Does Homeowners Insurance Cover Construction Defects?

If you've discovered construction defects in your home or condo, you're probably wondering whether your homeowners insurance will cover the repairs. This is one of the most common questions we hear from homeowners.

The financial anxiety is real. Many homeowners worry they'll be stuck with massive repair bills or that filing a claim will hurt them financially.

Here's the short answer: homeowners insurance generally does NOT cover construction defects themselves, but may cover resulting damage in limited circumstances. The real coverage comes from builder liability insurance, not homeowner policies.

Understanding this critical distinction matters for protecting your rights. In our experience recovering over $500 million for clients and successfully resolving more than 1,000 construction defect cases, we've seen how confusion about insurance coverage can delay homeowners from pursuing valid claims.

This article explains which insurance actually covers construction defects and why that matters for your case.

Why Homeowners Are Confused About Construction Defect Coverage

The confusion makes perfect sense. You're used to your homeowners insurance covering damage to your home, so it's natural to assume construction defects would be covered too.

But construction defects are different. Construction defects are flaws in design, materials, or workmanship that reduce the home's value or make it unsafe or unusable. These defects existed from the moment of construction, even if you didn't discover them until years later.

Here's the fundamental difference:

• Homeowner policies cover sudden, accidental events like fire, storm, or theft
• Builder liability insurance covers defects in construction work

Colorado's Construction Defect Action Reform Act (CDARA), codified in C.R.S. sections 13-20-802.5 to 13-20-808, governs how construction defect claims work in Colorado. This legal framework targets builders and their insurance, not homeowner policies.

There's a good reason for this: builders are responsible for their work. The law recognizes that construction defects should be covered by the party who created them, not by the homeowner who's the victim.

What Does Homeowners Insurance Actually Cover?

Standard homeowner policies cover sudden and accidental direct physical loss. That's the key language you'll find in most policies.

Here's what IS typically covered:

• Fire damage
• Storm damage
• Water damage from burst pipes
• Vandalism or theft

Here's what's typically excluded:

• Wear and tear
• Maintenance issues
• Defects in construction or materials
• Gradual deterioration

Construction defects don't fit the "sudden and accidental" requirement. The defect existed from the time of construction, even if it wasn't discovered until later. The discovery might be sudden, but the defect itself isn't.

There's one important exception. If a construction defect CAUSES sudden, accidental damage, the resulting damage might be covered. For example, if defective plumbing bursts and floods your home, the defective plumbing itself isn't covered, but the water damage to your floors and walls might be.

Even in that scenario, you're still paying your deductible and the underlying defect remains unrepaired. Homeowners shouldn't rely on their own insurance for construction defect claims.

Where Construction Defect Coverage Actually Comes From

Builders, contractors, and developers should carry commercial general liability (CGL) insurance specifically to cover their work. This is where construction defect coverage actually exists.

Colorado law recognizes that faulty workmanship causing property damage can be an "occurrence" under builder liability policies. C.R.S. section 13-20-808 presumes that damage arising from construction defects constitutes an "accident" and thus an "occurrence" under liability policies, unless the construction professional intended and expected the damage.

Colorado courts and the Tenth Circuit have interpreted standard CGL policies to broadly cover construction defect claims. This legal framework has expanded coverage for homeowners pursuing defect claims.

In plain English, here's what this means: builders' insurance is designed to cover unforeseen damage from faulty work. Even though the builder performed the work, if that work was defective and caused damage, it's considered an "accident" under the insurance policy.

House Bill 10-1394, codified at C.R.S. sections 10-4-110.4 and 13-20-808, requires insurers to defend builders against CDARA notices of claim and shifts the burden of proof away from homeowners. This legislation strengthened homeowner protections significantly.

The bottom line: construction defect claims are pursued against builders and their insurance companies, not through homeowner policies.

How Colorado Law Protects Homeowners (Without Using Their Own Insurance)

CDARA creates a structured process for homeowners to pursue claims against builders without going through their own insurance. This process protects both parties and encourages resolution before litigation.

