FLOWING DOWN LIABILITY IN CONSTRUCTION DEFECT LAWSUITS

unknownIn construction defect lawsuits, third-party (or fourth-party) claims are routine to flow-down liability downstream.  Right, a general contractor sued by an owner will want to flow-down its liability to the subcontractors.  And, subcontractors will want to flow down their liability to sub-subcontractors and suppliers.   Common, and appropriate, flow-down claims are indemnification and contribution claims

 

In an appellate opinion with little factual discussion, Gozzo Development, Inc. v. Esker, 2016 WL 2908442 (Fla. 4th DCA 2016), the trial court entered summary judgment in favor of subcontractors dismissing the contractor’s indemnification and contribution claims.  The owner sued the contractor for a violation of building code (and corresponding defects and damage) and the contractor, in turn, sued subcontractors for indemnification and contribution.  The contractor was seeking indemnity for the statutory building code violations as well as contractual breaches that caused the construction defects and damage. 

 

On appeal, the Fourth District reversed the trial court’s summary judgment as to the indemnification claim, but affirmed the trial court’s dismissal of the contribution claim (as Florida abolished joint and several liability in negligence-based actions):

 

Further, as appellant [contractor] sought indemnity for violations of both statutory and non-statutory building standards, it was error to grant summary judgment on the indemnity claim under a provision that applies only to statutory liability. The statutory building code does not preclude liability for violating a contractual duty to adhere to local building standards.

However, we affirm the trial court’s summary judgment on the contribution claim, as appellant’s right to contribution had not arisen by the effective date of the revised statute barring joint and several liability.

Gozzo Development, 2016 WL at *1. 

  

It is important to understand the manner in which liability is flowed downstream (passed-through) in construction defect lawsuits.  It is generally this reason why construction defect lawsuits contain many parties, from the general contractor hired by the owner to the subcontractors, sub-subcontractors, and suppliers implicated by the defective work.   These articles on indemnification (common law and contractual) and contribution explain these very important flow-down claims in more detail. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CONSTRUCTION DEFECT INDEMNITY OBLIGATIONS – COVERED VS. NON-COVERED CGL CLAIMS

If you are a contractor or subcontractor and a construction defect claim is asserted against you, then you have tendered such claim to your commercial general liability (CGL) insurer.  No doubt about it.  In doing so, you have wondered whether your CGL insurer will indemnify you for the damages asserted against you by the third-party.  You have wondered whether the damages asserted against you are covered by your CGL policy.   If you have not wondered and asked these questions, then you should!  Below is a portion of a presentation I recently put on regarding construction defect indemnity obligations under CGL policies and, particularly, covered claims versus non-covered claims.  

 

Download (PDF, 195KB)

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

OWNERS: DON’T IGNORE THE STATUTE OF LIMITATIONS IN FLORIDA STATUTE s. 95.11(3)(c) FOR CONSTRUCTION DEFECTS / DAMAGE

Unknown-1If you are an owner experiencing construction defects or corresponding damage (e.g., water intrusion) please consult with counsel.  Not doing so can result in your lawsuit being forever time-barred by the statute of limitations!  Do NOT let this happen to you; this means that any valid claims you may have associated with the construction defects or corresponding damage are gone.

 

The statute of limitations for construction disputes including construction defect disputes is embodied in Florida Statute s. 95.11(3)(c), set forth at the bottom of this posting.  Please check out this article and this article for more information on the statute of limitations for construction defects. 

 

For example, in Brock v. Garner Window & Door Sales, Inc., 2016 WL 830452 (Fla. 5th DCA 2016), homeowners experienced water intrusion from their windows and sued the company that installed the windows.  The problem, however, was that the homeowners sued the window installer more than four years after the homeowners discovered the defect (the statute of limitations in s. 95.11(3)(c) as set forth below) but less than five years after the discovery of the defect.   The homeowners tried to creatively argue that the five-year statute of limitations governing written contracts should control because the window installer was not a licensed contractor and should not reap the benefit of the shorter four-year statute of limitations. The Fifth District rejected this argument. 

