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Construction Insurance Bulletin


By August 9, 2013No Comments

In the residential-construction industry, plaintiffs’ attorneys keep coming up with new creative ideas for class-action lawsuits – a shift from litigation by individual homeowners to more inclusive claims, such as the Chinese drywall class-action suit settled last year for $80 million.

More and more of these Construction Defect claims by developers and builders, often filed in plaintiff-friendly jurisdictions such as Southern California, allege potential water damage from faulty pipe fittings and minor leakages in homes. For example, Karen Rice, vice president of construction claims at XL Group North America’s Los Angeles office, says that although fewer homes have been built in this region during the past several years, XL hasn’t seen a reduction in residential water leak litigation so far. She adds that plaintiffs are filing leakage suits within an average of three to five years, rather than six or seven years, “probably because of the [ailing] economy.”

According to Rice, “these are pinhole, minute leaks, causing some water damage; there really isn’t any water damage that we can tell.” Thomas Varney, risk-consulting manager in the Americas for Allianz, points out that such leaks often occur because a worker failed to tighten, cap, or complete a connection to the plumbing or sprinkler system properly – often in an area that’s not visible, or on a higher floor that might have a significant amount of water.

The best way to help protect your business against these types of claims is to set, and enforce, comprehensive and effective safety practices, guidelines, and criteria in the workplace.

Our Construction insurance specialists would be happy to review your safety program. Feel free to get in touch with us at any time.