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.
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