Multi-Party Construction Mediations and How to Address Them

Fri, Mar 28th, 2025 | by Miles Mediation and Arbitration | Article | Social Share

By Gary Snodgrass

Multiparty construction mediations are often complicated due to the number of liability, causation, and damages issues. Whether the mediation occurs prior to litigation or after litigation is initiated, there are several tasks the mediator, or neutral, must perform to help the parties reach resolution. As a mediator of construction cases, I will discuss some of the common issues that arise during multi-party construction cases — and how to address them. These issues are relevant to the mediator as well as the advocates involved in construction mediations.

The Importance of Preparation

Preparing ahead of time helps set the stage for effective mediation; as a construction mediator, you should be familiar with the language of construction and the standards that are applicable to any dispute. Request prealiminary written information from the parties to help you review the multiple factual and legal issues at play. The parties should outline background information regarding the claims, theories of liability, causation and damages, and settlement status to help arm you with enough knowledge about the case to begin planning how to achieve a settlement.

The Issue of Insurance Coverage

One of the first issues to address is the question of insurance coverage available to the parties. When there are multiple defendants with claims and crossclaims, you must determine which parties are insured and which are uninsured. You must also understand contractual indemnity, contribution, additional insured coverage, the proper measure of damages, waiver of subrogation, consequential damages and limitation of liability provisions. As a mediator, you should determine whether there are coverage issues that may affect the process in reaching a settlement.

In multiparty cases, you may want to meet with the defendants first to determine whether insurance policies are responding to the claims — and if insurance adjustors or claims supervisors from insurance companies will be available for the mediation. If a party has not even attempted to turn in a claim to the insurance company, the whole process can be delayed. Meeting with the defendants as a group to determine whether insurance proceeds are available is an important first step.

There may be coverage issues on some of the claims, and insurance companies may have sent reservation of rights letters to their insureds regarding coverage under various types of professional and commercial general liability policies. For example, contractors may be facing coverage issues based upon “poor workmanship,” for which insurers often deny coverage when the claims relate to the work itself and the quality of the work. The mediator must know whether an insurance carrier is going to contribute money to the settlement despite any reservation of rights. There may also be some limitation on the amount of money the insurer is willing to offer before a declaratory judgment action is filed by the insurer, asking that the court find that the insured has no coverage, or to limit liability to certain claims against its insured.

Assessing the Merits of Claims and Defenses

Once the insurance coverage issues are identified, the mediator can proceed to the merits of the claim or claims, and the defenses raised by the defendants. Multi-party construction cases may involve architects, engineers, contractors, surveyors, subcontractors, lenders, suppliers, owners, and developers on a wide variety of projects. Whether some parties are aligned or not, or whether some have contractual and business relationships, is an important consideration.

Joint defense agreements may be in play and separate rooms for the various defendants can be adjusted accordingly once the mediation begins with the plaintiff. Some defendants may stay together in a room to discuss joint offers from two or more defendants who are on the construction side or on the design side. Obviously, the mediator must understand the basic issues involved in the construction case and the various roles of multiple companies working on a construction project.

The mediator and lawyers involved should also know the theories of liability of the claimant or petitioner against each defendant. If there are third-party actions, the structure of the mediation may change because an adversarial relationship may develop when a third-party plaintiff sues a third-party defendant or defendants.

If there is one main defendant and several third parties being brought into a case by the main defendant, once the insurance issues are straightened out or at least recognized, negotiations can be pursued between the main defendant and the third-party defendants separately from the plaintiff. The mediator and advocates must also be familiar with the legal and factual issues regarding standards of care, code violations, failures to comply with local laws, applicable statutes, standards that are applicable to design and construction defects, and recognized defenses such as comparative fault, statute of limitations, statute of repose, limitations of liability and other potentially applicable defenses to claims under the applicable state and/or federal law. Conflict of laws sometimes come into play to determine what law applies or the parties already agreed contractually upon the law of the place of the project being applicable.

Apportioning Damages

One of the legal quagmires faced by the mediator and the advocates is how to apportion or allocate damages among the various parties. The neutral must anticipate how the court may instruct the jury if a jury trial is pending. Often in construction cases, there are third-party claims or crossclaims based upon negligent misrepresentation, fraud, warranty claims, strict liability, and other causes of action, at least on paper. However, all these multiple theories of liability complicate issues of indemnity and contribution and apportionment.

Generally, contribution is limited to joint negligent tortfeasors and many of the theories of liability in such cases do not lend themselves to apportionment of fault as a matter of law. This is an area of law that is almost always hazy and ambiguous, but the advocates must address each of the theories and ask themselves whether apportionment of fault can be based upon multiple liability theories that are not compatible. In other words, whether a good faith settlement finding can be made by a court when there are non-tort theories of recovery, or whether the applicable statute contemplates settlement by joint negligent tortfeasors is a legitimate issue. In the end, however, the issue is how much a party is willing to pay given all the uncertainties of litigation and the complexity of the legal issues which will have to be sorted out by a court, if the mediation fails.

Contractual Relationships

Another extremely important element in construction cases is the contractual relationship between one party and another, if any, and the contract documents that are entered into by the parties on the project. It is important to find out if there are relevant AIA (American Institute of Architects) or other form documents. Specifications and notes on drawings can be relevant and the mediator must pay attention to details and reduce a complicated matter down to basic points being made. The mediator must be able to wade through a maze of events and contract and tort duties and responsibilities and create chronologies of what (allegedly) occurred.

Discussing Settlement

By having a joint session with defendants first, the mediator can assemble all pertinent information and positions of the defendants. During this initial session with all defendants, the mediator should attempt to start the negotiations by determining which defendants have a common interest in resolving a case, and the amounts of money available from each. There is the potential for two or more defendants in a separate breakout room discussing a joint offer and possibly making separate settlement offers. This may or may not pressure other defendants to “sweeten the pot.”

The mediator must also discuss what happens if the mediation fails. Either the parties will try a lawsuit in a courtroom, arbitrate, or settle the case later. The mediator should encourage the parties to think about what is going to happen in the courtroom in front of a jury, depending on the venue, and before the judge or arbitrator(s). Knowledge of the venue, the juries, and the judge and arbitrator involved helps the mediator predict possible outcomes, and evidentiary rulings are critical because whether something comes into evidence or stays out impacts the “flavor” of the case.

Every construction mediation is unique and different and can be structured to achieve resolution in creative ways. For example, the usual approach of meeting first with the plaintiff and subsequently the defendant or defendants may lead to delays in the process and the need for more sessions with the various parties while meeting with all the defendants first and encouraging discussions among the defendants to formulate offers can help encourage settlement.

To conclude, the construction case mediator and the parties’ advocates should be knowledgeable about how construction projects work, be familiar with the contract documents on the project, the relevant contractual relationships, contract duties and obligations, legal and factual defenses to the liability theories, causation, and damage claims. The mediator and all counsel involved should also have a basic understanding of the issues and language of the case as well as the positions of any experts involved in the matter. While multiparty construction cases can be complex and complicated, this kind of thorough preparation and grasp of the issues helps set the stage for resolution.

*Originally published in Missouri In-House Counsel and reprinted with permission.

About Gary Snodgrass

Gary Snodgrass is a practicing lawyer and mediator, a founding partner of the firm Pitzer Snodgrass, P.C. (office in St. Louis, Missouri). He has conducted over 125 mediations involving a wide variety of matters including construction, products liability, professional liability, personal injury, and general liability.