CU 21 42–EXCLUSION–EXTERIOR INSULATION AND FINISH SYSTEMS

(April 2019)

INTRODUCTION

This endorsement is used with only the Insurance Services Office (ISO) Commercial Liability Umbrella Coverage Form. It is similar to CG 21 86–Exclusion–Exterior Insulation and Finish Systems used with the ISO Commercial General Liability (CGL) Coverage Form. CU 21 42 should be attached to the commercial liability umbrella coverage form whenever CG 21 86 is attached to the underlying CGL Coverage Form.

EXTERIOR INSULATION AND FINISH SYSTEMS (EIFS)

These systems are used as an economical way to provide exterior insulation to both residential and commercial building projects. The issue is that major defects in many of the installations cause losses.

Faulty application or installation, incompatible materials, and failed or inadequate caulking trap moisture and have caused the following types of losses:

• Heavy concentrations and build-up of toxic mold
• Breakdown and rotting of finishing materials
• Major damage to material used as the application base, especially wood framing
• Collapse of the exterior material

Such incidents have led to substantial rebuilding and replacement costs. These situations have led to the introduction of this exclusion.

Example: Great Idea Builders constructed homes in a subdivision. Five floor plans were available but all used EIFS in their exteriors. All homes were built, and their owners were satisfied until the Madisons’ daughter developed Multiple Sclerosis (MS) type symptoms. Mold allergies were discussed, and tests conducted in their new house. The mold levels were extremely high, and the investigation revealed that trapped moisture with the system had produced mold. The Madisons notified the homeowners association of their findings and other homeowners discovered the same problem. The members joined together to file a class action lawsuit against Great Idea that requested demolishing all houses and rebuilding them correctly.

It is important to note that the EIFS industry has responded to many of the problems that have resulted from this type of construction. However, because of the mold-related issues, it is now used more in commercial buildings than in residential construction.

CU 21 42–EXCLUSION–EXTERIOR INSULATION AND FINISH SYSTEMS ANALYSIS

Exclusion

This endorsement restricts coverage. It excludes coverage for losses due to designing, manufacturing, building, preparing, distributing, installing, maintaining, or repairing any exterior insulation or finish system. It also excludes losses that involve the named insured's product or work related to or used with such systems.

Note: The intent of this endorsement is to exclude losses that involve these systems the same way as losses that involve faulty or defective work or construction instead of treating them as fortuitous loss exposures.

Related Court Case: Imminent Collapse Covered Under Hidden Decay Provision

Definition

Exterior Insulation and Finish System is any non-structural system that finishes the exterior. It has five required components:

• Insulation board that is at least semi-rigid. It must be made of expanded polystyrene along with other materials.
• Mechanical and/or adhesive fasteners. They attach the insulation board to the surface of the building or structure being insulated.
• A base coat that may or may not be reinforced
• A surface textured finish coat that often has color added to it
• Flashing, caulking, and sealant used throughout the installation