With many property owners still owing more than their properties are worth, combined with the run-up in construction in the mid-2000s and resulting poor quality in many instances, I am led to conclude that thousands of construction defect suits will likely be filed in the next two or three years. Anti-construction defect litigation statutes adopted in many states will have little effect in stemming the tide. Component manufacturers will be among the many in the construction chain having to figure out how to defend and extricate themselves from such suits.
Knowing what your Commercial General Liability (CGL) insurance policy can provide in terms of a construction defect lawsuit defense and payment is crucial. Understanding the degree to which many insurance companies will go to neither defend nor pay on construction defect claims is even more important. Far too many construction subcontractors and suppliers, including component manufacturers, are, in my opinion, naive when it comes to knowing what to expect from, and how to effectively manage, their insurance companies over a construction defect lawsuit.
How a component manufacturer deals with a Reservation of Rights letter, the involvement of the manufacturer in the advocacy of their best interests, and the use of personal counsel and personal expert(s) with the insurance company and at times, managing the relationship between the manufacturer and certain parties to the lawsuit, is essential to a successful resolution of a construction defect lawsuit.