Business Risk Exclusion Precludes Water Damage Coverage
March 4, 2015In this insurance coverage case, the Court of Appeals construed the “business risk exclusion” to preclude coverage for water damage to a townhome complex that the insured was building. A business risk exclusion is a typical provision in commercial general liability insurance policies that is used to exclude coverage for “certain risks relating to the repair or replacement of the insured’s faulty work or products or defects in the insured’s work or product itself.” The reason behind including such exclusion is simple: the insured should be able to control the quality of the goods and services it supplies. In this case, the Court found that the exclusion precluded coverage because the evidence established that property damage at issue occurred during the construction of the townhome complex.
