Investigation and Litigation of a Roof Failure: Who Will Pay?

INVESTIGATION AND LITIGATION OF A ROOF FAILURE:
WHO WILL PAY?
BY EDWARD O. BETKER, RRC
ROOF EVALUATION, INC.
3050 Sumter Avenue N., #7, Crystal, MN
P: 612-599-8840 • F: 763-546-1572 • E-mail: betker123@comcast.net
AND
MICHAEL G. TAYLOR, JD
LEONARD, STREET AND DEINARD
150 South Fifth Street, Suite 2300, Minneapolis, MN 55402
P: 612-335-1589 • F: 612-335-1657 • E-mail: Michael.taylor@leonard.com
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ABSTRACT
The speakers shall present the technical and legal aspects of a roof failure located in the
Midwest on a luxury retirement condominium facility. Numerous repair attempts by the primary
material manufacturer, the selling roofing contractor, the owners, the installing contractors’
insurance carriers, and the project designer were repeatedly unsuccessful in providing
for clean, dry occupancy. The owner elected to completely reroof the affected area of
the facility. In conjunction with advice from legal counsel, the owner elected to pursue financial
retribution from the aforementioned interested parties.
The paper that follows summarizes the technical findings of the investigation as well as
the results of the legal proceedings. The issues that will be addressed are: Is it really a roof
failure? If it was, was the roof failure premature? What caused the roof failure? What remediation
is currently necessary? What are the relative costs of the remediation options? Who
are the legally responsible parties? What are the recoverable damages? Are any of the damages
covered by insurance?
SPEAKER
EDWARD O. BETKER, RRC — ROOF EVALUATION, INC.
ED BETKER serves as president of Roof Evaluation, Inc. and has been a roofing consultant
since 1977. He focuses on roof consulting on all types of roofing systems on residential
and commercial facilities. Ed became a registered roof consultant in 1992. Betker
has been a member of RCI for 20 years, currently serves on the membership board of the
Northwest Loss Association, is a former board member of the Cool Roof Rating Council, and
former chair of the Publications Committee for RCI. He has made numerous presentations
to professional organizations and has published articles on roofing issues.
MICHAEL G. TAYLOR, JD — LEONARD, STREET AND DEINARD
MIKE TAYLOR is chair of the litigation division of Leonard, Street and Deinard. He is a
member of the company’s board of directors, its operations and compensation committees,
and also chairs a regional practice group focused on litigation and serving the legal needs
of businesses in North and South Dakota. He is past chair of the firm’s construction litigation
practice group. Mike joined the firm in 1984. He practices principally in the areas of
construction, commercial, and insurance coverage litigation nationwide. Over the past 24
years, he has served as lead or co-lead litigation counsel and has won or obtained highly
favorable awards or settlements in litigations or arbitrations across the country. In addition,
he actively counsels clients on a wide range of issues related to dispute avoidance. Taylor
has published numerous articles on litigation and dispute resolution issues and has spoken
extensively on these issues at legal and business seminars throughout the country,
with an emphasis on construction and insurance coverage issues. He has been selected as
a SuperLawyer® by Minnesota Law & Politics magazine, has been listed among The Best
Lawyers in America in the areas of litigation and construction law, and has been praised in
Benchmark Litigation “for his commercial, construction, and insurance coverage work.”
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INTRODUCTION
Every commercial building owner reasonably
expects that the roofing system
covering its building will protect the interior
spaces from the elements. This is true no
matter what type of roofing system the
owner has paid for, no matter the cost. It is
also true that owners expect that a properly
designed and installed roofing system will
require little maintenance over its useful
life. When roofing systems fail, it is often the
case that a large number of parties, including
contractors, design professionals, roofing
consultants, materials manufacturers,
property managers, and insurance companies
are brought together to determine the
cause of the failure, define actions necessary
to remediate the failure, and to contribute
money to the proposed solution. The
case history that follows involves a project
with three separate roof systems. Beneath
one of these sections, water repeatedly
found its way into the building, damaging
the interior spaces. Then a hailstorm resulted
in even more catastrophic damage.
PROJECT BACKGROUND
The roofing systems on this building
covered approximately 21,000 sq ft. The
building roof was divided into three sections
of approximately equal size: a north, a middle,
and a south section. The building was
older, and all three original roof sections
had been replaced at different times. The
north and south sections had been replaced
during a two-year period in the midnineties.
