One significant lawsuit has the potential to put you out of business, which is why it's imperative that you understand potential construction defects, how to prevent those defects and potential lawsuits, and how to protect your business with the right Contractors Insurance.
Modern Contractor Solutions magazine defines a construction defect as "a defect in the design, the workmanship, and/or in the materials or systems used on a project that results in a failure of a component part of a building or structure and causes damage to person or property, usually resulting in financial harm to the owner." Construction defects can lower a home's value and can even cause bodily injury or property damage.
Construction defects come in many forms. A defect can be as simple as an improperly painted room or as complicated as a foundation that affects the structural integrity of the building.
Some of the most common and most costly construction defects include the following:
According to FindLaw, courts typically categorize construction defects into four categories:
And there are two types of defects – patent and latent. A patent defect is an obvious flaw that can be easily seen, such as a crack in the foundation or flaking stucco. In contrast, latent defects are hidden issues that aren't as easy to identify, such as plumbing that is improperly installed that causes leaks and damage. These defects may not be evident until well after a project has been completed.
Anyone who works on a project – contractors, subcontractors, developers, suppliers, architects, and engineers - can be held liable for construction defects. Laws regarding construction defects are complicated and vary by state.
Currently, in Pennsylvania, the statute of limitations on construction defects is two years from discovery, and the statute of repose is 12 years after completion of construction. Lawyers.com explains, "A statute of limitations sets a lawsuit-filing time limit based on when the potential plaintiff suffered harm, a statute of repose sets a deadline based on the mere passage of time or the occurrence of a certain event that doesn't itself cause harm or give rise to a potential lawsuit."
"An ounce of prevention is worth a pound of cure" is a well-known proverb that certainly applies when it comes to liability. Your first goal should always be to prevent liability by taking the following measures:
Sometimes, despite all of your best efforts, errors do occur, which is why the right insurance is crucial to any construction company's success. The following types of insurance can help protect your business from construction defects:
The independent insurance agents at American Insuring Group specialize in Contractors Insurance, so they can 1) ensure you have the right coverage and 2) ensure you pay the lowest price for that coverage by shopping the market extensively for you.
Give us a call today at (800) 947-1270 or (610) 775-3848, or connect with us online for a free estimate.