Winning the Liability Game

Many states such as California, Nevada, Arizona, Hawaii, Washington, Georgia, Texas, Colorado and Florida have adopted laws outlining procedures for handling construction defect claims prior to filing a lawsuit. These laws sometimes are referred to as “right to repair” statutes. Their stated purpose is to afford builders and contractors the right to repair construction defects before a lawsuit is filed.

Unfortunately, these laws do not outline or guarantee a builder the ability to recover the monies spent on these repairs from insurance and/or the trades whose work is implicated. Despite this shortcoming, there are many ways builders can protect themselves both before and after a claim is made.

For starters, outlining subcontractor obligations for repairs in subcontracts is a good idea. The subcontracts delineate the construction work the subcontractors are expected to perform. The contracts also can delineate the obligations the subcontractors have to repair faulty work and/or to reimburse the builder for making repairs to the faulty work. Subcontractors should not be required only to repair the faulty work itself, but also should be required to repair any damage caused by the faulty work.

For example, if a plumbing fitting leaks and damages the wall of the kitchen, the plumber should be required to fix the fitting which leaked as well as repair any damage caused by the leak. Simply stating in a contract the subcontractor must repair any faulty work may not be enough. The subcontract should make it clear the subcontractor is responsible for fixing the faulty work and any damages it caused.

Another good practice is to keep updated records regarding subcontractor/supplier contact information. For every home or building constructed, a master list should be kept of all subcontractors who performed work on the project and all companies that supplied materials. This list should include: name of the company/contractor; contractor’s license number; address and telephone number of the main office; name, address and telephone number (both cell and office) of the jobsite superintendent; and the name of the person with whom the contract was negotiated. After work has been completed, the contact information should be updated yearly. This will ensure that if you need to contact the subcontractor/supplier, the contact information is current.

Keep a record of manufacturers’ warranties to help homeowners if needed. Oftentimes claims arise because of a product failure — a window doesn’t lock, a thermostat isn’t working or a faucet is leaking. Many times homeowners are not educated about making claims directly to a manufacturer. By keeping records of the warranties offered by manufacturers, a builder can help the homeowner make a claim directly with the manufacturer. If it is a product failure that falls within the warranty, the manufacturer often will repair or replace the item at its own cost.

It’s also important to develop a procedure for reporting problems. The agreement with clients to build or purchase a home typically outlines a builder’s obligations to that client, including any obligation the builder may have to repair damages. These agreements also can outline the client’s obligations to the builder. The agreement should clearly set forth the procedures a client should use to notify the builder of a problem. By developing a procedure before work is completed, confusion and risk of a claim can be minimized.