Construction defect claims and cases are scenarios wherein physical loss or damage is claimed to be related to defective building elements that will require repair or replacement. Typical defect claims and cases will involve exterior building enclosures or the building structure. However, it is important to note they can also include other building systems such as electrical, mechanical, or plumbing. This article will focus on exterior building enclosures.
The cause of a defect can be related to design, use of incorrect or unapproved materials, defective materials, improper techniques, improper installation, or poor workmanship. In addition to repair or replacement of the defective building elements, the extent of the claim will likely involve repairs to other building elements that have been impacted by the defective elements or which will be impacted by the replacement or repairs.
The proposed repairs to correct defective conditions can be extensive, including the replacement of the complete exterior enclosure system of the building (windows/glass, stucco, brick, etc.) and, in some cases, demolition and replacement of the entire building. In many cases, inspections and/or tests have been performed at representative locations to determine the extent, if any, of the defect and resultant damage. The claimed defect should be supported by detailed engineering analysis as a basis for any failures related to the defects that have occurred. The construction defect claims typically also include a repair estimate which should be supported by detailed quantities and unit prices. The basis for timing or age of the defect (or statute of limitations) can vary based on the location/state.
Depending on the defect issue and the claimed extent of damage, the construction defect claims can be quite broad and extensive, but the analysis of most defect claims will include an investigation of the defects and an analysis of the claimed costs.
To properly review construction defect claims, there are several parts of the claim that require thorough investigation. These key parts of the investigation include:
In order to perform an analysis of the (estimated?) cost to mitigate the defect and damages, the following steps are typically performed:
In some cases, if the engineering verification of the claimed defect results in a different or abbreviated repair scope of work, an independent repair estimate may be required to reflect this alternate scope of repairs. If singular or multiple policy periods are related to the defect damage in question, an allocation of the repair costs related to the specific time period(s) may be required.
In the cost analysis of the claim, it is also important to consider segregating (into individual “buckets”) the costs for repairing defects, resulting damages, repairs related to betterments, code upgrades, industry standard upgrades, and repairs related to typical building maintenance.
Construction defect insurance claims require investigative and design data to allow for proper estimating. The scope of repairs should be reviewed in detail to account for any betterments or upgrades in the proposed repair work. Detailed repair quantities should be developed in order to validate to amount of work for each repair element.
Jim Borders is a Managing Director in J.S. Held’s Builder’s Risk Practice. He is an exterior enclosure and façade expert with over 25 years specializing in the curtain wall and glazing industry and has experience working on numerous types of buildings across the U.S. including commercial, hospitals, research, stadiums, airports, hotels, residential, education, and governmental projects using typical curtain wall systems, cable suspended glazing systems, and custom fabricated glazing systems. Jim also performs contract management and negotiations, estimating, schedule development and analysis, design development, QAQC development and cost tracking and analysis, curtain wall performance mockups, design and incorporation of fire safing systems into curtain walls, and system failure analysis.
Jim can be reached at [email protected] or +1 206 895 9511.
Granger Stuck is an Executive Managing Director in J.S. Held’s Builder’s Risk Practice. His career spans more than 30 years as a construction industry professional, with more than $2.1 billion and 6.8 million square feet in successful construction projects for two of the nation’s top contractors. Granger has worked on numerous consulting projects and disputes involving delay claims, cost claims, and other construction related disputes. He focuses primarily on providing schedule analysis to determine project delay, analysis and estimating of costs, and litigation support.
Granger can be reached at [email protected] or +1 206 895 9501.
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