If insurers truly had sympathy for these homeowners and followed the letter of their insurance policies, they would point out to their policyholders while coverage may not apply to the “defective material” in the foundation, any ensuing or resulting damage to the rest of the structure should be covered. Most of these homes have “ensuing damage”.In addition, these policies imply reasonable steps policyholders are required to take to protect the structure of their home from further damage, such as the cost of raising the structure so the defective foundation can be replaced, should also be covered.
A compelling argument can be made that the majority of the foundation replacement costs and structural damage should be covered by most home policies. Changes made to the collapse definition should be a non-issue.
Defective products may not be covered by home insurance policies but they do appear to provide coverage for damage which ensues.
Coverage for ensuing damage is triggered by a covered peril. Same applies for the further damage requirement – the policy doesn’t cover the steps to protect the property from further damage if the cause of loss also isn’t covered. Those are not covered perils in of themselves, they are additional coverage given due to a loss by a covered peril. A gradual, slowly crumbling foundation due to building defect is not a covered peril in most homeowner policies. The homes should either be given back to the mortgage company if a fix can’t be afforded, or abandoned. That’s the unfortunate truth, and that’s sometimes the cost of owning property. The only responsible party is the party who sold the defective materials here.
What is a “covered peril” on most Ho-3 type policies? Direct loss to property unless excluded! Policies exclude loss “caused by” faulty or defective materials used in construction but extends to any ensuing loss not excluded. Where do you find an exclusion for the resulting damage to the structure? If a loss is not specifically excluded, it should be covered.
Insureds are required by a policy condition to protect their property from further damage. Do you not agree the reasonable costs of those required efforts are generally covered expenses?
If a defective water pipe bursts inside a wall, the policy doesn’t cover the defective pipe but covers the resulting damage and it covers the cost to open the wall and close it up after the defective material is replaced. How is that any different than covering the cost to raise the structure so the defective foundation can be replaced?
Frank, first, I disagree with your position, albeit, a more popular one. Most property coverage forms exclude continuous exposures that take place over a long period of time with good reason. I don’t know that I’ve ever read a policy that covered gradual occurrences such as the one described in this article at least not as a proximate cause of loss. Second, you mention that, “If insurers truly had sympathy for these homeowners…”, come on….you have CPCU behind your name. Insurers are either contractually obligated or not.
Maybe the State of CT would like to step up to the plate…..but they’re just about broke already. If I was an insurance company doing business in CT, I’d be ready to fight this tooth and nail. Should these homeowners somehow prevail, it will open Pandora’s box for insurers across the country.
I’m not expecting everyone to agree with my position but I’m not sure I agree with “not covered because it’s not a collapse” position either.
To me this is not the normal settling, shrinking, etc. type damage, this is a recently discovered “defective material” which suddenly manifested itself in the cracking of the foundation.
I didn’t write the insurance coverage that says damage caused by “defective material” is not covered but any ensuing loss not otherwise excluded is, the insurers did.
It’s also a well tested insurance principle which requires insureds to take reasonable steps to protect their property from further damage. If that means the expensive process of raising the structure so the defective foundation can be replaced; then that is what the policyholder is entitled too.
There is a CPCU after my name and I pledged to make my best effort for my clients. I feel a compelling argument can be made for some coverage to apply to these claims.
July 7, 2017 at 2:42 pm
The OCG says:
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The foundation is excluded because of the faulty materials and latent defect exclusions. The resulting damages are also excluded.
The ensuing damages are cracking sheetrock, out of plumb floors etc. These are all caused by the settling of the foundation. Damages caused by settling/shrinking of a foundation and collapse are excluded. (Policy excludes all settling not just ‘normal’ settling.) We can’t get around this either because the cause of the foundation settling is excluded.
It is not a collapse under the modern iteration of that coverage. So the give back for abrupt collapse under the Additional Coverages doesn’t apply.
[this is a review using the ISO HO3 form]
The Old Claims Guy.
I suggest you will find there is a difference between “caused by” and “resulting from”.
The foundation may be excluded because the damage was “caused by” defective material but the cracking sheetrock, etc. is damage “resulting from” the defective material and as I read the policy that brings coverage into play.
On that basis, I respectfully disagree with your position.