Here's the basic CDARA process:

• Homeowners provide written notice to the builder
• Builder has opportunity to inspect
• Builder can offer to repair or settle
• If not resolved, homeowners can proceed with litigation

CDARA requires notice before litigation and allows builders opportunity for repair, while establishing procedures for claims involving actual damage, loss of use, bodily injury, or failure of building components. These requirements create a roadmap for resolving disputes.

Recent developments have strengthened homeowner protections further. HB25-1272 introduces warranties covering defects and damage at no cost to homeowners for specified periods in middle-market housing. This bill requires third-party inspections and limits claims to those causing actual damage or safety risks.

Insurers cannot cancel or reduce a builder's coverage based on repair or settlement offers. This protection ensures builders can't avoid legitimate claims by threatening homeowners with coverage issues.

This entire process happens without touching the homeowner's insurance. Your policy isn't involved, your claims history isn't affected, and your premiums aren't at risk.

Why You Shouldn't File a Construction Defect Claim With Your Own Insurance

Filing a construction defect claim through your homeowner's insurance creates serious problems:

• The claim will likely be denied due to construction defect exclusions
• The denial goes on your claims history
• It may affect your future insurability or premiums
• It wastes valuable time while statute of limitations runs
• It doesn't address the root problem or hold builders accountable

Even if resulting damage is covered, you still pay the deductible and the defect itself remains unrepaired. You might get your water-damaged drywall replaced, but the defective plumbing that caused it is still there waiting to fail again.

The right approach is to pursue the claim against the responsible party, the builder, and their insurance from the start. This targets the correct insurance policy and holds the right party accountable.

Experienced construction defect attorneys understand how to navigate builder liability coverage, not homeowner policies. In over 1,000 cases, we've recovered damages from builders and their insurers, not from our clients' homeowner policies.

What You Should Do If You Discover Construction Defects

If you've discovered construction defects in your home or condo, follow these steps:

Step 1: Document everything. Take photos and videos, keep records of when problems appeared, and note any damage or safety concerns. This documentation becomes critical evidence.

Step 2: Do NOT file a claim with your homeowner's insurance. This is not the right avenue and can backfire as explained above.

Step 3: Consult a construction defect attorney immediately. Statutes of limitations apply, and the CDARA notice process has specific requirements that must be followed precisely.

Step 4: Let your attorney handle communications with the builder. The notice of claim triggers the builder's insurance duty to defend. Your attorney knows how to properly initiate this process.

Step 5: Understand your duty to mitigate. Colorado law requires homeowners to prevent damage from getting worse, but this doesn't mean paying for major repairs yourself. Your attorney can guide you on reasonable mitigation steps.

The sooner you act, the more options you have. Waiting can result in additional damage and potential statute of limitations problems that could bar your claim entirely.

Consultations are free, which means you can learn your rights without financial risk.

Our Experience With Construction Defect Insurance Claims

At Nelson Law, we focus on quality over volume. We don't handle thousands of cases at once. Instead, we concentrate on achieving maximum results for each client we represent.

Our trial-ready reputation matters in settlement negotiations. Builders and their insurers know we'll take cases to verdict if necessary, which consistently leads to better outcomes for our clients.

"I was so worried about filing a claim with my homeowners insurance and how it would affect my premiums. Nelson Law explained that my insurance wasn't the issue at all. They recovered full damages from the builder's insurance company, and my policy was never involved."

We've successfully resolved claims involving water intrusion, structural defects, stucco failures, foundation problems, and many other construction defect categories. In each case, recovery came from builder liability coverage, not homeowner policies.

Key Takeaways: Understanding Construction Defect Insurance Coverage

Remember these critical points about insurance and construction defects:

• Homeowners insurance does NOT cover construction defects themselves
• Builder liability insurance is the proper coverage for these claims
• Colorado law (CDARA) provides a framework that protects homeowners
• Filing with your own insurance is the wrong approach

If you've discovered construction defects, take these next steps:

• Don't wait. Time limits apply to construction defect claims.
• Don't contact your homeowner's insurance company about construction defects.
• Document everything while it's fresh.
• Contact an experienced construction defect attorney to understand your rights.

Contact us for a free initial consultation. We'll review your situation, explain your options, and help you understand which insurance coverage actually applies to your case.

You can get answers without financial pressure. Understanding the right insurance coverage is the first step toward holding builders accountable and protecting your home investment.