Thursday, November 20, 2014

CONSTRUCTION DEFECT



What is Construction Defect?
Generally speaking, a construction defect is a deficiency in the design or materials or systems or workmanship and construction of a building or structure resulting from a failure to design or construct in a reasonably workmanlike manner, and/or in accordance with a buyer's reasonable expectation.  
Workmanship defects typically result from the contractor’s failure to build a structure or component part of a structure per the construction documents. Workmanship defects may include items such as an improperly installed weatherproofing system, improperly installed stucco or EIFS exterior wall system, soils that were not properly compacted, or improperly installed flashing or a lack of flashing.
The most dangerous defects have the capacity to fail, resulting in physical injury or damage to people or property.  However, many defects present no increased risk of injury or damage to other property but nevertheless cause harm to the property owner in the form of loss of use, diminution in value, and extra expenses incurred while defects are corrected.  This latter type of defect is often referred to as a passive defect.  Whether, and to what to extent, coverage applies in liability policies for claims alleging construction defects is a matter of serious debate both in insurance circles and in the courts.  Many states have more specifically defined the term "construction defect" for purposes of applying statutes that dictate processes for remedying and litigating construction defect claims.  These statutory definitions vary by state.
California
The California State Jury Instructions define a construction defect as “the failure of the building or any building component to be erected in a reasonably workman like manner or to perform in the manner intended by the manufacturer or reasonably expected by the buyer, which proximately causes damage to the structure.”
A construction defect would result from:
1.                  Defective building material or components.
2.                  A violation of Building Codes at the time of construction.
3.                  Failure to meet professional standards for design at the time plans were approved.
4.                  Failure to build according to accepted trade standards for good and workmanlike construction.
Common examples of defective construction may include: Significant cracks in the slab and/or foundation; unevenness in floor slabs caused by abnormal soils movement; leaky roofs and/or windows; moisture problems due to improper drainage and/or waterproofing; faulty or corroded plumbing; faulty framing; over stressed structural members, bowing or slanting of floors and walls; doors and windows that bind and are difficult to open and close; and cabinets or counter tops that are separated from walls or ceilings. (This is not an all-inclusive list.)  Any condition in your property which makes it unsuitable for its intended use may be considered a defect. (California Civil Code 896)
Texas
Under Texas Law, the answer to this question depends on whether you are focusing on commercial or residential construction.
  • For commercial construction, no statutory definition exists for the term “construction defect”. As such, the courts may look to other sources for guidance. As a point of reference, some insurance policies have defined construction defects (in reference to exclusions for coverage) to mean any alleged or actual defective, faulty or delayed construction, whether or not as a result of:
    • Faulty or incorrect design or architectural plans
    • Improper soil testing
    • Inadequate or insufficient protection from ground movement, settling or shrinking
    • Construction, manufacture or assembly of any tangible property
    • Failure to provide (or to pay for) construction-related goods or services
    • Supervision of all of the above
  • For residential construction, the non-expired Residential Construction Commission Act defined a construction defect as any matter in which a person has a complaint against a contractor with regards to:
    • The design, construction, or repairs of a new residence, or
    • Alterations, repairs or additions to an existing residence or adjacent structures
  • The term may also refer to physical damage to the residence, adjacent structures or the actual property on which these structures sit which was caused by a construction defect.
Minnessotta
Minn. Stat. §327A.02, subd. 1(c) (2010), states that contractors must provide to homeowners a warranty ensuring a residential dwelling will be free from major construction defects for a ten-year period. “Major construction defect” is defined as follows:
actual damage to the load-bearing portion of the dwelling or the home improvement, including damage due to subsidence, expansion or lateral movement of the soil, which affects the load-bearing function and which vitally affects or is imminently likely to vitally affect use of the dwelling or the home improvement for residential purposes. “Major construction defect” does not include damage due to movement of the soil caused by flood, earthquake or other natural disaster.

Minn. Stat. § 327A.01, subd. 5 (2010).


Many insurance policies define construction defect as follows:

CONSTRUCTION DEFECT is defined as the failure to perform “your work” in a reasonably workman-like manner so that “new residential construction” is unable to serve the purpose intended or reasonably expected by the purchaser.
“Construction Defect” may arise from any and all aspects of the erection of “new residential construction”, including but not limited to surface or subsurface site preparation and the installation of:
(1) Live horticultural elements;
(2) Permanent landscape features made of stone, brick or concrete;
(3) Outdoor systems such as lighting, sprinklers and drainage;
(4) Exterior additions and appurtenant structures such as decks, porches, stairs, sheds, pergolas, arbors and gazebos.