You’ve Been Served With a Notice of Claims for a Construction Defect: Now What?

The Construction Defect Action Reform Act (CDARA) is an attempt by the Colorado legislature to regulate legal actions arising from construction defects. Amended in 2003, the statute aims to limit the amount of frivolous construction defect claims through a Notice of Claims Process. First, it is important to know if you fall under the scope of the CDARA. The statute applies to actions against “Construction Professionals”. Read the article below to learn if you qualify as a Construction Professional and the steps you need to take to address the Notice of Claims Process.

Are you a Construction Professional?

A Construction Professional is, “an architect, contractor, subcontractor, developer, builder, builder vendor, engineer, or inspector performing or furnishing the design, supervision, inspection, construction, or observation of the construction of any improvement to real property.” In cases of a commercial project “Construction Professional” also includes the previous owner if they are not the one claiming a defect. The term encompasses a broad range of professionals. If you fall under this definition and have been served with a notice of claims, time is of the essence.

What should you do next?

1.      Take Action on the Notice

As a Construction Professional receiving a Notice of Claims you should notify your general liability insurance carrier. Many general liability policies require the insured to give prompt notice of any claims as part of the coverage requirements. You can also check with your insurance broker, who can help you understand whether insurance requires you to provide notice and can assist in tendering the claim to your insurance.

You should also send a written notice of inspection to the claimant. The claimant is the individual alleging a defect in the construction or improvement on the property you worked on. This written notice entitles you to inspect the property. Check with your insurance before the inspection, as some providers will send expert engineers or other professionals to assist in the inspection process. The claimant must give reasonable access to the property and the claimed defect. This generally means access to the property during normal business hours.

2.      Conduct an Inspection

You then have 30 days from receipt of the Notice of Claims to conduct a thorough inspection. The Construction Professional should extensively photograph the property, area of claimed defect, the defect itself, and take notes. In some instances, you may need to provide written notice to the claimant to preserve the area to avoid spoiling relevant evidence. A thorough inspection allows you to be well informed when tendering an offer, which in turn allows you to protect yourself or bring in a third-party at fault.

3.      Respond to Notice of Claims

After completing an inspection, you then have 30 days to tender a settlement offer to the claimant (45 days for commercial projects). The offer can be to settle with payment or to conduct repairs. Whether to repair or offer to pay depends on a variety of factors. For repairs keep in mind the relationship between you and the claimant, what would the scope of the repair be? Would the claimant accept or continue to question the work done? Can you negotiate ensured acceptance of the repair? The considerations to pay a settlement rather than repair are similar but it is good to keep in mind the cost of repair versus cost of settling. If you tender an offer to repair to the claimant, you must set out a timetable for the repairs to be completed in the offer.

4.      Ending the Notice of Claims Process

After you have given the claimant your offer, they have 15 days to accept or reject. If the offer is accepted and is for repairs, repairs must be completed within the timetable you outlined in your offer to the claimant. If the Notice Process breaks down for any reason, like failure to follow the statutory timing requirements or by claimant rejecting the offer, then the claimant can pursue litigation.

5.      Consider Retaining a Lawyer

The Notice of Claims process provides a means of resolving a dispute before legal action is taken against you. It is also a complicated process with strict timing deadlines. Failure to comply with the deadlines will cause the Notice of Claims process to break down, subjecting you to litigation. Having a skilled attorney by your side can help you navigate this complex process. If you have been served with a Notice of Claims and have questions, please contact the experienced Colorado construction defect attorneys at Galvanize Law Group to assist you through the process and protect your interests.