A Video Explaining the Latent Defect and Inherent Vice Exclusions

Latent Defect

Cases that provide coverage despite an exclusion for latent defects fall generally within two categories. The court determines either that:

the defect could have been discovered through appropriate testing and it is therefore not latent; or
the loss resulted from a contributory covered risk.

“A policy will define latent defect” as “a hidden flaw inherent in the material existing at the time of the original building of the yacht, which is not discoverable by ordinary observation or methods of testing.” “The word “inherent” requires that a latent defect be characteristic of or intrinsic to the material. The word “flaw” imposes the exact opposite requirement. It includes problems with a specific piece of material, but not problems characteristic of the material itself. In short, giving the terms their plain and reasonable meaning, there can be no such thing as an inherent flaw.” (Ardente v. Standard Fire Ins. Co., 744 F.3d 815 (1st Cir. 2014))