Excluded In Standard Coverage
Alice Yao | Updated July 19th, 2020
While cooking dinner one night, you noticed out of the corner of your eye, a patch of water stain on your ceiling. Oh no! Is there a water leakage upstairs?
After consulting a plumber and a restoration technician, you were told that water has been seeping into the tiles and subfloors of your bathroom for months. This is all because your new toilet installed by a contractor was put in without a gasket!
Any homeowner would undoubtedly feel the frustration of this situation. Unfortunately, there is more bad news, you are likely going to be told by your insurance company that this seepage is not covered by your homeowner’s insurance policy.
There is no easy way to break this news to a frustrated homeowner as an insurance agent, but construction defects are common exclusions on homeowner’s insurance policies.
In this article, we will go over construction defects in details and review the following:
- How to identify construction defects?
- Why are construction defects not covered?
- Will resulting damage from construction defects be covered?
- How to avoid a similar situation in the future?
How to identify construction defects?
In many instances, construction defects are discovered by a licensed home inspector during the process of a real estate transaction. An inspector has thorough professional knowledge and experience to properly identify construction defects or poor workmanship.
In other instances, construction defects are revealed after the homeowner reports damage and it has been assessed by a professional like a plumber or another contractor.
Always consult with your insurance agent before filing a claim with your insurance company. If you make a decision to submit a claim for formal coverage review, a claim adjuster will be assigned to perform a comprehensive inspection of the damage. The claim adjuster will examine the damage with an expert of that trade to confirm whether the cause of loss is construction defect.
Why are construction defects not covered?
There are a number of covered risks under a homeowner’s insurance policy, including fire, theft, vandalism, sudden and accidental incidents, etc.
Construction defects are excluded from a homeowner’s insurance policy as a covered risk because they are results of poor workmanship by builders or contractors.
Will resulting damage from construction defects be covered?
Here is another example, you had your bathroom recently remodeled by a contractor and the valve of your toilet was not installed properly. You wake up the next morning and your bathroom is flooded.
The flood damage in your bathroom is considered the resulting damage.
Your homeowner’s insurance may cover this water damage, but it will not cover the cost to fix the valve of your toilet.
After your claim is settled, your insurance company may also pursue the contractor who had failed to install your valve properly for reimbursements to the water damage.
The above example is to illustrate that, under certain circumstances, the damage may be covered by your home insurance policy if the resulting damage is sudden and accidental - even if the cause of loss is stemmed from poor construction workmanship.
How to avoid a similar situation in the future?
The best way to avoid finding yourself in this situation is to only select reputable contractors with a long working history of successful home projects. It is vital to do the proper research on your contractors and verify they are properly licensed and bonded for your projects.
Keep in mind that per homeowner’s insurance contracts, homeowners are not only required to take the necessary measures to upkeep their homes, but also to mitigate further damages when a loss occurs. We recommend that homeowners themselves perform routine inspections of different areas within their home.
If you discover any issue at all, do not wait to fix it. Find a reliable contractor right away and settle any issue before it morphs into a frustrating nightmare.
Identifying and mitigating potential issues may not help you avoid builder defects, but they will help you minimize further financial loss.
It is important to understand how your policy covers you, so be sure to discuss with your insurance agent and make sure you are adequately protected.
By Alice Yao |