 

Regardless of whether your claims are against a licensed or unlicensed contractor, the four-year statute of limitations in s. 95.11(3)(c) is going to control your construction defect lawsuit.  In the case above, the homeowners waited more than four years after discovering the water intrusion to sue their window installer.  As a result, their counsel had to come up with an argument to try to circumvent the four-year statute of limitations.  Unfortunately, the argument was not successful and the homeowners potentially valid claims were time-barred.  Clearly, this is a situation you want to avoid so that you are not having to defend your valid claims with a statute of limitations defense.

 

 Florida Statute s. 95.11(3)(c)

(3) WITHIN FOUR YEARS.—

***

(c) An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

MAKE SURE YOU HAVE THE SUBCONTRACTOR EXCEPTION TO THE “YOUR WORK” EXCLUSION

imagesI previously discussed the importance of the subcontractor exception to the “your work” exclusion in CGL policies (exclusion l) for contractors and subcontractors that subcontract out scopes of work.  Without this exception, the CGL policy provides minimal (and I mean minimal) coverage for property damage associated with construction defects.  If you are involved in construction, you categorically need to make sure there is a subcontractor exception to the “your work” exclusion in your CGL policy.  The subcontractor exception to the “your work” exclusion is the language bolded below that negates the application of the exclusion:

 

 

 

This insurance does not apply to:

 

l. Damage to Your Work

 

 

“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”.

 

This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

 

The Middle District in Auto-Owners Ins. Co. v. Elite Homes, Inc., 2016 WL 409577 (M.D.Fla. 2016) recently issued an opinion involving the application of the “your work” exclusion in a homebuilder’s CGL policy that did not have the subcontractor exception (the language bolded above).  Ouch!!!!  Without this exception, the policy excluded from coverage “property damage to your work arising out of it or any part of it and included in the products-completed operations hazard.”  Elite Homes, supra, at *2.  But again,there was no subcontractor exception that negated the application of this provision to work performed by a subcontractor.

 

What is the impact of not having the subcontractor exception to the “your work” exclusion?  This case explains.  The owners sued the homebuilder for water intrusion and damage from window defects.  The complaint alleged that the leaky window(s) caused damage to drywall, insulation, interior finishes, wood frame, and sheathing.    The homebuilder’s CGL insurer denied the homebuilder a defense and coverage based on the “your work” exclusion—the owner alleged damage to the homebuilder’s work (the structure of the home) but nothing else.  The Middle District concurred that the water damage alleged in the owner’s complaint arose out of the homebuilder’s work and was damage to the homebuilder’s work (the home).  Hence, the “your work” exclusion barred coverage for the owner’s construction defect lawsuit against the homebuilder.

 

This opinion is painful because it illustrates the non-value the CGL policy provided to the homebuilder for property damage associated with defective windows.  This outcome was the result of a CGL policy that eliminated the subcontractor exception to the “your work” exclusion.  If the policy had this subcontractor exception, then there would have been coverage for the water damage caused by the defective windows and the homebuilder’s CGL insurer would have been obligated to defend the homebuilder in the owner’s lawsuit.  The homebuilder would have been able to say that it hired a glazer (subcontractor) that performed the window installation and the glazer’s defective window installation caused damage to other subcontractors’ work.  

 

Make sure to review your CGL policy.  If you do not have the subcontractor exception to the “your work” exclusion, the outcome in this case could likely be the outcome in your case dealing with property damage caused by defective construction.  Consult with your insurance broker because this subcontractor exception to the “your work” exclusion is a must in construction!  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

 

CGL INSURER LIABLE FOR ATTORNEY’S FEES JUDGMENT AGAINST INSURED

images-2Commercial general liability (CGL) policies contain a section called “Supplementary Payments – Coverages A and B.”   This section states in relevant part:

 

 

1.  We [insurer] will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:

            e.  All costs taxed against the insured in the “suit.”

