Faulty Work and Digester Cover

June 29, 2015

A local sewer authority that we insure experienced a large loss when the steel anchors for the cover of a digester corroded and gave way. This allowed the cover to lift under the pressure of the contents inside it, causing damage to the cover itself and requiring extensive repairs at a cost of around $340,000.

We knew the anchors themselves would not be covered, but we hoped the other repairs would be covered under the CP 10 30 04 02. The insurance company denied coverage because of the exclusion for rust, and the resulting damages were not one of the specified perils (as required by the CP 10 30). However, we think the steel anchors were actually faulty workmanship—they should have been stainless steel—and that the exclusion allows for resulting damages from any covered cause of loss.

We think the lifting of the digester cover is a covered cause of loss, and its movement is actually what damaged the cover, but the insurance company still says the rust exclusion takes away coverage. Our view is that rust takes away coverage for the anchors but not for the digester cover. What do you think?

Pennsylvania Subscriber

What you have is an issue of fact: was the placement of steel anchors faulty workmanship, or were they correctly in place? If they were truly faulty workmanship, then the lifting of the digester cover would be covered. However, if the steel anchors were considered adequate and proper construction then the rusting of the anchors and any resulting damage would be excluded.

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