The roof over the middle section
was replaced later, in the mid-2000s. After
the reroofing, the south roof began to leak
in spots, and local roofing contractors were
called in on numerous occasions to locate
and fix the leaks. The fixes consisted of simple
patches to the membrane. The owner
did not ask for a more serious investigation,
nor did the roofing contractors suggest that
one be performed. Everyone involved considered
the original leaks to be relatively
minor in nature, but the roofing contractors
were never able to stop them entirely, and
over a period of nine months, new leakage
spots continued to develop and to increase
in size and severity. In the spring of 2008,
the south roof began leaking more seriously
during the annual snowmelt. Later that
spring, the roof was further damaged by a
significant hailstorm, and Roof Evaluation,
Inc. was called in as roofing consultants to
investigate.
Copies of the contracts between the
owner and installing roofing contractors
were made available to us, as were the standard
manufacturers’ warranties that had
been issued to the owner by each of the
respective membrane manufacturers on all
three roof sections.
A very important aspect included in the
background information is that leakage into
the interior of the building, with resultant
damage to and repairs of tenant space, had
occurred well before the hailstorm. Another
very important aspect of the background
information is that the repair contractors
never discovered various anomalies in the
south roof membrane, which were undetectable
by a quick visual observation, but
which became blatantly obvious under a
closer inspection.
The final piece of information of interest
is that the roofs over north and middle sections
were never affected by the hailstorm.
These roofing systems remain on the building
to this day.
THE INVESTIGATION
The project
consisted of a
multi-story condomi
n i um/ a p a r t –
ment facility with
full occupancy. The
furnishings within
this multi-unit
building were “high
end” in nature, as
were the interior
finished surfaces.
The rooftop access
requirements for
facility maintenance
were minimal,
and therefore
there was not a lot
of traffic on the
roof.
With the possible exception of performing
the previous roof repairs, no comprehensive
evaluation of the roof system condition
had ever been made. Initially, we were
asked to determine the general roof system
condition and to make recommendations
for any necessary remedial action. We were
also requested to determine the cause of the
previous performance problems and to
determine if any other parties could be considered
financially responsible for the costs
of any repairs and corrective measures. We
were specifically requested to recommend
all necessary work to return the facility to a
condition where a long-term, watertight
condition would be established.
Our evaluation included reviewing the
contracts, manufacturers’ warranties, and
other background information. We also visited
the site and made visual observations.
During the reroofing of the south roof, we
visited three additional times to observe the
condition of the materials being torn off. On
all visits, we took photographs.
Virtually all of the previous leakage that
occurred was beneath the south roof.
Within this roof section, a mechanically
attached, thermoplastic-type roof membrane
was present (Figure 1).
Visual observation of the roof assembly
in this area revealed that surface patches to
the roof membrane had recently been made
INVESTIGATION AND LITIGATION OF A ROOF FAILURE:
WHO WILL PAY?
Figure 1
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on multiple occasions (Figure 2).
In addition, several membrane patches were evident,
installed either at the time the roof membrane was originally
provided or installed years before the onset of the most recent
leakage (Figure 3).
In isolated areas somewhat concentrated in distribution,
discontinuities that may have resulted from hail impact were
evident (Figures 4 and 5).
Discontinuities in the membrane were also encountered
where the membrane waterproofing had cracked directly over
fastener heads securing the underlying roof insulation.
Although the waterproofing at these locations was compromised,
the reinforcing scrim within the membrane remained
intact based on visual observation (Figure 6).
More linear discontinuities in the roof membrane were
present in the complete absence of any discontinuity in the
underlying supporting substrate or any indication of previous
roof traffic (Figure 7).
Figure 2
Figure 3
Figure 4
Figure 5
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Directly attributable to the reroofing, there were several
incidents of physical damage to the roof membrane (Figure 8).
At each of these locations, the physical damage to the
membrane was actually witnessed as it occurred or there was
obvious deflection due to significant deformation of the underlying
insulation from traffic on the roof surface. The very brittle
nature of the membrane was readily apparent as the
reroofing waterproofing was compromised at a location where
no previous leakage into the assembly had occurred, and the
cracks in the waterproofing developed merely by kneeling or
walking on the roof surface (Figure 9)
Test openings were made into the roof assembly at locations
where surface discontinuities in the membrane existed
as well as at several other locations where observable discontinuities
were not evident. In many instances, there were very
significant quantities of free water, sometimes in the form of
ice, on and within the underlying roof membrane and insulation
(Figure 10).
On all of the roof sections, the roof membrane exhibited
signs that it was under tensile distress to varying degrees.
Figure 6
Figure 7
Figure 8
Figure 9
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This condition was most evident at the
perimeter details where diagonal wrinkling
of the membrane flashings had developed
(Figure 11).
