Don’t lose downstream claims correcting construction defects.
Your project did not go well. Subcontractors performed poorly, the architect was impossible and delivery occurred late. You were lucky to break even and glad to be finished. A couple of years pass and the phone rings. It’s the owner. The project is now leaking and merchandise is being ruined. Your investigation confirms construction defects and the owner is threatening a lawsuit if you don’t immediately begin repairs. What’s the next step?
What is your plan?
Suppose you no longer work with the responsible subcontractor? Do you self perform the work? Hire a replacement? How do you appease the owner? If you plan to sue the derelict sub or his insurance company for the repair work or the owner’s damages, it is imperative to consider how rushing to perform repair work now will impact your future claims.
First, if the damage is severe, increasing or uncontrolled, you have a duty to the owner (and the subcontractor) to lessen or “mitigate” the damages. The defective work may have to be altered in order to stop the leak. However, every effort should be undertaken to stop the water without disturbing what will become evidence. In other words, if you can tarp it or patch it, don’t tear it out. Without question, take extensive videos and photographs of the before and after condition, if emergency repairs are necessary to mitigate damages.
Here’s why. If you can reasonably anticipate litigation, then a competing duty to preserve evidence for the subcontractor arises. Place yourself in the shoes of a subcontractor that receives notice of a claim or lawsuit after repairs are underway or complete. Just as it would be unfair to you for the Owner to destroy, alter or cover evidence related to a claim against you, it is simply not fair to destroy or alter evidence needed by the subcontractor to defend itself.
The law defines the intentional destruction or alteration of evidence in pending or foreseeable litigation as “spoliation.”
If you breach a duty to preserve evidence by alteration or destruction, and a court determines that your “spoliation” prejudiced the subcontractor’s ability to present its defense, the penalty could be harsh.
Sanctions range from instructions by the judge to the jury allowing them to presume the destroyed evidence was favorable to the subcontractor to the death penalty (dismissal of your lawsuit), in egregious cases.
Once you receive notice of a construction defect and you stop the worst of the owner’s damages, then you and the owner owe a common duty to preserve evidence in anticipation of litigation. Before altering the defective work, through testing or repair, written notice should be delivered to the affected subcontractor advising of the alleged defect. Defendants should be provided an opportunity to either participate in your investigation or allowed to perform independent forensic testing upon their work in its original condition.