Navigating Construction Defect States: How DOXA Helps Agents Secure the Right Coverage

Some states make securing construction liability insurance more complex than others. These “defect states” have unique construction defect laws that impact policy wording, capacity, and legal exposure, making it difficult for retail agents to secure the right protection for their clients. Understanding these intricacies is critical for agents working with builders, developers, and contractors.

To break down the complexities of insurance in construction defect states, we spoke with our insurance experts at DOXA. With decades of experience handling complex construction risks, they provide insights into why defect states are so difficult—and how DOXA helps agents navigate them.

What Makes Certain States “Defect States”?

Construction defect laws vary by state, but some have stringent regulations complicating the insurance process. These states are known for:

• Extended statute of limitations for defect claims (e.g., up to 12 years in some cases)
• Broad definitions of “occurrence”, which can impact coverage interpretations
• High litigation rates and large-scale defect claims
• Significant capacity challenges, making it difficult to find insurers willing to take on the risk

These challenges predominantly impact residential construction—particularly projects built for sale to individual unit owners, such as condominiums and tract homes. When a defect claim arises, it’s rarely just one unit owner filing suit. Instead, you could be looking at a class action lawsuit with 50 to 200 claimants, drastically increasing defense costs and overall exposure.

The Toughest Defect States: Hawaii, Florida & Colorado

Some states stand out as especially difficult markets for securing construction insurance.

Hawaii: A Severe Capacity Crunch

Hawaii has one of the most challenging insurance markets for residential construction due to the high frequency of defect-related litigation. The toughest part of residential construction in Hawaii is simply finding capacity.

Losses have been so adverse that many carriers will only deploy $3 million to $5 million in limits per policy. For larger projects, brokers often have to piece together coverage from multiple carriers to secure adequate protection. Consider a 500-unit condo project in Hawaii, where it took 29 different carriers to meet the required limits. It’s not only complex—it’s incredibly expensive.

Florida: Limited Market Options & Legislative Changes

Florida’s construction insurance market has always been difficult, but recent legislative changes have added new layers of complexity. For-sale residential projects in Florida struggle to find capacity for coverage. Whether it’s high-rise, mid-rise, or frame residential construction, agents may only have two or three viable primary market options.

In addition, Florida’s statute of limitations for defect claims has changed, which affects coverage considerations and long-term risk management. Retail agents must ensure that policies align with the latest legal requirements to avoid exposure.

Colorado & the Amended Definition of “Occurrence”

Certain states, including Colorado, Hawaii, and New Jersey, require amended definitions of “occurrence” in construction policies. Without this unique wording, coverage disputes may arise when a claim is filed. If the policy language doesn’t align with state law, claims may not be treated properly under the policy, leading to major issues for insureds. That’s why agents must work with a team that understands these state-specific policy adjustments.

How Agents Can Successfully Navigate Construction Defect States

For retail agents and brokers working in these challenging markets, expertise and the right partnerships are key. Here’s how to stay ahead:

• Understand local insurance laws. Defect states have unique regulations that impact policy wording, claim response, and statute of limitations. Agents must stay informed to protect their clients.
• Partner with specialists. Generalist wholesalers may not have the expertise needed for defect states. Working with an experienced team like DOXA ensures policies are structured correctly from the start.
• Find the right carriers. Given the capacity crunch in defect states, agents must work with insurers that understand construction risk and are committed to the market long-term.
• Layer coverage when necessary. When a single carrier can’t provide adequate limits, brokers must know how to layer coverage across multiple insurers to meet project requirements.
• Educate clients on risk mitigation. Developers and builders can reduce claims exposure by using high-quality materials, ensuring compliance with building codes, and implementing risk management best practices.

Why DOXA?

Construction insurance in defect states is highly complex—but DOXA is built for these challenges. With deep expertise, strong carrier relationships, and a specialized focus on construction risk, we help retail agents secure coverage in the toughest markets.

DOXA understands the intricacies of defect states and how to structure policies correctly to avoid costly disputes. We work closely with agents to develop customized solutions that address the unique legal and capacity challenges in these markets.

Need help navigating construction insurance in defect states? Contact DOXA today to learn how we can help you secure coverage and manage risk effectively.