HOW DOES THE RCLA AFFECT CONSTRUCTION DEFECT CLAIMS UNDER MY HOME WARRANTY POLICY?
As of 1993, the definition of a contractor was expanded to include “risk retention groups” which insure all or part of a builder’s liability for construction defects. These companies, such as Home Buyers Warranty and Residential Warranty Company, should not be confused with homeowner’s insurance carriers, such as State Farm or Allstate. The latter groups of insurance companies is not considered “risk retention groups” by the State Board of Insurance, and are thus not subject to the RCLA. Under typical home warranty policies, the warrantor is obligated to “step into the shoes” of the builder to satisfy certain types of claims. Usually, the warranty company is only obligated in the first two years when the builder fails to meet specific warranty obligations. In the remaining years of the policy, the warrantor’s coverage is limited to “Major Structural Defects”, as that term is defined by the policy. If your builder is backed by a warrantor, the recommended course of action is to send the