July 5, 2017 at 2:40 pm
Debra MacCoy says:
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Frank Lombard why doesn’t the State of CT Insurance Commissioner look into what you have been trying to say for a few months now if there is in fact coverage for this on an ensuing basis, wouldn’t that peak the interest of the Governor’s office and of the senators and representatives who have said they want to find a solution to this crisis, what if the solution has been staring every homeowner in the face, what if it really is in the policy that could merit at least an effort on someone’s part with the resources to gather what you say and on behalf of us with homes affected direct the many down this unknown path shouldn’t our attorney’s filing claims on behalf of us be made aware, and the AGO’s office and DCP’s office if this is truly a bonafide of merit solution than where does it begin and can you give guidance to this “claim of ensuing damages”, I’m glad you are putting the word out but we need someone here in CT to clarify this and give guidance to this. Hoping for a legislative solution is fleeting, but what’s not fleeting is hoping for a solution to this crisis.
If there was/is a problem with the foundations, should not the owners of the quarry (who knew the concrete was going to be used for homes) and also the builder/contractors who built those homes have responsibility for the defect which they knew about when the homes were being built? That’s where a lawsuit should be directed.
Sure, there are two issues. The responsibility of the quarry owners to the home and condominium owners and the responsibility of the home insurers to their policyholders for coverage within the scope of their policies. Insurers, if they pay claims caused by defective products, have the right to recover their losses from the responsible party and they are best prepared and have the resources to do so. But that shouldn’t prevent homeowners from recovering losses covered by their home insurance policies.
Having a dwelling foundation endorsement would cover repairs for the foundation. This is not something that is normally included in your policy, but is something every homeowner should consider when purchasing a policy. Water Damage Endorsement and Dwelling Foundation is coverage I always carry on my home. Unfortunately, if you are a price shopper and don’t research your coverage, and you don’t have an agent who cares enough to discuss these endorsements, then you are out of luck when things like this happen. Everyone thinks their low-cost home policy covers them completely. If you shopped for the cheapest price, you bought the cheapest policy. (TALK TO YOUR AGENT!)
To Interested- Not sure I can let that comment go. Most home insurance policies “include” foundations within the description of covered property. I wouldn’t want IJ readers to think they had to purchase special coverage for “Water Damage and Dwelling Foundation”, I suspect they will find that already included under standard HO-3 type forms.
Alice, both Beckers and Mottes have been given the free pass on this as far as being liable to the 30,000 home owners that could end up with the foundation failing as the AGO said they sold the aggregate with out the knowledge of the pyrrhotite mineral in the aggregate, therefore, they can’t be sued as they didn’t have the “intent” to sell bad concrete, and the contractors can’t be sued as the statute of limitations is only for 10 years and it takes at least 10 years for the mineral to do it’s damage but once it starts it rapidly gets worse. Also, since the 1987 Beach case the insurance companies in an effort to lesson their culpability and responsibility to cover foundations has taken it out of their policies so if I just bought a $200,000 home five years ago and haven’t paid down the loan much I basically still owe the $200,000 and then to go to a bank and ask them for an additional $200,000 for a home that is now worth $65,000 because of the condition of the foundation now bowing inward and the cracks getting worse – the banks aren’t going to loan me or the other homeowners the full $200,000 to remediate the problem by lifting the home up off the foundation in order to get the defective concrete out, what is left for the homeowner to do. The homeowner can’t sue Mottes or Beckers or the Contractors or the State for not putting out the warnings they promised the contractor who brought it to DCP attention in 2008 – and they can’t get an additional loan to make it now $400,000 that would be the cost of the home and the cost of the replacement, there is a reason we bought a $200,000 home because we couldn’t afford a $400,000 loan which would make the monthly payment far exceeding what I could manage to pay with all my other monthly bills. So what now, what’s left for the homeowner who no fault of their own purchased a home that had a hidden mineral that will ruin the foundation and eventually will collapse and with our wall bowing inward that is the beginning of caving in and soon to follow collapse, should I remain there until it collapses and causes great harm to me and my family. WHAT or WHERE is the hope in all of this I put $40,000 down on a home which is the required 20% down, if I walk away from the home I loss my savings that I put into the house, and I lose my good credit that I have. So again WHAT do we do, other than get bashed by so many people in this State that say they care all the while bashing us for asking for help in this God awful crisis.
Travelers Insurance Co sent a change of coverage between 1990 and 2000, the change dropped all concrete coverage on homeowner policies. They have every right to do so. They have a moral and financial obligation to CT building officials to explain why. CT AG had to have approved the change in coverage. The AG has since received donations beyond belief for election to senator. If the JI would follow up on this it would show where the blame belongs.
