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All newly constructed buildings that are intended for residential occupancy – from single family homes to condominiums – must have "2-5-10" new home warranty insurance coverage.
After a warranty claim is delivered to the warranty provider and builder, the question becomes: What now? What steps should a homeowner or strata corporation take after submitting a warranty claim?
While it can be tempting to sit back and wait for a response from the warranty provider, an owner should consider taking steps to ensure their claim is being handled appropriately.
Warranty providers are subject to mandatory claims handling obligations that are set out in the Homeowner Protection Act (HPA) Regulation. This article discusses certain requirements and provides tips on how owners can be proactive following their warranty claim submissions.
1. Request a prompt evaluation
Upon receipt of a 2-5-10 warranty claim, a warranty provider must promptly make reasonable attempts to contact the owner to arrange an evaluation of the claim. The warranty provider must make all reasonable efforts to avoid delays in responding to the claim, evaluating the claim, and scheduling any required repairs.
After submitting a warranty claim, the owner should diligently follow up with the warranty provider to request a prompt evaluation of the claim and determination of warranty coverage.
An owner can assist in avoiding claim delays by cooperating with the warranty provider and builder to provide site access and further information upon request.
2. Review the evaluation
Warranty providers will typically deliver a letter and spreadsheet that sets out their position on warranty coverage for each reported claim item.
An owner should carefully review the warranty provider's determination of warranty coverage to confirm that the information contained in the letter or spreadsheet is accurate and complete.
3. Consider next steps
Each warranty claim item will typically be categorized as either:
a. investigation required,
b. more information or details required,
c. denied / not warrantable, or
d. valid / warrantable defect.
Post-submission steps will vary depending on how a defect is categorized and evaluated.
a. Investigation required
If a reported defect is categorized as requiring an investigation, the owner should contact the warranty provider to schedule their site visit to complete the investigation.
An owner must permit the warranty provider and/or builder to access the home at all reasonable times, on reasonable notice to the owner, to investigate complaints or claims.
If the builder investigates and concludes that a reported defect is not warrantable and the owner does not agree with the builder's assessment, the owner should request that the warranty provider perform an independent assessment and evaluation of the claim item.
b. More information required
In some circumstances, the warranty provider or builder may request additional information, photographs, or more details about a reported defect. In such circumstances, the owner should promptly respond with the information requested and arrange for site access.
c. Not valid / not covered
If, following an evaluation of a warranty claim, the warranty provider determines that the claim is not valid or not covered under the policy, the warranty provider must notify the owner of the decision in writing, setting out the reasons for the decision.
A warranty provider may reject a claim or deny coverage for several reasons that include:
-the defect falls under permitted exclusion, such as weathering, normal wear and tear, deterioration or deflection consistent with normal industry standards;
-the applicable warranty coverage has expired;
-the item does not meet the HPA Regulation definition of a "Defect" – i.e. design or construction that is contrary to the building code or that requires repair or replacement due to the negligence of the builder or person for whom the builder is responsible at law.
If warranty coverage is denied, the owner should seek legal advice at an early opportunity to determine their options and next steps.
All lawsuits must be commenced within a deadline known as a limitation period. Pursuant to section 23(1)(b) of the Insurance Act and section 10 of the regulation, an action or proceeding against an insurer in relation to a home warranty insurance contract must be commenced not later than 2 years after the date the cause of action against the insurer arose.
Given this two-year limitation period and other litigation deadlines, owners should not delay in seeking legal advice.
d. Warrantable or Resolved / Completed
If a defect is categorized as warrantable, repairs must be completed in a reasonable manner and within a reasonable time. More information on 2-5-10 warranty repairs is discussed in this related article.
i. Timing of repairs
Warranty repairs must be undertaken in a timely manner, with reasonable consideration given to weather conditions and the availability of materials and labour.
While a builder may be given the opportunity to correct defects within a reasonable time – generally 30 days – homeowners should not be unduly delayed in getting warrantable defects repaired. If the builder does not repair the defect within a reasonable time, a warranty provider is expected to arrange for repairs to be completed by another qualified party.
An owner should diligently follow up and alert the warranty provider if the builder does not resolve and complete all warrantable defects within a reasonable time.
ii. Repair specifications
A warranty provider must deliver repair specifications to the owner, along with a letter indicating the date the repairs were completed and referencing the repair warranty.
On completion of any warranty repairs, the owner should follow up with the warranty provider and builder to request repair specifications and the date of completion.
The owner should maintain a detailed spreadsheet of all reported defects and record the status of each claim item, including the date of repair work and the cost of the work, if known.
iii. Standard of repairs
All repairs and replacements made under home warranty insurance must be completed in a reasonable manner using materials and labour conforming to the building code and industry standards.
On completion of any warranty repairs, the owner should have a consultant or contractor review the work to confirm that it was completed in a reasonable and satisfactory manner.
iv. Warranty on repairs
All repairs and replacements made under home warranty insurance must be warranted against defects in materials and labour until the later of:
(a) the first anniversary of the date of completion of the repair or replacement, and
(b) the expiry of the applicable new home warranty insurance coverage.
Once a defect is repaired, the owner should diarize the one-year anniversary of the completion of the repair and assess the quality and durability of the work. If there are defects in the repair or replacement work, the owners should deliver written notice to the warranty provider and builder of a claim under the repair warranty.
Conclusion
A strata corporation or homeowner will typically put time and effort into a 2-5-10 warranty claim submission but will often overlook the warranty provider's claims handling obligations and post-submission steps.
Owners should be proactive in ensuring their warranty claims are managed in a timely, fair and impartial manner and in accordance with the HPA-mandated claims handling requirements.
If you are dissatisfied with the outcome of your 2-5-10 warranty claim, consider seeking legal advice in a timely manner.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
