Construction Defects & Related Lawsuits
A construction defect is any physical condition that reduces the value of a structure or endangers the health or safety of its occupants, that is a result of a flaw in design, materials, or workmanship, and that is not the result of normal aging or wear and tear. Examples can include new construction with water intrusion, faulty drains, cracks in the foundation, or settlement problems caused by inadequate grading and drainage. Since a typical construction project involves multiple contractors, including architects, carpenters, excavators, electricians, and plumbers, and it involves materials from many different manufacturers, defects are not unusual. Identifying the source and cause of a problem can be difficult and may require the services of a building professional.
Initial Concerns
Time is of the essence when you suspect that your home has a construction defect. If your builder provided a warranty, it is of limited duration. If you have to file suit, the state statutes of limitations and of repose impose deadlines.
Some builders provide written warranties. If a builder does not provide a written warranty, a warranty may be created by state law. For example, most state courts recognize an “implied warranty of habitability” that entitles the owner to a remedy for major defects that make the building unusable, even if there was no written warranty. Some states have very specific laws concerning construction warranties. Some builder’s warranties are purchased from outside insurers and remain in place even if the builder goes out of business.
Some defects are not covered by the builder’s warranty. For example, defective appliances are generally not covered by a builder’s warranty. Products not covered by a builder’s warranty may be covered by a manufacturer’s warranty. Your builder likely provided you with those warranties when you took possession of the property.
Follow any written procedures for reporting the defect. In many cases, a phone call to your builder will result in a prompt response. Cooperate with your builder in allowing access to the property. Keep notes about what is done and said during any inspections. While waiting for a response, take necessary steps to limit the damage and document your efforts for future cost recovery. For example, if water is getting into your home, take steps to prevent further leakage and damage. You may need to consult an outside expert to determine the source of the problem and avoid making the problem worse.
If the builder does not respond to your satisfaction, examine your original contract. It may provide for arbitration or mediation of such disputes. Your contract may also dictate the process if you are dissatisfied with the results of arbitration or mediation.
Lawsuits
Construction defect lawsuits may proceed under a number of theories, such as negligence, breach of contract, breach of warranty, fraud or misrepresentation, or strict liability. The parties involved in the construction may try to blame others, while some of the parties may no longer be in business. When a defect is major, and particularly if it has resulted in damages beyond the cost of structural repair, such as cases involving the development of toxic mold, the builder may not have the resources to provide a remedy.
The builder’s insurance can be a major factor in such a suit. A common problem, in recent years, has been insurance companies telling builders that these claims are not covered by commercial general liability policies because faulty work is not an "accident" under their policies. Some state courts find that coverage does apply, taking the position that negligent or defective work is unintentional from the point of view of the insured.
Whether homeowners’ insurance might provide coverage depends on the policy and what triggers the manifestation of the defect. Many policies specifically exclude defects in materials and workmanship from coverage. If, for example, your roof shingles were curling and showing premature deterioration, your homeowners’ policy would likely not cover repair, but if your roof blows off in a storm (a covered occurrence) you might have coverage even if the roof was defective.
