Teresa m. Beck | The CLM Magazine | March 2018
How Good Are You at Predicting Construction Verdicts?
One of the most important things that claims professionals, risk managers, and defense counsel do is evaluate the verdict potential of cases that are headed for trial. As a trial date approaches, invariably, the infamous roundtable meeting is scheduled where key members of the claims and defense team convene with their most experienced personnel to discuss key issues in the case. We take out our cyrstal balls and make our best estimates about the odds of winning a case, the likely outcome at trial, and other vairables like the risk of runaway verdicts and the idiosyncrasies of the judge or jury pool.
This is an area where there is little science. Members of the litigation team from the defense attorney to the claims professionals, claim managers and risk managers put their heads together and forecast the outcome as best as they can based on their years of experience and often with help from jury verdict reports. We can never have too much information about what the judge or jury has determined after trials of cases similar to the ones we are litigating.
With that in mind, below are summaries of four cases from around the country with as much detail as could be obtained from jury verdict and news reports concerning liability and damages. As each case is reviewed, consider the probable outcomes. Should the case end in a plaintiff or defense verdict? If you expect a plaintiff verdict, how much do you predict the verdict was? Was there any comparative fault? Deanne Murphy, construction defect senior resolution specialist with Gallagher Bassett, will also share her assessment of the outcome of each case before the actual verdict is revealed.
Our first case comes from one of the hotbeds of construction litigation: California. This construction defect case involved a 246-unit, two-tower high-rise condominium project located in Long Beach, Calif. The plaintiff was the homeowners’ association, whose members owned interests in the project. The major damage claim revolved around the large window walls of the high-rise buildings, with additional claims involving plumbing, HVAC, electrical, automatic fire sprinkler, and miscellaneous architectural issues. An asphalt-based peel-and-stick flashing was used on the window walls to protect them from water intrusion. The flashing, however, allegedly turned into liquefied “gunk” over time and seeped onto the metal cladding of the window walls. Plaintiff claimed that the liquified funk needed to be removed and the metal cladding needed to be repainted or replaced at a cost of several million dollars. Plaintiff requested over $10 million at trial. Teh developer argued that the cost of repair for the window wall, assuming liability, was $5 million, the defense cost of repair.
DEANNE MURPHY SAYS: I have some experience in defending these types of product issues, so I predict that the developer’s cost of repair should prevail. given the defense cost of repair is $5 million, the verdict will be at least that much.
ACTUAL VERDICT: In this California construction defect case, the jury awarded a total of $5 million for the window wall claims. The developer entities were held 15 percent responsible, the builder was held 60 percent responsible, and the glazing subcontractor was held 25 percent responsible. The product manufacturer of the flashing material was found to have no responsibility. Other window defects were awarded at $72,852 with the builder entity responsible for 65 percent and the glazing subcontractor 35 percent responsible. finally, other miscellaneous defect claims were awarded for $468,123, with the developer entities responsible for five percent and the builder entities responsible for 95 percent.
The next verdict comes from Arizona. The facts involve a 58-year-old welder who was injured while working at a construction site managed by the defendant general contractor (GC) when he fell through an unguarded, unprotected hole in a floor where a staircase was to be installed. Plaintiff filed suit, alleging the GC failed to appropriately discover and correct dangerous conditions at the worksite and failed to hire safe subcontractors. Plaintiff also alleged that an employee of the defendant subcontractor, who was contracted to install the steel staircases, removed teh safety railings from the stairwell while plaintiff was working int eh area prior to the fall. The defendant GC denied liability, arguing plaintiff was an experienced worker who worked at the site for several months, and plaintiff was inattentive and walked through danger tape.
In terms of damages, plaintiff reportedly suffered a skull fracture, brain bleeds, multiple fractures of toes and bones in the feet, and blood in his right eye, which impaired his vision. Plaintiff also alleged that as a result of his injuries, he was permanently unable to perform his occupational duties. Plaintiff claimed severe and permanent injuries and a total economic loss exceeding $3 million and made a claim for punitive damages. Defendants argued plaintiff’s complaints had resolved within days after his fall and that any ongoing complaints were related to a preexisting condition. The jury verdict report did not indicate the amount of medical specials (they may have been withdrawn to prevent the jury from anchoring to low medical expenses). Defendants made a final offer of $280,000 before trial.
