Protection From Rogue Waves?
By Christopher E. Carter, P.E.
In the early morning hours of April 14, 2005, the 965 foot long, 14 deck cruise ship, Norwegian Dawn, carrying over 2,000 passengers, was hit by a 72 foot high rogue wave off the coast of Virginia. Luckily, no one was killed, and damage was limited to broken windows which caused 62 cabins to flood – all the way up to the tenth deck.
For builders, the rogue wave can be a company killer, and can come in the form of a bad subdivision. I know of one neighborhood in Parker which had about half its 251 homes develop moderate to serious structural problems. The average repair cost per home was approximately $17,000. That’s a two million dollar hit. Are you able to absorb that? Most builders are not.
That’s why commercially available limited home warranty programs are a good idea. They protect against qualifying workmanship, systems, and structural defects, are insurance-backed, and are government regulated. Their paid claims do not affect your bottom line – unlike a “self-insured” warranty program. The difficulty lies in selecting the right one.
In Colorado, there are generally five companies which can offer HUD approved ten-year home warranty programs to builders: Home Buyers Warranty Corporation (www.2-10.com), Residential Warranty Corporation (www.rwcwarranty.com), StrucSure Home Warranty Corporation (www.strucsure.com), Professional Warranty Service Corporation (www.pwsc.com), and Quality Builders Warranty Corporation (www.qbwc.com). Brain damage may occur if you try to discern these programs without proper training. Nevertheless, here are five important questions to ask their sales rep which may help:
- How is structural coverage determined? Some programs use the HUD definition of “unsafe, unsanitary, or otherwise unlivable.” Others use a conditional definition based on “the physical safety of the occupants,” for conventional-loan homes, or the HUD definition, for FHA or VA-loan homes. Others use structural performance tolerances, i.e. a beam deflection of ½ inch in 8 feet.
- What is included in a covered structural claim? Some programs cover damage to designated load-bearing elements and direct damage to non-load bearing elements and direct cosmetic damage. Others only cover the designated load-bearing elements – leaving all other direct or coincidental damage expenses to the builder or homeowner.
- What is the deductible or shared-risk expense, if any? Some programs deduct a moderate percentage of the home sale price. Others have a flat rate based on risk.
- What, and how many, coverage exclusions are there? Some programs exclude damage caused by “soil movement,” some do not. Some have as little as 22 exclusions, and some have as many as 40.
- When does structural coverage start? Some programs offer the 10-year insurance-backed structural coverage from day one. Others only provide it in years three through ten.
As they say in the warranty business, “there’s a rate for every risk,” and you get what you pay for, but having a limited home warranty program will, without question, give you survival ability from a monster wave. How well you survive, will depend on the stability of your ship.