It is really up to you. You have a lot of leverage here with the warranty in place and the contractor
admitting to failing to provide a service they were supposed to do (most construction
defect work is much harder to prove - it usually involves inferior product, or negligent or shoddy construction work).You can negotiate a settlement for yourself that makes you satisfied - having them come out and do it right (dig it out and wrap the house) would give you what you bargained for (if you were in a position where you had to sue them to enforce the contract, this would be called "benefit of the bargain damages
").You can certainly ask them for lesser monetary compensation, but more than just the amount you paid at face value (this is a negotiation).One word of caution, with construction defects, make sure that you don't sign a release or settlement that is greater than what you are willing to sign. So for example, if you are settling on the wrap issue, but you are getting the leak fixed in some way, and getting paid, you can sign a settlement to that effect, but you wouldn't want to sign a release that released the contractor from all liability (the type of release that we would normally be talking about after a more comprehensive "construction defect case" where the homeowner
hires a construction defect attorney, and an architect
and contractor who inspect the house (usually with "destructive testing") and then get compensation for all damages that were identified, the contractor pays for this, but they are then released from any future liability for the home (the homeowner cannot claim that they later found other damages).