Answer: The best place to put insulation in a cavity wall is in the cavity. You can maintain a freely draining cavity with proper detailing and construction practices. I have seen many designers use 2-inch-thick rigid insulation with a 4-inch cavity. This leaves a 2-inch drainage space between the exterior face of the insulation and the interior surface of the brick.
The Brick Industry Association, in Technical Notes on Brick Construction 21, states that "the clear distance from the back side of the brick to the exterior side of the insulation must be no less than 1 inch." This technical note further states that "mortar protrusions should not contact the insulation, as this is a direct path for water." This approach can be very effective provided that you install the insulation in sections that are 16 inches or 2 feet high as the wall is being built. After building both wythes to the proper height, install the insulation so that the boards fit between the rows of wall ties.
You'll need to exercise care in order to prevent mortar droppings from accumulating on the top surface of the previously installed insulation. This top edge, along with the wall ties, creates a ledge that fills much of the cavity. This is a natural spot for mortar droppings to accumulate. Before installing the insulation, you should inspect the cavity and remove mortar droppings from the top of the previously installed insulation.When both wythes are built together, it is important to place the insulation against the face of the backup wythe. The insulation should either be adhered to the exterior surface of the backup or be secured in place by some other means.
If the backup wythe and the insulation are installed before installing the veneer wythe, there should be either a 2-inch cavity between the face of the veneer and the exterior face of the insulation, or drainage mat installed on the face of the insulation. If drainage mat is not used, mortar droppings may easily bridge a 1-inch cavity.
When the backup wythe and insulation are installed before the exterior wythe, the joints in the insulation can be taped. This creates a barrier within the wall that provides better resistance to water penetration and may improve the thermal performance of the wall system.
If the insulation is positioned against the inside face of the backup masonry wall, the thermal performance of the system is reduced. The insulation is disrupted at the floor lines, creating a thermal bridge. The lack of insulation creates a colder region at the top and bottom of the exterior walls during winter months.
Also, many codes do not allow the use of foam insulation on the inside of a wall system. Because of this, many designers place fiberglass insulation between steel studs or furring channels. This introduces many additional thermal bridges. Also, because fiberglass insulation can absorb water, the installation of a vapor-retarding membrane is critical. Condensation within these spaces can lead to moisture problems, such as corrosion or biological growth. These problems will not usually occur with the extruded polystyrene or polyisocyanurate insulation that is typically used between the masonry wythes. These types of insulation function as their own vapor-retarding membranes.