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Protect Valuable Property Rights in the event of construction defects and the resulting damage to your condominium or townhome project.


Frequently Asked Questions

1. Q. What if our developer has gone out of business?

A. If your developer has gone out of business, it probably already has distributed its assets to the owner or owners of the company, and no longer has any substantial “tangible” assets. However, it will almost surely still have “intangible” assets, among which are likely to be contractual indemnity claims against the subcontractors responsible for the defective work, and rights under its liability insurance policies. This “insurance coverage” under the developer’s earlier liability policies, plus the developer’s contractual indemnity claims against subcontractors on the project, often enable a settlement to be funded even if the developer is no longer in business.

2. Q. What if the developer not only is out of business, but no longer has liability insurance coverage?

A. The question is not whether the developer currently has a liability insurance policy. The question is whether the developer had such a policy when the damage first occurred, and not whether the developer had such a policy at some more recent date. And it is likely that the developer had some kind of liability insurance until sometime after completion of the project even if that insurance was dropped at some later date.

3. Q. How do we know if the developer ever had any liability insurance?

A. You don’t know for sure whether the developer or its contractors ever had liability insurance until you get into the dispute resolution process, at which point that insurance information is required to be disclosed. However, even if they didn’t each have separate liability insurance policies, most responsible developers and their contractors will collectively purchase a single liability policy, called a “wrap policy”. Such a policy insures the developer and all its participating contractors under a single policy to cover their property damage liability arising out of the construction of the specified project.

4. Q. What if our developer goes through bankruptcy?

A. A developer’s bankruptcy may affect what court takes jurisdiction of the claim, but developer bankruptcy does not extinguish the obligations of a developer’s insurer, even if their insured is going through bankruptcy. And since the resolution of many and perhaps most construction defect claims is funded by developer and contractor insurers, developer bankruptcy may have little if any impact on the dispute resolution process.

5. Q. What if our association does not have the funds to finance the prosecution of a construction defect claim?

A. The association may have several choices. First, it might levy an assessment to finance prosecution of the claim. Second, it might be able to take a bank loan to finance the prosecution of the claim, or at least the cost of repairing the defects. Third, a law firm may be willing to work on a contingent fee basis, or a hybrid basis, the latter involving a smaller than usual hourly rate plus a smaller than usual contingent fee.

6. Q. What is the likelihood of a successful outcome if we prosecute a construction defect claim?

A. No two cases are exactly the same, so the results in one case don’t necessarily guarantee a similar result in another case involving different facts and circumstances. I have been involved in over 200 construction defect cases, with a successful result in perhaps 98% of those cases. Obviously, some cases have been more successful than others, and the Code of Professional Conduct prohibits any lawyer from guaranteeing a specific outcome for any client. Suffice it to say that I have helped over 200 associations with construction defect claims, usually have done so on a contingent fee basis, and could not have afforded to stay in business all these years representing associations on a contingent fee basis unless my firm was able to obtain favorable results.

7. Q. What is your experience in representing associations in construction defect matters?

A. Well, for starters, I have been assisting associations in resolving their construction defect issues for over 25 years, in the course of which I have helped association clients recover around $200 million.  Before I started representing associations 25 or so years ago, I represented several major developers in the resolution of construction defect disputes.  While I no longer represent developers, the fact that I once did gives me insights into how developers and their insurers approach construction defect cases that an attorney whose construction defect experience is largely limited to representing associations may not have.

Also, having once represented developers, I have considerable experience in evaluating insurance coverage for construction defect claims under developer insurance policies since I have had to deal directly with the insurers under these policies.

Finally, I have tried a number of cases, including construction related cases, so I know how to try a construction defect case, and I make sure that the other side is aware of that fact.  Many construction defect lawyers have never tried a construction defect case.  If I am involved in a case, the client has the comfort of knowing that its lawyer has settled lots of defect cases, has seen the dispute resolution process from “both sides of the table”, and knows how to, and is prepared to, try a case if the case cannot otherwise be fairly resolved.

8. Q. How long will it take to get our case resolved?

A. As with the answers to other questions, it depends on the facts. How strong is the claim? Do the experts for the other side see the defects more or less the same way that our experts see them? What is the attitude of defense counsel? What are the attitudes of the insurance adjusters on the other side of the table? How effective is the mediator? If the matter is in litigation, how helpful is the judge in encouraging early resolution? The long and short of it is that in a complicated, multi-party case where substantial sums of money are at stake, resolution typically takes anywhere between 6 months and 24 months. However, the sooner the association moves forward, the sooner the claim will be resolved.

9. Q. What is the likelihood our case will go to trial?

A. Not likely. Somewhere around 95% of all civil litigation ends up settled without going to trial. The only questions usually are when and for how much. Mediators tell me somewhere around 2% of residential construction cases ever go to trial. In residential construction defect cases in which I have been personally involved, I would say around 98% have settled without a trial, so my personal experience has been consistent with reports to me from mediators in this regard.

10. Q. How do we go about determining the extent of defects in our project and how to correct them and repair the damage they have caused?

A. The first step is to send out a unit owner survey to find out what information unit owners have on this subject. Unit owner responses can be helpful, but their value is limited. First, they may be aware of the symptoms but may not be aware of the cause of the problems. And second, since defects in construction may remain hidden for many months or years, what they know may be merely the “tip of the iceberg”, with the remainder hidden inside the exterior wall cavities of the building envelope.

So in addition to the survey, an architect, engineer or other consultant with specialized training in construction defect investigation, will be hired to perform on site investigation, using the unit owner survey responses as the starting point.

A question invariably arises as to how thorough that investigation should be. There is no simple answer to that question. The best answer is probably as follows: One way to discover all the defects would be to “deconstruct” the entire project. That of course would be prohibitively expensive, economically wasteful and just plain foolish. On the other hand, the investigation should be sufficiently extensive that it is likely to reveal most if not all of the defects in construction, and to reveal whether the defects in question are isolated or systemic. The more thorough the investigation, the more persuasive the resulting report from the association’s consultant is likely to be.

Richard H. Levin

  • Contact Us

    Levin Law Group LLP

    Richard Levin
    Managing Partner
    rlevin@levinlawgroupllp.com

    28494 Westinghouse Place, Suite 307
    Valencia, CA 91355

    951 Mariners Island Boulevard, Suite 300
    San Mateo, CA  94404

    Emily S. Levin
    Partner
    elevin@levinlawgroupllp.com

    606 N Larchmont Boulevard, Suite 4B
    Los Angeles, CA  90004

    Phone: 877-879-8776
    Fax: 877-310-0160