Trinity Industries, Inc. v. Insurance Company of North America
916 F.2d 267 | Court of Appeals for the Fifth Circuit | 1990
What This Case Means for Subcontractors
Halter Marine built a vessel with a defective twist in the hull caused by misaligned sections. The owner (Leam) won an arbitration award for the defect. Halter tried to recover the arbitration payout from its Builder's Risk insurance policy, but the court ruled the policy does not cover contractual liability for faulty workmanship. The court found that Builder's Risk insurance covers physical damage to the vessel itself, not the cost of fixing poor initial construction or paying damages for defects.
Key Takeaways
- •Builder's Risk insurance does not cover your contractual liability to pay arbitration awards or damages for defective work—it only covers physical loss or damage to the structure itself
- •Disclose known defects immediately; hiding defects during inspections can hurt your insurance claim and your legal position
- •Review your insurance policy language carefully to understand what is and is not covered before a dispute arises
The policy does not cover the arbitration award, and therefore reverse.
Frequently Asked Question
Will my Builder's Risk insurance cover me if I have to pay an arbitration award for defective construction work?
No. Builder's Risk insurance covers physical loss or damage to the structure itself, not your contractual liability to pay damages or arbitration awards for poor workmanship. You need separate liability coverage for defects in your work. Always review your policy terms and consider additional coverage for workmanship liability.
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