Can Home Builder Warranties Mitigate Litigation in 2019?

March 28, 2019

When it comes to the home building market, risks cannot be avoided, especially for complex residential construction projects. According to Jeffrey Kozek, a principal at Resolution Management Consultants, Inc. (RMC), home builders could face an increase in legal claims and litigation costs in 2019. These risks may include workplace injuries, failure to comply with construction state statutes, pay violations and homeowners’ defect claims. While it’s impossible to completely eliminate risk, there are a number of actions home builders can take to alleviate the burden of various liabilities and potential litigation. For example, knowing how their legal team identifies risk and incorporating a solid warranty program.

 

2019 Construction Litigation Trends

What are the predicted construction litigation trends for the current year? One of the primary trends anticipated for 2019 is an increase in dispute and litigation costs due to the increasingly litigious nature of the residential construction industry and the time and effort required for each legal claim. Because of the current shortage of construction laborers, Kozek also predicts an increase in legal claims. Due to fewer cases reaching the arbitration stage, more mediation is also expected over the next year. In addition, he suggests there could be an increase in overtime pay disputes due to potential violations of the Federal Labor Standards Act (FLSA). With building companies seeing and experiencing these construction market’s litigation trends, home builders are evaluating different ways to prevent legal issues and protect their business by outsourcing their new home builder warranties and developing other risk management strategies.

How Legal Issues Can Be Avoided for Upcoming Construction Projects

If risks are imminent, how can legal issues be avoided for upcoming construction projects? According to Kozek, careful planning and risk management tactics are essential in preventing litigation in the home building market. Walter J. Adams Jr., Vice President & Senior Claims Examiner at Berkley Alliance Managers, and Construction Executive contributor, outlines specific steps that can be taken to combat the recent uptick in home building construction litigation.

The steps for avoiding legal issues for upcoming home building construction projects include:

  1. Ensuring that project outlines and agreements clearly state the allocation of all risks
  2. Educating every construction team member about risk management
  3. Developing a clear plan of action and strategies for various liabilities

In addition to these steps, comprehensive insurance and new construction home builder warranties are the best defenses for avoiding legal issues and taking a proactive approach to the construction litigation trends of 2019. Different types of home builder’s insurance include general liability insurance, professional liability insurance, and builder’s risk insurance.

Benefits of Home Building Risk Management Services

Home builders are faced with the ongoing challenge of meeting the elevating demands of the residential construction market while also managing financial pressures and legal risks. Some builders and developers may opt to self-administer structural home warranties of their own in an attempt to cut down on costs. However, self-managed warranties are typically created without a proper risk assessment, and they usually don’t save home builders money in the long run. Because of this, more home builders are outsourcing their new home builder warranties to an expert provider.  A home builder warranty is one of the most important risk management tools for preventing litigation and preparing for liabilities. By transferring litigation risks to a third party warranty provider, new home builders are able to protect their bottom line by avoiding certain outcomes that have the potential to damage their business operations in the short- and long-term.

Professional Warranty Service Corporation helps new home builders conduct thorough risk analyses to determine the best home builder warranties for their projects. Home builder warranty coverage minimizes litigation costs of homeowners’ defect claims. The home warranties covering structural items from PWSC are a vital part of a home building risk management solution designed to eliminate the financial burden that comes with the risk of litigation. PWSC partners with home builders to provide comprehensive, third-party administered builder warranty programs, legal resources and claims resolutions. To learn more about the new construction risk management, home warranties and other services offered from PWSC, contact us today.