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Five Construction Mistakes That Consistently Hurt Contractors—Part 1

“Smart people learn from their mistakes. But the real sharp ones learn from the mistakes of others.”
―Brandon Mull, 2007.

“Whose fault is it?” That is usually the question in any lawsuit. This is especially true in a lawsuit involving construction defects. The owner, developer, architect, engineers, general contractor, and subcontractors all blame each other. That means the attorneys for the parties will be looking for opportunities to shift blame. I have consistently encountered five mistakes that contractors make that open the door for someone to shift blame in their direction.

Mistake No. 1.   Installing your work over someone else’s defective work

Frequently, areas of construction operate like units with several trades all working on the same area. For example, installing windows could involve framers, a window installer, a window manufacturer, a waterproofer, and an exterior cladding installer. As an example, assume you are hired to install windows. You notice, however, that the window openings have been reverse flashed by the framers so water will not drain properly. To be clear, installing flashing is not your responsibility, but you know the flashing is incorrect.

Unfortunately, if the windows leak, everyone will be sued. Of course, the problems with the windows leaking could be related to something else entirely, like problems with the roof or foundation, which brings up a whole other set of problems. But you install windows over defective flashing, there will likely be a problem with the window. Ultimately, experts may determine it was someone else’s fault, but it will take months of litigation to reach that point. Rather than put yourself in that position, if you notice a problem with another contractor’s work in the same area where you are working, it is better to alert the general contractor in writing and obtain their written approval to proceed or have the work corrected before installing your work.

If you fail to give written notice to the general contractor of any suspected defects before proceeding with your work, then three things usually happen. First, as I mentioned earlier, a problem will arise in the area that will trigger everyone who worked on that area being sued. Second, construction contracts often have clauses saying you are representing that you have inspected the work of others and did not find any problems before you installed your work. Finally, one of the attorneys will usually ask a line of questions in your deposition trying to make the point that you hold yourself out as an expert in your trade and everyone is relying on you to be an  expert so you should have found the problem and warned someone instead of installing your work over work that you knew was defective. The argument that it was not your area of responsibility may not be enough to allow you to be dismissed from the lawsuit.

Mistake No. 2.   Failing to require insurance or a subcontract from your subcontractors

When there are construction problems that cannot be resolved, litigation ensues. The owner sues the general contractor who then sues the subcontractors. The general contractor usually requires all of the subcontractors to have insurance, to make the general contractor an additional insured on the subcontractor’s policy, and to sign a written contract. The contract has numerous duties, makes several representations, and is there to protect the general contractor. The case proceeds and is usually resolved by insurance companies. The more insurance carriers available to help resolve a case, the easier the case usually is to settle.

The problem is if a subcontractor hires another subcontractor to perform the work without requiring a contract and insurance, then some of these protections will not be present. Many times, even if there is a subcontract, it has very few of the same protections that general contractors insist on having. Likewise, insurance may be non-existent.

I understand that often subcontractors may be small, family-owned operations or individuals neither of which can afford insurance. I also realize the cost savings these small subcontractors provide makes them very attractive to use. You must realize, however, that it is risky. You are going to be responsible for their work, and you will be the target in the litigation because you have the insurance and you entered into the original contract. That means you need to be sure their work is correct because you will be the one standing behind it.

This is the end of part 1. Because of the length of this post, I am breaking this discussion into two posts. In the continuation, I will discuss three other mistakes to avoid.

Scot Pierce, Esq. is a trial lawyer and transactional attorney.  Click on his picture for his profile page.

Disclaimer: This post contains general opinions and analysis and should not be treated as advice for any specific case.

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