by Ron Holmes
Construction across all sectors is booming. Cranes are everywhere. But, as we all know from history, the music will stop and the lawsuits will follow. The Plaintiff’s attorneys in California have elevated to an art form the filing of construction defect lawsuits immediately prior to expiration to the statute of repose in that state.
Beware the Statute of Repose
While not yet as common place in Texas, that practice is becoming more prevalent, especially by condominium owners associations. I recently served as lead counsel on behalf of a developer of a high-rise residential condominium project in Houston who, together with the GC and the professionals, were sued at the tail end of the statute of repose for construction defects, even though Hurricane Ike had wreaked havoc on the high-rise several years earlier (intervening cause be damned). I say that only to caution you to get prepared and be prepared for construction defect lawsuits because they will be coming after five, or seven or even ten years.
Will you be prepared?
There are actions you can take now that will be beneficial if, somewhere down the road, you find yourself being sued for construction defects. What can you do to better protect yourself?
I think most developers, contractors and professionals realize that the four year statute of limitations for construction defect lawsuits can be substantially extended by the discovery rule, but are eventually capped by the ten year statute of repose. That is a long time. First, you should review your current document retention policy. If you are trashing documents five to seven years after completion of construction, you might consider extending that time period to ten years and a few months. In the lawsuit I mentioned, a major sub had trashed all evidence of its insurance; unfortunately, so had his carrier. As a result, the sub could not prove he had the requisite insurance and found himself facing a breach of contract claim for failure to provide required coverage.
Review your Insurance Coverages and Amounts
You want to be certain you have adequate coverages and in adequate amounts that are on an “occurrence” basis and have a sufficient tail to get you through the statute of repose. So, gather complete copies of all insurance policies and endorsements that you were required to carry or elected to carry and that others were required to provide to you. Make certain, as an owner/developer, that you received copies of the additional insured endorsements you were supposed to receive. Although your construction contract may require the contractor to furnish proof of insurance by way of a Certificate of Insurance, a typical certificate of insurance (“Accord 25”) expressly disclaims reliance on the Certificate. Next, review all of the foregoing and compare to your contracts to ensure you have the coverages and the amounts you should. Then, summarize the foregoing, and keep all of those documents for at least ten years after completion of construction.
What Else Can You Do?
You can retain in advance a lawyer skilled in the handling of construction defect litigation to review your development/construction files now in order to determine if you have protected yourself as much as is reasonably possible for that future lawsuit or if something more can be done. A little money spent now may save you a great deal of money down the road.
At Holmes Firm PC, we have lawyers experienced in construction defect litigation who can assist you in determining your exposure and how to mitigate that exposure. When it matters, give us a call.