Defending Accusations Of Construction Defects
The simplest method to avoid responsibility for building defect claims is to prevent them from occurring in the first place. However, because preventing a claim is not always possible, it is critical for adjusters to take action as soon as a new construction defect claim is received in order to restrict responsibility and maximize defense expenses.
When does a person become liable?
A construction fault arises when a construction project fails to meet contractual requirements and specifications, or fails to follow widely recognized industry standards, resulting in damages. Whether your insured is an architect, builder, or contractor, they can be held accountable for negligence if they fail to fulfill their responsibilities to the standard of care that a reasonably trained professional would exercise under comparable circumstances. The following are some of the most prevalent building fault theories of liability:
Concerns about job quality
Defects attributable to poor craftsmanship or quality of work are one of the driving causes behind building fault claims. Whether your insured is a designer, developer, or subcontractor, a certain level of knowledge and a certain level of care are required for the job to be done. Construction fault claims are frequently classified as patent (obvious or reasonable discovery) or latent (hidden) (concealed). Latent faults may occur throughout construction, but they are not noticed or diagnosed for several years afterward. Differential settling owing to inappropriate soil compaction, resulting in fundamental structure and wall fractures, water penetration due to improper flashing and installation of outside windows, or even catastrophic fire damage due to defective electrical wiring are examples of these problems.
While not all latent faults provide an immediate threat of injury, as time passes, a specific problem may pose a significant risk of harm. To decide if the claims are timely, you'll need to know your jurisdiction's statute of limitations and statute of repose for patent flaws, as well as any tolling provisions for latent defects.
Infractions of the law
There are local and national building rules and safety requirements that must be observed in addition to the reasonable and professional standards of care that govern work conducted on a construction site. A claim for faulty design or construction can be filed if the codes or standards are not followed. For example, whether or not there is evidence of degradation to the existing roof components, an architect's wrong calculation of the required number of vents to be placed per square foot in an attic is a per se construction error.
Violations of work scope
Whether your insured is working on a new house, a commercial development, or a home rehabilitation, all construction projects are normally carried out according to project specifications, which detail what should be built, how it should be built, and what materials should be utilized. Architects, engineers, developers, contractors, and subcontractors are frequently involved in the creation of such designs, each with their own set of responsibilities. If a party overextends its job scope or fails to comply with the terms of their work contract, claims may emerge.
Tips for disputing allegations of construction defects
Construction defect claims seldom provide clear proof of fault. It is critical to have a thorough comprehension of the ideas that will be studied. However, many crucial processes must be completed before an adjuster can conduct a merits examination of the claim. Gathering information on each of these checklist elements will help you limit the responsibility and defense expenses connected with a building fault claim:
Obtaining information
Start with the essentials, as gathering information takes time, and the other party may want to move the building fault claim along quickly:
- From the beginning until the completion of the project, all communication, contracts, subcontracts, invoices, plans, drawings, modification orders, and pictures must be kept.
- Identify all current and past personnel who worked on the project, including their job titles and responsibilities.
- Establish a primary point of contact for your insured, preferably someone who is familiar with the information you'll need without having to consult paperwork or phone other individuals.
Determine the insured's scope of work
The key documents controlling the applicable scope of work for the insured will be the correspondences, contracts, subcontracts, invoices, plans, drawings, change orders, and pictures collected in the above checklist item. However, if the documents are received, examine beyond the contracts' simple language to establish the particular physical regions inside the project where the insured worked to see if this was beyond the scope of work or within the bounds of the parties' agreements.
Determine the scope of work for any additional partners involved
When a construction defect claim comes in, it's easy to ignore the need of doing a careful review of the scope of work for parties that aren't the insured. Understanding the scope of work of other project participants, on the other hand, can help you figure out who was performing within their proper scope and who wasn't. This can assist decide who else, outside your insured, may have extra or entire culpability, as well as who else should be at the table to share in the claim's defense expenses.
To ensure that the parties were licensed to conduct the work that they eventually did on the project, obtain proof of a contractor's or architect's license, as well as confirmation of good standing as a business. Other parties may have liability difficulties as a result of performing work for which they are not licensed, opening up new opportunities for bringing cross claims to lessen your insured's exposure.
Considerations relating to the duty to defend and indemnify
In addition to examining employment contracts for factual and scope-of-work concerns, the contract should be examined to see if the text compels the insured to indemnify or defend other project participants.
Furthermore, the insurance policies applicable to the claim may contain provisions naming the insured as an extra insured on the policy of another party (or vice versa). What additional project-related insurance does your insured have? Is there any time for them to work on the risk provisions? Are there any indemnification or obligation to defend clauses in any of the policies? Answering all of these issues correctly from the start is critical, since they impact not just the claim's defense but also its resolution.
Send mail about reservations of rights
The initial examination may lead to the conclusion that the policy does not cover the situation. When agreeing to accept the tender of a new claim, the adjuster should inform the insured that such acceptance is conditional on the insured's reserve of rights to withdraw acceptance of the defense based on newly found facts that cause a change of analysis.
Retaining expert witnesses: considerations
Expert testimony is crucial in construction fault lawsuits, which may be rather complicated. As a result, having a qualified expert witness who can act as an impartial party in establishing whether a claimed problem may be traced to the insured is crucial. The expert must also be able to communicate difficult topics in a simple and understandable manner.
As a result, it's critical to find an expert who not only has relevant experience with the claimed flaw in question, but also has specific competence in the area, as courts may reject experts who don't. While a licensed professional engineer may provide a general explanation for why foundational cracks in garage flooring were discovered, a geotechnical engineer will have the expertise to determine if the cracks were caused by differential settlement caused by poor soil compaction during construction.
Retaining a consulting expert should be considered depending on local evidentiary laws (as opposed to a testifying expert). Expert discovery standards compel a testifying expert to provide his or her opinions in line with them. In other cases, however, a consulting expert may be allowed to pronounce on the merits of accusations, allowing the adjuster to assess responsibility without danger of their opinions being revealed via discovery.
If consulting experts are considered the same as testifying experts, a comprehensive examination should be conducted on a case-by-case basis before determining whether or not to retain an expert. An effective expert witness may make the difference between a jury agreeing with your theory of responsibility and returning a favorable result.