If insurers truly had sympathy for these homeowners and followed the letter of their insurance policies, they would point out to their policyholders while coverage may not apply to the “defective material” in the foundation, any ensuing or resulting damage to the rest of the structure should be covered. Most of these homes have “ensuing damage”.In addition, these policies imply reasonable steps policyholders are required to take to protect the structure of their home from further damage, such as the cost of raising the structure so the defective foundation can be replaced, should also be covered.
A compelling argument can be made that the majority of the foundation replacement costs and structural damage should be covered by most home policies. Changes made to the collapse definition should be a non-issue.
Defective products may not be covered by home insurance policies but they do appear to provide coverage for damage which ensues.
Coverage for ensuing damage is triggered by a covered peril. Same applies for the further damage requirement – the policy doesn’t cover the steps to protect the property from further damage if the cause of loss also isn’t covered. Those are not covered perils in of themselves, they are additional coverage given due to a loss by a covered peril. A gradual, slowly crumbling foundation due to building defect is not a covered peril in most homeowner policies. The homes should either be given back to the mortgage company if a fix can’t be afforded, or abandoned. That’s the unfortunate truth, and that’s sometimes the cost of owning property. The only responsible party is the party who sold the defective materials here.
What is a “covered peril” on most Ho-3 type policies? Direct loss to property unless excluded! Policies exclude loss “caused by” faulty or defective materials used in construction but extends to any ensuing loss not excluded. Where do you find an exclusion for the resulting damage to the structure? If a loss is not specifically excluded, it should be covered.
Insureds are required by a policy condition to protect their property from further damage. Do you not agree the reasonable costs of those required efforts are generally covered expenses?
If a defective water pipe bursts inside a wall, the policy doesn’t cover the defective pipe but covers the resulting damage and it covers the cost to open the wall and close it up after the defective material is replaced. How is that any different than covering the cost to raise the structure so the defective foundation can be replaced?
Frank, first, I disagree with your position, albeit, a more popular one. Most property coverage forms exclude continuous exposures that take place over a long period of time with good reason. I don’t know that I’ve ever read a policy that covered gradual occurrences such as the one described in this article at least not as a proximate cause of loss. Second, you mention that, “If insurers truly had sympathy for these homeowners…”, come on….you have CPCU behind your name. Insurers are either contractually obligated or not.
Maybe the State of CT would like to step up to the plate…..but they’re just about broke already. If I was an insurance company doing business in CT, I’d be ready to fight this tooth and nail. Should these homeowners somehow prevail, it will open Pandora’s box for insurers across the country.
I’m not expecting everyone to agree with my position but I’m not sure I agree with “not covered because it’s not a collapse” position either.
To me this is not the normal settling, shrinking, etc. type damage, this is a recently discovered “defective material” which suddenly manifested itself in the cracking of the foundation.
I didn’t write the insurance coverage that says damage caused by “defective material” is not covered but any ensuing loss not otherwise excluded is, the insurers did.
It’s also a well tested insurance principle which requires insureds to take reasonable steps to protect their property from further damage. If that means the expensive process of raising the structure so the defective foundation can be replaced; then that is what the policyholder is entitled too.
There is a CPCU after my name and I pledged to make my best effort for my clients. I feel a compelling argument can be made for some coverage to apply to these claims.
The foundation is excluded because of the faulty materials and latent defect exclusions. The resulting damages are also excluded.
The ensuing damages are cracking sheetrock, out of plumb floors etc. These are all caused by the settling of the foundation. Damages caused by settling/shrinking of a foundation and collapse are excluded. (Policy excludes all settling not just ‘normal’ settling.) We can’t get around this either because the cause of the foundation settling is excluded.
It is not a collapse under the modern iteration of that coverage. So the give back for abrupt collapse under the Additional Coverages doesn’t apply.
[this is a review using the ISO HO3 form]
The Old Claims Guy.
I suggest you will find there is a difference between “caused by” and “resulting from”.
The foundation may be excluded because the damage was “caused by” defective material but the cracking sheetrock, etc. is damage “resulting from” the defective material and as I read the policy that brings coverage into play.
On that basis, I respectfully disagree with your position.
