Evaluation and Settlement of the Construction Defect Claims or Suits

Construction Defect Negotiation

Negotiation is an art that is impossible to teach. It is not the same as haggling at a bazaar over the value of a brass pot. It is an art by which one person convinces another that entering into an amicable agreement where both parties leave the negotiation session somewhat unhappy is better than leaving it to a jury of 12 persons who know almost nothing about construction and construction defects to determine the amount needed to resolve a lawsuit or a claim. The effective, totally prepared, negotiator will resolve the dispute less unhappily than the other side, while also convincing the other side that he or she was at a disadvantage.

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To reach such a resolution it is necessary for both parties to be completely prepared with all facts available. Each repair estimate must have been thoroughly reviewed and compared so that both sides recognize that they are comparing apples to apples, lumber to lumber, not apples to pomegranates. The parties and their counsel will then advise each other of their positions with regard to the settlement of the structure claims based on a mutual understanding of the objective value of the loss determined by a comparison of the repair estimates. If the only damage is to property, settlement should be relatively easy if there is no issue of liability, statute of limitations, or statute of repose that could prevent the plaintiff from moving forward to trial. If any liability issues exist, once damages have been set, it is time to seek the assistance of a mediator or consider submitting the differences between the parties to arbitration.

When negotiating any settlement, the measure of damages should be considered. It is usually not the cost to repair but is, rather, the difference between the value of the property before the loss and the value of the property after the loss. Consideration should also be given to the fact that, even after repairs are completed the property may, as a result of stigma, have lost value which should be resolved by the calculation.

There is a disparity between states on the subject. For example, in Kansas, where repair fails to restore the property to its former condition and value, the court can award both repair costs and the loss of value as reasonable statement of damages, as happened in Venable v. Import Volkswagen, Inc.  In Kansas Power and Light Co. v. Thatcher, the court adopted the principle of contract damages that requires the court to make the damaged party whole by putting that party in as good a position as the party would have been had the contract been performed.

To reach a settlement both parties must find that the agreed cost to repair is less than the diminution in value of the property as a result of the defects and that once repaired the value of the property will be the same, or greater, than it was before the defect caused damage or as if there never existed a construction defect.

If the plaintiff and defendant(s) can be satisfied that the estimates cover the entire scope of loss to which he or she agreed, the settlement of a structure loss will be amicable. Preparation, open sharing of information (that would be presented to a court regardless), and calm deliberation will resolve complaints, claims, or lawsuits that seem impossible to resolve when the claim was first presented.

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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