Three graded wordings setting how far, on a construction site, cover follows damage arising from a design or workmanship defect.
A construction all-risks policy covers accidental damage but not defective work itself, since an insurer does not fund the building. What remains is to say where the boundary falls when a design defect causes the collapse of an adjoining structure, and that is the purpose of the three graded clauses developed by the London engineering group. The first excludes everything connected with the defect, including the damage it causes. The second, much the most widely used, covers the resulting damage but excludes the cost of the improvements that would have been needed immediately before the loss to correct the defect. The third leaves outside cover only the cost of improving the defective element itself. The gap between these wordings is worth tens of per cent of a major loss, and it is negotiated alongside the premium, which makes it one of the rare places where the choice of a clause reads directly in the result. Their use presupposes technical expertise able to isolate the share of rectification attributable to the defect.
The LEG 1, LEG 2 and LEG 3 clauses were developed by the London Engineering Group to replace inconsistently drafted defect exclusions, the LEG 2 version of 1996 and the LEG 3 version of 2006 remaining the reference wordings used on international projects.
LEG 1, LEG 2, LEG 3, London Engineering Group, clauses de défaut de conception