Frank Lombard why doesn’t the State of CT Insurance Commissioner look into what you have been trying to say for a few months now if there is in fact coverage for this on an ensuing basis, wouldn’t that peak the interest of the Governor’s office and of the senators and representatives who have said they want to find a solution to this crisis, what if the solution has been staring every homeowner in the face, what if it really is in the policy that could merit at least an effort on someone’s part with the resources to gather what you say and on behalf of us with homes affected direct the many down this unknown path shouldn’t our attorney’s filing claims on behalf of us be made aware, and the AGO’s office and DCP’s office if this is truly a bonafide of merit solution than where does it begin and can you give guidance to this “claim of ensuing damages”, I’m glad you are putting the word out but we need someone here in CT to clarify this and give guidance to this. Hoping for a legislative solution is fleeting, but what’s not fleeting is hoping for a solution to this crisis.
If there was/is a problem with the foundations, should not the owners of the quarry (who knew the concrete was going to be used for homes) and also the builder/contractors who built those homes have responsibility for the defect which they knew about when the homes were being built? That’s where a lawsuit should be directed.
Sure, there are two issues. The responsibility of the quarry owners to the home and condominium owners and the responsibility of the home insurers to their policyholders for coverage within the scope of their policies. Insurers, if they pay claims caused by defective products, have the right to recover their losses from the responsible party and they are best prepared and have the resources to do so. But that shouldn’t prevent homeowners from recovering losses covered by their home insurance policies.
Frank is correct. But another reason for this ruling is to explain why so many insurance companies are registered in Connecticut….
Having a dwelling foundation endorsement would cover repairs for the foundation. This is not something that is normally included in your policy, but is something every homeowner should consider when purchasing a policy. Water Damage Endorsement and Dwelling Foundation is coverage I always carry on my home. Unfortunately, if you are a price shopper and don’t research your coverage, and you don’t have an agent who cares enough to discuss these endorsements, then you are out of luck when things like this happen. Everyone thinks their low-cost home policy covers them completely. If you shopped for the cheapest price, you bought the cheapest policy. (TALK TO YOUR AGENT!)
To Interested- Not sure I can let that comment go. Most home insurance policies “include” foundations within the description of covered property. I wouldn’t want IJ readers to think they had to purchase special coverage for “Water Damage and Dwelling Foundation”, I suspect they will find that already included under standard HO-3 type forms.
Alice, both Beckers and Mottes have been given the free pass on this as far as being liable to the 30,000 home owners that could end up with the foundation failing as the AGO said they sold the aggregate with out the knowledge of the pyrrhotite mineral in the aggregate, therefore, they can’t be sued as they didn’t have the “intent” to sell bad concrete, and the contractors can’t be sued as the statute of limitations is only for 10 years and it takes at least 10 years for the mineral to do it’s damage but once it starts it rapidly gets worse. Also, since the 1987 Beach case the insurance companies in an effort to lesson their culpability and responsibility to cover foundations has taken it out of their policies so if I just bought a $200,000 home five years ago and haven’t paid down the loan much I basically still owe the $200,000 and then to go to a bank and ask them for an additional $200,000 for a home that is now worth $65,000 because of the condition of the foundation now bowing inward and the cracks getting worse – the banks aren’t going to loan me or the other homeowners the full $200,000 to remediate the problem by lifting the home up off the foundation in order to get the defective concrete out, what is left for the homeowner to do. The homeowner can’t sue Mottes or Beckers or the Contractors or the State for not putting out the warnings they promised the contractor who brought it to DCP attention in 2008 – and they can’t get an additional loan to make it now $400,000 that would be the cost of the home and the cost of the replacement, there is a reason we bought a $200,000 home because we couldn’t afford a $400,000 loan which would make the monthly payment far exceeding what I could manage to pay with all my other monthly bills. So what now, what’s left for the homeowner who no fault of their own purchased a home that had a hidden mineral that will ruin the foundation and eventually will collapse and with our wall bowing inward that is the beginning of caving in and soon to follow collapse, should I remain there until it collapses and causes great harm to me and my family. WHAT or WHERE is the hope in all of this I put $40,000 down on a home which is the required 20% down, if I walk away from the home I loss my savings that I put into the house, and I lose my good credit that I have. So again WHAT do we do, other than get bashed by so many people in this State that say they care all the while bashing us for asking for help in this God awful crisis.
Travelers Insurance Co sent a change of coverage between 1990 and 2000, the change dropped all concrete coverage on homeowner policies. They have every right to do so. They have a moral and financial obligation to CT building officials to explain why. CT AG had to have approved the change in coverage. The AG has since received donations beyond belief for election to senator. If the JI would follow up on this it would show where the blame belongs.