Homeowner’s Insurance Does Not Cover Defective Construction

The Sixth Circuit Court of Appeals ruled that an insurer was not obligated to pay for water damages to a condominium building because the insurance policy specifically excluded coverage for damages caused or resulting from building construction and design defects. TMW Enterprises, Inc. v. Federal Ins. Co., No. 09-1542, (6th Cir. Aug, 25, 2010). Substandard construction on an exterior wall allowed the water intrusion which resulted in damages of $4 million.

“In no case will we entertain any loss or claim that occurred or was in progress prior to the policy period inceptiondate or after the policy period expiry date shown on the Declarations.” This, and other similar language is common in policies as it implies that defective construction occurs prior to completion. While this language is in the insuring agreement, the clause discussed in the TMW case was a specific exclusion which related to substandard construction.


  1. The quoted statement from the policy only addresses the relation between the time that a claimed loss occurs and the coverage period. There is no valid reason to conclude that this statement, if read as plain English, should be taken to “imply” anything at all about design and construction.

    Of much greater interest is; (1) Extent to which insurance policies in general have specific exclusions for damage due to defective design and construction, (2) Standards used to define defects, and (3)Limits, if any, on the time period (after construction) during which defects can be considered as the primary cause of damages.



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