Limiting Construction Defect Litigation
10/01/2009
LIMITING CONSTRUCTION DEFECT LITIGATION
by John V. O'Meara, Esq.
So there you are after a hard day's work. You stop by your office to check in and there it is - another construction defect lawsuit. As usual, it relates to a project completed years ago on a job without a complaint. You do not know whether to laugh or cry. But you do what you always do. Off it goes to your insurance company, who will hire a lawyer that you have never heard of. Eventually the insurance company will throw money at the case, and it goes away. And you believe that's the end of it, until you receive the bill for the next year's liability insurance premium which, remarkably, is significantly higher than the year before. So what do you do?
The title of this article was going to be "Three Ways That Contractors Can Eliminate Construction Defect Litigation." But, as I was writing this article with that working title and applying 20 years of experience in defending contractors in construction defect litigation cases, I realized that an article with that title would be extremely short. My advice? Retire. Quit. Give up. There is simply no way to eliminate construction defect litigation cases altogether. Anyone who tells you differently is either delusional or inexperienced. This article is intended to provide practical advice which can limit the number of lawsuits that you need to contend with.
RULE NUMBER 1: Don't sign it if you don't understand it!
It is imperative that you read everything, understand everything, clarify if necessary, and if the owner or other party to the contract will not discuss the issue, run for the hills. When each party understands the contract terms (especially the materials to be used and the scope of work to be performed) and each other's expectations, misunderstandings occur far less frequently. Also, seeking a clear understanding of contract terms is an excellent way to elicit the character of the entity that you are dealing with. If they are problematic at the relationship's inception, they will be far less agreeable if things go sideways. And, when in doubt, consult a lawyer. Be penny wise, not pound foolish. Lawyers always cost more money when they are cleaning up messes than when they are preventing them.
RULE NUMBER 2: If the deal sounds to good to be true, it probably is!
Many owners squeeze their contractors for the lowest price, and then seem surprised when their expectations go unfulfilled. The same can be said for subcontractors that underbid to get a job, only to realize that the job cannot possibly be constructed to meet code, contract and plan requirements. The result is either an incomplete job, poor performance or a contract dispute over change orders.
Be realistic in what can be done and at what cost. Subcontractors that constantly underbid eventually get into trouble and are no longer your competition.
RULE NUMBER 3: Communication in writing is the foundation of any relationship!
Many lawsuits can be avoided with simple written communication. Communicate at all critical phases during the job. Communicate at the completion of the job. If there are agreements made after execution of the contract, get it in writing. If you solve a problem, confirm the solution in writing. And remember, email is written communication and can form a contract. Print all email correspondence to and from other parties and save it in the job file and on your computer. It will avoid later misunderstandings. And, as for emails, think before you push "send." Those seemingly innocuous emails may be "Exhibit A" someday.
Editors Note: Mr. O'Meara is a partner in the law firm of Bremer Whyte Brown & O'Meara LLP and specializes in construction defect litigation in California, Nevada and Arizona. Located in Woodland Hills, CA, he can be reached by telephone at 818-712-9800
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