Focus Column Alternative Dispute Resolution
Los Angeles and San Francisco Daily Journal
September 19, 2005
Protocol for Repairs: The Heart of Construction-Defect Resolutions
The singular issue damning construction-defect cases from prompt and efficient resolution is the confluence of multiple interests, most of which are in a head-on conflict with cost-efficient resolution.
Without discussing the separate and conflicting interests of contractors, developers, insurers and lawyers, this article recognizes that the process of litigating and resolving these disputes has been fraught with waste and inefficiency and that a sane and disciplined approach to resolution is required.
Construction-defect cases are product-liability claims. They should start and conclude based on an honest and objective analysis of the conditions that reasonably might fall below acceptable construction standards and that are producing damage or likely to produce damage.
Getting through the interests requires that the plaintiffs and developer work cooperatively with a neutral to reach an objectively verifiable and fair repair protocol. To do this, a claimant should produce a confidential and mediation-protected defect list and cost of repair. This should not be the worst-case scenario that would be presented to a jury. It should reflect an honest and conservative analysis of conditions and a reasonable bid based on cost of repair.
Once this is completed and the reports are produced, the developer's retained consultants should review and be prepared to accept or present appropriate contrary opinions regarding the issue or the repair. They should meet and confer with a neutral mediator to arrive at a mediated scope of repair. The mediator should be empowered to retain a neutral general contractor. This contractor resolves issues on which the plaintiff and developer's consultants cannot seem to compromise. The neutral produces a firm bid to do the work identified in the mediated scope of repair. This bid, plus attorney fees and hard costs (reduced to reflect a reduction of time committed and risk incurred), forms the basis for settlement of the claims. Claimants should agree to accept this amount if offered within 120 days of its determination (as long as the bid remains open). This delay permits the builder to meet with its subcontractor's insurers in an effort to fund the agreed amount. When meeting with the subcontractor's insurers, the builder should be prepared to articulate a percentage of the total costs requested from each participating subcontractor. Rather than spending enormous sums on additional consultants to split hairs on specific issue and allocation analysis, the carriers for the subcontractors should recognize this as an art, not a science. If the overall settlement number has been achieved through the process outlined above, it will represent a fair and bid-produced repair.
The developer should identify subcontractors by fitting them into percentage of settlement slots, such as 1 percent, 5 percent, 8 percent, 10 percent and 15 percent. When the developer's percentage for supervision is added, the total should be 100 percent of the settlement amount.
All parties should understand that this allocation is of a substantially compromised claim and that, if resolution is not obtained, the mediation process ends, and the cost of repair is higher; attorney fees are higher and litigation costs, as they generally do, substantially exceed the settlement value of the claims.
If full funding of this mediation-compromised repair protocol cannot be obtained, the developer and its insurers should accept the reasonable contributions committed, fill the gap and litigate to recover indemnity under their contracts. Juries are sympathetic to builders who step up and repair agreed adverse conditions. The case is trimmed and much easier to prosecute. The cycle of costly inefficiency is broken, and fees are recoverable, generally, under subcontract agreements.
If not settled, mediation efforts should cease until all relevant discovery concludes and the matter is close to trial. The mediation process should no longer be a component of litigation of the claims.
Parties must understand that the benefit of the expedited claim evaluation and resolution process is to avoid litigation expenses and risk and to produce a fair method to address homeowner claims. That is the reward and the incentive to work together, cut through the competing interests, and resolve the claim based on the real issues at hand.
About Alexander S. Polsky, Esq.
About my ADR practice: The Los Angeles and San Francisco Daily Journal newspapers once wrote: “Alexander S. Polsky, Esq . has demonstrated a unique ability to resolve particularly complex and/or highly emotional cases as a mediator, arbitrator and discovery referee. In doing so, and in naming me one of the Top 20 mediators and arbitrators in California for three consecutive years, this publication and the lawyers who participated in the survey honored my efforts in this field in a most humbling manner. I am equally honored that local bar association annual reviews consistently accord high marks for fairness as an arbitrator and tenacity and commitment as a mediator. I have participated in the resolution of over 7,500 disputes nationwide during my 27 years of practice.I am available to mediate and arbitrate cases worldwide. In the United States, I have ADR offices (JAMS) in Anaheim, Atlanta, Boston, Chicago, Dallas, Denver, Las Vegas, Los Angeles, New York City, Philadelphia, Sacramento, San Francisco, San Jose, Washington DC.
I am pleased to serve on the faculty of the University of Southern California where I designed and deliver a course on Negotiation and ADR. I am equally pleased to deliver training in these areas to law firms, associations and corporations worldwide. I am available exclusively through JAMS ® . To contact me via email, send correspondence to: apolsky@jamsadr.com or direct dial (714) 501-1321, via JAMS ® (714) 937-8233. To schedule a matter contact CEdwards@JAMSadr.com . In addition, hot-linking to my web site will provide access to downloadable copies of my specialty and general CV's as well as articles I have published. If you have read this far, I am most appreciative. Thank you!
- My practice is as a dispute resolution professional and as a special master and arbitrator. As such, it covers many disciplines. They include:
- Appellate dispute resolution
- Business and Class Action
- Construction defect, accident and E&O
- Domestic relations and child custody
- Employment and sexual harassment
- Environmental exposure & remediation
- Franchise disputes & class actions
- Government liability/code enforcement
- Insurance coverage, E&O and bad faith
- Labor/management disputes/fact-finding, wage & hour claims
- Maritime
- Medical negligence & devices (neutral & party arbitrator)
- Product liability, including mass tort under Federal MDL
- Real estate-transactional and E&O (licensed real estate broker)
- Serious injury and wrongful death
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