THE PROBLEM of construction defects has made writing insurance for homebuilders seem almost as difficult as the home-building process itself. Insurance companies have given away too much coverage in the past. Courts have interpreted insurance policies more broadly than insurers intended, and many attorneys have learned to take advantage of the situation when filing lawsuits. At times, the combination of these factors has effectively turned the CGL into a performance bond for contractors.

The insurance industry recently has developed some temporary answers to the problems related to insuring contractors, but we still need to find better, more permanent solutions. In this article, I’ll discuss insurance for home builders and the potential problems that construction defects present, how the construction and insurance industries address those problems today, and whatsolutions we should consider for the future.

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