Subscribe to The Work Damage Insurance, by Noémie Faux
By FauxMie, Expert Bordeaux My Business – Insurance
Why is it necessary to take out property damage insurance?
Although there are no coercive penalties under the law for individuals who do not purchase property and casualty insurance, there are serious benefits that are often overlooked. This famous lack of punishment only applies to private owners. Indeed, for professionals and promoters alike, Article 243-3 of the insurance code punishes the failure to compulsoryly subscribe to a damage insurance by imprisonment of six months and/or by a fine of up to 75,000 euros.
1. The legal framework
Upstream, it seems essential to recall the SPINETTA law of January 4, 1978. “Any natural or legal person who, acting as the owner of the work, a seller or agent of the owner of the building, has building work carried out, must subscribe before the opening of the building site, on his behalf or on behalf of the successive owners, an insurance guaranteeing, apart from any search for responsibilities, the payment of the repair work of the nature of those responsible for the builders within the meaning of Article 1792-1 of the civil code.
The Spinetta Act essentially establishes a presumption of liability on all construction stakeholders.
Damage insurance is therefore legally mandatory for anyone who, as the owner of a work, mandates workers to carry out work. Among the works “subject to the obligation of damage insurance work” can be the construction of a detached house or an apartment building. Rehabilitation, renovation, refurbishment, etc. are also affected in existing buildings.
2. Undeniable benefits
The amount of the insurance premium for a home damage insurance is of course more important than for car or home insurance. This financial aspect deters some novice individuals at first. However, this is evidence of a lack of awareness of the indisputable benefits of this insurance. First of all, the first advantage is its duration: this guarantee is 10 years. Of course, there are often reservations at reception that can already be problematic. But the most serious damage, which then affects the very strength of the house or building, appears a few years later in the majority of cases.
Then, this insurance can be called a formidable parachute. This contract is an effective protection for the contractor, because it aims to guarantee, for 10 years after receipt of the work, and without deductible, the financing of the repair work of the damages for which the Builders are responsible (the famous ten-year responsibility of the builders), without waiting for the completion of the appeals that will be addressed to them. The triggering of the warranty consists of the simple observation of disorders affecting the solidity of the work or rendering it unsuitable for its destination. The famous long years of legal proceedings so dreaded by some will not then be the business of individuals who have taken out a damage insurance. Their insurance has an obligation to compensate their customers and will then have to take care, alone, to recover the funds and to operate the various guarantees of the other players.
Damage insurance in the works that may affect the strength of the structure or the equipment elements that are inseparable from the viability, foundation, frame, enclosure and cover works or to make the dwelling unsuitable for its destination. This may include water infiltration into the dwelling through a crack in the façade, a
floor subsidence, significant cracking in the walls, breaking of the recessed pipes, collapse of the roof…
Optional options for property damage insurance can enhance coverage. This is particularly the case with the civil liability “Builders Non-Directors” known as CNR: If the work is sold for 10 years after its receipt, the owner is classified as “Builder” by the civil code (Article 1792-1, paragraph 2). He must therefore take out a 10-year liability insurance but, since he is “non-director”, the guarantee is called “Builder Non Director”. And a final advantage, not least, the first is the insurer’s deadline to respond to the customer: According to Section L. 242-1 of the Insurance Code, the insurer has a maximum period of sixty days, from the receipt of the declaration of this claim, to notify the insured of his decision as to the principle of putting into play the guarantees provided in the contract.
3. The risks of not underwriting
Although the law has refused to apply the criminal sanctions provided to the individual contractor, the absence of a subscription entails a significant risk-taking. This risk includes the possible resale of the work within ten years of receiving the work: the buyer is entitled to ask for a lower price in case of no damage to the works. More and more notaries are advising their clients on this practice because the buyer is taking an additional risk. Indeed, as noted above, the most serious disorders often appear a few years later. If the original owner resells his property after work three years later, what about the new owner’s recourse in case of the appearance of a disorder? If there is no ongoing damage, it is unfortunately appropriate to refer to the classic regime of questioning, often long, of all the responsibilities of all stakeholders in construction/renovation, and sometimes of legal proceedings. This disadvantage (which is precisely the consequent advantage of taking out property and casualty insurance) therefore allows the new purchaser to apply for a reduction in the purchase price.
In conclusion, property damage insurance, in addition to being a compulsory insurance, is a real guarantee for the owner. It is the property and casualty insurer who will make a quick decision to pay for the work and then subrogue the owner to seek liability from the builder. The rates of a property damage insurance premium are based on the amount of construction or work. This amount, although it may seem important at first, smoothed over ten years of guarantees, will not cost you more than home insurance and will save you from some unpleasant surprises in construction. Hence the importance of one to be accompanied by an insurance broker who really masters the risks of construction.