 

In the recent decision, Mid-Continent Casualty Co. v. Treace, 41 Fla. L. Weekly D60c (Fla. 5th DCA 2015), an owner obtained a judgment against its contractor in a construction defect case.  The court then entered a judgment for attorney’s fees and costs in favor of the owner.  The owner then initiated a proceeding against the contractor’s CGL insurer to recover the judgments.  The trial court refused to allow the owner to recover its attorney’s fees against the insurer and the owner appealed.  On appeal, the Fifth District examined the above language in the contractor’s CGL policy that said the insurer would pay for “[a]ll costs taxed against the insured in the ‘suit.’”   In examining this language, the court found that the language “‘all court costs’ could be read to include attorney’s fees, especially since there was no definition of that term in the policy…[T]he insurer did not, but could have, defined ‘court costs’ to specifically exclude attorney’s fees.”  Treace, supra.    For this reason, the court held that the attorney’s fees judgment was recoverable by the owner against the contractor’s CGL insurer.

 

This case provides a strong argument for a claimant that recovers a judgment against an insured in a construction defect lawsuit that includes attorney’s fees that attorney’s fees are recoverable under the insured’s CGL policy. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

COBLENTZ AGREEMENT AND ALLOCATION OF DAMAGES IN CONSENT JUDGMENT

A Coblentz AgreementI previously discussed Coblentz agreements.  A Coblentz agreement is an agreement between a claimant (e.g., property owner) and a third-party (e.g., general contractor that caused construction defects and damage) when the third-party’s liability insurer denies a defense (and coverage) to the third-party.  The claimant and third-party enter into an agreement where a) the claimant obtains a consent judgment against the third-party, b) the third-party assigns its rights under its liability policy to the claimant based on the insurer’s refusal to defend and indemnify the third-party, and c) the claimant releases the third-party from any individual liability irrespective of whether the claimant recovers from the third-party’s liability insurer. (Check here for a presentation on Coblentz agreements.)

 

One of the key components of the Coblentz agreement is the consent judgment given by the third-party to the claimant.  It is always a good idea to allocate between damages covered by insurance and damages not covered by insurance.  The reason is that liability insurance is not designed to cover defective workmanship.  Rather, it is designed to cover damages resulting from defective workmanship.  In a construction defect dispute, the consent judgment should reasonably allocate the covered damage (damage caused by defective workmanship) and uncovered damage (the cost solely to repair defective workmanship).  These amounts should not be arbitrarily decided but should be supported with expert opinions since this point would be litigated against the liability insurer when the claimant tries to recover from the third-party’s liability insurer. 

 

For example, in the recent opinion of Bradfield v. Mid-Continent Casualty Company, 2015 WL 6956543 (M.D.Fla. 2015), an aspect of the opinion dealt with the lack of an allocation of damages in a consent judgment given in consideration of a Coblentz agreement.  The contractor gave the owner a consent judgment in the amount of $671,050.  But, there was no allocation of this lump sum amount for covered and uncovered damage or what this lump sum was designated for.   The consent judgment was based on an estimate prepared by an expert but the estimate included costs to repair defective work, or work that was not covered by the liability insurance policy.  The Middle District of Florida found that this failure to appropriately allocate covered verses uncovered damage was fatal to the owner’s claim against the third-party contractor’s liability insurer to recover the amount of the consent judgment. The court explained: “Florida law clearly requires the party seeking recovery…to allocate any settlement amount between covered and noncovered claims.” Bradfield, supra, at *24.

 

Even if damages were allocated, the consent judgment still needs to be reasonable and entered in good faith. The court discussed this aspect of the Coblentz agreement despite finding that the failure to allocate was fatal to the owner’s claims against the contractor’s liability insurer.  As to the reasonableness of a consent judgment, the court importantly maintained:

 

When an injured party wishes to recover under a Coblentz agreement, [t]he claimant must assume the burden of initially going forward with the production of evidence sufficient to make a prima facie showing of reasonableness and lack of bad faith, even though the ultimate burden of proof will rest with the carrier. The courts impose good faith and reasonableness requirements in these cases due to the risk that the settlement of liability and damages in a settlement agreement may have little relationship to the strength of a plaintiff’s claim where the insured may never be obligated to pay and has little to lose if he stipulates to a large sum with the plaintiff.

