Key Takeaways
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Contractors may be faced with construction delays due to the current Longshoremen’s strike
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Look to your contracts for responsibilities and remedies for delays, which depend on specific terms and applicable state laws
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Specific types of insurance policies may also provide protection against delays caused by events like the Longshoremen’s strike
The International Longshoremen’s Association (ILA) went on strike this week which affects ports from Texas to Maine. The impacted ports are some of the main points of entry for construction materials, heavy machinery, food, vehicles, and chemicals. Depending on how long the strike lasts, contractors may run into issues with specific items leading to delays and increased costs.
Here are some key points to consider relating to both contract law and insurance coverage.
Contractual Rights, Responsibilities and Clauses
The rights and responsibilities of a building contractor facing delays due to external factors like a Longshoremen’s strike can be complex and depend on the specific terms of the contract and applicable state laws.
Contract Terms: The contract between the contractor and the client typically outlines the procedures for handling delays. This may include force majeure clauses, which can excuse delays caused by unforeseen events like strikes.
Notification: Contractors are generally required to notify the client promptly about any delays and their potential impact on the project timeline.
Mitigation: Contractors must take reasonable steps to mitigate the impact of the delay. This could involve finding alternative suppliers or adjusting the project schedule.
Escrow and Bonding: State law may require contractors to either place client payments in an escrow account or provide a bond to protect those payments until the project is substantially complete.
Permits and Inspections: Contractors must ensure that all necessary permits and inspections are obtained and completed, even if delays occur.
Payment Schedule: Contractors should adhere to the payment schedule outlined in the contract. Clients are advised not to pay the full amount upfront and to withhold final payment until the project is completed and inspected.
Force Majeure Clauses: A force majeure clause in the contract can provide relief to contractors by extending deadlines without penalties for delays caused by unforeseen events like strikes. This clause typically allows for an extension of the project timeline.
Insurance Coverage
Contractors may also have remedies available under their insurance policies that can provide protection against delays caused by events like a Longshoremen’s strike through specific types of insurance. Here are some key options:
Builder’s Risk Insurance
Coverage: This insurance typically covers physical loss or damage to the construction project, including materials on-site, in transit, or stored off-site. Some policies also cover “soft costs” such as additional expenses incurred due to delays.
Delay-in-Completion: This endorsement can help cover costs if the project completion is delayed due to covered events, including strikes.
Business Interruption Insurance
Coverage: This insurance can help cover lost income and ongoing expenses if the business operations are interrupted due to covered events. It may not directly cover material delays but can provide financial support during disruptions.
General Liability Insurance
Coverage: While primarily for third-party claims of bodily injury or property damage, some policies may offer limited coverage for certain types of delays.
Legal Recourse
If a delay leads to a dispute, both parties may seek legal recourse. Contractors and clients can negotiate a resolution or, if necessary, pursue arbitration or litigation based on the contract terms and applicable laws.
