Liveblogging WCCCDS 2017: “We can resolve construction defect claims early!”

Every year at West Coast Casualty’s Construction Defect Seminar, at least one panel discussion is held on a new or innovative way of resolving construction disputes as efficiently, effectively and most importantly, as inexpensively as possible. This year is no exception.

Resolving Construction Defect Claims Early

Panel: J.D. Turner, Joseph Kaneda, Timothy C. Earl, Phil Collias, and Todd Schweitzer

Where have we been and where are we now?

Some trends:

  • More multi family construction disputes, more nonresidential, and in general, more complex project types
  • These projects require a completely different skill set and level of analysis, particularly on the part of the experts
  • EB–5 Visa money seems to fund more projects that end up in litigation
  • Insurance coverage changes as well to meet the requirements of these needs
  • COVE insurance product provides a novel and collaborative approach to preventing protracted and expensive litigation
  • Preference towards more extensive, thorough and more proactive investigation of buildings early on

Some challenges facing the building industry:

  • Unsatisfactory responses by homebuilder warranty programs has led to increased litigation
  • Due to extremely high SIRs (self-insured retention), insurance claims adjusters may not have a lot of hands-on involvement early on in a case, so builders often need to seek out their own counsel and conduct repairs
  • Difficulty triggering the carrier’s involvement in a claim, in absence of an actual lawsuit, can make it difficult to resolve claims
  • Repairs may not actually result in a full release of liability

There exists a real opportunity in the industry to educate builders to the economic impact of various claims management and dispute resolution strategies.

What are some of the benefits to early case resolution?

  • Certainty as to outcome
  • Repair of home and prevention of future damages
  • Limitation of attorneys’ fees, expert fees, and other costs
  • Savings to builder’s general and administrative expenses
  • The longer a claim takes to resolve, the more expensive it will always be

Some obstacles to early case resolution:

  • A recent court case reaffirmed the intentional acts exclusion which had a distinct chilling effect on resolution of claims
  • There is a trend stemming from multiple occurrences exclusions that is delaying or slowing carrier response and thus resolution in some situations
  • Policy language interpretations will almost always dominate settlement of claims, bogging down the entire process
  • Deciding whether or not to pursue subcontractors and/or design professionals is a critical decision to be made when an OCIP or CCIP is in place

What are some of the elements of a successful early resolution of a claim?

  • Stated goals
  • Stipulation for discovery/mediation
  • Ensure all parties have sufficient information to participate in meaningful discussions
  • Ensure correct participants
  • Ensure insurer participation
  • Interim discovery between mediation sessions
  • Realistic cost and scope of repairs
  • Possible involvement of neutral experts (this is most likely an unrealistic goal)
  • Get to know the various players and their roles
  • Don’t lose sight of the coverage
  • Maintain credibility throughout
  • Always be trying to settle

Ultimately, resolving construction claims is a process. As Mr. Kaneda said, “it is often a dance.” As long as the stated goals include early resolution of claims, and as long as all parties share those stated goals, only then can an effective early claims resolution process occur.