November 27, 2017

Prepare for the storm of construction claims from the 2017 hurricane season

The aftermath of this year’s hurricanes includes massive reconstruction across the impacted areas and as a result, the possibility for construction defect claims.

Hurricanes Harvey and Irma caused heavy damage to land, buildings and other improvements in Texas and Florida and also to the inventory of lumber yards and other suppliers. Hurricanes Irma and Maria devastated Puerto Rico, which has additional challenges in getting ready to rebuild due to its island setting and financial situation.

Texas and Florida already are among the nation’s leaders in new construction, consisting primarily of home building. Hurricane Harvey temporarily halted construction in the impacted areas of the state, but builders are getting back to work. Florida’s increase in new construction is slower but remains steady, with residential construction far outstripping commercial and public projects.

New construction inevitably leads to construction defect claims. The claim volume projected before the storms should now increase. Following the recent storms, developers may soon see suits which allege that existing property suffered additional damage during a hurricane due to poor construction or design. Moreover, partial reconstruction, extensive repair, and new construction to replace destroyed property seems likely to propagate yet more construction defect suits in the near and distant future.

The likely cascade of claims arising from these hurricanes will last a very long time. We encourage insurers in the construction market for the southeastern United States, and especially their local claim handlers, to be prepared for high volume and high costs in these challenging environments.

Read the full article by James Koelzer and Holly Harvey here: