ENERGY-CONSCIOUS CONSTRUCTION: Litigation Insurance?

This insulation job in a California subdivision is an example of production work at its worst. Without quality control, this insulation could be covered by drywall and forgotten.

Complex designs invite the comfort and moisture problems that lead to lawsuits. This room has a complex thermal envelope that many contractors would have difficulty sealing.

The "mother of unducted returns," this garage platform will support two systems. Because it is difficult to seal properly, it draws air from the garage and outside. This can lead to comfort and safety problems, and possibly lawsuits.

An afternoon breeze can make a poor insulation job into a disaster. Will the drywall contractor reinstall it?

Duct seal wanted! This kind of poor quality work will lead to air leakage, uncomfortable homeowners, and high energy bills--one step closer to contractor call-backs and the possibility of litigation.

Are defect suits simply a short-lived fad? No statistics have been gathered nationwide, but California construction cases dealing with defective workmanship and inferior products total in the thousands. According to a 1996 study commissioned by San Diego's Building Industry Association, a whopping 81% of randomly selected condominium associations have been involved in construction defect litigation (CDL). These cases are not limited to California. Class action lawsuits targeting hardboard exterior siding, exterior insulation and finish systems (EIFS), and asphalt roofing shingles have originated from Mobile, Alabama, home of product defect lawyer Richard Dorman. These cases affect an estimated 4 to 5 million homes throughout the United States. You may unwittingly be involved in a class-action suit, thanks to the efforts of Dorman and other lawyers who have developed an expertise in pursuing defective product claims for the benefit of homeowners.

Elsewhere in the country, litigation is taking off. Plaintiff and defense lawyers, experts, and insurance staffers are setting up shop in boomtowns such as Las Vegas and Phoenix. In Nevada last year, more Californians than Nevadans took lawyer licensing exams. Claims are already popping up in Las Vegas, where an estimated 70,000 new residents per year flock for employment and affordable housing. As construction firms in these cities rush to hire new workers, quality has taken a nosedive. Superintendents complain that they have become babysitters to unskilled workers.

Frivolous Suits or Faulty Homes?

Whomever you believe, the chief complaint almost always involves two things: water and comfort. Builders who fail to keep customers dry and comfortable will almost inevitably end up in a lawsuit. Complaints also focus on defective products that fail to live up to their advertised claims, such as lifelong plastic plumbing systems and untested, leaky windows. Homeowners often feel cheated when these simple components cause trouble in their $200,000 homes. They resort to the law to help them recoup.

Defects occur for many reasons, some more frequent than others. These include complex house design; changing customer expectations; new, untested, and incompatible materials; a lack of quality control on the job site; changes in the workforce; compressed schedules; and the lack of widely accepted standards for quality verification.

Twenty years ago, production home design was relatively simple. We used time-tested siding, plumbing, and roofing materials that varied little from what worked before. Today, our homes incorporate lavishly tall ceilings, entire walls of beautiful glass windows, and complicated roof pitches that add curb appeal. When design overshadows common sense, trouble occurs. HVAC system layout is rarely contemplated in the design. Insulation difficulties are worked out in the models. Window potshelves and architectural pop-outs are fancifully illustrated but rarely technically detailed in the construction documents. The result is a design that the public craves but which the builder struggles to achieve.

Customers no longer accept high utility bills and drafty homes. They expect "efficiency," and more comfort and convenience than in the past. But while some builders have tightened up their construction, they have not always thought through the implications, such as the effect on natural draft combustion equipment.

Many materials work great when they're perfectly installed to manufacturer's guidelines. But give a new plastic water pipe system to a copper pipe plumber and watch the sparks (and the defects) fly. Manufacturers are often ignorant about the conditions and construction practices on different job sites. Every year hundreds of new products are marketed to builders, many of which have never been tested outside a weathering chamber. Builders need to be cautious when selecting new and untested products, including innovative windows, plastic plumbing, and new roofing materials. They should know what specific industry tests those products passed and their performance history in the local climate with the selected integrated components. It's critical to learn more about the products being offered, how they were tested and how long the identical product has been in service before making the selection.

Building production homes is akin to other manufacturing businesses, but the factory is the ever-changing jobsite. How does house construction stack up to computer fabrication, for example? Computer parts are standardized; they generally fit together; and the system is stress tested before leaving the plant. In contrast, the parts of a house come to the site as raw materials that must be cut, fastened, allowed to cure, and integrated with many other parts that do not necessarily fit. A home is rarely if ever given a "test run," unless you count those few builders who operate appliances and conduct air infiltration, infrared, and duct leakage testing. In addition, the workers building the house may have never worked together before. They may not speak the same language, and they don't necessarily have much understanding or concern about components of the home outside of their individual specialty.

Houses must indeed be stress tested. Their components must be made compatible, integrating seamlessly into the system. Quality control procedures and inspections must not be left to the production staff, who are often most interested in staying on schedule. Some builders rely on the government building inspector for their quality control. These builders have no system for identifying the most important measures of quality--health and safety, comfort, durability, and affordability. When quality control is separated from production, great improvements are made, often within a few days. For example, HVAC workers should use a duct blower during the framing stage to find significant leaks.

Workers are more specialized in their trades than ever before. True journey-level carpenters are rare on the job site nowadays. They have been replaced by specialists who may only do stairs or stand-up walls. These highly specialized workers are less likely to recognize problems with other people's work, and are unable to correct obvious deficiencies. Language is often another barrier on the job site, causing communication problems that can lead to costly mistakes. With the demise of union labor, many workers receive only on-the-job training, with little or no overview of the house as a system. The results are poorly integrated components and poor teamwork.

