If your association is contemplating filing a transition and/or construction defect related lawsuit, or is currently involved in a lawsuit with a contractor that worked on, and/or repaired common elements or property, it is logical to first approach corporate counsel regarding these claims. However, during that meeting, the Board and Management should ask serious questions of counsel in order to ensure that counsel is best equipped to handle this particular construction-related dispute. There are 5 important questions to ask counsel, to ensure that its rights protected , counsel is up to the challenge and that any fee arrangement is best and feasible.

Question IV: Do you know the insurance issues crucial to the success of these cases?

In New Jersey, builders and contractors are not required to have assets sufficiently large enough to pay any damage proximately caused by their negligence. In most cases that would deter someone from suing that company for fear of winning the battle and losing the war; i.e. winning, but getting no recovery at the end.  Contractors are often “shell” companies; meaning, a company with few assets and no direct employees. Many of them file bankruptcy or disband shortly after the project is complete. So where does the money come from?  In the construction defect litigation context it generally comes from commercial general liability (CGL) insurance policies. While the project is ongoing, it makes economic and practical sense for general and sub-contractors to obtain CGL insurance policies. In the event that the job is hit by a storm, someone is injured on the job or an accident occurs with the equipment, these policies may provide coverage.  Also, in order to obtain construction financing, contractors are often times required to obtain commercial general liability policies. Via these insurance policies associations may be able to recover sufficient monies to fix their defects.

The key however, is not just knowing that these policies exist, but hiring an attorney that knows the nationwide case law surrounding the exact language of CGL policies. Insurance policies are standard forms in most cases, so the language is reviewed by judges across the country. This means that lawyers who do construction defect work must be familiar with the decisions of all state courts and federal courts.  They also must be able to draft the Association’s complaint and other documents in such a way as to trigger these policies and not afford the carriers a chance to decline coverage or avoid responsibility altogether.  This case law changes constantly, and unless the Association’s attorney does this work often, there is little chance that he/she will be current on the most recent decisions.  Failing to be current on the most recent case law can cost associations millions of dollars in settlement/verdict monies. Thus the fourth question to ask a construction defect attorney being interviewed by the Board, is whether he/she knows how CGL polices work and how they will provide sources of funds for repairs.