For this weeks Guest Post Friday here at Construction Law Musings, we welcome back Melissa Dewey Brumback. Melissa (@melissabrumback) is a construction attorney and partner in the firm Ragsdale Liggett, PLLC in Raleigh. Although not as old as some crusty lawyers, she has already spent over a decade representing engineers and architects, advising them on contract proposals to limit risks, and defending them when litigation does arise. She is the author of the award-winning Construction Law in North Carolina a blog dedicated to the A/E community. Melissa is rated AV, the best rating of the Martindale Hubbell lawyer rating system, is a certified LEED Green Associate, and serves as President of the RL Mace Universal Design Institute.
Nixon. Clinton. Edwards. It’s always the cover-up that brings a person trouble. Likewise, attempting to ignore or cover up a possible claim against your work on a construction project can get you into financial trouble.
No one likes to face the reality of a possible professional negligence claim. However, you must report any such claim as soon as you become aware of it. Almost all insurance companies (and, specifically, Errors & Omissions policies) require notification right away. Unlike a minor fender-bender, where you may be just as well off settling the case without reporting it to your insurance company, a construction lawsuit can mean big bucks. A typical construction lawsuit can cost well over $100,000, and can take thousands of hours of man-hours. If you face a claim of negligence, run, do not walk, to your carrier and ‘fess up.
For starters, if you do not report a possible claim right away, the insurance carrier could perform a denial of valid insurance claim. Sure, no one likes to admit a possible mistake, or risk having their insurance premiums increase, but even worse would be to pay for insurance, delay reporting the claim, and then face the possibility of a claim denial.
Just as important, though, is that your insurance carrier is not the enemy. They have a vested interest in keeping you out of expensive litigation and having you remain a long-time, paying customer. Most construction liability carriers have experienced lawyers on staff who can help you minimize potential claims if you contact them immediately. Sometimes, the carrier will hire a local construction law attorney for you, at their expense. They can help you to respond to letters claiming errors or omissions in your work, so that you are protected from later lawsuits. This service is called “loss prevention.” It is generally not considered a claim (since no lawsuit has yet been filed), you usually do not have to pay your deductible, and you get free, and often critical, assistance at the first whiff of potential trouble.
If you do not have insurance (although really, you should), you still should consider having a lawyer assist you behind the scenes to clear up any potential problems at the first sign of trouble, before they become exacerbated. Some clients worry that if the owner or contractor knows they’ve “lawyered up,” that it will make matters worse or somehow indicate they are worried about their design. Don’t let that stop you. No one has to know that you’ve gotten a lawyer involved. I’ve ghost-written many letters for clients, that they then put on their letterhead and send out to document a sticky situation. The other side is none the wiser.
Be honest and realistic about potential claims, and get help early. You’ll be glad you did!
Melissa and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.
Thanks for the opportunity to post again, Chris!
Glad to have you again. Always good to get the AE perspective.
Thanks for the advice, Melissa. Most of this is foundational, but unfortunately is among topics not taught to A/E’s as essential – or simply ignored. A/E’s historically have not been among the superior risk managers.
I do want to comment on your suggestion regarding ghost letters. My own experience on the forensic side (for both A/E’s and those opposite) is that most ghost letters are immediately detectable. This is due to the structure, phraseology and terminology common to attorneys but seldom used by A/E’s in their communications. While the letter’s true authorship is intended to be concealed, usually that fact is hardly ‘invisible’ to the educated reader.
A technique that works well is for early, informal letters to be drafted by the A/E in his/her own format and language style, but with the sage oversight and advice/suggestions of counsel or consultant. As a consultant to those who are on the cusp of a dispute – but not yet ‘lawyered up’ (for whatever reason) – I often guide preliminary communications to ensure they are appropriate in tone, but couched in language my client is accustomed to using in dialogue with others in their day to day dealings. This may not always prove successful, but when informal exchanges take place early and in good faith, the odds are at least increased in favor of resolution short of litigation.