A Court in the US has delivered the world’s first legal decision on the most generous of the three London Engineering Group (LEG) clauses related to defect exclusions, LEG3, in the case of South Capitol Bridgebuilders v Lexington Insurance Company.

The fact that the Construction All Risks (CAR) market (otherwise known as the Builders’ Risk market) has been waiting for a LEG3 decision for this long means that SCB v Lexington was always going to receive a lot of attention. 

However, the unrestrained and intemperate language used by the judge means that there is a risk that the decision will create more heat than light and has the potential to lead to a reaction by CAR insurers which could negatively affect the interests of policyholders.

This case study therefore attempts to take a step back from the eye-catching language used by the judge in SCB, and discuss what the future for LEG3 might look like.