Can I force the builder to have the stucco redone if it's documented construction defect?

You can try. I would wait until you get the civil engineer's report.

Interesting question. I would think that even if not legally required to do so, a reputable builder would WANT to fix this, in order to demonstrate good customer service, as well as to avoid any bad word of mouth. You could complain to the state licensing board or the BBB. There are all kinds of ways that your bad experience could affect the contractor's future business. A smart businessperson will not allow this to happen. If he is not a smart businessperson, your answer depends on the cost of repairs. If it is less than $5,000, you could file a claim in small claims court. I am a little concerned about potential statute of limitations defenses, though. If the work passed inspection when it was done, the builder is not responsible for the life of the property. Given what has happened, it sounds like this is a pretty clear case, however. To the extent you can resolve it outside of court, it benefits both parties.

You might be running up against a statute of limitations issue of 6 years subject to discovery do not delay.

You probably would have to sue to have the work totally redone. The statute of limits clock started when you first discovered the defect. Talk to other contractors on what it will cost to redo the work. This number is what you would use in your discussion with the builder. On the plus side, the builder is talking to you and has agreed to do the repairs. After this long, the builder would normally not warrant the work.

If the only way that the repairs can be permanently fixed is to remove all of the existing stucco and replace it, then yes, you can required the builder to do that. How much of the exterior will need to be fixed or replaced will probably depend on the engineer's report. If the report doesn't raise or address the issue of the quality of all the existing structure, you may have to work with the builder to make the more extensive repairs you mention. I suspect you will be balancing between the cost of paying for some of the repairs that you want but aren't determined to be absolutely mandatory and paying for a lengthy trial to force the builder to replace all of the stucco.

You may have statute of limitation issues that need to be discussed with an attorney, before you have any further discussions with the insurance company or the civil engineer. Assuming there is not a statute of limitations problem, you need to wait until you receive a copy of the report from the civil engineer. There are two potential problems that appear from you facts: (i) Defective siding; and/or (ii) improper compaction of the soil or failure to have the foundation secured to bedrock. The civil engineers report should identify the cause of the cracking and peeling. It is also unclear from the information provided, whether the exterior of you home is plaster or siding. If it is siding, then it is unusual to have the siding cracking and peeling. The civil engineer should also render an opinion in his report as to what he believes is the cause of the cracking and peeling. You will also need to provide the attorney with a copy of any warranty provided by the contractor to you. You will also need to provide the attorney with a copy of any warranty that the manufacturer of the siding or plaster material provided to the contractor, who should have provided a copy to you when the home was completed. I cannot over emphasize the need to promptly contact an attorney. The warranty and statute of limitation issues need to be understood first, before there are any other non-privileged communications which establish a discovery date of the defective construction. Of course, you can always call me. Good luck.