contributed to, made worse by, or in any way results from that peril.” Based on this fairly broad exclusionary language, Judge Doty concluded that the Friedbergs were out of luck.