Washington offers unique landscapes, a generally predictable mild climate with typically snowless winters, pleasant summers, and the ability to engage in outdoor activities during each season. Nevertheless, the state, affected by the humid Pacific Ocean air, has disadvantages, too. One problem is the notoriously poor quality of residential construction work intended to protect the building envelope from water intrusion, and the physical damage resulting from such work.
This article identifies deficient construction practices and offers a step-by-step recommendation that a homeowners’ association (HOA) may use in assessing potential damage to the common areas of its buildings and key steps to consider when invoking and enforcing property insurance coverage to repair that damage.
This article is not intended to serve as a DIY manual that HOAs should use in detecting damaged building areas and asserting claims against their property insurers. The article is designed to inform HOA members of the surprisingly rare knowledge that property policies never expire and may fund repairs of water-related damages.
Causes and inspection of damage
Washington’s rainy winters routinely cause deterioration of residential structures unless waterproofing precautions are considered as part of construction. Without this precaution, rainwater inevitably gets inside the building envelope and causes the development of mold or rot that will gradually bring the building to the stage of collapse, defined as “substantial impairment of the structural integrity of a building or part of [it] that renders such building … unfit for its function or unsafe.” Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co., 183 Wn.2d 485, 487 (2015).
Washington law provides typical examples of defective work that invites water intrusion. See, e.g., Nichols v. Peterson NW, Inc., 197 Wn. App. 491, 496 (2016) (improper installation of the roof and water exposure caused the extensive damage and mold growth in their home.”); Westlake View Condo. Ass’n v. Sixth Ave. View Partners, LLC, 146 Wn. App. 760, 771 (2008) (“[I]dentified possible causes of the water intrusion, [included] the failure to seal the windows or properly apply weather-resistant barrier paper … [that] caused the frames to bow, necessitating the replacement of almost all the windows.”); see also Haas v. Kartashev, 154 Wn. App. 1050 (2010) (unpublished opinion) (“[I]ncomplete weatherproofing, incomplete flashing, faulty installation of the EIFS [exterior insulation finishing system] [and] secondary moisture barrier paper, and improper sealant installation … ‘allowed water to migrate behind the siding and caused extensive dry rot damage to the sheathing and framing.’”). Roofing defects may also result in improper drainage and cause the roof to leak or fail.
Physical damage to a building frequently starts with (1) water intrusion through the siding, windows, or roof, (2) resulting from a contractor’s failure to make the building waterproof, which (3) later manifests itself as crooked window frames, dry rot, mold, bulged walls filled with water, or moss growing from underneath the siding, all of which may constitute “collapse” if the building or the relevant material or part becomes unfit for functioning or unsafe. Consequently, the first step in determining whether common areas of an HOA building sustained damage is a thorough visual inspection of the potentially damaged area.
Expert’s role
The next step entails hiring an expert, preferably a structural engineer, to inspect the potentially damaged area visually, and then perform minimally invasive testing by removing a few pieces of siding. That will either show the need for further invasive testing or dispel HOA’s suspicion of damage.
Inspection, Insurance Policies, and Tenders of Claims
Because not many HOAs know that a 20-year-old property insurance policy provides coverage for continuous damage if it incepted or continues to exist so long as the policy is effective, first-party “all risks” property policies are of “occurrence” type and provide coverage for damage that initiates during the policy period regardless of its discovery. Fujii v. State Farm Fire & Cas. Co., 71 Wn. App. 248, 250 (1993) (“in order to trigger coverage under a policy, the insured must sustain a covered injury or loss, however minute, during the effective period of the policy”). When an insured sustains damage of a continuing nature, all insurers that provided coverage during any portion of the damage period are jointly liable for covering the entire damage. See Gruol Const. Co. v. Ins. Co. of N. Am., 11 Wn. App. 632, 637-38 (1974). As a result, once an HOA’s expert determines the timing of the inception of the damage, the HOA should make every effort to (a) find all of its property insurance policies covering the period between the inception and present, and (b) tender claims for coverage to each insurer that issued a policy during that period.
Insurers’ Investigation and HOA’s Remedies
Once insurers receive the claims, Washington’s Insurance Regulations, WAC 284-30, et seq., mandate that they promptly investigate the loss and determine whether their policy covers the damage. Now the HOA’s expert may perform fully invasive testing of the damaged area in the presence of each insurer’s representative. If the testing confirms damage, each insurer should pay for the testing. Absent exigent circumstances, the insurers must complete their investigation and determine whether there is coverage within 30 days. The insurers’ failure to comply with a single regulation in WAC 284-30 constitutes a per se “unfair or deceptive” practice under the Consumer Protection Act (CPA). Indus. Indem. Co. of the Nw. v. Kallevig, 114 Wn. 2d 907, 925 (1990) (“A single violation of WAC 284–30–330 … is a per se unfair trade practice”). If a violation of the insurance regulations is established, the HOA may recover against the noncompliant insurer treble damages capped at $25,000 and attorney’s fees and other costs of litigation, if one ensues. If it is also determined that the damage occurred during the policy period and no exclusions bar coverage, the insurers unreasonably denying coverage may be liable for violation of the state’s unique Insurance Fair Conduct Act and expose themselves to uncapped treble damages and attorneys’ fees. See RCW 48.30.015; 48.30.015(3).
