Are Construction Defect Increasing Insurance Claims?

The Impact of the Real Estate Market and Construction Backlogs
So the crazy real estate market and the construction industry backlogs are creating more problems than just having trouble building homes or doing renovations. It’s also affecting the insurance industry.

Construction Defects and Insurance Challenges
If you’re doing remodels or construction on homes, the fact that it’s difficult to get materials and find quality labor is starting to show itself in construction defect insurance claims. As a contractor or builder, you have certain types of coverage that will cover you for construction defects. It may show up in your surety bond coverages, but the type and skill level of your subcontractors or your employees may be showing up in claims against a build project that had defects.

Types of Construction Defects
Those defects can show up in various ways—maybe installing something improperly, forgetting to install something altogether, or the subcontractor not aligning certain trades or mechanicals with the framing. For example, a plumbing vent stack may not be lined up correctly, causing seams to be right up against the ceiling joist. In one instance, we saw a job where the vent stack wasn’t aligned properly, and when it settled, it was pushing down on the plumbing, risking a catastrophic break.

Changes in the Construction Industry
Keeping in mind that there were some major differences in the construction industry over the last 24 months, you may also want to see if there are additional coverages that, as a contractor, you want to have or to make sure that your coverages are in place to begin with.

Ensuring Quality Control in Construction Projects
You may also want to have a quality control person review some of your projects to see if the construction was done to specification. Even though inspectors sign off on permits, they may not catch everything, especially defects or quality control problems that show up down the road. This is particularly true if they’re not part of safety, framing, electrical, or plumbing but are only related to cosmetic aspects. Such issues may surface later, underscoring the importance of thorough quality control measures.

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