This tensile distress was also evident
within the membrane at the time of sampling
where the opposing edges of the cut
membrane immediately separated from
each other, resulting in a permanent gap
between these opposing edges. This tensile
distress was also evident to a lesser degree
at the discontinuities in the membrane,
independent of the sampling process where
the opposing edges were no longer in contact
with each other.
INVESTIGATION CONCLUSIONS
It is imperative during the evaluation of
any roof assembly that the magnitude and
the severity of the reported performance
problems are ascertained. The cause of any
performance problem can range from the
need for minor maintenance to the procedural
and legal ramifications of a complete
roof system failure. On this facility, each of
the three roof assemblies were roughly
equivalent in age and were exposed to virtually
identical weather conditions and other
factors of exposure, as well as the owner’s
own maintenance
program,
yet still
had significantly
different
per formance
histories.
From a
roofing standpoint,
appropriate
courses
of action varied widely among the areas,
based on their performance. The variability
of the performance was due to the inherent
system characteristics as opposed to other
factors such as different exposures, workmanship,
facility use, occupancy variables,
etc. Based on the background information
and our observations, the nonperformance
of the roof systems on this project also varied
greatly. Two of the three sections only
required very minor preventative-type
maintenance, while the third section, which
had experienced the most significant leakage,
required complete replacement of the
roof system. The need for roof replacement
was the result of three primary causes.
The most serious deficiency was the
ongoing fatigue-type failure of the membrane
waterproofing, which was developing
at random and unpredictable locations
attributable to long-term weathering and
aging of the membrane itself. There are no
preventative maintenance or remedial
repairs that can be performed to arrest or
prevent this chronic-type problem from
continuing to develop and worsen. This condition,
in and of itself, would, at a minimum,
mandate complete replacement of the
roof membrane.
The second condition that existed at the
time of our evaluation was the inability of
the roof membrane to withstand even normal
roof traffic, which is virtually always
necessary on any roof system throughout
its service life. A roof system that cannot
even be walked or kneeled upon without
resulting in damage to its integrity should
never be tolerated or represented as a suitable
installation option, even in the short
term.
The third and somewhat incidental
event resulting in interior water entry was
the physical damage to the roof membrane
resulting from hail impact. As the leakage
from this source developed only after
repeated water entry, the conclusion that
this event was the principal cause of the
roof failure is inappropriate. The presence
of excess moisture within the roof assembly,
which was the result of all three of the causes
of membrane failure, mandated more
complete roof replacement as opposed to
just removal and replacement of the membrane
waterproofing alone.
The distortion of the membrane due to
tensile forces is a further indication that
deterioration of the membrane was continuing
to develop, and over the most south section
where the deterioration of the roof system
performance was most significant, not
replacing the roof membrane would have
been considered risky, at best.
LEGAL ANALYSIS
When a commercial building owner
faces large and unexpected costs due to the
early and unexpected failure of a roofing
system, the owner will usually look to other
parties to help pay for some or all of its
Figure 10
Figure 11
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costs. In the case study discussed above, on
the advice of the roof consultant, the owner
decided to completely replace the roof over
the south section at a cost of approximately
$69,000. Because of the hail damage, the
owner first turned to his own property
insurance carrier for contribution. The carrier
initially resisted, claiming that the
owner’s own consultant agreed that that
particular section of the roof needed
replacement before the hail damage. The
owner commenced arbitration against the
carrier, and at mediation, the carrier agreed
to pay the $69,000 reroofing costs, plus
costs incurred as a result of having to repair
damage to the building’s interior. Having
made this payment, the carrier had the
right to bring its own lawsuit against parties
it may have felt were partially responsible
for the problem, including the original roofing
contractor and any subcontractors, the
membrane manufacturer, the original
architect and roofing consultant (if any), the
various repair contractors, and any roofing
consultant hired to inspect the roof on a
periodic basis after original completion.
Because of the small size of the actual damages
paid and the expense of litigation, the
carrier decided it was not worth it to pursue
the matter.
The costs incurred by owners as a result
of roofing system failures are often much
higher, however, and roof-related lawsuits
and arbitrations represent a significant
number of the construction defect cases
brought by building owners in any given
year. In the sections below, this paper will
explore some of the issues an owner might
confront when deciding whether to seek
contribution or indemnity from another
party considered partially or totally responsible
for costs the owner has incurred as a
result of a roof system failure.
Up-Front Costs
Depending upon the severity of the
problem, a building owner who discovers
conditions with the building envelope similar
to those described in the first sections of
this paper may have to immediately initiate
costly repairs, regardless of whether there is
a potential recovery from others responsible
for the construction or design of the roofing
system. A failure to initiate repairs could
result in significant additional damage to
the building in the future. Further, if portions
of the building envelope crumble or
fall away, this could result in catastrophic
loss or injury to third parties, either in the
form of third-party property damage, injury,
or death. If this were to occur in a situation
where a building owner knew or should
have known about the problem, but did
nothing, significant additional (and uninsured)
liability could attach.
