Any situation or condition happening on your property that not only lowers its value but also jeopardizes the structural integrity of the building is referred to as a construction defect. The party must show that there was a significant flaw in the building’s construction, a structural flaw, or substantial injury to someone or damage to their property.
Several circumstances can result in these defects, but some more typical ones are construction errors, preliminary site analysis, flawed structural engineering, and defective building materials.
Construction Defect 101 Series is made to offer simple and easily understandable explanations of legal components included in construction defects, which could help you get through the process faster and easier. The series discusses equitable contribution, split billing, reconciliation, and recovery.
The Florida Legislature
Before explaining the importance of different components, it is essential to mention that the State of Florida has passed HP 301 statute section 624, 1055. What does this mean for the State of Florida regarding actual contribution and construction defect litigation?
That means the Florida legislature made a substantial change in the law and is moving towards a cost-sharing approach like California, which everyone should adapt to as quickly as possible to avoid potential legal issues.
Equitable Contribution and Carrier Allocations
One insured, two insured, four insured, 25 insured or more. Each AI (additional insured) carrier has to defend. Once an AI carrier has accepted a tender, this carrier has accepted the portion of the allocation based on their tender date for all defense fees and costs. As carriers are added or removed from the distribution, a reallocation is calculated, increasing or decreasing each carrier’s shares.
For example, suppose four AI carriers are included in an allocation with the same tender date and four hundred thousand dollars (400000$) worth of legal vendor and expert invoices. In that case, each carrier is allocated one hundred thousand dollars (100000$). Remember, carriers that have accepted a tender agreed to be included in the allocation and are obliged to pay for the defense. Meaning they have a duty to defend.
Your law firm needs to divide a single bill among various carriers with different percentages and collect payment from each. This task can get complicated quickly. You may even have to upload your legal accounts to third-party audit firms, such as legal acts, who will make adjustments reducing your legal bill as per assures guidelines.
Splitting legal bills can be complex, especially if you break the bills among several carriers with different tender dates. Ask yourself whether the carriers are paying their total amount of the split bill or only paying a portion of their balance due. Are you following up with the carriers not paying their full share? Are you reallocating that share to the other carriers, or are you running off that amount? Are you getting paid 100% of your legal bill or settling for 70 or 80% of the payment, leaving a significant shortfall?
Reconciliation is the key to recovery, refunds, payments, and no overpayments. Reconciling might sound easy; one minus one equals zero. Now let’s consider that several carriers who have accepted tender, meaning they have a duty to defend, may not send payments where they have been instructed to but are sending payments to the vendor. Don’t forget that the law firm also pays the vendor directly. The client may also have sent payments to vendors at some point.
But here is where it can get messy. Payments may not be recorded correctly or at all or may have been refunded to the wrong party. Invoices may not have been billed but have been paid or missing altogether. Reconciling these vendor and carrier accounts escalates the entire payment process, getting vendors and clients paid faster.
Construction defect litigation is a long, complex, and costly process. Your client has already funded the defense and expects 100% of all sums to be recovered. How will you do that? Billing, communication, follow-ups reconciling, reporting, and recovery. All this needs to be coordinated and is best handled in one place.
Vendor Cost Control is designed to help you ease these processes, take your mind off complicated legal issues, and track those involved as contractors and subcontractors. To handle complex litigation allocations and agreements, VCC has evolved from its origins as a software product into a service.