Build Your Foundation: Five Smart Strategies to Prepare Your Construction Case for Mediation
Construction lawsuits can encompass a wide variety of claims ranging from construction defects, construction delays, breach of contract claims, structural deficiencies, and environmental issues, to name only a few. They also often involve multiple parties and may have complicated factual scenarios that can make it difficult to determine liability among defendants, even when it’s clear that a negligent act or contract breach has caused damage to a plaintiff.
These kinds of multiparty, complicated lawsuits may be well-suited to mediation. If you’re going to mediate a construction case, careful consideration of the typical issues involved, and thoughtful preparation of your case can greatly improve your chances of settling your case. Here’s a closer look at how to prep your construction case for mediation.
Identify the Parties
One of the first steps to take before mediation is making sure that you have identified all the relevant parties — such as the general contractor (“GC”), the architect, engineers, and subcontractors, for example. You’ll also want to confirm all possible insurance coverage for the parties, whether that’s builder’s risk, general liability, “additional insured” status, or other types of coverage that each of the defendants may have.
Consider Jurisdictional Issues
You’ll also want to consider whether there may be competing jurisdictional problems with your case. Let’s say you have a case involving an owner who’s suing for an alleged breach of contract by a subcontractor hired by the GC. The owner may have a contract with the GC that requires arbitration while the GC’s contracts with its subcontractors fail to include an arbitration provision.
Consider indemnification clauses as well to ensure that you have all parties present at the mediation. While the language of the contracts will guide you, your goal is to get all parties to agree to mediation before arbitration. Even if you’re in an arbitration proceeding with subcontractors who may not be involved in it, you can still get them to agree to voluntarily participate in mediation to resolve the lawsuit.
Prepare to Tell Your Story
Next, you want to plan how you will give the mediator the “big picture” of what’s going on. Having plans at the mediation can help facilitate that. Consider having your expert(s) available to explain technical issues that exceed the general knowledge that you can expect an experienced mediator to have. I’ve had mediations where being able to ask questions of an architect or engineer has been very helpful. I have also had parties make their experts available for questioning by the adverse party during mediation to facilitate understanding of technical issues.
Prepare Your Client
You must also fully prepare your clients for what will happen at the mediation, and for the positions they are taking in mediation. If your client has real exposure in a case, you must communicate that before the mediation — hearing that for the first time in mediation can derail or delay any potential settlement. Your client should have a realistic evaluation of the case, whether as a plaintiff or a defendant, ahead of the day of mediation.
If your client is an owner or general contractor, you may also have an ego issue to deal with. If your client is successful and has been used to being in charge and have everyone defer to him or her, that may get in the way of mediation. Again, preparing your client about what to expect can help set the stage for a successful settlement.
At the mediation itself, keep an open mind to what may happen. I recently mediated a roof repair case where the property owner had contracted with the GC to do a roof repair on the rubber membrane roof of a large warehouse. The GC subcontracted the work to a small company that ruptured a seam in the old roof while hauling materials. A massive rainstorm soaked and damaged the roof as well as damaging equipment and goods in the warehouse and led to a business interruption claim by the tenant of the building.
In this case, there was a question about coverage for the subcontractor who did the actual roofing. The subcontractor had insurance coverage but there was an exclusion for a rubber membrane roof. The insurance company sent a reservation of rights letter; it was willing to participate in the mediation but stated that if the case wasn’t settled, it wouldn’t cover the damage because of the exclusion. There was also an indemnity agreement between the roofer and the subcontractor.
In that case, we did have a successful mediation, with the GC picking up more of the loss than he would have had if there been insurance coverage for the roofer, and the case settled.
Business Connections Matter
The business relationships between the parties may also affect the outcome of the mediation. For example, you may have a GC that builds hospitals all over the country for the owner. In that case, the GC may want to take care of its client (the owner) and may bend over backwards when subcontractors are found liable in a construction case. I’ve seen cases where the GC agreed to pay the owner for subcontractors’ subpar work and then pursued its claims against the subcontractor outside of the mediation.
Construction cases can be complicated, but ensuring that you have the relevant parties involved, preparing ahead of time, and staying flexible can help set the stage for a positive result at mediation. And if the case reaches impasse at mediation, don’t give up. Plan to follow up with the parties afterwards to see if settlement is still possible. Many construction cases can, and do, settle post-mediation and before trial.
ABOUT BARRY L. HOWARD
Barry L. Howard has been mediating cases since 2007 and has been a full-time mediator for the last four years. Barry has mediated personal injury, professional liability, medical malpractice, civil rights, employment disputes, construction defects and injury, wrongful death, and commercial disputes. Commercial dispute cases include multi-million-dollar equipment lease cases, breach of contract, transportation contracts, financial institution consumer transaction disputes, and mortgage/wrongful foreclosure cases. Barry also mediates professional liability cases, including attorney malpractice, real estate agent errors and omissions (“E&O”), insurance agent E&O, and accountant professional liability. He has mediated more than 2,200 cases in person and more than 200 virtual mediations using Zoom.