It’s likely that all contractors will eventually be named in at least one lawsuit
Just like everything else, buildings have a lifespan. The ancient ruins of Rome and Greece prove that.
Regardless of the methods or materials used in construction, all structures are susceptible to fail before their intended use runs its course. A construction defect can be attributed to the failure of just one element of a structure resulting in damage to a person or property. If that component was manufactured defectively, installed incorrectly, or wasn’t suitable for that structure, the installer (general contractor and/or subcontractor), manufacturer, or seller of that component can be held liable for the damages.
Effects of a construction defect
Damages to property or persons that can result from a construction defect/failure can include, among other things:
- Total building collapse
- Settling or cracking of foundation due to soil consolidation
- Inoperable windows or doors
- Leaking windows or doors
- Water intrusion through defective siding or flashing
- Mold resulting from water intrusion
- Walls out of plumb or cracking/settling/tilting
- HVAC and plumbing systems failure
- Chemical leaks from building materials
Construction defect claims are on the rise, so chances are fairly high that most contractors will be involved in a construction defect claim if they haven’t been already.
Construction defect lawsuits can involve high dollars, especially given the complexity of defending multiple defendants, which means lots of attorney hours. The judgments and settlements also tend to be quite large.
Who can be affected
Claims of construction defect can target any of the following parties:
- Engineers (including geotech)
- Property owners
- Real estate investors and developers
- Real estate inspectors, brokers and salespeople
- Builders, contractors, and subcontractors
- Buyers and sellers,
- Parts manufacturers
- Material suppliers
- Property managers
Contractors General Liability policies may or may not cover construction defect claims depending on the nature of the claim, how the allegations in the lawsuit are worded, the policy language, and state case law. Many General Liability policies have contruction defect exclusions such as CG2294, Damage to Work Performed by Subcontractors on Your Behalf, EIFS, and Mold. In addition, case law in many states will not allow construction defects to fall under the definition of an “occurrence,” which will result in automatic claim denial even without a construction defect exclusion. See our report, “Construction Defect and General Liability for Builders,” for a full explanation of the construction defect crisis and how builders can protect themselves.