Insurance Coverage Disputes and Construction Defects

Association of Construction and Development
April 8, 2013 — 1,787 views  

Construction defects can emerge from a variety of sources. There are those defects that are related to the design, materials and workmanship, and those that are related to land movement. Some of these defects can cause damage to the structure as well as individuals, both physically and financially.

Because constructing a building is quite an expensive project, you need to remember that defects can lower the property value. If you are in the construction business, it is very important that you take appropriate steps to avoid the occurrence of construction defects and related claims. However, because some defects are unavoidable, ensure that you have the proper insurance policies that protect from any financial liabilities and losses.

Types of Construction Insurance

You should purchase your construction insurance before you start your building process. Different types of construction insurance are available today. During construction, ensure that you have a Builder’s Risk Insurance, which will pay for any damage done to the structure itself due to theft, fire, accident, or weather. This insurance may not include damage caused by natural calamities like floods and earthquakes, but such insurance schemes can be bought separately.

Most states require you to purchase Worker’s Compensation insurance, which you might be able to endorse on your ‘Builder’s risk insurance’ or buy it separately. Subcontractors may have a separate worker’s compensation insurance in their possession. This insurance policy is helpful in circumstances where workers sustain injuries or illnesses during the construction period.

Builder’s risk insurance usually even covers non-tangible monetary losses that are related to the construction directly. Expenses related to unexpected interests, legal costs, marketing, and leasing are some examples of this type of financial loss. You might even be able to regain some of your lost income caused by a delay in completion of a building project.

Assess the type of project you are undertaking, the risks involved, the number of people that will be working on the project, the period of the building work, etc. These factors will help you determine which types of insurance you will need. For large projects, all of the above-mentioned insurance plans might be needed. You might want to ascertain this, as every state has different rules regarding construction insurance.

Selecting the Right Construction Insurance

Having an effective construction liability insurance can protect those in the building profession from lawsuits, which are filed against them, and even from suffering liabilities due to unexpected situations. This is why it is very important to choose an insurance policy that covers every eventuality. Liability insurance will cover you against any construction defects caused due to the negligence of subcontractors and other workers involved.

You can choose the right construction insurance policy for your project by learning about the different policies. You also need to know the factors that are taken into consideration to determine the amount of premium you will pay for your policy. Underwriters usually consider what type of construction you are going to undertake. If risks involved are higher, the policy will have higher premiums as well. Consult an insurance and a legal expert for details.

Association of Construction and Development