by Quenda Behler
I thought I'd celebrate JLC's 25th anniversary by writing
about legal issues that have been bothering me — and
probably you — for the past 25 years. Someone else
might have a different list of complaints, but hey, it's my
column, so here's mine.
The Crisis Du Jour
It used to be asbestos, then it was mold. Now the big issue is
toxic cleanup. What these issues have in common is that
politicians, government regulators, and customers all insist
that they be fixed — right away — but no one
wants to pay.
Something else they have in common is that we didn't know
they'd be problems until after the fact. As a result,
contractors have been dropped into a swamp of lawsuits;
obscure, confusing, and contradictory regulations; and oddly
written contract provisions — all aimed at answering
that ultimate question: Who gets stuck with the bill?
Take asbestos. At one time it was considered the new
miracle product and was used everywhere — including
inside school buildings — for a variety of purposes.
It was even used for decoration, as a paint additive, because
it provided an interesting texture. Only later, over a period
of time, did we begin to discover how dangerous the stuff
So whose problem was this? The manufacturers', for one
— but it also became a nightmare for the contractors,
who'd installed the very products that their customers asked
for, only to get pulled into lawsuits on the theory of "sue
everyone in sight." The contractor could win the suit and still
end up spending a lot of time and money defending himself in
More recently the problems have been mold and toxic waste. We
weren't decorating with mold, of course — but the
point is, it hasn't always been considered such a big health
hazard. And toxic waste? Some of it was simply called trash 25
years ago, and no one worried too much about where it went. But
now, suddenly, these are huge, expensive problems.
Money is not the only issue with these sudden crises. There's
also the question of what we're supposed to do next. Once you
know something's dangerous, how do you abate it? Once you know
some of your waste is toxic, where do you put it? And how do
you write your contract to reflect these issues?
What to do: Keep informed. When contractors turn to
me with these sorts of questions, sometimes I can only mumble
something along the lines of, "If you try this, I think you'll
be okay, but I can't guarantee it," because some of the issues
have yet to be resolved. The best advice I can offer is to stay
informed. Read magazines like this one. Keep in touch with
contractors associations. Attend programs and conferences where
you can learn building practices that will help you avoid such
And if you discover you have a problem on your hands, talk to
your attorney early — but don't choose one of those
attack-trained lawyers who'll get in there and rip out your
opponent's throat. Not right away, anyway. You want someone who
works in your field and has negotiating experience. If you're
having — or expecting to have — a problem
with a customer, don't forget the value of personal contact.
Stay in touch and try to work it out with him before things to
get the point where he's making complaints to regulatory
agencies or talking to his attack-trained lawyer.
All of which brings me to my next complaint.
The Mess in Our Legal System
Suppose someone did what he had reason to believe was correct
at the time, but then he discovered he was wrong — and
this came to the attention of a regulatory agency. Since
federal and state regulatory agencies are usually understaffed
and underfinanced, they sometimes attempt to control what
happens on the job site by finding one or two offenders and
crucifying them. They make an example of them that is so
horrendous, everyone thinks, "Whoa, I'm sure not going to do
It doesn't have to be the government coming down on you,
either; it could be a customer. Clients can sue you for just
about anything. Maybe they catch your employees smoking on the
job and blowing second-hand smoke into the customer's air
— it's impossible to predict what could lead to a
suit. And you'll have to defend yourself. Even if you have the
customer from hell who is clearly wrong, wrong, wrong, you
could be tied up in court for a long time and forced to spend
thousands of dollars. Moreover, unless the lawsuit involves
certain kinds of claims — or is absolutely baseless
and malicious — you aren't going to get that money
back. Not even if you win.
But that's not the worst news. Here's the most frustrating
part: You might be absolutely innocent, but if that lawsuit
involves an area where the law is still being worked out, you
Sometimes your lawyer will have to say something that I
personally just hate telling people: "If you fight this out to
the bitter end, you might win, but that doesn't matter. You had
better settle it, because right or wrong, you can't afford to
be involved — and besides, you might not win."
Got that? Even if you are what we in the legal trade like to
call "the innocent party," that's not necessarily going to
protect you. This can be true even in arbitration; while I
prefer arbitration for a number of reasons, I do have to admit
that it's not the quick or cheap dispute-resolution system it
used to be.
What to do: Document everything. Do I have any
helpful advice here for how you might avoid being a human
sacrifice? Yes: Try to head off these problems before they get
started. Get good legal advice from an attorney with experience
in the construction industry about how to write your contracts.
Create a paper trail: Save all your job contracts, receipts,
and other paperwork — every single piece. Make notes
about all of your contacts with your customers and subs.
Also, keep a log in your laptop or a spiral notebook. You're
not writing War and Peace; your log should have just brief
statements in it, like "9/9/07, John Q. Customer called, said
he didn't like the paint; 9/9/07, Joe Supplier called, said
trusses would be delivered and ready for work start next
Monday; 9/9/07, spoke to Jim Painter, told him to talk to John
Q. about a different color."
Sounds simple, doesn't it? So simple you may think it's a
waste of time, but trust me, it's not. You can use your log to
refresh your customer's or your supplier's or your sub's memory
about what actually happened or was really said. In addition,
if you keep those kinds of records, your lawyer will love you
Mold, toxic waste, and the like are health problems. But now
I'm going to talk about political issues: consumer-protection,
anti-drug, and hiring laws, and immigration.
