First Cost and Betterment – Two Types of Defenses against Claims for Construction Damages

First Cost and Betterment: 2 Types of Defenses against Claims for Construction DamagesIn construction litigation cases, owners often ask, “how much can I recover from the designer’s error or contractor’s defective work?” Alternatively, designers and contractors typically want to know, “what is my exposure?” The answer depends on many different factors, two of which should be considered by owners, designers, and contractors: first cost and betterment.

Owners are not always entitled to costs incurred due to negligent design

“First costs” are the costs for construction that the owner would have incurred if the initial design plans matched the final design plans. Sch. Bd. Of Broward County v. Pierce Goodwin Alexander & Linville, 137 So. 3d 1059, 1070-71 (Fla. 4th DCA 2014). In other words, the costs that an owner would have necessarily incurred to have a non-defective building or component construction built. Id.

For example, if an engineer negligently designed a septic system’s drain field to consist of 1,000 square feet of drain field, instead of the required 1,200 feet of drain field, the owner would not be entitled to the cost of building the additional 200 feet of drain field because the owner would have had to incur that cost anyway to have a non-defective, functioning drain field. Lochrane Eng’g, Inc. Willingham Realgrowth Inv. Fund, Ltd., 552 So. 2d 228, 232-33 (Fla. 5th DCA 1989).

This does not mean that the designer is never liable for damages resulting from the negligent design. Id. The negligent designer may still be held responsible for any consequential damages caused by the system’s failure (e.g., cost to make it temporarily functional, clean up, or damage to other property or persons) and the increased cost of installing the additional 200 feet of drain field, if the cost had increased from the time of original construction to the time of it is corrected. Id.

Owners may be entitled to cost of repairing, not improving, defective components

“Betterment” occurs when an owner makes repairs with a more expensive design, uses higher quality materials, or increases the defective building or component’s useful life. Grossman v. Sea Air Towers, Ltd., 513 So. 2d 686, 688 (Fla. 3d DCA 1987); Temple Beth Sholom & Jewish Ctr., Inc. v. Thyne Const. Corp., 399 So. 2d 525, 526 (Fla. 2d DCA 1981); Mall v. Pawelski, 626 So. 2d 291, 292 (Fla. 4th DCA 1993); Louisville Scrap Material Co., Inc. v. Petroleum Packers, Inc., 566 So. 2d 277, 278 (Fla. 2d DCA 1990). This means that typically an owner is only entitled to damages for the cost of restoring the defective construction component to a condition that complies with the original design. Thyne Const. Corp., 399 So. 2d at 526.

For instance, if a deck was negligently designed and collapsed, the owner would only be entitled to recover the cost of rebuilding the deck to the original load capacity using materials of the same or similar quality. Sea Air Towers, Ltd., 513 So. 2d at 688. The owner would not be entitled to recover damages for the design and material costs for increasing the load capacity to a greater capacity than what the owner originally contractor for. Id. To the extent that an owner, for example, seeks damages for only the replacement cost of a roof, those damages may be set-off or pro-rated for an increase in the life expectancy of the roof. Pawelski, 626 So. 2d at 292; Petroleum Packers, Inc., 566 So. 2d at 278.

Owners, compile your costs before seeking damages

All this means that, if you are an owner seeking damages for a negligent design or defective construction, you will want to seek the full measure of your damages. You would therefore compile all the costs that you have incurred to make the design compliant and rebuild the defective component and any other consequential damages resulting from the negligent design or defective construction. Once you have these amounts, you will want to keep in mind that the negligent designer or contractor may attempt to reduce your damages claim by presenting evidence to show that a portion of your damages is not recoverable because they are considered first costs or betterment.

Designers and contractors, analyze the owner’s claimed damages

On the flip side of the coin, if you are a designer or contractor who’s been accused of negligent design or construction, you will want to analyze the owner’s claimed damages to see if they might be reduced by the amount of the first costs or betterment. The best way to do this would be through expert testimony showing that the owner would have incurred some of the costs anyway or that the costs are beyond that which was originally contracted for. Remember that this may be done through your own expert or by simply getting the owner’s expert to agree during cross examination. Pierce Goodwin Alexander & Linville, 137 So. 3d at 1073.

So remember, if you are the owner, ask for everything and make the designer or contractor question your damages claim, and, if you are the designer or contractor, immediately assert the defenses of first cost and betterment, preserving the ability to prove that the owner is not entitled everything.

  • Derrick M. Valkenburg

    Derrick M. Valkenburg is a partner in Shutts & Bowen LLP's Orlando office, where he is a member of the Construction Litigation Practice Group.

    Derrick's practice focuses on construction, commercial and real property litigation. He ...

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