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Insurer avoids payment for water damage caused by defective workmanship

TMW Enterprises purchased an existing building and insured it with Federal Insurance Company under an "all risks" policy.  Soon after buying the building, TMW discovered that the building had suffered substantial water damage caused by errors made during its original construction.  TMW undertook repairs, totaling several million dollars, and argued that Federal should be responsible for some of its repair costs.  Federal argued in response that any damage to the building was excluded from coverage under a policy exclusion relating to defective workmanship.  TMW took the position that water damage was covered under the policy despite the workmanship exclusion, but the Sixth Circuit concluded that TMW's proposed exception to the exclusion would virtually eliminate the workmanship exclusion entirely.  As a result, the defective workmanship exclusion was enforced to deny TMW's claims, although TMW was allowed an opportunity to return to the lower court to prove any damages caused by water damage independent of poor construction.
Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
Toll Free: 1-800-678-1307
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