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Risk Of Loss In Florida Construction Contracts


Business may have been slow for some Florida construction contractors over the last few months, but the industry is expected to bounce back in solid fashion as 2021 draws to a close. Statistics indicate that South Florida will wrap up the year at almost $20.3 billion in total construction market volume, and 2022 will get a boost up to an estimated $21.1 billion. Residential construction represents a large chunk of total volume at around $10.4 billion, as the region trends toward what experts have dubbed the “Manhattan-ization” of housing. By 2023, construction in the lower third of the state could reach $22.7 billion, and residential construction projects will be more than 53 percent of the volume.

With the expected uptick in business, all parties to a construction contract must be diligent in protecting their contractual interests. If we can learn anything from a global pandemic, it is that risk of loss is a key issue that must be properly apportioned. You can trust your Florida construction lawyer to address the details, but it is helpful to review some information on risk of loss in Florida construction contracts.

 Basics on Risk of Loss 

In the context of project delivery in Florida construction, risk is an event or series of circumstances that has a substantial impact on the objectives of the contract. Risk exists because of uncertainty and the inability to completely prevent:

  • Labor disagreements and strikes;
  • Errors in the construction bid documents;
  • Inadequate or faulty plans;
  • Mistakes by design professionals;
  • Natural disasters and weather conditions, a particular concern in South Florida; and
  • Other specific risks based upon the location and environment.

These risks cannot be eliminated, which means parties must resort to managing them appropriately based upon their role in the project.

Factors to Consider with Risk of Loss 

It would be easy to pin responsibility on the general contractor, at least from the standpoint of the property owner, developer, and subcontractor. However, doing so can make the construction project cost-prohibitive: To balance the risk of loss, the party that bears it will usually acquire insurance, and policy premiums would be sky-high. As a result, parties should consider a range of factors when determining how to apportion risk of loss in a Florida construction contract:

  • Whether the risk is within a party’s control and the costs involved with exercising control;
  • The ability to transfer the risk through insurance coverage;
  • Whether a party has insight and/or can foresee certain events that affect risk;
  • What party will realize the most significant economic benefit for managing the risk;
  • Which party would suffer the greatest financial burden for sustaining the risk;
  • Whether shifting the risk to a certain party makes sense for efficiency, planning, and scheduling.

Our South Florida Construction Attorneys Can Advise You on Risk

To learn more about risk of loss in construction contracts, please contact Linkhorst Law Firm, P.A. to set up a consultation at our offices in Jupiter, FL. We can explain the details and advise you on specific issues after reviewing your circumstances.



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