Episode 2 – 10.21.17
- Construction Defect Insurance
- Right to Repair Act
- Latent defects
ACTS law hour today with:
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Debby: Good afternoon Los Angeles. This is TalkRadio 790 KABC. Welcome to the Acts Law Hour heard every Saturday at noon providing you with solid information from our good friends at Abir, Cohen, Treyson, and Salo.
Speaker 2: TalkRadio 790 KABC.
Debby: The ACTS Law Firm, that’s ACTS law, A-C-T-S Law. Find them at actslaw.com. If you have any questions today about personal or commercial property damage including construction defects or anything related, and you don’t know where to turn, call us now at, 800-222-5222, that’s 800-222-5222. We’re live in studio knowledge is power, power is knowledge and the ACTS Law Hour wants to empower you. Here’s your host and managing partner at the ACTS Law firm, Danny Abir.
Danny Abir: Good morning, Debby. How are you?
Debby: Good morning. How are you?
Danny: Good, thank you. I want to say hello to all our listeners as well as our engineer, Frank. Hi, Frank.
Debby: Yes, it’s a team effort here to get this show going.
Danny: Yes, it’s going to be a great show. We’re going to talk about construction defects. We’re going to talk about current events. We’re going to talk a little about insurance bad faith and property insurance coverage. For that purpose, I brought with me my partner Terry Bailey. Hi, Terry.
Terry Bailey: Good afternoon, everyone. Thank you.
Debby: Wow, what a thundering voice of strength, right? [laughs]
Danny: I knew he was just perfect for this radio show.
Debby: Absolutely, welcome Terry.
Terry: Thank you, Debby.
Debby: We’re so glad you’re here. We know our listeners are homeowners, for the most part, they have homes and they have things that are happening to their homes. They will gain a lot from listening to what you have to tell them today. If you’re listening and have a question for this great lawyers, please call us at 800-222-5222 as we get into property claims. Danny what’s in the news, what’s happening these days?
Danny: If you remember last week, we talked about the shooting in Las Vegas. You asked questions about who could potentially have liability other than the shooter. In the news over the past week, we’ve seen a lot of different things about this. Including areas that could potentially give rise to liability on behalf of the promoter as well as the MGM Grand, the Mandalay Bay hotels. I thought that that would be something very interesting to address actually.
Debby: Well, you guys are attorneys. You are in it to help people through injuries of all types whether it’s personal or property. What happened in Vegas was definitely an injury to a lot of people, and the liability is widespread, is that true?
Danny: If you look at each particular entity or individual, or if you look at who could potentially be liable here independent party with regards to this. You’ll see a lot of different issues that will pop up. One of them, for example, we talked about this last time, the shooter took with him, had with him over a couple of dozen assault rifles in his room.
Debby: He had so much stuff. How did he get up that security elevator?
Terry: That’s the question is how was he able to get 23 odd rifles and probably thousands of rounds of ammunition, up into his room without it raising a red flag to anybody at that hotel.
Danny: It’s funny, Terry and I were talking about this the other day. Everywhere in Vegas, all the hotels, there are cameras everywhere and that you can’t do anything without the cameras picking you up. One of the biggest questions is how did he get all of these up there. One of the pieces of news that came up last week was the fact that the shooter had access to the service elevator because he was considered a high-roller.
Basically, they gave him a pass to be able to take everything through the service elevator. Whether the service elevator area if they have cameras or not, that I don’t know. We don’t know the facts about that. Just the mere fact that he was able to use a service elevator avoids people being able to take things up the elevators.
Debby: What’s the timeline on this? What happens first, there’s so much to go over and there’s so much to discover, what happens, what’s the timeline for finding the liability?
Danny: It’s going to have to have discovery. You have to get into this. Right now, I think the FBI and the local police they’re still looking into this. They’re trying to determine exactly what happened. As attorneys, when we’re looking at it one of the questions that we’ve been asked is, why are we even looking into this?
We have clients who they’re children that have lost their parents, and somebody has to provide for them. Like we talked about, the estate of the shooter is there but it’s limited. If and only if there is somebody else who was liable for these injuries or the death of the victims, we can look at that and to see if there is a possibility that they would be liable.
Debby: Well, we’ve been hearing that it took them 12 minutes to get to the shooter’s room, the security group. Why do you think that was and why would it have taken so long? Is that something that would raise concerns?
Terry: That certainly raises more issues, too. We’ve heard that it took 12 minutes for the security to reach the shooter’s room. There are so many other things that could’ve been done that would’ve alerted security that they didn’t do. For example, again, I was having this conversation with my partner over here yesterday about alarm systems. He has an alarm system in his home that if a window was broken alerts him and tells him which window is broken. It can’t be that difficult to put such an alarm system in a hotel. You would think that the hotel would want to know if one of the windows in their high-rise was blown out or knocked out with a hammer.
Debby: Yes, we’re not getting any straight answers. I would assume that’s because the discovery needs to happen and there are a lot of things that need to happen. In fact,-
Debby: -we’re standing and waiting for some conclusions. Do you have any armchair, quarterback conclusions on any of this before we actually find out what happened?
Terry: I think that’s one of the things that’s so frustrating is we still don’t have a straight timeline. This guard that was the one who was shot, first we heard that he was shot I don’t know 10, 12 minutes before the shooting started and then we’ve had it was after. The timeline keeps going back and forth, and that’s frustrating to everybody that we can’t seem to get a straight story out of either the hotel or perhaps the police. I’m not faulting the police, they have a very difficult job to do but can we get a straight story?
Danny: Then, you look at the venue itself, there were people who were injured as a result of wanting to try to get away, were their emergency exits proper? If it wasn’t proper that could potentially [unintelligible 00:07:37] and it doesn’t matter if there was a shooter, if there’s a fire, if there’s something but if you have these many people in that area, you had too many people there, could that have been an issue? They couldn’t get to the emergency exits if there were any.
If they were, were they appropriate? Were they the right exits for people to use? You had children like we talked about. You could have children from six years and up and was that appropriate given the circumstances and given the venue that was being used? All of these are questions that you look into when you’re looking at liability. That’s what we’re looking at ourselves.
Debby: Well, it’s a changing landscape now when we all go to a different venues. I’m sure it’s at the top of mind of where is the nearest exit, and how do I look at this concert venue, or if we go to any kind of performance, how can we get out of here safely. Maybe some good will come out of it in that way, but boy, it’s such a tragedy. I just can’t even start thinking about that.
Terry: It is a changing landscape what you’re talking about, whether we’re going to a movie theater or to a concert. Yes, we do look around, or at least I do anyway and think where’s the closest exit, how will I get out of here in the event of some sort of an attack or a tragedy. That also brings up another point to in hindsight is 2020. After all of the terrorist attacks and whatnot that we’ve been through in the last 10 or 15 years with the attacks at concerts and theaters, in Europe, the nightclub in Florida, it just seems to me that there should be some heightened security at these events.
Debby: Right, has that changed the way you approach venues as just a citizen?
Terry: It’s not going to change the way I live my life. I’m still going to want to go out and do things but I’m certainly a lot more vigilant. Everybody has to be vigilant. Times have changed, there’s just a lot going on and a lot of crazy people out there.
Danny: Absolutely. Actually, this is a little bit of a segue to congratulate the Dodgers to making it to the world series-
Terry: Absolutely, let’s get–
Danny: -for the first time since 1988.
Debby: [laughs] Good news, we need good news, right?
Danny: To change the subject, in some way, I want to congratulate them, too. Again, we’re looking at the world series coming up, thousands and thousands of people go into venues. Heightened security is very important and that’s a factor that I was referring to when I was going there. It’s funny, I talk to a lot of friends who would frequent Vegas and frequent concerts and their approach has changed with regards to how they look at where they’re going to go, whether they’re going to go to concerts or not, whether they’re going to go to an open area or not.
That’s going to be a factor I think in everybody’s life. It may not change the way they live their life, but they’re going to have to be a lot more cautious, unfortunately.
Danny: The next segment, we’re going to talk about construction defect but I figured before we go there, why don’t we talk about, Terry, at the beginning of the next segment-
Danny: -and know a little bit more about your background and what you’ve done and then start talking about construction defect.
Debby: If you’ve just tuned in, you’re listening to the ACTS Law Hour, we’re talking about construction law and property claims. If you want to talk to either one of our attorneys here today, call 800-222-5222, that’s 800-222-KABC. When we come back more with Terry Bailey and Danny Abir from actslaw.com
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Debby: Welcome back. You’re listening to TalkRadio 790 KABC. This is the ACTS Law hour with your host Danny Abir and our guest today is Terry Bailey who specializes in construction defect claims. To get on the air with the lawyers from the ACTS Law, A-C-T-S, call us now at 800-222-5222, that’s 800-222-5222. Danny, would you want to introduce our special guest today?
Danny: I would rather have Terry tell us about his background himself.
Debby: Awesome. [chuckles]
Danny: He would do a much better job than me trying to basically give all the details. I’m sure there are a thing that you don’t want me to talk about, Terry.
Debby: We do want him to talk about those things.
Terry: Yes, talk about whatever, there’s no secrets here.
Debby: Yes, it’s very transparent on the radio here.
Terry: Okay, I’ll give you a little bit about my background before we jump in here. I grew up in a construction family, my father, my uncles, my brothers-in-law, everybody in my family worked in construction. I worked in construction for a number of years and was a licensed general engineering contractor before I decided to go to law school. That background —
Danny: Why in the world would you want to go to law school?
Debby: Right, that’s what I’m curious about. I want to know what happened there.
Danny: Twenty-some years later I still don’t know why I went to law school, why did you go to law school?
Debby: [laughs] I’m not an attorney but I play one on the radio. I want to know what it’s like to be a real attorney.
Terry: Well, that takes me back a few years. As a youngster growing up, I always wanted to go into law and become a lawyer but there was a family business there and I enjoyed the type of work I was doing. Actually, I had a conversation with my late father one day and he encouraged me to go back to school and get an education and do what I wanted to do.
Debby: Fantastic, so you did.
Danny: Since you got out of law school, what have you been doing?
Terry: Well, my first job as an attorney was at a very general practice room. I did a little bit of everything, I did some tax and transactional, even a little family law which was scary. Then, I was handed a couple of construction cases and it was just a natural fit for me. I understood what was going on, I know the construction processes and practices, I know what occurs out in the field. Honestly, since I was old enough to walk, I’ve been on construction jobs. It just seemed to be a natural fit and the rest is history.
Debby: I think that anyone that would consult you for construction advice and construction defect issues would be very, very fortunate because of your background. You understand, you know what’s inside those structures, you understand from top to bottom what they’re dealing with, what is the scope of work and a reasonable settlement and all kinds of things. I think it’s very fortunate that you have that background.
Terry: You hit on something that I wanted to talk about and that is, how do you know what’s going on behind those walls? One of the things we’ll get into in a few moments here is some indicia of types of damages that point to structural problems or water intrusion or the like.
Debby: Well, why don’t you tell us first off what is a construction defect? That’s the type of law you practice but for the average consumer, what does that mean exactly?
Terry: Well, let me just back up for a second. For most people, probably the three of us sitting around this table included, the purchase of a home represents the single largest investment that we’ll make in our lives and you want to preserve that investment. Likewise, a lot of people count on their home as a security for their retirement years. If you’re having problems with your home, you need to have a professional inspect your home and determine what the source of the problem is and fix it before it causes long-term damage.
For example, I have a few things that I wanted to talk about as far as types of defects. There are certain things that we call cosmetic defects, cracks in the kitchen counter tile or paint imperfection and stuff like that, that’s really not what we’re talking about when we’re talking about construction defects. What we focus on and what is most important to the consumer or the homeowner are those defects that can turn around and cause long-term damage to your home.
A cracked tile on your kitchen counter, it’s going to be unsightly and maybe slightly annoying. If you have water intrusion through decks or windows or something, that is going to affect the structural integrity of your home in your long-term investment.
Debby: Absolutely, but what comes to mind right away is, “Okay, if it’s something that eating away and eroding at my home as maybe the soil wasn’t packed correctly or something was going on with before the construction of my home was actually done. My house starts to deteriorate but it’s 10 years down the line.” What is the limitations before I have no recourse?
Terry: Well, there are a host of different statutes of limitation that may apply depending on the particular defect that you’re talking about. You did hit on one thing, that is there is a ten-year what we call a statute of repose which means as an absolute ten-year deadline to file a lawsuit. The time is usually calculated from either the recordation of the notice of completion or the certificate of occupancy for that home.
Debby: If you just tuned in, you’re listening to the ACTS Law hour right here on Talk Radio 7.90 KABC. Our guest is Terry Bailey, talking about construction law for homeowners.
Danny: Basically, construction defect, one of the things is the interplay of insurance in construction defect. Like Terry mentioned, you may have a crack in one of the tiles or you may have something that’s going to cause water intrusion to come into the house. Let’s talk about insurance and how your insurance covers or does not cover situations where there is construction defect.
Terry: Well, most insurance policies do have exclusions for construction defect or wear-and-tear and things like that. If it is a, for example, with the water loss, the homeowner’s insurance policy, the language that they use is sudden and accidental discharge. If a pipe bursts, that type of property damage would be covered under the homeowner’s insurance policy. If it’s construction defects such as say, a leaking roof, unless you can prove that the roof was compromised as a result of wind that led to the water intrusion, you may not have coverage under your homeowner’s insurance policy. Then that’s the time to think about going after your builder or contractor who constructed your home.
Debbie: Right. Well, I know that there can be defects with the architects and the design that the engineers put together and that can be something you don’t see right off the bat. Then you were talking about the cosmetic things that you do see such as cracked tiles or whatever that would be. What about workmanship? Is there a liability there somewhere if it was shoddy workmanship?
Terry: There is liability now under the Right to Repair Act, which took effect on January 1, 2003. Previously, for again what I might refer to as cosmetic damages or imperfections in the paint, finishes and things like that, the law in the state of California held that you cannot recover for such defects because they didn’t cause damage to other property. Those are sought of the keywords is damage to other property. What the legislature did in the early 2000’s was came up with the Right to Repair Act which sets forth a whole host of these smaller minor issues that you can recover for but the builder has the absolute right to come in and repair those.
For other defects, for the latent defects which are the ones that really cause structural damage to your home, water intrusion or soil compaction as you talked about a minute ago, Debbie, those are issues that really need to be investigated and taken care of to prevent that further long-term damage. When you get water intrusion into your home, it affects the wood, you get dry rot, termites and the like.
Danny: One of the things we talked about with regards to a statute of limitations, which is in a way a problem area if you think about it, is the statute of limitations when it comes insurance versus construction defect. Meaning, if the homeowner or the property owner does not know whether it’s something that insurance does cover or should cover or not, that whether there’s construction defect, if they let go of one, they could potentially lose if they focus just on construction defect.
They may lose the statute of limitations when it comes to the property loss so that’s something that it actually requires someone who really knows what they’re doing and have a focus on it. What we can do in the next segment is talk more about the statute of limitations as well as one of the areas of construction defect that comes up a lot more is remodeling and people who actually do the remodeling of their homes and that’s when they hit more construction defect issues.
Debbie: Right, what can people do preventatively before they actually hire that contractor or give a nod to the plans that have been drafted. Definitely. If you’ve just tuned in, you’re listening to the ACTS Law Hour right here on Talk Radio 790 KABC. Call us now with any questions you might have on construction or your property or anything that you’re thinking about doing. You can call us at 800-222-5222, that’s 800-222-KABC.
Danny, did you want to go over a couple of things. What causes the defects besides the improper soil analysis or site planning or structural engineering or negligent construction? Is there something I’m missing?
Terry: I think you hit just about all of them. Some of the latent defects that we’re really concerned about are, again, it’s water intrusion whether it’s to your roof, to windows, decks, French doors or notorious leakers and so are skylights. Then the other big one is the improperly compacted soil. What happens if the soil is not properly compacted? Over time with the introduction of water, landscaping and the like, your home will literally start to sink. The foundation will crack, the interior finishes will crack.
Debbie: You’ll see a lot of cracking in your stucco, in your outside exterior, too, I would guess.
Debbie: Right. Well, this is really very interesting and things that we need to know. The ACTS Law firm, A-C-T-S law.com or go to 833-ACTS law. Call them 833-ACTS law and find out more if you want to call them off the air and reach them at their firm and go to their website at actslaw.com. This is the ACTS Law Hour and we’ll be right back.
Gary Garrison: TalkRadio 790 KABC news updates, I’m Gary Garrison. A 19-year-old man who was wounded at an officer-involved shooting in Santa Ana last night remains hospitalized in stable condition. It’s not clear what prompted officers to open fire. A man was killed and a woman was wounded in a shooting early today in the Jefferson Park area of Los Angeles. Hollywood director Quentin Tarantino says he knew about Harvey Weinstein’s alleged misconduct and should’ve done something about it. There’s a rape investigation underway that may lead to Weinstein’s prosecution.
Gusty winds are returning with the fire danger elevated across SoCal today. Gust reaching up to 45 miles an hour across Southern California’s mountains and valleys. KABC SoCal weather partly cloudy, turning sunny today. [unintelligible 00:06:30] More news coming up and continuous coverage at KABC.com. I’m Gary Garrison, TalkRadio 790 KABC news.
Debbie: Welcome back. You’re listening to Talk Radio 790 KABC and this is the ACTS Law Hour with your host Danny Abir and our guest today is Terry Bailey. We’re talking about construction. Your home. Your property. What you need to know. How to make you safer and more prepared for any kind of construction work that you might have going on or have had done. You might think there is some kind of defect out there with your property. If you do, call us 800-222-5222, 800-222 KABC.
Danny: I do encourage interactions to the extent that you do have questions, please feel free to call. We actually would love to take your call and answer your questions. Let’s give a couple of examples, Terry of construction defect so people have a better understanding of exactly under what circumstances and when should they pick up the phone and call us. When would be the best time to do that?
Terry: Let me give you a couple examples of cases that we’ve handled over the years. One that comes to mind with soil issues is a large custom single-family home. When I received the call, the potential clients told me that they had a lot of cracking of their tile, cracking of the stucco as you alluded to a moment ago, Debbie. Interior surfaces cracking and the like.
I assumed prior to going out there, this is probably a soil subsidence case or there’s something going on. When I first went out to look at the home and to meet the clients, I walked around the backyard and I saw how steep the slope was. This was a cut fill lot and probably three-quarters of the home was on fill and a quarter of the home was on cut. When I walked to the backyard and I looked at the cut of the slope, I couldn’t believe it how steep it was.
It was probably about 1.4 to one, a technical term but slopes when a grading contractor is creating a fill lot and cutting a slope, the ratio is supposed to be two to one. That means for every one foot that you drop vertically, you move two feet horizontal. The fact that this-
Debby: This was straight down. [laughs]
Terry: It was literally a cliff. What–
Debby: There’s the defect right there, right? [laughs]
Terry: Yes, what happens as a result of cutting that slopes so steep. There was about 40 to 50 feet of fill at the deepest part is the dirt actually starts to move sideways. Instead of sinking, the fill goes sideways and that creates a lot of problems for the home. That home was literally splitting in two.
Debby: Absolutely, I bet it was. Well, we have a call on the line. Are you with us?
Manish: Yes, my name is Manish.
Debby: Great. Danny, you want to take the call?
Danny: Hi, Manish, how are you doing?
Manish: I’m doing great. How are you?
Danny: Great, thank you. What can we do for you?
Manish: I have a house, I’ve been here for like 10 years. Basically, I was the first owner of the house. I have a bathtub upstairs right next to my shower. Last week, the kids were taking a bath and we had the tub always on. We have little jets. Then randomly, a bunch of water showed up outside of my bathtub area as well as downstairs in the kitchen. I can’t tell where the water came from. I just shut it off and I haven’t turned it on since, but I don’t even know how I should tackle it.
Terry: I guess, the first question I would ask you is, you said about 10 years. Has it been more than 10 years or less than 10 years you’ve since you purchased the home?
Debby: The 10 years is critical.
Manish: January of 2007.
Debby: Just missed it.
Terry: Unfortunately, you may be too far gone to pursue a construction defect action against the builder, but there still may be a property homeowners insurance claim there.
Manish: Okay, how would I tell if it’s a homeowners’ claim or do I call someone else?
Danny: You can call our office. What we do is, we can have an expert free of charge take a look at it. See if it’s a damage that would be covered by your homeowners insurance and guide you from there. We basically help homeowners from day one from the get-go when the claim happens that we presented to your insurance company. To make sure that the insurance company understands that you know your rights and you know exactly how they’re supposed to deal with it. These are damage just to upstairs and you said there’s damage to downstairs as well?
Manish: I don’t see any damaged as of yet, it’s just the upstairs was like a full of water. Then when I came downstairs, it was flooded with water. I can’t even tell where the water came from. I haven’t used the bathtub again since then.
Danny: It was definitely sudden and accidental. It’s not something that was going on. When there’s a pool of water, it’s got to be something that’s happened that sudden accidental that could potentially be covered by your insurance policy.
Manish: Okay, great. [unintelligible 00:35:01] That sounds fantastic.
Danny: Feel free to give us a call. You can give me a call on Monday morning first thing. Actually, this happened how long ago? Yesterday?
