The parties closed escrow based on a fully executed Arizona REALTORS® Residential Resale Contract. After closing, the buyers discovered that homeowners’ insurance premiums will be approximately 5 times more than they anticipated based on a prior fire in the home. The fire and resultant repairs were disclosed by the seller in the transaction. The buyers are demanding that the buyers’ agent reimburse them for the cost of the additional insurance premiums for the time they own the house, which the buyers estimate at 10 years.
Is the buyers’ agent legally obligated to pay the unexpected insurance premiums?
There is a trend with the Arizona appellate courts to enforce risk shifting provisions in contracts. For, instance the language warning the buyers to investigate square footage if it was material to them was enforced by the Court in Elm Retirement vs. Callaway, 226 Ariz. 287, 246 P 3.d 938 (App. 2010). The language regarding insurance is akin to the square footage language enforced by the Court of Appeals. The insurance language (lines 237 through 239) provides:
IF HOMEOWNER’S INSURANCE IS A MATERIAL MATTER TO THE BUYER, BUYER SHALL APPLY FOR AND OBTAIN WRITTEN CONFIRMATION OF THE AVAILABILITY AND COST OF HOMEOWNER’S INSURANCE FROM THE BUYER’S INSURANCE COMPANY DURING THE INSPECTION PERIOD.
(emphasis in original)
Based on the quoted language, the buyer’s agent should not be obligated to pay the increased insurance premiums. Independent legal counsel should be consulted.