Property Insurance
A building owner will often turn first to
the property insurer to cover anticipated or
actual costs associated with a defective
roofing system. While this paper will not
focus in detail on all of the insurance issues
that might come into play in a situation like
the one described above, three points are
worth noting. First, a property carrier will
not pay simply because a roofing system
has prematurely failed. Property insurers
are not guarantors of the roofing contractor’s
work or the designer’s or roof consultant’s
services. There is other insurance
that can be purchased for that, most typically
by the contractors, designers, or consultants
themselves. Rather, a property
insurer’s obligation to pay is triggered, in
part, when an owner incurs damage or loss
to other property as a result of a roofing
system failure. In the case of a failed roof
system, this is usually when the owner discovers
leakage into the interior of the building.
Second, given the facts in this case
study, the carrier could have taken the
position that it would not pay for any of the
owner’s losses because the roof had to be
replaced anyway, regardless of the hail
damage. After all, the owner’s consultant in
its report admitted that even before the hail
storm, the membrane on the south roofing
system was so damaged that it couldn’t
even be walked on or knelt upon without
further damaging it. Replacement was necessary
before the storm, and the owner
shouldn’t be able to use the storm as an
excuse to get the carrier to pay for repairs
and replacement that were necessary anyway.
Third, the carrier could have refused to
pay some or all of the owner’s losses on the
grounds that the owner did not mitigate its
losses, and in fact actually increased them,
by failing to properly inspect and maintain
the roof and by not replacing it sooner than
it did. After all, the carrier might reason,
earlier and more thorough inspections
would have revealed the deteriorated condition
of the membrane, and if it had been
replaced before the hailstorm, the hailstorm
might not have caused any damage (it didn’t
damage the other two sections of roof or
the interior spaces beneath them).
OBSTACLES TO RECOVERING
AGAINST THIRD PARTIES
When an owner (or insurance carrier)
reaches the decision that money needs to be
paid to repair or replace a roofing system
and to fix any related damage, the owner
frequently hires a lawyer to determine who,
if anyone, may be legally responsible to pay
for some or all of the loss. To borrow a quote
from Captain Renault at the end of the
movie Casablanca, the lawyer’s job is to
“round up the usual suspects.” Of course,
the parties who are rounded up are determined
not only by who actually might be
responsible, but also by who can legally and
practically be made to pay. Below are some
considerations that go into this analysis.
Statutes of Limitations and Repose
Roofing systems seldom fail right away.
Often, a number of years go by before a failure
occurs. The timing of the failure can figure
significantly into whether the original
roofing contractor, designer, and consultant
can be made a party to a lawsuit or arbitration.
Many, if not most, states have statutes
that will bar a building owner from bringing
a lawsuit for damage resulting from negligent
design, faulty construction, or defective
materials after a certain amount of time
has passed. In Minnesota, for example, the
applicable statute of limitations provides
that any lawsuit based on a construction
defect must be commenced within two years
after the discovery of an injury sufficient
upon which to sue (Minn. Stat. § 541.051).
Further, the Minnesota statute of repose
provides that (except in limited circumstance),
regardless of when the defect is discovered,
any lawsuit based upon a construction
defect must be brought within ten
years after substantial completion of the
construction.
Most other states have similar statutes
of limitation or repose, although the time
periods vary somewhat from state to state.
In some states, claims otherwise timebarred
by an applicable statute of limitation
or repose will be allowed to proceed if the
owner can show fraud or fraudulent concealment
on the part of the defendant.
Roofing contractors and consultants who
discover conditions with the building envelope
similar to those discussed in the first
sections of this paper should recommend
that the building owner immediately consult
with a lawyer to determine whether a
timely claim could be brought. Many defective
roofing cases are time barred because
owners spent two or three weather cycles
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attempting to patch and repair and let the
applicable limitations or repose periods
pass.
Contractual Limitations of Liability
Written contracts are used to memorialize
agreements between parties. Form construction
and design contracts, such as
those provided by the AIA and AGC, are
used frequently by owners, contractors,
architects and roof consultants. Contracts
not only identify the rights and obligations
of parties, they can also (and almost always
do) serve to limit them or increase them
beyond what the law might otherwise
require. Some examples of rather typical
contractual limitations of liability include
the following:
• Clauses that shorten (or lengthen)
the otherwise applicable statute
of limitations periods. In some
states, this is illegal, but in others
it’s freely allowed if bargained for in
good faith. For example, such a
clause in an owner/contractor
agreement might require that the
owner bring any lawsuit within one
year of discovering damage, instead
of perhaps the two years allowed by
a statute.
