Condo insurance problem

[Parkinglotracer]

Friend has $1M condo that was found not to be built to code ( structural defects) after they bought it and moved in. There may be pending legal action against builder. It is small multi story condo < 5 units.

Condo members are having engineering firm fix structural problems.

At some point someone in condo contacted the condo insurance company thinking they might be able to file a claim for a pre existing structural problem. Insurance company is sending an inspector out.

What happens if Condo insurance is cancelled and mortage companies are notified? Worst case what happens if condo is uninsurable? What will mortage companies do?

Thanks for your perspective.

[Mr. Rumples]

There are likely two polices: the master policy on the building and common elements and the owner's HO6. Perhaps the master can go to the secondary market.

Mortgage companies are familiar with this issue increasingly due to areas with fires, floods and so on. They might find insurance - which will be expensive. It's doubtful they will want back an uninsurable property.

Wise to talk to an attorney who specializes in condo and real estate law. Laws vary as to whether the owner of the construction company is personally liable if fraud is found - that is a legal question. In VA, when someone uses their business’s corporate status as a "shield" against fraud there are precedents for piercing the shield.

[Parkinglotracer]

There are likely two polices: the master policy on the building and common elements and the owner's HO6. Perhaps the master can go to the secondary market.

Mortgage companies are familiar with this issue increasingly due to areas with fires, floods and so on. They might find insurance - which will be expensive. It's doubtful they will want back an uninsurable property.

Wise to talk to an attorney who specializes in condo and real estate law. Laws vary as to whether the owner of the construction company is personally liable if fraud is found - that is a legal question. In VA, when someone uses their business’s corporate status as a "shield" against fraud there are precedents for piercing the shield.

Thank you. I was thinking any state or mortgage company found insurance will be expensive. Condo group has sought counsel. I think they have a differencing of opinions on the path forward because of the cost of bringing legal action. Thank you.

[DoubleComma]

Not someone I know personally, but I’m aware of a situation similar to what you describe except it was a single family home. In this case, the first winter the home had a total roof failure as result of very modest, well below average, snow load. The insurance company sent out an engineering firm to inspect and determine the cause of failure, the homeowner also contracted with their own structural engineer to ensure there was a consensus of opinion. Both engineers found the roof was not appropriately built and supported.

Of course the contractor and contractor’s insurance company were sued. The interesting twist was the county and county inspector were also named in the lawsuit. It was determined the county failed to perform a proper plan inspection at the issuance of the building permit and local inspector signed off at several field inspections where the defect should have been caught.

I don’t recall the exact percentages, but the repair (rather rebuild) was covered by the contractor, contractors insurance and the county.

Of course this was a long process to reach resolution. Fortunately the owner had sufficient resources to pursue this lawsuit.

So wonder if the local municipality who approved the plans package and the inspector(s) who signed off during the construction might have some culpability as well.

[Mr. Rumples]

Of course the contractor and contractor’s insurance company were sued. The interesting twist was the county and county inspector were also named in the lawsuit. It was determined the county failed to perform a proper plan inspection at the issuance of the building permit and local inspector signed off at several field inspections where the defect should have been caught.

That is an important consideration. My late husband worked for the govt. and carried a liability policy (I think it was about $300 a year premium) in case he was personally sued. Most don't carry it other than perhaps teachers. Someone dropped the ball.

[Parkinglotracer]

Not someone I know personally, but I’m aware of a situation similar to what you describe except it was a single family home. In this case, the first winter the home had a total roof failure as result of very modest, well below average, snow load. The insurance company sent out an engineering firm to inspect and determine the cause of failure, the homeowner also contracted with their own structural engineer to ensure there was a consensus of opinion. Both engineers found the roof was not appropriately built and supported.

Of course the contractor and contractor’s insurance company were sued. The interesting twist was the county and county inspector were also named in the lawsuit. It was determined the county failed to perform a proper plan inspection at the issuance of the building permit and local inspector signed off at several field inspections where the defect should have been caught.

I don’t recall the exact percentages, but the repair (rather rebuild) was covered by the contractor, contractors insurance and the county.

Of course this was a long process to reach resolution. Fortunately the owner had sufficient resources to pursue this lawsuit.

So wonder if the local municipality who approved the plans package and the inspector(s) who signed off during the construction might have some culpability as well.

There was a discussion of whether to include the codes dept in a local municipality in the lawsuit but legal counsel has recommended against it. It is the NE near the financial capitol of the world and possible someone was paid off to sign off sadly. It failed inspection the first three times the same codes person came out.

[snackdog]

They can almost certainly find insurance, it is just a matter of cost.