Construction Damage Insurance

Frequently Asked Questions

• Why and when should you take out Construction Damage Insurance?

  Construction Damage Insurance is insurance that must be taken out before the start of the work, and its purpose is to guarantee the cost of repairing defects affecting a real estate property. This guarantee is valid for ten years from the date of acceptance of the work and is transferred to successive owners of the property. This insurance was created to ensure quick repair for victims of defects affecting their construction. It aims to pre-finance the cost of repairs for ten-year damage for which constructors are responsible according to Article 1792 and following of the Civil Code.

• I am doing work on an old building. Do I need to take out Construction Damage Insurance?

  Yes, the law does not limit this guarantee to new constructions.

• Why do I need to take out Construction Damage Insurance if the company has ten-year liability insurance?

  These are two mandatory insurances: Construction Damage Insurance for the owner and Ten-Year Civil Liability Insurance for the company.

• Who must take out Construction Damage Insurance?

  Several categories of project owners must insure: - Real estate developers, sellers of buildings to be constructed, who must take out this insurance for the benefit of successive owners; - Builders of individual houses (the law requires that the reference of the Construction Damage Insurance be specified in the construction contract concluded with the project owner); - Individual project owners when they deal directly with the builder (contractor, architect, etc.). All the previously listed project owners must take out this Construction Damage Insurance at the beginning of the work (on the date of the declaration of the start of the construction site). It is a mandatory insurance. Failure to take it out is legally sanctioned. These penalties do not apply to individuals building a home for themselves or for their spouse, their ascendants, or descendants, or those of their spouse. However, failure to take out this insurance can cause difficulties in the event of selling the property during the ten-year guarantee period.

• What is the Construction Damage Insurance guarantee?

  - Mandatory insurance taken out by the project owner before the start of the work (SPINETTA law). - Protection against construction defects. - A complement to the ten-year civil liability of the parties involved. Its purpose is to allow quick financing of the cost of repairs due to potential defects.

• What is a construction?

  A construction is the object and result of work, consisting of physical and solid elements, having a function or purpose.

• What constructions are subject to the obligation of Construction Damage Insurance?

  All work where a defect in its execution could compromise its solidity or purpose.

• From what amount of work do I need to take out Construction Damage Insurance?

  The law does not specify any amount. Only the nature of the work determines whether there is an obligation to take out Construction Damage Insurance.

• How does Construction Damage Insurance work?

  Construction Damage Insurance is pre-financing insurance, meaning the Construction Damage insurer will, without any search for liability, finance the work determined by a unique expert report. Once the victim is compensated, the Construction Damage insurer will turn to the responsible constructors and their ten-year civil liability insurers.

• When and how to take out Construction Damage Insurance?

  - Before the start of the work. - By declaring all the parties subject to the compulsory ten-year liability insurance regime, whether they are designers or contractors: geologist, BET, consulting engineer, architect, technical controller, company... - Regardless of the amount of the work.

• When and how to declare a claim?

  You must declare the claim as soon as the damage appears by registered letter with acknowledgment of receipt or by email, specifying the nature of the damage.

• What are the deadlines for processing a claim?

  The processing of Construction Damage claims is governed by law with strict management rules and deadlines. Here are the various steps following the declaration of a claim: 1- Within 60 days after the claim declaration, the insurer must notify their position regarding the activation of the guarantee. 2- Within 90 days after the declaration, the insurer must present a compensation offer. 3- If the insured accepts this offer, the insurer must pay the compensation within 15 days.

• What are the consequences of not having Construction Damage Insurance?

  - In the event of a claim and in the absence of Construction Damage coverage, the injured party will have to prove the fault, evaluate the cost of repairs (expertise at the injured party’s expense), and exercise their own recourse against the presumed responsible artisan and their insurer, with no guarantee that this recourse will succeed and no possibility of advance funding for the repairs. - The absence of Construction Damage coverage also engages the project owner's responsibility towards future buyers. - Finally, as it is a legal obligation, according to Article L 243-3 of the Insurance Code, various penalties apply for failure to take out insurance, including a criminal penalty: a fine of €75,000 and up to 6 months imprisonment.