Market v. Owner of New Residential Tower

The Situation

The construction project in this scenario was a high-rise luxury residential tower in Miami, Florida. The project itself completed construction in 2022, and the building has been occupied and operating since then. During construction of the project, over a six-month period in 2021, eight separate and discrete water loss events occurred at different areas of the tower while construction was underway. Damage from the loss events ranged from high to low compared to the latter loss events. However, the owner had claimed that all eight loss events were only one loss event for the purpose of deductibles.

In the beginning, J.S. Held was retained to review the claims from the dates of loss, and a builder’s risk property damage consultant captured photos of damage, assessed unimpacted project work, and monitored the progress of repairs. The repair claim evolved into a delay claim initially put forward by the contractor. The contractor had claimed that the loss events in aggregate delayed their ability to achieve temporary certificate of occupancy (TCO) milestones. The contractor’s delay claim was followed by a delay claim from the owner for soft costs. However, the owner’s delay claim was based not on delays to TCO but delays to the owner’s ability/willingness to confirm final acceptance of residential units—typically a higher standard than TCO.

How We Advised

First, J.S. Held provided builder’s risk property damage consulting services to review the contractor’s repair cost claim. While this process was relatively smooth, the contractor followed up the repair claim with a time element delay claim for extended general conditions. The contractor had claimed that due to loss-related repairs, their ability to achieve TCO milestones was delayed, and they incurred extended fixed costs due to having to stay on the project longer than expected. J.S. Held reviewed the project documents and published a delay report that found zero calendar days of loss-related delay to the TCO milestones. This was primarily due to ongoing concurrent delays on the project, not the loss events.

The contractor did not agree with the report and retained a consultant and counsel to continue to pursue their delay claim. Additionally, the owner had submitted a delay claim for soft costs, but they measured delay to a subjective post-TCO milestone which would have included punchwork and other final touches that were not necessarily required for occupancy but were required for substantial completion.

The problem for the contractor and the owner was that in their entirety, the contemporaneous records (schedules, monthly reports, and other items) consistently documented monthly that the loss events were not driving the longest path (critical path) of the project. For purposes of delay-claim submission, their strategy was to argue that those documents from 2021 and 2022 were wrong, and that we (the market and J.S. Held) should entertain an attempt from the insured and their scheduling consultant to rewrite the historical record, which told a different story more conducive to presenting a loss-related delay claim.

The owner’s scheduling consultant put forward a highly hypothetical “impacted as planned” analysis that excluded all of the non-loss-related delays and issues that occurred in the post-loss period and focused only on the consultant’s definition of loss-related activities and their interpretation of how it should interact with the contract work activities for purposes of forecasting a hypothetical delay period due to the loss-related repairs.

J.S. Held’s scheduling consultants reviewed the delay claim and found it to not only contradict the entirety of the historical records, but it also built upon a foundation of assumptions that were demonstrably false. While J.S. Held had previously reported on the historical records to the market, this time J.S. Held provided reporting that showed how the owner’s consultant’s hypothetical model was flawed and inappropriate for proposing loss-related delay. Their consultant essentially reviewed a handful of photographs and took the liberty of rebuilding the contractor’s pre-loss native schedule from years prior to include what they considered additional as-built progress and logic changes that the contractor should have considered at the time.

During mediation, J.S. Held presented to the market its review of how the insured’s consultant’s assumptions, related to as-built progress at the time of the loss events, were false and portrayed the project as being further along than it actually was to effectively show less remaining work than there actually was; the ultimate goal was to theorize that the project could have finished much earlier than possible. J.S. Held also demonstrated to the market that schedule changes made to the contractor’s contemporaneous native schedule by their consultant were unreasonable and impractical. The claim is currently in mediation, and the owner’s consultant has not directly responded to J.S. Held’s findings of their as-built progress and schedule modifications.

Key Contact

George Myers
Assistant Managing Director
Builder's Risk Practice
+1 813 676 1094
[email protected]

Related Practice Areas

> Construction Insurance Claims Services
We have a dedicated team of experts that have consulted on and testified in complex matters involving buildings and infrastructure that have been damaged during the course of construction. Our team of global experts calls upon decades of technical field experience working for many of the largest commercial contractors in the world. We have specialized expertise in delay analysis, schedule review, construction contract interpretation, repair cost review, and estimating.

>Construction Scheduling & Planning
J.S. Held provides unrivaled expertise in schedule development and analysis in all aspects of construction scheduling, from project planning through dispute resolution. Complexity in construction projects calls for in-depth knowledge of project planning to develop efficient and effective schedules. We provide project support throughout planning, scheduling, and, if needed, dispute resolution.