It’s likely that all contractors will eventually be named in at least one lawsuit
Just like everything else, buildings have lifespans. The ancient ruins of Rome and Greece prove that.
Regardless of the construction methods or materials, all structures are susceptible to failure before their intended use runs its course. A construction defect can be attributed to the failure of just one element of a structure. If that component was manufactured defectively, installed incorrectly, or wasn’t suitable for that structure, the installer, manufacturer, and/or seller of that component can be held liable for damages.
Effects of a construction defect
Below are some of the damages to property or persons that can result from a construction defect/failure.
- 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 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. Chances are fairly high that most contractors will be involved in one if they haven’t already.
Construction defect lawsuits can involve high dollars. This is especially true 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
Be aware of defect-related exclusions
Contractors General Liability policies may or may not cover construction defect claims. It depends on the nature of the claim, how allegations in the lawsuit are worded, the policy language, and state case law.
Many General Liability policies have construction defect exclusions, such as CG2294, EIFS, and Mold. In addition, case law in many states don’t allow construction defects to fall under the definition of an “occurrence.” That results 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.