Understanding Defect Exclusions
A practical guide to DE1-DE5 and LEG1-LEG3 with insights from Alan Scholes
Defect exclusion clauses can materially affect claims outcomes. To help brokers better understand the differences between DE1-DE5 and LEG1-LEG3, Alan Scholes, Construction & Engineering Underwriting Manager, has developed this educational resource using a consistent construction loss scenario to demonstrate how different wordings may respond in practice.
An overview of defect exclusions, why they exist and the role DE and LEG clauses play within Construction and Engineering insurance
Small differences in defect exclusion wording can have a major impact on the outcome of a claim. Understanding those differences is essential when advising clients on Construction and Engineering risks.
Design Exclusions: Episode 1 - 5
DE1: Full Defect Exclusion
DE4: Excluding Only the Defective Component
DE2: Limited Cover Beyond the Defect
DE5: The Broadest DE Cover Available
DE3: The Market Standard Position
London Engineering Group: Episode 1 - 3
LEG1: Complete Exclusion of Defect-Related Losses
LEG2: The Market Standard LEG Approach
LEG3: The Broadest LEG Cover Available
Questions?
If you would like to discuss Defect Exclusions, or Engineering insurance solutions, please get in touch with our specialist team.
Disclaimer
The examples used throughout this series have been simplified for educational purposes. Actual claims outcomes will depend on the specific policy wording, facts and circumstances of each loss.
The information provided in this content is intended for UK insurance brokers acting on behalf of their prospective or existing clients.
Any description is for general information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product. Policyholders who have questions or wish to arrange or amend cover should contact their insurance broker. Insurance brokers can find details of how to contact us here.
Any descriptions of coverage contained are meant to be general in nature and do not include nor are intended to include all of the actual terms, benefits, and limitations found in an insurance policy. The terms of any specific policy will instead govern that policy. Any guidance for UK insurance brokers is intended to provide general information only, and should not be used as a substitute for legal advice.