Evolution of Exterior Insulation and Finish Systems in California

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Exterior Insulation and Finish Systems (EIFS) has been around since 1969 and has grown in demand for new construction in California with a constant push to get closer to “net-zero” buildings. With our strong niche in plastering, drywall and painting contractors in California, one of the most frequently asked questions by insurance carrier underwriters pertains to whether a contractor self-performs or subcontracts out EIFS work. This has become a significant concern for insurers, particularly when it comes to the proper installation of drainage systems over wood-framed buildings and/or the use of inferior materials. Over the past decade, there have been significant strides to insulate contractors from claims arising from EIFS.

The major turning point for EIFS occurred during the 1995 hurricane season in North Carolina, when an increase in insurance claims highlighted the risks associated with improper drainage systems in EIFS installations (i.e. walls and ceilings). These claims prompted a dramatic shift in the way EIFS systems were installed and regulated moving forward. In response to these challenges, the industry made considerable strides to enhance moisture control, seismic resilience, and the use of materials that are better suited to California’s diverse climates—ranging from dry desert conditions to coastal, humid areas.

California’s building energy efficiency standards continue to evolve. As these standards become more rigorous, it is expected that EIFS will play an even larger role in meeting the energy demands of new buildings. The insulation provided by EIFS systems makes them a critical component of energy-efficient design, helping buildings achieve net-zero energy performance while still having curb appeal.

It is likely that EIFS will become a requirement for most, if not all, new construction projects in California in the near future. However, despite the system’s growing importance, many insurance carriers still view EIFS installations with caution, due to the historical challenges and claims associated with improper installation techniques. As a result, some insurers continue to treat EIFS as a “high-risk” exposure and require stand-alone policies to cover the potential risks.

Currently, there are approximately 7,660 plastering professionals employed in California, according to the most recent data from the Bureau of Labor Statistics (BLS.gov). However, only a small fraction of these employees are actively involved with EIFS installations. This limited exposure has contributed to a gap in the insurance market, with many carriers potentially lacking a deep understanding of the evolving EIFS industry and its improvements.

For plastering contractors in California, working with a knowledgeable broker is crucial to navigating the complexities of insuring EIFS work. Each company’s exposure to EIFS risk is unique, and it is essential to have a broker who understands these nuances. A specialized broker can help secure the most competitive pricing available and ensure that they are paired with insurance carriers that are not only familiar with the latest industry advancements but are also willing to offer comprehensive coverage for EIFS-related risks.

While industry change can take time, it is vital to have a broker who actively advocates on your behalf, challenging insurers’ outdated guidelines and promoting an accurate understanding of the current EIFS landscape. By building strong relationships with insurers who understand the evolving nature of EIFS, contractors can improve their risk management profiles and position themselves for long-term success.

If you have any questions relating to EIFS or any other insurance needs you may have, do not hesitate to reach out to me directly at ccraig@ranchomesa.com or you can call (619) 251-8278.