 

In Florida, the test as to whether a settlement is reasonable and prudent is what a reasonably prudent person in the position of the defendant [the insurer] would have settled for on the merits of plaintiff’s claim. Objective and subjective factors are considered, including the degree of certainty of the tortfeasor’s subjection to liability, the risks of going to trial and the chances that the jury verdict might exceed the settlement offer. [P]roof of reasonableness is ordinarily established through use of expert witnesses to testify about such matters as the extent of the defendant’s liability, the reasonableness of the damages amount in comparison with compensatory awards in other cases, and the expenses which have been required for the settling defendants to settle the suit. Bad faith also may be established by evidence of the absence of any effort to minimize liability.

Bradfield, supra, at 27 (internal quotations and citations omitted).

 

When considering a Coblentz agreement on behalf of a claimant, make sure the judgment allocates between covered and noncovered claims / damages and is reasonable.  The same experts utilized to support the allocation can be utilized to support the reasonableness of the allocation for covered claims / damages.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

THE DEFENSE OF BETTERMENT IN CONSTRUCTION DEFECT DISPUTES

UnknownThere is an affirmative defense referred to as betterment in construction defect cases.  This is a defense raised to challenge the amount of damages incurred by the plaintiff when the plaintiff performs repairs BETTER than the original design / contract documents.  See Grossman v. Sea Towers, Ltd., 513 So.2d 686, 688 (Fla. 3d DCA 1987) (“It is significant on this point that neither the architectural specifications nor the structural design was deficient for the original intended purpose. The proper measure of damages, therefore, should have been the amount necessary to restore the deck to its original condition….”).

 

Say the contract documents called for cpvc water piping and as a result of an installation failure, the cpvc piping was replaced with copper piping.  A claim was asserted against the plumber for the costs incurred to replace cpvc piping with the copper piping.  But, the contract documents only called for cpvc piping which was an acceptable design requirement.  So that fact that this piping was replaced with copper piping constitutes betterment or a repair better than the contract documents.  The plumber should not be responsible for this betterment as it would give the plaintiff (such as an owner) a windfall since it is getting a repair better than what it originally bargained for in the contract documents.  Rather, the damages should be to restore the cpvc piping to its original planned condition.

 

The theory is the repairs are not intended to constitute a windfall to the plaintiff with repairs better than what the contract documents called for.  The defendant is only required to perform work pursuant to the contract documents because that is what it was paid to perform.  It was not paid to perform work that exceeds the contract documents; thus, costs of repair work that exceeds the contract documents are “unreasonable” and should constitute bettermentThe magic word is “unreasonable”  as the plaintiff will and should establish in its case-in-chief that the repairs it performed were reasonable and cost effective in light of the given defect or failure.

 

For example, in Arch of Illinois, Inc. v. S.K. George Painting Contractors, Inc., 288 Ill.App.3d 1080 (Ill. 5th DCA 1997), a factory owner sued a painting contractor for defective painting. The painter was only to apply one coat of primer and one coat of enamel for a contract price of $59,000.   After completion, the paint started to peel.  The owner put on evidence that the bids to repair the work were between $120,000 to $248,000 to sandblast the peeling paint, prime the surface, and repaint the factory.   The painter argued betterment.  The appellate court, however, applied this logic: “If a paint job is substantially or completely defective and peeling, then completely undoing the faulty work so that the structure can be repainted does not amount to unreasonable destruction of the contractor’s work.” Arch of Illinois, supra, at 1084.

