Our litigious society isn’t just about people getting scalded by drive-through coffee and suing. It’s also a big concern for members of the fenestration industry, who frequently get burned in construction-defect litigation.

Chip Gentry of the Call & Gentry Law Group in Missouri discussed lawsuits, insurance and warranties during a presentation at a recent meeting of the American Architectural Manufacturers Association (AAMA).

Gentry said there’s a construction-defect crisis, and the fenestration industry is a major target for lawsuits. That’s because it’s often easier to sue one manufacturer than all the parties involved in a  project, he said. And with the mantra “build it cheaper and faster” driving shoddy construction standards across the country, he said construction-defect litigation is a growth industry, with skyrocketing attendance at “how to” seminars for lawyers looking to profit in the field.

Beyond the cost involved in these lawsuits, Gentry said they can take a long time to be resolved, be difficult to settle because of all the parties involved, and can demoralize your workers. He said high-risk projects for construction-defect lawsuits include lofts and apartment conversions, hotels, condos, townhouses and low-income housing.

Insurance is Key

That’s why it’s vital to have insurance to protect your business, particularly if you operate in Arizona and California. Gentry said you must make sure you have enough insurance limits to adequately protect you, adding that it’s better – and less expensive — to have multiple layers of insurance each year.

You want insurance with a duty to defend with defense costs in addition to limits, Gentry said. “You don’t want payment of defense costs to erode your limits for settlement or judgment,” he said.

To lower premiums, Gentry said look for something called self-insured retention (SIR).  SIR is paid by your company upfront before any obligation of your insurer is trigged. The deductible requires the insurer to defend you immediately and bill you for the deducible amount. If your company goes that route, consider the amount of the deductible or SIR that makes sense to maintain, including the possibility of an annual aggregate.

Also, be wary of adding vendors to your policy, which can increase your exposure to potential lawsuits.

When you’re looking for an insurance broker, Gentry said use one with a great reputation or lots of experience in the fenestration industry. Choose those rated “A” by A.M. Best, a highly regarded rating agency that focuses on the insurance industry.

Warranty Worries

Warranties are another tricky area for door and window companies.

For example, brochures, statements made by a manufacturer related to quality, websites, billboards, ads, the names of products, even what salespeople say can legally be considered a warranty. Puffery, however, is not, Gentry said.

“Saying ‘our perfect windows are the best choice” is okay,” he said. “But saying ‘our perfect windows keep the weather out’ is not okay, because it’s too specific.”

Implied warranties can also be tricky, Gentry said.

“If a manufacturer does not know of the particular purpose for which an owner intends to use a product, there is no implied warranty,” he said.

When setting up exclusions on your warranty, Gentry said it’s best to  limit damages to the purchase price, exclude consequential and other damages, limit the statute of limitations, limit the warranty if the product was subjected to unfair field testing, and  perhaps most importantly, limit the warranty if the product is installed improperly.

“I wouldn’t be up here today if every window were installed perfectly,” he said.

The Paper Trail

Next, Gentry touched on document-retention policies. He said having a strong one that’s detailed and clear will help you in court.

Examples of documents include employment documents, accounting and corporate tax records, legal records and electronic records. But Gentry said it goes beyond paper and now includes:

-All electronic hardware and software used throughout the company, including cellphones, laptops, etc.;

-All locations and storage formats of archived electronic data, and;

-All methods in which data can be transferred to or from the company;

To be on top of your document policy, it’s important to create an oversight team that includes senior management and  the legal, tax and information technology (IT) departments. The document-retention policy that your company comes

What do Lawsuits Look Like?

Gentry then walked attendees through the steps of a typical lawsuit.

He said property owners start most suits. The plaintiff usually will be the general contractor, the subcontractor, the architect/engineer or the window dealer.

The main types of lawsuits are breach of contract, breach of warranty, strict liability and negligence. But be forewarned – your insurance won’t cover the first two. Gentry said breach of contract is only available if the owner contracts direct with a manufacturer or through agents. A contractor/architect may be considered an agent for the owner, and a distributor or dealer may be considered  an agent for the manufacturer

Gentry said there are also statutory concerns, such as unfair trade practices, consumer protection laws and the Consumer Products Safety Act.

Leave a Reply

Your email address will not be published. Required fields are marked *