The Expert Podcast

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. So, 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.

If you are a contractor or builder, you have certain types of coverages that will cover you for construction defects. It may show up in your surety bond coverages, but the fact that the type and skill level of your subcontractors, employees, or staff may be showing up in claims against a build project that had defects is important to consider.

Those defects can show up in many ways—maybe installing something improperly, forgetting to install something altogether, or maybe the subcontractor didn't align certain trades or mechanicals with the framing. For example, we saw a job the other day where the plumbing vent stack wasn't lined up right, and one of the seams was right up against the ceiling joist. When it settled, it was pushing down on the plumbing, and it was about ready to break the vent, which would have been pretty catastrophic.

Keeping in mind that there have been 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.

You may also want to have a quality control person review some of your projects to see if the construction was done to spec. Even though the inspectors are going to look at it to sign off on your permits, they may not catch everything, and they may not be able to catch defects or quality control problems that show up down the road—especially if they're not part of safety, framing, electrical, or plumbing. If they're just part of cosmetics, you may see those show up a little bit later.