These are real problems and I'm certainly not suggesting that
you ignore them — but tell me the truth: Are they
problems you expected to be required to solve when you set out
to make your living remodeling kitchens?
Consider immigration. No matter how it gets worked
out politically, this issue is going to cause problems for
contractors. The most extreme proposals — to seal the
border and deport anyone who is here illegally — will
make finding and hiring construction workers much more
Even if the country doesn't go to that extreme, things could
become a lot tougher for GCs. For one thing, there's likely to
be a lot of new red tape. What happens if you hire a guy who
has an accent but, because he was born in southwest Texas,
doesn't have immigration papers? Is it up to you to prove that
he's a citizen? When did that get to be your job?
My fear is that someday contractors will be confronted with a
new kind of inspector who can shut down the job if an employee
— citizen or not — doesn't have the right
documentation. But suppose those papers are forged? Would you
recognize a forged driver's license or birth certificate?
Didn't take that criminal forensics course, did you?
Here's another aspect of the problem that worries me: Some
local municipalities are starting to pass their own laws about
illegal immigrants. Does that sound like a good idea? Should
contractors be required to conform to different rules depending
on where the job site is? As far as I'm concerned, the building
code is bad enough as it is — and it's written by
people who were trying to make it uniform.
I feel the same way about the lawsuits and various regulations
that make contractors responsible for their employees' drug and
alcohol abuse. If the guy's doing the job, shouldn't that be
good enough? Why do you need to make your employees urinate in
a cup just so you won't be a casualty in the war on
My point is that contractors build things. If they wanted to
enforce laws about drug use or illegal aliens, they would have
joined the police force.
What to do: Learn the rules. Do I have any real
advice to offer, or am I just venting? Well, reasonable or not,
you have to do what you're required to do. Which means that you
have to make an effort to find out exactly what the
Again, programs sponsored by contractors associations and
magazines can be invaluable. Also, all those regulatory
agencies have piles of brochures about their rules that they
would be happy to give — or sell — to
I wouldn't want to tell you what I think of the standard AIA
contracts that try to offload architectural mistakes onto
contractors. Hey, if the architect didn't realize that the
concept of handicapped-accessible includes a bathroom with a
door wide enough to accept a wheelchair, why should it be up to
the contractor to draw that fact to his attention?
What to do: Be careful what you sign. So when you
read those architect-driven contracts, watch out for phrases
like "due diligence" and "joint and several liability." Oh, and
"indemnification" — treat that word like a flu
symptom. You might think indemnification means only that you're
promising to reimburse somebody for his expenses that were
caused by your mistakes, but some indemnification clauses are a
lot broader than that. You actually could be accepting the
responsibility of paying for the damages caused by somebody
else's mistakes — like the architect's.
When you see these terms — due diligence, joint and
several liability, indemnification — call your lawyer
and find out what you're getting into.
Insurance Companies That Won't
I don't hate insurance companies when they refuse to pay
claims. I'm too mature for that. I understand that they pay
claims out of a pool of money created by the premiums the
insured parties pay, and that they have a fiduciary duty to
protect that money from claims based on things the policy
What I do blame the insurance companies and their agents for
is all the contractors I see who think they are adequately
insured because of the way the policy was described to them,
but aren't. Words like "comprehensive" and "general coverage"
are tossed merrily around, and after the contractor makes out
the check for the premium, he gets a 10-page policy in very
small print and lots of legalese.
But then — to take just one example — when
the foundation starts to crumble because the sub ordered the
wrong concrete, the GC is told the damages were caused by a
"defect" and his policy doesn't cover damage caused by
"defects." Or a storm comes and the damage isn't covered by the
flood insurance, because it allegedly was caused not by a flood
but by standing water created by the excessive rain. Or toxic
waste is discovered on the site and shuts down the job, and it
turns out any claims created by that problem are
What to do: Think ahead. I do believe that insurance
is both useful and necessary. I absolutely do not recommend
going without it.
But you don't know what grief is until you try to get certain
insurance companies to pay up — so here's what you
need to do before you buy your insurance. Think about what
kinds of things could actually go wrong on your job site. Talk
to other builders in the area and in your local contractors
association. Find out what kinds of claims they've had, and
which insurance agents were helpful.
Let's say, for example, that you're building in the snow belt.
One question you should ask your agent is what happens when an
early storm drops a foot of snow before the framing is
complete. If you find out you aren't covered for that, you
might decide that, hey, it doesn't matter because the risk is
too small to be worth paying insurance for; maybe you're
starting in June and expect to finish in August. But make the
decision a deliberate one — don't just assume your
policy will protect you.
Also, read the exclusions; you'll find them in very small
faded print somewhere around page 18 in the policy. (I'm
joking, all you insurance people out there, so please don't
call me.) Better yet, ask your agent to mark them all; if
something's unclear and you don't understand exactly what is
excluded, ask. And then keep that marked-up copy. Your lawyer
will want to use it if you have to sue to collect on your
Finally, remember that there are other ways to avert problems
besides writing checks for insurance policies. Review your
safety policies for content and check to see how rigorously
those policies are actually followed on the site. Look at how
your contract explains what happens to the payment terms and
completion dates if disaster strikes. (I know you use the same
contract over and over, and by the way, I don't think that's
such a good idea.) Find out who your contract makes responsible
for carrying what kind of insurance.
And make sure your standard procedures include getting proofs
of that insurance coverage and that you have a system for
filing and saving those proofs.
Quenda Behler Story has practiced and
taught law for more than 25 years.