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We purchased a house in Texas 5 months ago. 3 months ago we discovered hidden water damage from a roof leak within exterior walls.

Our insurance hired a third party engineering firm who concluded the damage had been happening long before we bought the house. The previous owner is trying to make things right, and filed a claim with their insurance.

The damage and problem was completely hidden within the walls with nothing visible that could be noticed during the home inspection. But the previous owner's insurance is trying to deny the claim, claiming it's not their problem since the issue was not noted at the time of sale.

Is this a legit reason to deny a claim? Or is the previous owner's insurance company responsible (assuming no other reason for exclusion) for hidden damage that occurred prior to the sale while they were the insurer?

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  • I'm 99% sure that an insurance company is under no legal obligation to cover damage to a house it no longer covers, even if that damage occurred during a time when the house was covered. It would be like getting in a car accident, cancelling your insurance, then 6 months later trying to file a claim. This would be the same even if the old homeowner still owned the home. However this all requires a good read-through of the terms of the policy, which I'm assuming you don't have?
    – Ron Beyer
    Commented Dec 13, 2018 at 21:35
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    On your car accident example, if your car was insured at the time of the accident and you could prove it, you absolutely could file a claim even if you no longer had insurance. Likewise for a home. In Texas you have two years from the time of damage, and the claim goes to whoever the insurer was at the time of damage.
    – aggieNick02
    Commented Dec 13, 2018 at 21:47
  • Here's a link explaining: insurance.com/auto-insurance/auto-insurance-basics/… . The wrinkle with my question is that ownership of the property has changed, but the damage still occurred with the old owner and insurer.
    – aggieNick02
    Commented Dec 13, 2018 at 21:53
  • @RonBeyer your comment is only valid for “claims made” policies (like professional indemnity). The type of insurance here (home and contents) it trigged by the event even if the claim is made many years latter.
    – Dale M ♦
    Commented Dec 13, 2018 at 23:07

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Unfortunately for you, the insurance company is right.

Even with the rise of modern consumer protection law, caveat emptor ("Let the buyer beware") still largely applies to real estate transactions. Exceptions are where the building is new (not applicable), the seller gave a specific warranty (unlikely) or the seller deliberately concealed the defect (not applicable).

If, as you say, the damage was "completely hidden" it is unlikely that your building inspector was negligent or breached their contract so you cannot recover from them.

Sadly, this is at your cost. Your insurer may be liable but that would depend on the terms of your insurance policy.

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  • Thanks for the input. I don't think my inspector was negligent, and I also realize that the previous owner's insurance company has no liability to me. But do they not have liability to the previous owner for damage that occurred while insured? They would if the previous owner still owned the property but no longer had insurance. I'm trying to understand why the transfer of property wipes out their liability to the previous owner.
    – aggieNick02
    Commented Dec 13, 2018 at 23:40
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    @aggieNick02 If the previous owner still owned the house, it would be damage resulting in loss of value for the owner. Now that he sold the house to you, he's already gotten the sale price of the house, and so hidden damage does not give him any financial harm. Their contract was with the previous owner, who suffered no harm. They did not contract with you, and owe you nothing for your loss of value.
    – David Thornley
    Commented Dec 13, 2018 at 23:44
  • Thanks @DavidThornley, that is a good explanation. I was hoping otherwise for both my and the previous owner's sake. The previous owner was also the builder, so there is liability there for the construction defect that caused the damage. Unfortunately homeowner's insurance appears to be the only insurance he had.
    – aggieNick02
    Commented Dec 13, 2018 at 23:49
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Late response but all insurance companies will initially deny this type of claim. Depending on your state you may actually have recourse but unfortunately you will have to get a lawyer.

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