July 06, 2018
A construction defect claim is a claim that is filed when a building or any component of that building, system, or adjoining property fails. Many of these faults can be obvious just looking at the building and many are even covered by general liability insurances that companies traditionally purchase. However, for general liability to cover a claim it, the time and place of the error must be able to be determined. Assuming that it is known when the building was constructed (any time recently), this is generally not a hard piece of information to come up with.
However, as with anything, there are exceptions that can be made for general liability not covering all construction defect claims. If the situation cannot be documented and it cannot be shown when the incident happened and/or prove that the construction company was responsible for the problems with the structure and any piece of it that malfunctions.
What Are Some Of The Grounds For Filing Construction Defect Claims?
If someone is filing a construction defect claim, there are many disputes from various general liability insurers as to what will constitute a construction deficit and what they should be liable to pay for versus what they should not have to pay for. This has been going on for almost all of the 20 years in which liability companies have been having to handle construction defect claims.
As a result, the general rules have been established for grounds for situations in which these construction defect claims are filed in. They have found that most claims fall into 4 categories):
- faulty construction work has occurred on the structure
- the results damaged the work that other people did causing defects in the structure
- damage has resulted to a 3rd party property owner as a result of the work done on a structure
- the structure has faults but it was not due to work on the structure that was defective
Determining what claims the general liability insurer is responsible for and which they are not responsible for is a constant debate. Specific laws vary by local area and state as to what the laws in that town/city/county/state/etc. are and claims are filed.
Generally, it has been determined that only the faulty work of the insured party is covered by general liability insurance. If the damage was caused by an outside party (other than the insured party) then the general liability insurance company was not responsible for covering the costs of the case as their party did not cause the problem. This means that the person looking to file the case would have to take that case up with the party who caused the damage if they wished to receive remuneration for the damages.
How Are Construction Defect Claims Avoided?:
While there is no way to 100% avoid every construction defect claim that can ever happen, there are many ways to limit the chances of having a construction defect claim pressed against you. The following are the 3 out of the 4 types of common defect claims and some ideas on how to avoid lessening the chances of this claim being levied against you in the future:
- Faulty Construction Work Occurring On A Structure: Hiring professional architects and builders who have their own liability insurance policy to cover their work. This extra insurance on the part of the worker lessens the likelihood that your insurance will have to pay for faulty work done by the workers that these other liability insurance company covers as they are there to take over the claim rather than making your insurance pay for it. Moreover, hire only professionals who have completed programs that qualify them to do the specific kind of work they are being hired to do.
- The Results Damaged Work That Other People Did To Your Property: Hire companies that have documented (at least to some extent) what their work and quality standards and assurances are to their customers. Seeing that a company has at least some written explanation of their work and the standards they hold their employees to ensure that you are hiring a reputable company that holds their workers to doing only the highest quality of work, which minimizes the risk that you will have allowing them to do work for you.
- Damage Resulted Damages To A 3rd Party Owner Due To Work Done On Your Site: This is the category to which there is no one real simple solution. The best possible idea to try to lessen these claims is to educate owners on the maintenance of their property. If this doesn't work then contacting either the legal counsel or insurance will help you determine what to do before resolving the situation. They can recommend how you should proceed.
What About "The Structure Has Faults But Was Not Due To Work On The Structure" Reason?
This is the one caveat where the insurance of the construction company and are generally known as "construction defect" which means that as things age over time, if no date or time of the construction contributing to the defect can be placed, the construction company's insurance plan will not be responsible for covering the damages.
This is because it's a fact that things break down, wear out, or fail over time. Simply put, the construction company is not responsible for those types of property issues if it cannot be proven that the material, construction job, or workers were the reason that this structure was compromised. Aging structures will have issues and that is simply part of owning any building or property.
In the end, these are a few things that you can do to help minimize the amount of construction claims you have to make against your general liability insurance company. It's impossible to avoid every single claim that will ever be filed against your insurance general liability insurance company, however understanding what can be avoided and doing what you can to avoid these issues can help cut down dramatically on the amount of claims you have to make on your insurance and consequently how much your liability insurance is likely to go up over time.
For more information on limiting the amount of claims that you have to make on your general liability insurance coverage please feel free to contact us.