Tracy Alan Saxe, a partner at the law firm of Saxe Doernberger & Vita, speaks with during the 2015 IRMI Energy Risk and Insurance Conference about litigation stemming from Builders Risk in the oil and gas industry.

Mr. Saxe sees a number of litigation issues affecting the energy industry directly related to a recent court decision regarding additional insured’s to the BP oil spill.

The most common sources of conflict on Builders Risk losses, according to Mr. Saxe revolve around the ‘faulty workmanship exclusion.’  Builders Risk policies are typically “all risk policies, which is an expansive grant of coverage.”  Even so, insurers are denying claims due to “an ensuing loss prevision. Mr. Saxe says the faulty workmanship is a very narrow scope of the loss, and everything that happens from that defect should be covered by the policy.

Mr. Saxe recommends that for Risk Mangers talk to their broker or agent when purchasing a builders risk policy, and ask for the “London Leg Form”.  There are three forms (Leg 1, Leg 2 and Leg 3) the higher the number the better it is for policyholders.   When a loss occurs, risk managers need to organize their team including forensic people and a coverage lawyer to figure out what happened.     Claim of loss should be reported in a way that matches the language of the policy.  He also recommends that all parties avoid pointing and email accusations, as insurance carriers will “cherry pick” emails and responses that match their needs.

For more from the IRMI Energy Risk and Insurance Conference, visit the IRMI website, or the On Demand Library.

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