Builder’s Duty to Homeowner Warranty

Homeowner Warranty and construction defects

Court rules warranty cannot waive duty to build in workmanlike manner

The Ohio Supreme Court ruled that a builder’s duty to construct in a workmanlike manner can’t be waived by the terms of a limited homeowner’s warranty agreement between a builder and buyer.

Two couples purchased homes from Centex and entered into a homeowner’s warranty agreement that limited Centex’s liability to a specific list of defects. Upon purchase of their homes, the couples noticed that their computers, cordless phones, and TVs did not work due to magnetic disturbance allegedly caused by steel beams used in the construction.

Both couples sued for breach of contract, breach of express and implied warranties, negligence, and failure to perform in a workmanlike manner. Since magnetic disturbance was not listed among the defects that were covered in the limited warranty, the trial court granted summary judgment in favor of the builder and this was upheld by the Tenth District Court of Appeals. The Ohio Supreme Court, however overruled and found in favor of the homeowners, stating that the limited warranty could not waive the common law right to assert claims based on failure of workmanlike performance.

Many General Liability carriers that specialize in insuring builders require the use of homeowner warranty products in order to decrease the chances of a liability claim being filed for a construction defect. However, this philosophy is usually based on the ability of the arbitration provision in most homeowner warranty products to resolve the majority of disputes.

Source: Ohio Court: Builders Must Construct Homes in Workmanlike Manner; Insurance Journal, April 2, 2012.
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