Manish: This happened about, I would say, about a week and a half ago. Then we left out of town and then we came back and we haven’t used it.
Debby: Let me give you the number of the firm. It’s 833-ACTS-Law, that’s A-C-T-S-Law, 833-ACTS-Law or go to actslaw.com and you can get all the information on the firm right there. Make sure and call them on Monday morning.
Manish: Okay, that’s A-C-T-S-L-A-W?
Debby and Danny: That’s correct.
Manish: Great. Thank you very much. Appreciate the help.
Debby: Thanks for calling.
Danny: Thank you for your call, Manish.
Debby: If you’re out there and you have a question for Danny Abir of Abir, Cohen, Treyzon and Salo or Terry Bailey, two of the greatest attorneys that I know. You can call them right now at 800-2225-222, that’s 800-2225-222 and get on the air. Call us now.
Terry: If I can, I’d like to just jump back for a moment what we were talking about with the slope creep and subsidence case. The point here is if you are starting to see cracks in the interior of your home, around windows, around doors, crack tile and things like that. Don’t ignore it. That’s generally an indication of a much more serious problem than just cracked drywall or cracked tiles. It’s an indication of a problem with the foundation and perhaps improper compaction of fill.
Danny: One question, Terry. With regards to the fires, the wildfires that we’ve been having. To what extent does that is there in any way construction defect can come in to that with regards to a structure that if it’s, I’m trying to see how I can phrase this question better. Let’s say, there’s a fire and because of a construction defect, the house would sustain more damage than they normally would. Is there any circumstance like that that people should be aware of? I’m just trying to relate it to the fires if in any way it would affect that because I know insurance gets affected by that?
Terry: I have not personally dealt with any cases where there was a relationship between construction defect and fires. One of the issues though that does come up frequently with homeowners insurance policies following a brush fire is flood and mud flows. Because the typical homeowners policy does not include flood insurance, but there’s a legal doctrine in the state of California that’s called the Efficient Proximate Cause. The argument or the theory of liability for the insurer is that, it wasn’t the storm that caused the mudflow or the flood, it was the brush fire that ignited the hillside of all the vegetation.
Debby: Exactly. In September, October, November, high fire season here in Southern California. We’ve just been through so many fires on the hillsides. All the homeowners that have homes up in the hills and the foothills are at risk I think to this type of thing. The wildfires were widespread. Danny, you were saying last week how the damage from putting out the fires and the flooding that can happen after creates just havoc?
Danny: That’s exactly what I was referring to last week actually, Terry, was exactly what you just noted is that because of the wildfire, there’s more potential for mudslides following that. Again, if you don’t have flood insurance, that’s what you should be looking into, one getting flood insurance before the rain started. You always want to prevent before things happen. Also to the extent that you didn’t have flood insurance, that’s something that could be covered because the true cause of it could be considered the fires.
Terry: Just to jump back to the fire issue for a moment. One of the things that I did when I was a teenager to make some cash.
Danny: You mean a couple of years ago?
Terry: Just a few years back.
Debby: Yes, absolutely.
Terry: I would go around my neighborhood. I would do weed abatement for all of my neighbors. It’s a great way to make money as a teenager.
Debby: What a great idea.
Terry: It reminds me of since we’re talking about fires that coming up on fire season, clear the weeds, clear the vegetation from around your home. I know that the Fire Department sends out those notices but make sure that you do that kind of stuff. It protects your home.
Debby: Yes, you want to be preventative and take action and be part of the solution for your property. That’s your biggest investment. I had heard that planting native plants in your yard is a great way to
protect yourself against the wildfire season.
Danny: Absolutely, in the next segment let’s talk about more preventative measures and also let’s talk about remodeling your home.
Debby: Let’s do that. I’m really nervous, I have a contractor at my house right now. I think it’ll be okay. You’re listening to the ACTS Law Hour right here on TalkRadio 790 KABC. Come back with us, we’ll be right back.
Debby: We’re back. You’re listening to Talk Radio 790 KABC and this is the ACTS Law Hour brought to you by Abir, Cohen, Treyzon, and Salo. The ACTS lawyers are here for you today and every day. Go to actslaw.com, that’s A-C-T-Slaw.com. The topic today, we’re talking about the construction defect and Danny we had such an interesting caller why don’t you recap that for our listeners.
