Litigation-I Win, You Lose vs. Mediation-Win/Win

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  Litigation is a zero-sum game.  It destroys relationships and fosters enmity between the parties.  Parties rarely walk away happy.  Even if they win, the expense of litigation is enormous, and collecting on judgments is difficult. Disputes ultimately resolve, but the focus on winning at any cost can lead to prolonged legal battles.  Living with a lawsuit causes ongoing stress, which can distract you from your business and even have an effect on your health. In a courtroom, the final decision lies with a judge or jury who may not fully grasp the complexities of the case. Parties relinquish control over the outcome, potentially leaving them dissatisfied with the final judgment. Mediation has the opposite effect.   Rather than polarizing people, it enables the parties to attack the issues and not each other.     The process promotes open communication, collaboration and problem-solving, which enables parties to actively participate in crafting ...

How to Calculate Construction Defect Damages


How to Calculate Construction Defect Damages

As an arbitrator, mediator and advocate, I am often surprised by claimant’s calculation of their damages in construction matters.  They come to hearings seeking wildly inflated damages or simply do not calculate their damages properly.  I cannot tell you how many times I have heard plaintiffs ask for all their money back, request lost wages or feel they are entitled to pain and suffering for the inconvenience they have experienced when a project does not go well.  This leads to inflated damage claims, which can hinder settlement and benefit only the lawyers. To avoid such outcomes, it is crucial to understand how to calculate damages correctly.

Image courtesy of sscreations at FreeDigitalPhotos.net
In most cases, Owner’s claims or for defective work. To support their claim, Owners must either hire an expert to evaluate the job or obtain subsequent quotes from at least two sources for repairs and completion. Both methods can serve as an assessment of the cost of repair and completion.

The preferred method for assessing damages is through an expert evaluation. Experts are objective and do not benefit from inflating costs, making their reports less biased and more credible in the eyes of judges and arbitrators. They also specialize in evaluating construction projects and are experienced in presenting testimony, making their reports clear and comprehensible.

Subsequent contractors, on the other hand, may inflate damages to win the job or overlook the original scope of work, making it challenging to make a realistic comparison of repair costs. However, subsequent quotes may present a more realistic market price for repairs, especially when expert costs are not justifiable.

The driving force when getting quotes to repair defective work is usually cost.  Experts are not cheap and the amount of your damages may not merit the expense.  In addition, it is still necessary to find someone to complete  the work of the prior contractor, so finding an expert involves an additional step in preparing your claim.  Expert costs can also escalate.  A verbal assessment costs less than a written report.  Testimony from an expert usually costs more.

If an owner decides to self-perform the work, they must justify the damages claimed. The only time I have seen an owner fully compensated for their sweat equity was when a client had actually worked for a contractor and knew his hourly rate.   The judge found his damages credible because he kept track of his time, documented the work performed and put a realistic dollar figure on each task.

Therefore, the first step in any construction defect claim is to have the work assessed.  The choice of the evaluator will depend on the value of the claim and the availability of experts.  The quotes obtained should be for the original scope of work plus change orders, and the amounts claimed should be realistic.

An objective assessment of your damages will do a great deal to persuade a judge or arbitrator to find in your favor.


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