Legal Question in Insurance Law in Illinois

I built a home in Illinois, thr were many defects (patent & latent) in the home after construction was complete. At closing thr was an agreement that the builder would correct the known defects - none were completed during the time the 1 yr warranty was in place (builder stated the home needed to settle 1st). There was an issue with floodings due to poor foundation construction & grading issues along with many, many other things. After multiple floodings a 3rd party claim was submitted against the builder's insurance (which is still pending) claiming gross negligence and adressing the flooding as well as many other defects & the insurance company has indicated that the builder's work is not covered but they are willing to pay damages for things covered under the builder's general contractor's liability & completed operations policy. I paid for a home inspection which revealed more defects & was given an estimate to repair damages in the amount of $70,000-$100,000. Because of decreased property values & the estimated amount of repairs I was told the house wasnt worth what was owed & that with the damages it would be a hard sell or if sold would result in me being upside down after the proceeds were paid. I was advised to either stay & fix the repairs or walk away. I chose to walk away & have since relocated to another state. The insurance company offered a lowball settlement offer which in no way came near to the amount of damage suffered so an agreement could not be reached at that time. When asked how much I was seeking in damages I stated the maximum allowed by the policy because I am not in the business of insurance & I didnt want to harm myself by saying a number below what was reasonable or customary. Because of the amount of damages in question, the still pending insurance claim & the fact that I now live in another state, I am wondering should the entire matter be pursued in federal court or should i continue to seek remedy through the insurance company or is there an alternative way of settling this matter?


Asked on 9/18/10, 2:21 pm

1 Answer from Attorneys
Mark Hartzer

I'm afraid my answer is going to be along the lines of, 'it depends'. The 1st question I would ask is whether or not the builder has a 'builder's risk' policy? Unlike a standard general liability policy, a builders risk policy covers damages that occur to the property during the course of construction. Find out if the builder/contractor/subcontractor has this type of policy. The 2nd question you need to ask is whether or not the insurance company has issued a 'reservation of rights' letter. There are huge coverage problems here. A liability policy covers 'resulting' or 'consequential' damages. It does NOT cover poor workmanship or design defects. The insurer may have made you a nominal offer because very little of the damage to the building is 'resulting' damage. Find out what they are willing to pay for, and what the won't pay for and why. Get the offer in writing. Asking for the policy limits is not reasonable, and the insurer is unlikely to take the demand seriously.

By 'walking away', you may have created or exacerbated a contractual breach. In any lawsuit, failure to perform by any party will be argued vigorously as a defense. Much of your claim is going to grounded in what your contract with the builder states. Read it carefully to see if you may have a 'liquidated damage' provision.

Who has title/deed to the property? If it is you, there is a possibility that the municipality may seek back property taxes, or even worse, demolish the building and bill you for the demolition costs. While I strongly recommend that you consult with an attorney, be prepared for the lawyer to express reservations about taking your case. There may be simply too much work involved for the possible reward without a substantial retainer.

My last piece of advice is to be prepared to be disappointed. There may simply not be enough money to remedy everything. Be as flexible as possible and good luck!

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Answered on 9/26/10, 8:10 am


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