Making the Modern Jobsite Work

The Building Industry Association and the National Association of Home Builders (NAHB) are improving training and education to overcome some of these problems. Some community colleges now offer classes that provide the basics in construction technology, estimating, and inspection. These classes are a great start toward educating workers to understand their responsibilities and the level of quality they should be aiming for.

Builders often boast about how fast they can build their production homes. Despite fluctuations in weather and manpower, they bring the homes in on time and on budget. Few superintendents or foremen obtain bonuses for quality. Superintendents should reward prudent builders who leave two or three days of float time to look for and correct defects that would otherwise get covered. Del Webb Homes, a builder who has completed nearly 60,000 houses in 12 communities, requires a team of superintendents to walk each home prior to insulation. The team independently analyzes the quality of work, and sufficient time is allocated to correct problems.

Some builders are rewarding subcontractors when a certain measurable level of quality is achieved. Why not give the HVAC contractor a $50 bonus each time the duct system tests under 5% leakage? Some builders carefully track the number of deficiencies each superintendent finds and corrects, and give incentives to the one who finds and corrects the most.

Unless there is a defined method to address discovered defects, those defects will often get covered up by the next tradespeople on the job. One way to reduce coverups is to use the Red = Stop, Green = Go identification system to alert workers to a problem or a correction. The red paint on a structural hold-down indicates a problem; it keeps subsequent trades from covering the problem up before it is corrected. The reward to the builder is fewer callbacks and reduced liability. It will never be cheaper than during construction to correct a known deficiency.

Standards

A relatively new damage theory in construction defect cases is that of personal injury. The idea is akin to automobile injury claims. Under this type of claim, a builder can be held responsible for pain and suffering, medical claims, and loss of enjoyment of a home if he or she builds a structure that causes occupants to get sick. Clearly no builder intends to build a home that will injure its occupants, but in fact new homes are being built without regard for how combustion appliances and fireplaces affect air quality and how this in turn affects the occupants (see "Carbon Monoxide Problems from New Furnaces," May/ June '97, p. 19).

What's Wrong with the Future?

The industry should learn from other successful manufacturers such as the Ford Motor Company and from service leaders like Nordstrom. Many improvements are possible, and the industry must take small steps every day toward improving quality and standardizing the methodology of constructing homes.

Avoiding the Litigation Trap  Contractors building single or multiple home developments can take several steps to reduce their risks in today's litigious market. Preconstruction Design carefully. Peer review all documents, and standardize details to those that have proven successful. Have superintendents, customer service, and vendors mark up the plans with their comments and criticisms. Stick with what works and avoid untested products. Obtain samples of the products and critically analyze how each product will integrate with the others you use. Do not allow purchasing agents to select products without looping those recommendations back to the pre-construction team. Good risk management includes a complete overhaul of legal contracts. Purchase contracts, subcontractor and vendor agreements, homeowner maintenance manual, and owners association documents are all critical. Hire a law firm that specializes in builder and contractor risk management or attend risk management seminars. Construction In production homes, think of the model as a prototype. When all rough trades are complete, walk the home with key personnel and the trade foremen to identify problems, allowing three to five days after inspection approval before covering the frame.  Have an independent inspector, either trained by your company or brought in from outside, inspect the work, walking the site with the construction staff to alert them to potential trouble. Prepare a series of detailed checklists that focus on likely failure points and complex areas of the home. Each checklist should be detailed enough to analyze the quality of a particular component specifically. Avoid checklists that simply say, "check framing" in favor of specific quality directives such as "all PAHD hold-downs in place and nailed with 16d commons." Such a list allows less-skilled workers to assist in checking and verifying the quality of the home. Invest in training and education, particularly where problems pop up.  Try positive reinforcement as a tool to improve morale with your fellow workers. People will do a better job when their good work is appreciated and commended. Document key construction features, such as waterproofing, drainage, and structural components. Also specify HVAC systems on the plans. Don't leave it to the trades to figure out what to put where. Photograph key features to verify that the work was completed per plans.  Maintain good communication with the building team. Some builders fax corrections to subcontractors daily; others call them by radio whenever a problem is identified. Any written record of a problem must have written closure to complete the paper trail. Keep the construction documents up to date, with all modifications verified on the construction site. Make sure all structural changes are forwarded to the building department and approved. Any significant changes to the building design or structural components should be documented in writing. Performance-test the house envelope, HVAC, and ventilation systems to ensure compliance on all models, and every three to five homes thereafter. Repeat whenever a new subcontractor takes over to ensure consistent quality. Postconstruction It's more difficult to sue a friend, so customer service often becomes important for avoiding lawsuits. Homeowners are more likely to give builders another chance if they believe the builder is trying hard to fully resolve the problem.  Jump on water intrusion and comfort problems immediately. Builders who wait more than a few days to fix problems lose some credibility with their customers. Analyze how your work is performing under actual conditions. Visit your clients occasionally, or send them questionnaires to help identify what they like or dislike about their home (this is very important for all attached housing). If a claim begins to turn nasty, hire outside experts to resolve the issue quickly. Clients lose faith in a builder who has made several unsuccessful attempts to fix something.  Carefully track failures with good customer service software or databases. Know what works and what doesn't. This is important information to pass on to your design team in preparation for the next project.

Stan Luhr is president of Pacific Property Consultants, a construction consulting firm in San Diego, California.

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