Construction defect -- what you can do to help protect yourself

You’ve done it. You’ve spent months working diligently developing your company’s safety and health manual. Training has been provided to all of your employees covering your new policies and procedures. Accident prevention programs, substance abuse programs, accident reporting, transitional duty, new hire orientations… You’re tireless efforts are working: your injury rate is dropping, as well as your claims frequency. 

Then it happens. The phone call no one wants to get, but this time it’s different. No employee was hurt at your jobsite. There wasn’t a vehicle accident, or even property damage at your office. This time you are being brought in on a construction defect claim. 

Construction defect is the failure of any building component or system, which is usually the result of improper installation, improper design, product failure or improper material selection, use and subsequent failure. These claims are different because in most cases it takes years for construction defect issues to materialize and often even longer before you find out what caused the damage. 

One of the more frequent types of construction defect claims is water intrusion, which can occur from roof leaks, windows, exterior siding/cladding systems, and balconies, among many others. Other claims can come from soil issues or deterioration of pipes, plumbing or other building materials. 

So, what can you do to help protect yourself from this type of phone call? There are many steps that can be taken, but we’re going to focus on three. The first is developing and implementing a Quality Assurance/Quality Control Program (QA/QC); the second is a strict document retention plan; and the third is quickly reporting claims.

A QA/QC program is a systematic approach to ensure that a product is built correctly and performs as designed. This program can be quite simple or complicated depending on the complexity of the job. This is why it’s important to have a specific plan for each project. The program can be broken down into several parts:

Using this information as a base for your QA/QC program can assist in developing an effective, easy to-use system, which can help verify quality construction. To assist in developing your inspection checklists, log in to the Travelers Risk Control Customer Portal at the top of the page and download our Prevention of Construction Defects: Best Practice Guidelines Sign-off/Responsibility Designation and Prevention of Construction Defects: Master Sign-off Document Supplement Form

So now you’ve done it. You’ve built your QA/QC program. Management has assigned QA/QC roles and responsibilities, materials are being inspected upon arrival and properly stored, employees are being trained and following manufacturers’ instructions, and quality inspections are being performed routinely at your project locations. Properly following these five steps can produce an abundance of documentation and it’s equally as critical to follow a strict documentation retention policy as it is to follow your QA/QC program. In fact, documentation retention should be included as a part of your QA/QC program.

In the course of building construction, there are many different types of documents that are created, such as superintendent log books, inspection forms, material purchase orders, training documents, drawings and specs — the list goes on and on. The thing to remember is that all of this information could be critical in defending your company in the event of a construction defect claim. A majority of the time our construction defect team investigates a claim, they find inadequate documentation or no documentation at all. Not having all the necessary documentation can greatly inhibit our ability to defend a claim. Change orders, RFIs and documented maintenance requirements for owners should be saved in a job file. Another item of importance is to never agree to make changes to the building or design based on what someone tells you. Always wait for a written document specifying exactly what changes are being made to the design before starting any work. Any pictures that are taken, either pre-install, during, or post-install, should be logged and kept with the job file. Since construction defect claims are most often made well after construction has been completed, it is vital to keep this information for as long as possible – at a minimum documentation retention period should extend for a time period that adds three years to the statute of repose in the state where the work is performed. However, ideally, job files should be kept indefinitely. 

So far two items have been discussed regarding construction defect. The first is a QA/QC program, which can assist in preventing construction defect claims and the second is document retention, which can assist in preparing defense for construction defect claims. The third piece comes into play after an issue is discovered: claim reporting. Reporting claims immediately greatly increases our ability at Travelers to assist in the investigation and response to a construction defect issue. Report any and all correspondence about the claim, as well as any expert reports provided by other parties. Any evidence that may be pertinent to the claim should be gathered, particularly the physical item itself that is said to have caused damage. To assist in investigation of claims, Travelers has a Construction Defect department that is made up of engineers and architects who are trained in the investigation of construction defect claims. We also have a laboratory that can analyze the physical evidence gathered during the investigation. 

Developing and implementing a QA/QC Program, with a strict documentation retention policy, and quickly reporting claims can greatly assist you in protecting yourself against construction defect claims. 

For more information regarding Quality Assurance/Quality Control and Construction Defect, log in to the Risk Control Customer Portal at the top of the page and type “construction defect” into the keyword search. Here you can find webinar replays, the aforementioned checklists, and other technical bulletins to assist you as you work to improve your QA/QC practices. 

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