Danny: Yes, they had a tub leak or whether appear to be a leak from the tub area and flooding the lower part of their house. The thing that’s most important from that call to pay attention to is they’ve had it for just over 10 years and that basically keeps them away from being able to claim construction defect because the statute has expired. That’s something that we have to be aware of as far as our statues. One thing going into this segment, the commercial said if your pipes are possessed-
Debby: Possessed, yes.
Danny: Is your pipes were possessed. Now, I was thinking maybe that’s far commercial because if your pipes are possessed and you have water damage to your plumber should be fixing it but at the same time the damage could be something that we could deal with when it comes to your insurance company. It’s a nice commercial going into this exactly.
Debby: Exactly, we planned it that way right.
Terry: Well, one of the things are I want to talk about this afternoon and you brought it up a moment ago that you have a contractor at your home right now, Debby.
Debby: Sure do.
Terry: I want to touch a little bit on remodeling and home improvement contracts. I cannot tell you how many times I’ve met with clients after there’s a defect. Well, let me just back up, my advice to you is if you are about to embark on a home improvement project or remodel is consult an attorney beforehand. I’m not a transactional attorney so I don’t draft contracts but I’ve seen the results of poorly drafted contracts over the years. There are certain things that you absolutely must include in any construction contract to protect yourself.
Debby: Yes, I’m sure that’s true. Like what?
Terry: You just got through [unintelligible 00:45:42] Again, consult an attorney at the outset like for example, all contractors will say, “Hey, I’m licensed and bonded,” Well, good, every contractor licensed and bonded. Well, hopefully, there at least license. That bond really doesn’t mean a whole lot, it’s a $10,000 or $12,000 surety bond. It doesn’t really help you a whole lot if you have major problems in construction defects which result in damage. One of the things that you absolutely must do is make sure that your contractor has a commercial general liability insurance policy.
Danny: It’s not the bond, it’s the insurance. That’s really, really important.
Debby: Right, have you seen a lot of cases where that wasn’t true?
Terry: That’s one of the most unfortunate things about some of the cases that we’ve had to turn away over the years. If there is no insurance available– It’s a different story for dealing with a Kaufman & Broad or a large home builder, they absolutely have the resources to take care of you.
Debby: That’s usually commercial though, that’s commercial structures. I want to talk to the homeowners because the people that are listening to our show have homes and this is Southern California and people are building huge estates and adding value upon value to their property. They should know that just a simple word from your general contractor is unnecessarily enough.
Terry: Yes, there’s no guarantee that, what you might refer to a small-time contractors or guys that are doing one house at a time or the like. You don’t know whether they have insurance and just when they- because they say licensed and bonded, a lot of people think, “Well, that’s good enough”. As Danny just said, it is that insurance policy that is most important. There’s a couple of other things that you really want to nail down in the contract and the first one I would say is a very clearly defined scope of work with a timeline and with the penalty for not complying with the timeline.
Debby: What kind of damages can be recovered realistically? What if someone is hurt in their home due to damage from their property or from some negligence in the structure of their property and they, in turn, get hurt, is that a double whammy?
Terry: Well, there’s a lot of–
Debby: Or is that too complicated?
Terry: There’s a lot there.
Debby: Can you answer that in 30 seconds?
Terry: I don’t know.
Danny: Objection, compound question.
Debby: Okay, yes, true. Danny jump in, feel free.
Terry: If I can get to recovery in just a second there’s a couple of other things that are really important that you need to include in your home improvement contracts. I talked about the clearly defined scope of work and making sure that you have a commercial general liability insurance policy in place having penalties for a delay. Here’s a couple more that are very, very important and you see this in commercial contracts but you don’t always see it in the residential contracts and that is what’s called retention.
Some people won’t even know what that means, but during the course of construction, your contractor will issue you request for progress payments. They’re going to ask you to pay, “Hey, we’ve completed X so now pay me for X.” Well, on large commercial projects what they do is they hold back 10% or maybe even 15% of that progress payment. That’s basically at the end of the case- at the end of the project that 10% or 15% that you’re holding back, that’s the contractors’ profit. He wants that money.
He will finish the job. I met with a potential client a couple of weeks ago and he was scratching his head saying, “I can’t get my contractor come out and finish my cabinets.” I said, “Well, how much do you owe him?” He said, “About 700 bucks.” I said, [chuckles] “That’s why he’s not coming back out.”
