Avoiding construction defect lawsuits

I know how much easier your lives would be if, once you completed your work, you didn't have to look back to it again. That is not the way we operate, particularly in the United States, where we have developed litigation to an art form. here, suing your contractor is almost a badge of honor, unlike other countries such as Japan, where it is a badge of shame that people can't resolve their own differences.

I know how much easier your lives would be if, once you completed your work, you didn't have to look back to it again. That is not the way we operate, particularly in the United States, where we have developed litigation to an art form. here, suing your contractor is almost a badge of honor, unlike other countries such as Japan, where it is a badge of shame that people can't resolve their own differences. we don't do ourselves any favors, either, by advertising products as "trouble-free" with "lifetime guarantees" that are good for as long as the judgment-proof, off-shore company is in existence.

Controlling expectations. There are things that contractors and suppliers can do to lower their risk of being involved in construction defect litigation. People sue their builders when the end product they get doesn't meet the result that they thought they had the right to expect — either how a product will perform or how long it will last. what makes people think that they are entitled to a particular result? It could be that a written contract specified what the plumbing fixtures would be. It could be a statute that required the HVAC system to operate for a year. It could be based on an "implied warranty" such as is contained in the Uniform Commercial Code, but which also exists in the "common law."

Written communications. Most (but not all) unreasonable expectations can be dealt with by detailed communication with customers. Setting out in writing how a product should work, and also pointing out factors that might affect its performance, can go a long way toward avoiding later claims.

Limiting warranties to types of repairs or lengths of time that make economic sense is a very typical way to handle this, but both the Uniform Commercial Code and many state statutes limit how much warranties can be disclaimed anymore, so this is not something that a contractor or vendor should try without legal counsel.

Opportunity to repair statutes. Many states now have construction defect repair statutes (most are limited to residential consumers) that try to stem the tide of litigation by requiring the homeowner to first give the builder the opportunity to come back to fix alleged defects before a lawsuit can be brought. Some specifically target condominium associations to avoid "class-action" type of lawsuits, which are an insurer's worst nightmare. The same defect (let's say, a moisture intrusion problem) that would spark one lawsuit if the building were apartments results in 80 lawsuits because the building is a condominium.

Just because a state doesn't have a right-to-repair statute doesn't mean that the parties can't agree to one, however, either in the original contract or after the problem surfaces.

Mediation before litigation. Statistics in all states show that the vast majority of lawsuits do not go all the way to trial. They settle — and the sooner they settle, the less either side pays in legal fees and time and stress. Thus, anything that a contractor or vendor can do to get the other side to the settlement table is a good thing.

Class-action lawsuits are an insurer's worst nightmare.

Many written contracts for construction now explicitly provide for mediation, which is a non-binding effort to settle with a neutral third party in the room. Some states now require this by statute as well. Even the most angry and recalcitrant owner tends to soften up when a retired judge or other mediator explains to him how long the litigation process will take, what it will cost, how much inconvenience he will have to endure (such as being deposed, lots of inspections) and the risk of not getting what he wants in the end.

Saying you're sorry. I know that mos t lawyer s would "have a cow" (to quote Bart Simpson) if they thought that their clients were ever making an admission of liability, but sometimes it is exactly the right thing to do. however, where the true economic damage is minimal but emotion is driving an owner to seek the death penalty because the faucet is chrome instead of brass, it may be that you don't even have to admit guilt if you treat the customer with TLC.

Simple steps such as promptly returning calls, calmly listening and empathizing ("I know this must be very frustrating for you"), sending an unsolicited gift certificate for a free dinner if their gas stove wasn't hooked up right, can do more than you would ever think.

None of this will replace having plenty of insurance, all the right coverage, and proper business and personal planning to protect your assets. There is still a lot of construction defect litigation out there, even with the right-to-repair statutes coming into existence in more states, and you need to be prepared to defend against the worst-case scenario.

Combining those prudent business practices with personal, pro-active treatment of potential claims, however, will likely be the best strategy to win in the long run.

Susan McGreevy is a partner at Husch & Eppenberger, Kansas City, Mo., 816/421-4800, e-mail to [email protected].

TAGS: Law