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 – What is “construction defect”? – How big a threat is construction defect litigation? – How common are CDL lawsuits? – What are the costs of construction defect litigation? – What issues cause construction defect litigation in the first place? – How does the CIA system work? – How much money could be saved with CIA’s risk management software system? – What makes the CIA system cost effective? – What if construction defects don’t get discovered and happen anyway? – If a CIA client is sued anyway, how can the system help during litigation? – What do CIA’s services cost? – Who does the work? – How do clients access the photos? – What is wrap insurance and why is it needed? – Why are construction defect lawsuits so lucrative? – How can CIA lower insurance costs? – Why hasn’t this system been offered before? – When is construction defect litigation going to stop? – What makes CIA different than any other third party quality control company? What is “construction defect”? Almost any condition that affects the value, use or appearance of residential, commercial or retail property can be a construction defect. (return to top) How big a threat is construction defect litigation? Construction defect litigation (CDL) has become a pandemic throughout the United States. In San Diego alone, it is reported that virtually 100% of all multi-residential construction projects built since the mid 1980s have faced litigation claiming construction defect within the ten-year statute of limitations. (return to top) How common are CDL lawsuits? Construction defect litigation plagues the entire residential, commercial, retail, and specialty construction industry as a whole. CDL has become so pervasive and lucrative for attorneys in California that every multi-family construction project of 20 units of more built in the last two decades has been litigated against. (return to top) What are the costs of construction defect litigation? Construction defect litigation adds an average of $23,000 per unit on all multi family residential projects of 20 units or more. The costs of wrap insurance policies and other protective measure to developers threaten to make otherwise viable projects too expensive to build. In many cases, developers are forced to directly pass the costs on to the consumer. (return to top) What issues cause construction defect litigation in the first place? Mistakes happen on construction sites. Sometimes, materials are faulty. More often than not, workmanship is incomplete or flawed. Without the type of protection that CIA offers, there is a risk that construction defect issues may go unnoticed and uncorrected, and covered up. When there are failures such as leaks, acoustical issues, noise or structural failure, it is not always clear which of many subcontractors or vendors are at fault. Without the benefit of CIA’s services, the situation is investigated and argued over, usually in court. (return to top) How does the CIA system work? CIA photographically documents construction projects on a daily, weekly, monthly, or as needed basis and upload the photographs in real time to a secured project web site for its clients and other interested parties, which may include project owners, developers, subcontractors, lenders, insurance agencies, and fund control agents. (return to top) How much money could be saved with CIA’s risk management software system? Since its inception, CIA’s imaging procedures have already successfully mitigated exposure to future construction defect litigation costs that would have cost 15% of the retail value of a $43 million construction project, or $6.45 million. (return to top) What makes the CIA system cost effective? CIA can assist in the tracking of all the work being performed by each and every contractor on the job at every step. Based on the photos being taken and the job schedule, CIA can help its clients identify who was where, at what time, and working on what portion of the building. This can be done without tearing out walls or fixtures to examine the point of failure. “In the end, CIA’s system provides accountability, quality, confidence, and will lower the cost of construction,” said Blackburn. “Builders and developers using CIA will be able to gain an advantage over their competition by offering a higher quality end product at a lower price to the consumer, reversing the skyrocketing costs of housing and insurance and preventing expensive lawsuits.” (return to top) (return to top) What if construction defects don’t get discovered and happen anyway? When there is a failure, developers must determine who is at fault with little evidence. In all cases where CIA has documented defect issues (water intrusion, smell, or noise) whether concurrent or subsequent to construction, the responsible contractor has bee identified with absolute certainty. This eliminates claims against a wrap insurance policy and prevents the developer from paying insurance deductibles of $50,000 per incident out of pocket. To date, CIA has successfully determined the cause of failure in every case. (return to top) If a CIA client is sued anyway, how can the system help during litigation? CIA will be able to prove the condition without any deconstruction required. Many times, lawsuits are filed on sheer speculation. CIA can eliminate this entirely. (return to top) What do CIA’s services cost? CIA’s most extensive service involves tracking a construction project from start to finish, taking photos every day, and attending all contractor, sub-contractor, owner, and developer meeting. While costs can run as much as $5,000 per unit for this premium service, the cost is recovered through reducing wrap insurance premium costs. In essence, the cost to the developer could be nothing. Fees are then recaptured within the first year of completion in savings to the developer by avoiding litigation of construction issues in the future that are discovered and resolved on site due to CIA documentation. (return to top) Who does the work? CIA contracts with skilled, experienced, well trained and licensed construction management firms throughout the United States to perform all its work. (return to top) How do clients access the photos? Each client is provided a discrete access code to open the digital photos on their project web site with instructions as to how and navigate through the photos. (return to top) What is wrap insurance and why is it needed? Wrap insurance is a policy that covers all parties to a construction contract such as the developer, architect, general contractor, and all subcontractors. This is in contrast to all of these parties obtaining separate insurance policies, which is the more common way insurance was secured in the past. (return to top) Why are construction defect lawsuits so lucrative? Insurance companies would rather settle as opposed to taking construction defect issues to trial. Prior to the services being offered by CIA, there has never been a system in place to demonstrate with evidence that the entire construction project was built correctly the first time. (return to top) How can CIA lower insurance costs? Existing wrap Insurance policies currently have a clause in the policy that allows for a discount when the developer uses approved risk management methods such as CIA’s services to mitigate construction defect litigation. This can be as much as 20%. (return to top) Why hasn’t this system been offered before? Other similar risk management systems have been offered and approved. None of them are as intensive and through using any system or software similar to the one CIA has in place. (return to top) When is construction defect litigation going to stop? This is a very common and on the point question. Many well respected attorneys, underwriters, risk managers, and virtually everyone in the construction field asks the same question. The answer is always the same. Construction defect litigation will stop when it can be proven by a third party inspector that the construction was performed correctly in the first place. That is exactly what CIA does. (return to top) What makes CIA different than any other third party quality control company? At the 2007 Building Industry Association (BIA) Construction Risk Management Conference and important point was raised; "In the fifteen-plus years that 3rd party quality control companies have been around, none have been able to reduce the cost of construction defect litigation." CIA can do both. By having a clear picture of the building before the walls are covered over CIA can eliminate the need for destructive testing. Destructive testing is often the most costly portion of any construction defect claim, because of this developers and insurers often settle rather than defend. By eliminating this cost CIA greatly reduces the cost of defending against these claims, by reducing the cost of defense the chance of a frivilous settlement is eliminated. When defect attorneys realize they have almost no chance of gaining a settlement they move on to another project that wasn't documented by CIA. (return to top) |
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