— Dan Burgardt
NEW ORLEANS, LOUISIANA, USA, January 2, 2024 /EINPresswire.com/ — A recent court ruling in Alabama has significant implications for homeowners looking to sell their properties. This development is crucial for understanding the complexities surrounding property damage liability and the role of homeowners insurance in such scenarios. Dan Burghardt, owner of Dan Burghardt Insurance, emphasizes the importance of this ruling for anyone in the process of selling a home.
In the case under consideration, a U.S. district court determined that a homeowner’s insurance policy might not offer defense costs coverage for claims alleging failure to disclose property defects, such as termite infestations. This decision becomes pivotal when the physical damage, in this instance caused by termites, is discovered or occurs after the property has been transferred to the new owner.
The crux of the court’s decision lies in the interpretation of an “occurrence” under homeowners insurance policies. The court sided with the insurer’s argument that mere failure to disclose does not constitute an occurrence that triggers coverage for property damage liability. This means that the damage, caused by the termites and not the act of nondisclosure, does not fall under the typical coverage offered by a homeowners policy.
Burghardt notes, “This ruling challenges the conventional understanding of homeowners insurance and its application in cases of property sales. It’s a reminder of the nuanced responsibilities homeowners bear when disclosing property conditions during a sale.”
The legal responsibility of homeowners in disclosing property defects is a contentious issue, varying across states. For example, Illinois mandates a checklist for home sellers to report certain common defects. However, the Alabama ruling aligns with a growing trend where economic losses from incomplete or inaccurate disclosures are not covered under general liability insurance.
Another aspect to consider is the legal doctrines determining when an occurrence happens and which insurance policy responds. These include the “exposure” and “injury in fact” doctrines, the “manifestation rule,” and various trigger rules like double or triple trigger. These doctrines help determine the timing of the occurrence, thereby influencing which insurance policy is liable.
In rare instances, first-party property coverage claims can be made by home sellers for damage to a sold property. However, several stringent conditions apply, including the requirement that the damage must be from a covered peril, occur during the coverage period, and not fall under policy exclusions.
Burghardt points out, “While such instances are rare, understanding these nuances is vital for anyone in the real estate market. It’s about being informed and prepared for the various scenarios that can arise during and after the sale of a property.”
The ruling from Alabama serves as a cautionary tale for home sellers, highlighting the limitations of homeowners insurance in certain scenarios related to property sales. The key takeaway, as Burghardt emphasizes, is the importance of thorough disclosure and understanding the intricacies of insurance coverage during property transactions.
“Caveat venditor – Seller beware. This phrase encapsulates the essence of this ruling and serves as a guiding principle for home sellers,” concludes Burghardt.
The case number for the recent court ruling in Alabama, which found that a homeowner’s insurance policy might not cover defense costs for claims alleging failure to disclose property defects like termite infestations, is Nationwide Mutual Fire Insurance Company v. Carmichael, Case No.: 77-22-cv-00689 (N.D. Ala. Aug. 23, 2023). This decision was made by the Northern District of Alabama.