The easiest way to avoid liability for construction defect claims is by preventing them altogether. However, since prevention of a claim is not always possible, it is important that adjusters take early steps upon receipt of a new construction defect claim in order to limit liability and ensure the most efficient expenditure of defense costs.

When does liability arise?

A construction defect generally occurs when a construction project either fails to conform to contractual requirements and specifications, or fails to comply with generally accepted principles governing the industry standards, resulting in damages. Whether your insured is an architect, builder or contractor, they can generally be held liable for negligence for failure to perform their duties consistent with the generally expected degree of competence that a reasonably skilled professional would exercise under similar conditions. Some of the common construction defect theories of liability include:

• Quality of work issues

One of the driving forces behind construction defect claims are defects attributed to poor workmanship or quality of work. Whether your insured is a design professional, developer or subcontractor, a requisite expertise and standard of care set the minimum threshold requirements for the work performed. Construction defect claims are often categorized as being either patent (obvious or reasonable discovery) or latent (concealed). Latent defects may exist during construction, but are not discovered or identified until several years following its completion. These defects can include differential settlement due to improper soil compaction resulting in cracks to foundational structures and walls, water penetration due to improper flashing and installation of exterior windows, or even catastrophic fire damage due to faulty electrical wiring.