Contractors live with construction risk every day, both in workplace safety and a whole slew of financial risks and legal disputes. It’s no secret that many private-owned construction companies end up closing shop in less than a decade, with smaller contracting firms are especially prone to risks of bankruptcy.
Legal claims (i.e. construction defects) can be especially insidious due to their tendency to catch a contractor years after the work was complete. It’s one of the reasons why license boards require contractors to have insurance. However, insurance does not always cover every claim so there is a risk that a contractor still has to pay out.
From our years providing expert witness services for thousands of construction litigation cases, VERTEX’s construction claims consultants believe that proactive risk management is a key strategy for helping avoid many kinds of claims. The following is a rundown of different types of construction claims any contractor should know about.
Common types of construction claims contractors should look out for
Construction claims can arise out of anything where a party asks for compensation outside the provisions of the contract. While the following list is far from complete, it should help you get a general idea of the type of disputes that most often result in problematic legal proceedings.
When accidents occur on the job site, whether they involve workers or bystanders, a claim is often filed alleging that safety standards were not followed.
When construction activity causes damage to the site or adjacent property, the contractor is apt to receive a damage claim from the client.
Change of Work
These claims occur when the client and the contractor disagree about what does or doesn’t fall within the scope of the work in question, usually involving a dispute over a contractor (or subcontractor) change order.
In certain cases, contractors need or are demanded to exceed the agreed-upon budget in order to be on schedule. When the client and the contractor can’t agree on whose responsibility it is to cover these extra costs, a schedule acceleration claim usually arises.
These claims are filed when a project takes longer than it was agreed upon in the contract, which in turn leads to productivity or financial loss. This can arise from situations outside of the control of the contractor such as weather or owner-caused delay.
Differing Site Conditions
This type of claim can arise when the conditions at a construction site are considerably different from those previously represented in the contract, or the actual conditions are not those primarily encountered in the area.
This type of claim often occurs long after the contractor has finished construction, where the client alleges that the contractor’s work product contains errors that are causing damage to the building and/or property within.
How to best avoid these types of construction claims?
No contractor or project is claim-proof. Still, there’s a number of steps you can take to minimize the chance of being dragged through costly and unpleasant litigation.
Well written and well-understood contracts
Business is all about communication, and a relationship based on mutual understanding makes it infinitely easier to resolve any issues that may arise. Quality contracts that clearly define the terms and responsibilities are a great bulwark against construction claims. Contracts that aren’t one-sided but instead have a fair allocation of risks across the parties who are best able to manage them greatly help reduce the risk of disputes.
Good project record keeping practices
The process of construction has many moving parts working on cohesion. One risk that comes with this flurry of information is accidentally acting on outdated, unclear, or incorrect information. By keeping an accurate record of activities on the job-site and work the contractor has done, they are able to communicate more effectively with the rest of the construction team and help avoid and resolve disputes early before they can turn into claims. In the worst-case scenario, good project records help the contractor’s legal team in defending them against allegations.
Good quality assurance practices
Effective quality assurance programs help a contractor manage many of the risks regarding the workmanship of their own and other contractors on the project. Having a record of quality control inspections also helps with the record keeping practice of a contractor.
Good construction safety practices
For contractors, protecting people and property during construction is a paramount responsibility. Having a construction safety program in place that can track and correct safety issues helps manage the risks of injury. Another great practice is making sure that every person on the job site has completed OSHA training and has their OSHA 10-Hour or 30-Hour Construction Card.
How Can VERTEX Help?
When things heat up and you and the other party cannot reach an agreement, your best option is to involve someone else to help mediate. But not just anybody. To make sure the situation is resolved in your best interest, with the least hassle possible, you should be supported by experienced construction experts.
Our team of construction professionals has extensive experience with all types of construction-related issues, with decades of experience both on-field and in the courtroom. We aim to help solve complex problems and communicate the industry’s jargon in clear straightforward terms.
This article was originally published by Xpera Group which is now part of The Vertex Companies, Inc.