DEANNE MURPHY SAYS: I predict that there will be no punitive damages since nothing in the facts suggests they would be justified. Under these facts, $280,000 seems like a low offer. I think it’ll be a $1 million verdict, unless the jury didn’t like the plaintiffs for some reason. Plaintiff should be at least 50 percent at fault for ignoring the danger tape.
ACTUAL VERDICT: The outcome in this Arizona construction injury case was a defense verdict, following two hours of deliberation by the jury.
Our third case comes from Texas and involved a commercial building owner who owned a multi-story building in Houston, Texas, which was severely damaged in a hurricane. The building was insured by a well-known insurer that allegedly failed to conduct an adequate investigation following a claim for damages to the property. The investigation was allegedly “outcome-oriented.” The insurer paid out $2.4 million in damages, but refused to pay more and declined to take a position on coverage. It is unclear from the jury verdict report how much total insurance coverage was available under the policy.
The property owner filed suit against the insurer and others in the Texas District Court of Harris County, arguing that the insurer breached its contract with the property owner and violated the Texas Insurance Code by failing to properly investigate and by underpaying the claim. The property owner sought payment of all covered damages, attorneys’ fees, costs of court, interest, and additional damages under the Texas Insurance Code. A week-long trial trial was conducted. Admittedly, there are many facts missing here and that is always a drawback when assessing jury verdict reports.
DEANNE MURPHY SAYS: I question why this case was tried by a jury, Commercial insurance policies generally have arbitration agreements, and it is often considered best to not publically try these types of disputes. That aside, the insurer does need to give an explanation for what is covered and what is not covered under the policy. Any failure to provide such an explanation is problematic and could be bad faith. It is hard top predict the amount of the verdict without knowing the policy limits, but this kind of case can go sideways. I would estimate a judgment of at least $600,000.
ACTUAL VERDICT: The outcome in this Texas bad-faith case was a $1.4 million judgment for the plaintiff.
Our last case was provided to us by Jury Verdict Reporter, a CLM-Member company, and comes from Colorado (special thanks to Sally K. Gilbert, editor and publisher of the Jury Verdict Reporter, which is based in Colorado). Plaintiff was a homeowners’ association located in Arapahoe County. The project at issue consisted of two levels of a subterranean garage, a ground level of retail spaces, and three additional floors containing 90 residential condominium units. Plaintiff sued the general contractor and the developer. The plaintiff alleged that the defendants improperly constructed certain portions of the project, including the balconies, stucco, windows, concrete flatwork, asphalt, roof and subterranean garage, causing $6 million in damages for the cost of repairs. Plaintiff’s final demand before trial was $6 million, according to plaintiff’s attorneys. The defense made no offer before trial.
DEANNE MURPHY SAYS: The lack of any offer before trial is concerning. It is unusual in a case like this for there to be no claims that create exposure sufficient enough to produce at least some settlement value. Just on these facts, it appears that the defense may not have had a solid cost of repair. Without a reasonable defense cost of repair, I predict the jury will give the plaintiff its $6 million in alleged damages.
ACTUAL VERDICT: In this Colorado case, the jury determined the plaintiff’s total amount of damages was $5.8 million. Plaintiff’s motions for pre-judgment interest, post-judgment interest, and costs were pending at the time of the verdict report.
What are the morals of these stories? As is often the case, the outcomes were mixed. In one example, a California jury seemed to carefully assess the damages and was not swayed by the damage arguments made by the plaintiff. The Arizona verdict reminds us that defense verdicts are still possible, and sometimes there is an argument to be made for trying the right cases. The Texas bad-faith case is a cautionary tale that coverage investigations can be tricky and that it is important to communicate that the insurer is seeking to find coverage rather than looking for reasons to deny it. Finally, the Colorado case suggests that making an offer before trial could prevent expensive litigation.
Of course, in all of these cases, there are factors that we don’t know about that may be significant. Either way, the outcomes are always informative as we consider the cases to line up for trial.