• Clauses that provide for short
guarantee periods. Many form contracts
between an owner and contractor
(AIA and AGC included) contain
provisions stating that the contractor
only guarantees his workmanship
for one or two years after
substantial completion. After that,
the owner is forced to rely on whatever
manufacturers’ warranties it
received.
• Scope-of-work clauses. Scope-ofwork
clauses are used to not only
positively identify what the contractor,
architect, or consultant is
responsible for, but also, what
he/she is not responsible for. For
example, a roof consultant may be
asked by an owner to “observe the
contractor’s work.” Some consultants
define that phrase in their
contracts with owners to make it
clear that they will not be on the roof
all day every day, and that “observe”
is not “supervise.” Some such contracts
actually define the number of
observation hours required, and
make it clear that by observing the
work, the consultant is not guaranteeing
the work of others.
• Elevated standard of care clauses.
If a contract is silent as to the standard
of care an architect, engineer,
consultant, or other professional
must take in performing his or her
services on a project, the law will
imply a simple negligence standard
of care. That is, to find the architect,
engineer, or consultant legally liable
for providing poor services, the court
must find that the professional provided
services below the typical
quality of such services as measured
by similar professionals in that community,
at that time, and with similar
training. Some owner contracts
with consultants, for example,
require that the consultant exercise
an elevated standard of care, such
as “best efforts” or “highest level of
diligence and care” in performing its
services. This increases the chance
that the consultant will be found
liable for a breach of contract.
• Money limitations of liability.
There is a growing trend among professionals
such as architects and
roof consultants to attempt to limit
their financial liability to the owner,
perhaps to the amount of the consulting
or professional fee or to the
amount of available insurance. The
trend is understandable. A professional’s
fees are normally relatively
small in relation to an owner’s actual
damages in the event of a catastrophic
roof failure. Limitation of
liability clauses can be a useful risk
management tool. However, they are
far from foolproof, because courts
around the country are divided on
whether, and to what extent, these
clauses should be enforced. This is
especially true if there is no indication
that the limitation has been
specifically bargained for or if it is
buried in the fine print. Of course,
such a clause, even if enforceable
against an owner, is not enforceable
against third parties such as tenants
or contractors with indemnity
claims.
Manufacturers’ Warranties
Roof consultants, architects, and contractors
often recommend that owners purchase
manufacturers’ warranties as a risk
management tool for minimizing exposure.
After all, the warranties are issued by manufacturers
with deep pockets who have
been in business for a long time. The warranties
themselves also extend protection
for long periods, typically 10 or 20 years.
However, owners should carefully read the
proposed warranty language before purchasing
one, as many of them contain significant
limitations on the manufacturers’
obligations to pay. Examples include warranty
clauses that make the warranty the
sole and exclusive remedy against the manufacturer,
prevent the owner from seeking
any consequential damages against the
manufacturer for damage to anything other
than the roofing system, limit the financial
obligation of the manufacturer to the cost of
the roofing system itself, void the warranty
entirely if the owner fails to properly maintain
the roof, and/or prevent or limit the
warranty from being transferred to another
party if the building is sold. There are times
when an owner is better off without such a
warranty rather than having paid for one.
Dispute Resolution Clauses
Resolution of disputes is both time-consuming
and expensive for all involved, and
contracts frequently contain choice-of-law
or venue provisions or alternate dispute
resolution provisions. A choice-of-law provision
simply identifies which state’s laws will
apply to govern any dispute. This can materially
affect risks, as statutes of limitations
and other laws impacting liability can differ
dramatically from state to state. Choice-ofvenue
provisions identify the location of any
dispute resolution. This also can materially
affect both risks and costs.
If, for example, the venue of any dispute
against Wal-Mart is to be Bentonville,
Arkansas, then any party with a claim
against Wal-Mart has to factor in the possibility
that a local judge or jury might favor
Wal-Mart in any dispute. Finally, in years
past, arbitration was thought to be quicker
and less expensive than litigation, and arbitration
clauses found their way into many
form construction, design, and consulting
contracts. Arbitration is no longer so
favored. Disadvantages of arbitration
include the inability to bring all relevant
parties into a single proceeding, the possible
bias of arbitrators, the lack of a right to
appeal even a clearly erroneous result, and
arbitrators who more and more frequently
allow the same discovery as is allowed in litigation,
which significantly shrinks its cost
advantage over litigation.