 

In construction defect disputes, whether a plaintiff or defendant, consider the affirmative defense of betterment.  This consideration will help a plaintiff in putting on its case-in-chief and a defendant in putting on evidence to specifically challenge unreasonable / better repair costs.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

IS THE 10 YEAR STATUTE OF REPOSE FOR CONSTRUCTION DEFECTS REALLY A 10 YEAR STATUTE OF REPOSE?

UnknownIt is time for a very favorable case for an owner that experiences latent defects.  In construction defect cases, there is a ten-year statute of repose to sue for latent defects.  Specifically, under Florida Statute s. 95.11(3)(c), the “action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.  Stated differently, the latent defect lawsuit must be commenced no later than 10 years from the latest of one of the specified conditions or else the lawsuit is forever barred.

 

The question is when does the ten-year repose period really begin to run; what condition specifically triggers the running of the period.   The Fifth District Court of Appeal in Cypress Fairway Condominium v. Bergeron Construction Co. Inc., 40 Fla. L. Weekly D1097b (Fla. 5th DCA 2015) concluded that the statute of repose in a construction defect case began to run on the completion of the contract which was the date the owner made final payment under the contract. Naturally, the completion of the contract would be the latest condition and completion does not occur until the owner fulfills its obligation by making final payment.

 

What does this mean?  This means that the repose period does NOT commence when construction is actually completed or when the certificate of occupancy is issued.  Rather, it commences when the owner tenders final payment to its contractor (after it accepts the construction and punchlist work).

 

The ramifications of this type of opinion are unknown and potentially scary.  What if the owner withholds payment and does not make final payment for months if not years after the contractor completed construction and the owner has received a certificate of occupancy.  Maybe there is a dispute as to punchlist or warranty items that results in the owner not making final payment.  Does the owner get the benefit of withholding money or delaying making final payment?  Perhaps.

 

There have been recent cases that have been fairly generous to owners with respect to the statute of repose in construction defect cases.  Thus, if you are an owner and discover latent defects, consult with counsel because all may not be lost regarding a potential defect lawsuit.  And, if you are a contractor, do not automatically dismiss a construction defect lawsuit as being outside of the statute of repose and be sure to consult with counsel to best protect your interests.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

SLAVIN DOCTRINE LIVES AND BREATHES (FOR THE BENEFIT OF CONTRACTORS, SUBCONTRACTORS, AND DESIGN PROFESSIONALS)

UnknownThe Slavin doctrine lives and breathes for the benefit of contractors, subcontractors, and even design professionals!  The Slavin doctrine is a widely used defense in Florida by contractors in personal injury disputes where the contractor is being sued by a third party for injuries the third party suffered caused by defects in the contractor’s work.  This doctrine emanates from the Florida Supreme Court’s case, Slavin v. Kay, 108 So.2d 462 (Fla. 1959), which stands for the proposition that a contractor’s liability in negligence—the duty of care owed to third parties—terminates if the owner accepts the contractor’s work with patent defects.

 

The Slavin doctrine was recently applied in favor of a traffic signal design subconsultant (subcontractor) hired to design traffic signals at an intersection in McIntosh v. Progressive Design and Engineering, Inc., 2015 WL 71931 (Fla. 2015).  The design subconsultant was sued in negligence for a defective traffic signal that caused an accident that killed the plaintiff’s father. The subconsultant argued that the Slavin doctrine applied because a patent defect with the traffic signal was accepted by the Florida Department of Transportation (owner of the project). Although the jury found that the subconsultant was negligent in the design of the traffic signal, the jury held the subconsultant’s liability was terminated because the defect was patent and  accepted by the owner.

 

The plaintiff appealed. On appeal, the Fourth District affirmed the trial court explaining the application of the Slavin doctrine:

 

The Slavin doctrine was born of the need to limit a contractor’s liability to third persons….The Slavin doctrine considers the respective liability of an owner and contractor, after the owner has resumed possession of the construction, for injuries to a third person for negligence of the contractor in the construction of the improvement.

