What advice do you have for avoiding the risks, costs and expenses presented by claims and disputes? 

Brian A. Wolf 
Smith, Currie & Hancock LLP 

Construction defect laws requiring pre-suit proceedings are intended to reduce litigation but result in extensive costs if not managed properly. Every contractor can do three things to reduce construction defect costs. First, modify or opt out of the process. Many state laws allow contractors to opt out of pre-suit procedure altogether. Doing so will avoid all associated costs and limit pre-suit discovery. Or, contractors may agree upon modifications to the procedure in the prime contract to help resolve disputes pre-suit while giving the contractor more control over the process. 

Second, negotiate reasonable cost shifting or sharing terms, and limit the time invested in the proceedings whenever the law allows. Costs may be shifted to the owner and subcontractors. Give consideration to establishing an agreed fund to cover the costs incurred in a pre-suit proceeding. Also, verify with the insurance carriers whether applicable insurance will pay costs resulting from pre-suit proceedings, including costs of retaining experts. 

Third, consider proactively hiring a consulting firm to identify conditions requiring repair, monitor the repair work and confirm completion. The benefits are increasing quality, preempting owner complaints and, sometimes, reducing insurance costs. 

Mark S. Dachile 
Senior Partner
Huddles Jones Sorteberg & Dachille, PC 

The first step is what I call “risk management through contract negotiation.” Although the specifics of any given dispute may be difficult or impossible to predict, the types of problems that lead to disputes can be anticipated and therefore should be addressed in the parties’ contracts. Clear contract provisions that appropriately allocate responsibilities, liabilities and procedures go a long way toward helping ensure that problems are resolved prior to and/or as early as possible in the claims/disputes process. 

The second step is “using the contract to solve the problem.” Although the problem may be too complicated to quickly determine who is liable for it, if the contracts were appropriately drafted and negotiated, the parties should be able to determine who is responsible for taking action to resolve it. Prompt resolution mitigates the overall costs. 

The third step is “realistic early assessment.” In many instances, there will be two sides to the story. More often than not, however, one of the sides is objectively more right than the other. Unless and until both sides have done sufficient investigation to determine who has the better argument objectively, it is unlikely that a claim can be settled. Getting to that realistic assessment earlier rather than later saves money.