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How could water damage be only 'partially' covered by insurance?

Insurance is one of those things that is great... in theory. It helps you pay for expenses that would cause you to take a serious financial hit or might be unable to cover on your own. Let's face it, your paycheck probably doesn't cover a new roof - even if it does, you've got other bills to pay.

In a perfect world, insurers would pay every penny you submit in your claim. Of course, we live in the real world. Insurance is a little more complicated than that, and certainly more confusing.

A real-world example: how water damage might... or might not get paid

Hurricane Matthew recently tore across Florida's shores and up the eastern coastline. The storm was so fierce that it altered the landscape, carving a new inlet onto St. Augustine beach.

Our thoughts go out to each and every family dealing with the aftermath of the storm. As our communities band together to repair homes and businesses, water damage is certainly on the minds of many.

Hurricanes are one thing, but imagine that you experience water damage after a normal storm. You would expect your homeowners insurance to cover the cost of the repair and compensate you for at least a portion of the value of the property that was destroyed.

With this in mind, you file your claim. The insurance company agrees to pay for some of the loss, but not all. Why? The storm brought an underlying issue to the fore: a construction defect. The insurance company might use excluded loss and ensuing loss to explain their decision.

  • Excluded loss: Many insurance policies exclude coverage for construction defects related to faulty construction or repair.
  • Ensuing loss: Faulty construction (be it a leaky roof, improper wiring or cracked foundation) can lead to or contribute to other types of damage. For example, your cracked foundation could cause water to seep in and cause mold.

Depending on your policy, your insurer may cover the ensuing loss but not the excluded loss (ie- they'll fix the mold but they won't repair the foundation). They will leave that expense for you to sort out with your builder or other responsible party.

Even in litigation, the law is somewhat "up to interpretation," applied differently from jurisdiction to jurisdiction or based on different facts.

What should homeowners do?

When major issues arise that could relate to a construction defect, homeowners should consult with an attorney who has experience with these matters. The truth is that many factors can go into a situation involving construction defects - none of which can be answered by a blog post online or without knowing the specifics of your situation.

In Florida, many single-family homes, condominiums and townhomes are part of an association. If a contractor, developer or other party did work on several homes in your community, they might have problems as well. Your association is likely better equipped to handle a potential lawsuit than you may, as a single homeowner.

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