***

Under Slavin, the liability of a contractor is cut off [terminated] after the owner has accepted the work performed, if the alleged defect is a patent defect which the owner could have discovered and remedied. The contractor’s work must be fully completed before the owner becomes liable and the contractor is exonerated. The rationale is that [b]y occupying and resuming possession of the work the owner deprives the contractor of all opportunity to rectify his wrong.

 

McIntosh, 2015 WL at *3 (internal quotations and citations omitted). 

 

For a contractor to be relieved of liability under the Slavin doctrine, the defect MUST (1) be patent and (2) accepted by the owner of the project.  The Slavin doctrine would extend to subconsultants and subcontractors as long as a patent defect in their work was accepted by the owner. 

 

A patent defect is a defect that is known or obvious, or a defect reasonably discoverable with the exercise of due diligence / reasonable care.  On the other hand, if the defect is a latent defect (a defect not reasonably discoverable with the exercise of due diligence / reasonable care), the Slavin doctrine does not apply.  As reflected by the Fourth District in McIntosh, it is up to the jury to determine whether the defect is a patent defect or a latent defect. McIntosh, 2015 WL at *4. 

 

Acceptance occurs if the owner accepts the contractor’s work.  McIntosh, 2015 WL at *5.  “Acceptance is the term applied for shifting the responsibility to correct patent defects to the party in control [of the work].” Id.

 

Here, the jury found the defect with the traffic signal was patent and accepted by the owner.  Evidence apparently revealed that an employee of the owner discovered the defect before the car accident.  Evidence further supported the subconsultant’s position that the owner (Florida Department of Transportation) accepted the defect.  The subconsultant’s design was accepted and put out to competitively bid by the owner. At this point, the subconsultant had no control over construction or when the traffic signal would be operational.  And, when the accident occurred, the project had just been completed with the traffic signal in operation.

 

In a personal injury case against a construction professional (whether a contractor, subcontractor, design professional, or subconsultant) the Slavin doctrine remains a viable defense.  Most courts, as exemplified by this case, will let the jury determine the two fundamental components to the Slavin defense: 1) whether the defect was patent and 2) whether the owner accepted the contractor’s work with the patent defect.  In this case, the design subconsultant got the huge benefit of the jury’s verdict, rightfully or wrongfully.  This means that design professionals sued in negligence in a personal injury case should rely on the Fourth District’s application of the Slavin doctrine in this case to get this defense determined by a jury. The design professional should always be able to argue the owner accepted the design and put the design out to bid; the owner knew the design was not perfect and accepted patent errors and omissions in the design; the design professional had no control over construction or when construction would be completed such that the project would be operational / utilized by the owner; and the owner accepted the work by allowing the project to be utilized even though it had control to remedy the patent defect.    

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

MAKE SURE TO HAVE THE RIGHT WITNESS IN A CONSTRUCTION DEFECT CASE TESTIFY AS TO THE ESTIMATE

imagesIn construction defect disputes, the plaintiff (or party proving the defect) oftentimes relies on an estimate instead of actual costs. The reason being is that the plaintiff is awaiting money from the dispute in order to fund the repairs.  I have previously discussed that there is nothing wrong with a plaintiff relying on an estimate to support its damages in a construction defect dispute.

 

However, it is important when relying on an estimate to ensure that you have the right person or expert testifying so that there is NOT an issue with that estimate being introduced as evidence during trial.  If the estimate forms the basis of your damages, you want to ensure that estimate is admissible evidence at trial.

 

Recently, I wrote an article about the application of the business records exception to the hearsay rule.  This article discussed a case where a plaintiff owner tried to introduce its estimate / damages through its architect.  The problem was that while the architect generated the repair scope of work (which is common), the architect did not generate the cost / pricing information.  Rather, the owner’s general contractor generated the cost estimate / pricing information with input from subcontractors (which is common).  Thus, the cost estimate / pricing information was hearsay as it pertained to the architect that was not properly admissible under the business records exception to the hearsay rule.  But, this evidence would likely be deemed admissible if the general contractor testified as to the cost estimate.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.