Dan Heilman – February 18, 2013
Once a construction project is finished, most builders want the same thing: to move on to the next one. But builders occasionally face an impediment in the form of a defect claim filed by a project owner.
Complaints of defective or poorly installed windows, water intrusion, inadequate ventilation and myriad other issues can mean hassle and expense for builders who aren’t careful to avoid such claims.
Defect claims, or claims for damages that occur during the construction process, are more common in residential construction. In those cases, the project owner probably isn’t accustomed to dealing with contractors — as opposed to commercial property owners, who are used to ironing out kinks with contractors as part of their workday.
Defect claims are also partly a product of the nature of construction: If there’s a miscommunication between the owner and contractor or between the contractor and subcontractor, mistakes can happen.
“They can be a real problem if the builder isn’t proactive about them,” said Eric S. Hayes, a shareholder with Brown & Carlson in St. Louis Park. “Part of the issue is that a lot of them don’t know that it’s not just the building codes that need to be followed, but also the standards in the industry. There might be a violation of an industry standard that isn’t codified.”
Those types of gray areas can easily lead to defect claims. Industry standards dictate that a framer is required to frame windows so that they’re weatherproof — but an exact definition of “weatherproof” is hard to come by.
“Is there a specific way you’re supposed to reverse-lap the windows when you install them?” said Hayes. “There are certainly codes on proper installation, but there are also standards that are open to interpretation.”
That lack of exact guidance can inadvertently lead to substandard work, which in turn can easily lead to defect claims. Mark J. Peschel, an attorney with Johnson & Lindberg in Bloomington, points to poorly flashed windows and entryways as a common defect claim subject.
Minnesota’s building codes say that exterior openings exposed to the weather shall be flashed in a manner to make them weatherproof, but they don’t specify how that goal should be accomplished.
“Builders tend not to know the weatherproofing code provisions as well as they should,” said Peschel. “That leads to a lot of water intrusion issues.”
Get it in writing
Even when builders do everything according to code and standard, that doesn’t make them immune from defect claims.
“Some complaints say the builder didn’t use the right material,” said Paul Grinde, a partner with Ryan & Grinde in Rochester. “Sometimes it’s just a matter of, ‘This doesn’t look right.’”
Grinde said that if a builder is thorough about having the owner sign off on every blueprint and every change order, it can stop defect claims before they start.
“If there’s a list of everything going into the house, have the owner initial each page,” he said. “That way they’re saying they know exactly what’s going into the house. Then if they say later, ‘I wanted Anderson Windows,’ you can say, ‘No, here you said we were going to use Integrity Windows.’”
Defect claims rarely go to trial. The vast majority settle, either in mediation or between mediation and trial. A careful builder can even avoid having claims mediated: Minnesota statute dictates that contractors be given the opportunity to correct building defects. Taking advantage of this “do over” can result in a happy owner and one fewer legal headache.
It’s also important for builders to know that even if they think there might potentially be a claim, they should contact their insurer — don’t wait until they’re dealing with a summons and complaint.
“Most claims are turned over to insurance companies, and they hire defense counsel to defend them,” said Peschel. “At that point it tends to become a battle of experts.”
Hayes said builders can avoid the issue of defect claims altogether by being responsive during all phases of the construction process. If an owner writes a letter to a builder outlining areas of concern in a project, the builder should take that to mean that the business has been put on notice of a potential claim.
“I often hear, once things have gone sour and moved toward litigation, that the homeowner contacted the general contractor a dozen times about a leaking basement and nothing was done, so they were forced to sue,” said Hayes. “Some good, proactive service on the front end can save a lot of time and energy. Just respond to the questions and don’t let it fester.”
via Legal Matters: Avoiding the headache of defect claims | Finance & Commerce.