Making The Case For Bad Soil
A 2-10 Home Buyers Warranty® (2-10 HBW) claim story.
About the builder
A New Mexico Department of Energy Certified Builder strictly followed local building codes. The company built 8,800 homes over a 20-year period and prided themselves on being a community builder. They built homes in locations across New Mexico and had never received a claim. Even with this good claims history, the builder enrolled all of his homes in the 2-10 HBW program and provided a ten year insurance-backed structural defect warranty to his homeowners. This was a builder doing things the right way.
You never see it coming
After 20 claim-free years something happened. The builder received over 20 claims in one year with the bulk of the claims coming from a subdivision in central New Mexico.
“Where did the builder go wrong?”
The builder had conducted a geotechnical investigation of the soil prior to building; however, standard testing did not detect critical soil conditions. About four years after the homes had been built, the builder received notice that foundation damage was occurring in over 20 homes. The builder immediately filed multiple structural claims with the warranty insurer for the 2-10 HBW Warranty. The warranty insurer’s investigation revealed that soil settlement was occurring throughout the subdivision because subterranean water was entering the soil underneath the homes. This particular soil, known as hydro-collapsible soil, collapsed in the presence of water. The failure of the soil to support the load of the home resulted in extensive structural damage to each home. The rest of the homes in the subdivision were investigated and more signs of distress were revealed.
Typically, 20 claims in one year would destroy the builder’s reputation and company. Fortunately, this builder was a 2-10 HBW builder member who had placed structural warranties on every home built. As a result, the warranty insurer for the 2-10 HBW Warranty program was able to pay for the repair of many homes. The builder avoided this expense because he had shifted risk to the warranty insurer. Over 30 claims have been received to date and many are still open and being investigated. To date, the warranty insurer for the 2-10 HBW Warranty program has incurred several millions of dollars in costs related to the settlement of these claims on behalf of the 2-10 HBW builder.
Data collected from New Home Warranty Insurance Company