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Residential real estate developers, builders and contractors want their clients to be happy with their new home or condo. And in the vast majority of cases that happens: new homeowners tend to have a high satisfaction rate for their newly built home. But sometimes things fail, are defective or in need of repair. That's when frustration arises.

Builders and developers want to fix any defect or damage—they want to do what's right and protect their reputation and brand. But they're left exasperated because legal decisions have trebled their responsibilities and their liabilities. Many contractors also do not fully understand what is and isn't covered in the majority of Commercial General Liability (CGL) insurance policies. And insurance carriers are frustrated by the expansion of liabilities and their indemnity obligations according to statutes.

This frustration comes in large part from plaintiff's lawyers who have made construction defect a cottage industry. Plaintiff attorneys' fees and expert fees can sky rocket resulting in the homeowner failing at times to recover the cost of correcting the defect under dispute in the first place. Historically, litigation is an inefficient method to resolving construction defect discrepancies.

Still defects do occur. The majority of new construction claims come from moisture intrusion into the building envelope (facades, windows, roofs, doors, floors). Other construction claims come from HVAC systems (failing, inefficient flow or odors); shower enclosures (leaks, mold and penetration); and inadequate fire protection materials installed.

Today, 31 out of the 50 states have adopted Notice and Opportunity to Repair (NOR) statutes. These are also known as Right to Repair or Cure statutes. This state-by-state statute gives the builder and the homeowner an opportunity to avoid litigation by providing a process for solving construction defect claims prior to legal action being allowed. The normal process is that the homeowner notifies the contractor or developer in writing of the alleged defect; the builder must respond and perform repairs/pay a settlement for the repairs; both parties have to keep communications open per NOR.

Communication always beats litigation and that holds true for construction defect claims. For more information, contact your insurance carrier or agent/broker.

Instant Insights /

How to Navigate the Construction Defect Minefield

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