Know when to hold ‘em, and know when to walk away

By Emma Peterson.  

Understanding when fighting a claim is the right move, and when settling makes more sense.  

In a new episode of From the Ground Up™, Karol Weyman talks to John Kenney about handling legal claims. John is the CEO of Cotney Consulting Group, where he offers training and operations advice to professionals across the construction industry. And a fair bit of that advice is how to navigate the legal side of owning a contracting business. 

Claims and disputes are frustrating but not uncommon challenges for contractors. When asked about how to navigate this process, John’s first piece of advice was to find a way to distance emotion from the situation. He explained, “The first thing I love to tell contractors is keep emotion out of your decision because emotion is going to get you into trouble. And you can't decide based on being right, sometimes we can be right and it costs us way too much. You have to decide based on business impact.” 

So, how do you make the correct business decision about fighting or settling a claim? John tells contractors to look at three things – cost, time and recovery. He elaborated:  

The cost of the fight is related to attorney fees but also lost value. How much time are you spending focusing on this and missing other opportunities? The way I look at it is if you're going to spend money chasing it, then you're going to spend more time, which we all know is money, to recover, then, even if you're technically right, you're still losing.  

What contractors have to do is step back and use these three factors to assess whether they want to fight to prove a point or to move their business forward. If it’s the former, it might not be the time or the place. As John put it, “We want to make sure that it's a business decision. Sometimes it's just better off to get it settled, move on and be back to fight for another day.” 

And fighting another day doesn’t always have to be in court. In fact, the best business decision you can make is to proactively set up systems to avoid future claims as much as possible. John explained, “Honestly, a lot of the issues I see are not legal problems at the start. They're communication and documentation issues that turn into legal problems. So in the outdoor space, especially like landscaping, hardscaping, pool, etc., you have multiple trades overlapping, fast-moving projects and a lot of assumptions.”  

By removing those assumptions through clear communication and documentation, John shared what this looks like in practice:  

You need good documentation. Don't look at it as just having a bunch of paper. It needs to tell the story of the job clearly and consistently. To tell that story, you’ll want to have daily reports, photos from all stages of the project (including before and after images) as well as written change orders. There's no such thing as verbal. If you can't prove it, it can't be done.  

At the end of the day, John’s advice when it comes to claims is to avoid them. But if you do find yourself dealing with one, it’s key to ask yourself whether fighting or settling makes more sense for your business. And if you choose fighting, it's best to have the documentation in place to tell the story of what really happened.  

Listen to the podcast or Watch the recording to learn more about handling claims and other legal issues.