Volume 7, Issue 10 - November 2006

Risky Business
As Lawyers Look to the Window Industry as their Next Cash Cow, Learn How to Protect Your Company
by Tara Taffera

Construction defect litigation has been tagged “a growth industry” by the legal world. This is evidenced by the fact that 4,000 lawyers attended a construction defect seminar recently that was the largest of its kind. Lawyers Charles Gentry and Angela Elbert of Carson and Coil, P.S. in Jefferson City, Mo., gave a presentation at the recent GlassBuild America show, “Plugging the Leaks on Lawsuits: Practical Advice for Window Manufacturers in a Litigious World.” The advice they gave was indeed practical, and failure to follow this advice could be detrimental to your company.

“Lawyers are looking at this as, ‘How can I make a buck?’” says Gentry. “They are looking to cash in on this industry.”

Insure, Insure, Insure
Elbert offers advice on the types of insurance manufacturers need. She suggests that:

  • Make sure you have enough insurance limits to adequately protect your company;

  • Have multiple layers of insurance each year, and it is less expensive to buy insurance this way;

  • Buy insurance with a duty to defend with defense costs in addition to limits. You don’t want payment of defense costs to erode your limits for settlement or judgment;

  • If you want to lower your premiums get self insured retention (SIR) or deductible. This is paid upfront before any obligation of your insurer is triggered. The deductible requires the insurer to defend you immediately and bill you for the deductible amount. Also consider the amount of the deductible or SIR that makes sense to maintain, including possibility of annual aggregate;

  • Be careful of having a vendor’s endorsement or additional insured’s under your policy. Be careful to give anyone else rights under your policy as they may take away limits needed to protect you;

  • Find a reputable broker you can trust who has experience with other window manufacturers. 

  • Go with reputable insurers to make sure they will be there when you need them;

  • Make sure there are no exclusions for product liability claims, other than the standard types, in your policy, by endorsement;

  • Keep your old policies. These should be places in a fireproof, safe place and never thrown away. You never know what kind of claim you may have where an old policy is needed; and 

  • Keep track of prior claims and erosion of limits. 

Warranties
When manufacturers think of a warranty, they think of just that, “the written warranty.” But Gentry warns that advertisements, brochures and other materials can all be seen as implied warranties, and can come back to haunt a manufacturer involved in litigation.

Gentry tells manufacturers to remember to “build what you say you build,” and ask yourself, “Do your windows do what they should?”

Regarding implied warranties, remember the following:

  • If the buyer relies on manufacturer’s judgment, an implied warranty exists; and

  • If a manufacturer holds itself to be specially qualified, he may create an implied warranty.

But there is good news, according to Gentry. If specific terms are used, implied warranties can be excluded. The following is an example: “The warranty printed above is the only warranty applicable to this purchase, all other warranties, expressed or implied, including, but not limited to, the implied warranties of merchantability and fitness for a particular purpose are disclaimed.”

Gentry also offers some great ideas that he has seen some window manufacturers use in their warranties such as, “If you fail to maintain our product ...” Or, “If you install our product outside the 48 states ...” He says manufacturers can also limit their warranties if the product is subject to unfair field testing.

Some additional keys to a great warranty include:

  • Put it in writing;

  • Be clear as to what you are promising and what you are not promising;

  • Actually give it to the consumer; and 

  • Keep a copy in your project file. (If you can’t find it, it doesn’t exist).

Document Retention
While Gentry says it is extremely important to keep certain documents, he also warns against writing certain documents in the first place—such as certain e-mails. 

“It’s astonishing to me in the wake of Enron, etc., that certain e-mails are out there. If someone wants to find them they can find them.”

When gathering a document retention policy checklist he says these should include the following: employment documents, accounting and corporate tax records, legal records and electronic records.

He adds that a document retention policy should include the following:

  • Purpose of policy; 

  • Reporting structure;

  • Team responsibilities;

  • Delegation of record keeping authority;

  • Methods of classifying documents and determining retention periods for classes;

  • Retention schedule and procedures for classes;

  • Destruction rules;

  • Index of active, inactive and destroyed documents;

  • Suspension policy; and

  • Publish policy, train employees and monitor compliance. 

How important is this?
“Not having a document may prevent you from proving a claim or defense; Not having a document may allow the jury to presume the document would have hurt you,” says Gentry.

The War and How to Defend Yourself
Gentry says manufacturers should be prepared for attacks from a variety of plaintiffs. These can include owners, general contractors, subcontractors, architects/engineers and window dealers. The attacks can include breach of contract, products liability claims, negligent design, misrepresentation, fraud or a variety of other issues.

It is also important for manufacturers to understand how the plaintiffs plan their attacks, should you be the target of a claim. These include documents such as plans and specifications, correspondence, change orders, directives, job logs, invoices, bills of lading, product submittals, shop drawings, manufacturers’ specifications and test reports. 

Speaking of test reports, inspections and window testing will be a big part of the plaintiffs case. They may perform site inspections using moisture meters and probes, and may perform window performance testing, window removal and reassembly. 

With regards to performance testing, Gentry warns that plaintiffs may test using a new specification on an old installation.

Defendants must be prepared for all of these attacks. Should your company be the focus of a lawsuit, there are several steps to take.

  • Talk to your broker and put your insurance carrier on notice;

  • Demand a response from your insurance carrier;

  • Get defense counsel that you trust; and 

  • Be prepared for your carrier to sue you. A rule of thumb with many insurers is that small claims are covered but big claims are not.

Although you may think you won’t be the subject of a lawsuit, it could happen to you, so be prepared to defend yourself. y

Tara Taffera is the editor/publisher of DWM magazine. 

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© Copyright 2006 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.