7. Strategic Use of Experts
For homeowner claims of construction deficiencies, Chapter 40 requires the use of an expert in most CD matters. In order to lodge a successful defense against a claimant who has retained a team of CD experts requires that other parties also retain appropriate CD defense experts.
The use of defense experts falls into two categories within CD matters: (a) in-house expert-employees; and (b) experienced CD experts. Each category has its own unique role within the process.
In-house experts are critical for helping to determine matters, such as the scope of work performed by the party, and the cost to repair the defects as alleged. Their participation at mediation conferences is also helpful to bring appropriate defenses to the table. In-house experts are the best qualified to discuss issues such as the method of construction employed, quality control standards, and scope and timing of work performed.
Experienced CD experts are critical for their understanding of the CD process and their experience in laying the groundwork for successful mediations and into trial. CD experts are well-versed in the applicable construction laws, codes, ordinances, and standards of care within the industry. They know the type of claims that developers’ counsel will typically allege based upon a subcontractor’s particular scope of work in conjunction with the claimant’s allegations, and can inspect the site and review the client’s job file with an eye toward gathering appropriate defenses and information to reduce settlement costs.
Each party to a CD matter will retain at least one CD expert, and, depending on the issues involved, it is common for a party to retain three to six experts or more (e.g., civil, mechanical, structural, plumbing, electrical, cost-estimation, statistical). Each expert will be selected based upon the individual’s ability to best defend its client’s position; therefore, the experts’ opinions will, in most instances, be adverse to the other parties’ experts. There is room for interpretation within the statutes and codes, as well as with one’s opinion on the likely cause(s) of the allegedly defective conditions. It is thus important to retain an expert qualified to address these considerations. It is also imperative to retain a CD expert who routinely practices in this market, as that person is familiar and better qualified to defend against the rationale used by many of the local plaintiffs and developer experts.
CD experts also have experience with depositions and in preparing their clients for trial. They understand the best methods of collecting data and organizing their files, and they are familiar with the applicable laws of evidence.
CD experts, however, are very expensive, as their expertise is so specialized and unique to this area of the law. Oftentimes the cost of expert witnesses exceeds the cost of legal fees. Our law firm typically pays the expert witness directly, which is one reason why it is vital that our clients maintain a current balance with our firm.
8. Defenses and Considerations
There are numerous defenses available to a party, for example the issue of failure to properly maintain the construction by the homeowners or the HOA. Such defenses primarily relate to mitigation of damages or the concept of contributory negligence (which arguably may relate to the issue of severability of claims in the “joint and several liability” concept) and are in no way an absolute bar to liability. Our firm will vigorously use any and all defenses applicable to the situation. However, that these defenses will usually be most beneficial during settlement negotiations, as opposed to during trial, for the reasons outlined above.
There are also considerations such as the danger of establishing a precedent by regularly settling too soon, whereby the settling party gains a reputation for prematurely offering a monetary settlement in exchange for a release. Such a reputation could foster additional unwarranted claims in an attempt by the other party to increase overall contributions to the claimants’ damages.
Just as it is dangerous to settle too early, it is also dangerous to wait too long to settle. Costs and fees continue to mount as the case proceeds. As most of the parties reach settlement arrangements, the developer and general contractor claimants often begin to realize that they are potentially liable to the claimants for more than the value of the remaining third-party settlements. This may discourage acceptance of lower settlement offers, even ones that would have been accepted earlier on in the matter.
Finally, as discussed above, Nevada law is strongly in favor of the homeowner-claimants. A defending party may “win” as a prevailing party, yet still be liable for fees and costs far in excess of the actual “defect” cost. This results in perhaps winning the battle over the defect, but losing the war over fees and costs, which can far exceed actual damages.
9. Insurance Considerations and Attorneys’ Fees
Until such time that insurance coverage is determined and the appropriate tenders are accepted, the client will typically pay for its defense fees out of pocket. These fees are often later recouped from the date of tender, once the applicable deductibles or Self-Insured Retention amounts are reached.
Our firm is seeing an increasing number of instances where carriers delay coverage decisions for periods of six-to-twelve months. Unfortunately, Nevada law does not presently compel a carrier to immediately render a coverage decision. Nevertheless, we are being compelled to exert regular pressure on carriers to make a coverage decision. Often we have to threaten suit and in some cases actually file suit to determine if coverage exists.
Additionally, due to the increasing number of CD claims, carriers are becoming more creative with their exclusionary language. The policies are drafted with tighter language specifically written to help avoid claims. Hence, even if the party has a valid claim within the coverage period, the policy language may operate to exclude coverage.
The summary of construction defect litigation matters outlined above is only an overview of some of the main issues involved and is not meant to be exhaustive. The bottom line is that each matter must be analyzed individually with the goal of obtaining a total release from the claimants’ allegations at the least possible cost. This requires that a business decision be made based on a comprehensive analysis and understanding of the pertinent facts in each matter.