Debby: He wants his profits so he’s going to make sure and finish the job.
Terry: Exactly. Along the same lines there, you want to make sure that your subcontractors have comprehensive on a liability insurance as well. Last and most important and tears to my heart is an attorney’s fees clause because if you have to sue your contractor for damages and defects,
if you don’t have an attorney’s fees clause you will never be made whole. Because your attorney’s fees are going to come out of your recovery. Haven’t–
Danny: It will be on a contingent basis but you still end up having to pay out of pocket for it and you’re never going to recover it. That’s going to be a big chunk out of it.
Terry: Yes, and you want to make sure that that attorney’s fees clause also covers reasonable costs of the litigation and costs of investigation as well.
Debby: Well, that’s a really big thing to think about when you go ahead and sign off on some plans to have a second story added, or a new roof. It’s just a lot of prep, making sure all your ducks are lined up, right, Danny?
Danny: Yes, one of the things, for example with insurance, that you don’t have to worry about is if a court finds that an insurance company acts in bad faith, you would be entitled to your attorney fees and costs and potential treble damages to the extent that there’s a tort committed, so they’ll be punitive damages. However, you can at least recover your attorney fees and your cost if there’s a finding of bad faith in court. With regards to construction defect, like Terry mentioned, having that attorney fee clause is really what’s going to help you be able to recover the costs of litigation, which these days are really, really, expensive and [unintelligible 00:51:20].
The other thing, as someone who’s actually had remodeling done, or currently being done, is when it comes to the scope and how truly important that scope is. Because unless you’ve actually spelled it out, 9 out of 10 times a guy come back to you and say, “You told me to just do X and now you’re telling me to do X plus Y and I need more money in order to do that.”
Terry: Where I’ve seen stuff like that is and I can probably think of a half a dozen examples of a re-roof on an existing home where the homeowner said, “I thought you were going to do a complete re-roof. You were going to do this, you were going to do that.” The contractor had a completely different idea of what the scope of work was. It’s really important to nail down that scope of work.
The other thing, before hiring a contractor, and that is, do a little bit of research. You can find out all sorts of stuff about your contractor on the internet. Don’t be afraid to ask him or her for a portfolio of projects that they’ve completed.
Debby: References, be able to call.
Terry: Yes, absolutely. That was going to be my third one. [chuckles] It was, “Give me names to some of your clients. I want to call them and talk to them.” If the contractor starts back-paddling then maybe that’s not the contractor for you.
Danny: Terry, what’s the biggest construction defect case that you’ve ever handled?
Terry: Wow. Probably some condominium projects. We don’t see these condominium projects of this size anymore, but I’ve handled over the years HOAs condominiums in excess of 500 units and the recovery in those, depending on the damages, I’ve had some of those recoveries was upwards a $5 million.
Debby: So you represent the HOA, and the homeowner, and the commercial property owner. All those entities are people that you would potentially represent.
Terry: Exactly. Any property owner whether it’s a private homeowner, a commercial property, a business. In fact, we were talking I think at one of the breaks, about the Northridge earthquake. Following the Northridge earthquake, we represented a lot of single-family homeowners, a lot of HOAs, and also a lot of commercial property owners. I represented a lot of apartment building owners on their earthquake insurance claims following the Northridge earthquake.
Danny: Those were very big. Before I tell you about our next show since we have two minutes, one tip that you have for homeowners, Terry, as someone who’s been doing this for 25 years. What would be your tip that if there’s one thing they should keep in their mind and always in their back pocket?
Terry: That would be to be proactive. Your home is your investment, there’s nobody else that’s going to look out for your investment but you. If you see any of these indicia of water damage, or soil movement, or stuff. The cracks start out small, they don’t start out big.
When you first start seeing such indicia of damage, don’t wait. Call a professional, call us, we’re happy to come out and do an inspection. We do not charge to come out and do an initial inspection of your home. We’ll let you know what your rights are.
Debby: Great. It’s been a great show and I’m sure a lot of people have more questions. If you do, call the ACTS Law firm at 833 A-C-T-S, law. 833 A-C-T-S, law. They’ll be happy to answer any questions you have. Thanks to you for joining us today on the ACTS Law Hour. Knowledge is power, power is knowledge and I hope we’ve empowered you today. Make sure to set your dial on TalkRadio 790 KABC all week long and tune in next Saturday at noon.
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