One of the most common questions I get is whether homeowners’ insurance will cover foundation repair. There’s more to this question than meets the eye, with a few caveats everyone should know and some ways you can help yourself.

Sudden and Catastrophic

Modern homeowners’ insurance was designed to assist with sudden and catastrophic occurrences that can’t be anticipated. Nowadays, the definitions of those events are getting twisted, and in some cases, abandoned altogether. Floods and fires are apparently now being excluded and not covered, depending on how the fine print is interpreted.

Most foundation problems aren’t sudden or catastrophic, and don’t fall under the coverage of most homeowners’ policies. That said, there are some exceptions, which we’ll get into below.

Earth Movement Exclusion (Torreon)

Most homeowners’ insurance policies include what’s commonly called an “Earth Movement Exclusion.” Basically, this clause attempts to bring more clarity to the subject. It typically states that if damage to the structure is caused by soil movement, the policy won’t cover it.

However, if you can prove that the damage was sudden and catastrophic from something like a pipe break or a failure of a retaining wall due to design flaws or poor construction in the area supporting the home, then you may have a fighting chance of getting a claim approved.

I actually owned a rental home with this exact problem, and I did get insurance to pay for underpinning. However, I’m in the business, and I’ve got solid connections and technical knowledge. I paid for leak detection that showed three separate pipeline breaks. Then I had two local engineers write and seal reports confirming that the structural damage was a direct result of those pipe breaks.

A Happy Valley

In addition to that, I also had the experience of a huge tragedy at the Torreon Pines Golf Resort in Show Low, Arizona, back in 2007. I was hired to underpin an existing retaining wall to hold it in place while construction for an addition took place below. This retaining wall was adjacent to a very large clubhouse structure. At some point, in a later blog I will relay the full event in more detail. Long story short, during a huge monsoon storm, the entire 300-foot-long by 15-foot-tall retaining wall collapsed during construction. An elderly man was on the porch having dinner adjacent to the wall and rode it down and walked away!

At first, my insurance company filed an intent not to cover the failure. Since this was a multi-million dollar problem, I was concerned to say the least. I had a lot of sleepless nights. I hired a great forensic engineer, Fred Nelson, and hired my own attorney out of pocket, Kim Lough, to represent me because I didn’t feel my insurance company was looking out for my best interests and didn’t trust any attorney they would have provided. It turned out to be a good move.

These guys rolled up their sleeves and proved that the failure was caused by excess water that got to places it shouldn’t have and caused a cascade failure. By the way, I was sold the policy with the direct claim that it had no Earth Movement Exclusion. The agent who sold me the policy blatantly lied. Nevertheless, we were able to succeed with our claim anyway due to the innovative and hard work of my team.

The Value of Having a Baseline

One of the things that could help with proving a claim of a sudden catastrophic home foundation movement from water lines is to have an existing floor level survey to act as a baseline. By having this work done ahead of time and stored away, should there be problems, it becomes much easier to see what has happened.At a later date, a subtractive manometer analysis is performed. This is where you take the initial floor level readings and subtract the values from the current readings, and then plot a new topographical map of the difference values. This allows us to visually see the movement during the intervening time. I discuss this more in this post.

By looking at the two elevation surveys, each taken eight years apart, we can see gradual changes. We can see that there are fewer topo lines (both at 2/10” spacing). We can interpret this as the right-hand topo, taken at a later time period, showing perhaps less extreme changes in elevation. But beyond that, it is difficult to understand a pattern that helps us tell a clear story.

Now look below at the subtractive analysis. This is done by taking the numerical readings of the first survey, subtracting the values of the second survey, and then inputting those values into the topographical software.

Wow, now that is a pattern we can recognize! Bear in mind that these are not values we can find on the home if we were to go out and record elevations. This is subtractive only. It shows the movement over a period of time—a movie, if you will, as opposed to a snapshot on a single date. What we can say is that over an eight-year period, the movement has exhibited a dome-heave type of movement or edge settlement. Either the middle has risen, or the perimeter has dropped. Or both. It makes sense with the theory of moisture migration over time under a foundation, found in this blog post.

What this example vividly exemplifies is how instructive subtractive analysis can be, and how valuable it is to have a baseline of data for comparison and subtractive analysis later on.

Home Insurance Industry

This baseline and subtractive analysis is also valuable for the home insurance industry. Often, insurers must spend valuable time and money to defend against frivolous claims. This information allows quick and easy analysis to vet serious claims from frivolous ones without having to spend large amounts of time and money. If the movement over time can be shown to be gradual, the claim is easier to defend.

Mortgage Lenders

During the downturn of 2007–08, I witnessed the large REO portfolios of mortgage lenders who had homes with serious foundation issues that they had no experience or skills in repairing or selling. People walked away when they discovered foundation problems, coupled with the fact that they were underwater on their mortgage. Not a fun place to be if you were in the lender’s shoes.

If lenders have proper analysis done as a condition of lending, they could reduce the exposure they have in lending on a home where evidence of movement has been hidden. That could result in the new owners abandoning the home when serious movement continues.

I would propose training and certification of home inspectors to observe and record conditions that can be accepted and interpreted by forensic foundation engineers.

Insurance and home foundation repair have a number of different angles to them, and homeowners, insurers, and mortgage lenders will all be better off understanding how it works and how to protect themselves.