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Reviewing a Construction Damages Claim: What to Check Before You Accept the Number
A damages report has landed on your desk and you need to know whether the number is defensible. Most of what goes wrong in construction damages is not arithmetic. It is a state-specific rule applied from the wrong state, from an out-of-date source, or not applied at all. This guide walks the checks in the order they most often pay off and links each one to the cited rule for the jurisdiction you are actually in.
This page is reference information for your own verification. It is not legal advice and is not a substitute for confirming the current rule with the official source linked above or with counsel.
Start here: five checks that find most of the errors
Ordered by how often they turn something up, not by how much they are worth. Work them in order and you will usually know within twenty minutes whether the report is sound.
1. Is the interest rate the one that actually applies in this state and does it float?
28 of the 51 jurisdictions use a fixed statutory rate. The other 23 float against a published index and reset on a schedule
This is the single most common defect, because a fixed number copied into a spreadsheet stays there. Rates across the fifty-one jurisdictions here run from 4% on smaller Minnesota judgments to as high as 15% in New Mexico where a contract sets no rate. Rhode Island, Vermont and Washington sit at 12%. A report that applies a neighbouring state's rate, or a rate that was correct when the template was built, will be wrong by a wide margin over a multi-year claim.
Where the rate floats, ask which reset it used. Floating jurisdictions index to things like the one-year Treasury constant maturity, the Federal Reserve prime rate, or a state-published figure and they reset monthly, quarterly, semi-annually or annually depending on the state. A calculation that applies a single floating rate across a three-year accrual period, rather than stepping it at each reset, is not wrong in principle but will not survive a careful cross-examination.
What to ask for. The rate used, the statutory source for it and for floating states the published figure at each reset date across the accrual period. If the answer is a single blended rate, ask how it was derived.
2. Does interest run from breach, from loss, or from the date suit was filed?
The accrual date frequently moves more money than the rate does and it is the check most often skipped
Most people assume prejudgment interest runs from the breach or from the date of loss. In a meaningful minority of states it does not. Iowa is a clear example: interest on a money judgment accrues from the date the action was commenced, not the date of breach and the same filing-date rule applies to property damage and tort claims. Texas, Michigan, Massachusetts and Louisiana tie accrual to filing in comparable ways.
The practical consequence is large. On a claim where the breach occurred two years before suit was filed, a filing-date state removes two years of interest from the calculation. At 10% on a $400,000 principal, that is roughly $80,000 of the claimed number that should not be there. Conversely, if you are reviewing a claim in a breach-date state and the report used the filing date, the claim is understated and you should expect it to be corrected upward.
Several states also split the rule by claim type, applying one accrual date to contract claims and another to property damage or tort. Check that the report used the rule for the cause of action actually pleaded, not a general rule for the state.
What to ask for. The accrual date used, the statutory or case authority for it and confirmation that the authority addresses the claim type pleaded rather than a different one.
3. Was labor depreciated and does this state allow that?
Eight jurisdictions here restrict or prohibit depreciating labor: Alaska, California, Illinois, Louisiana, Mississippi, New Mexico, Virginia and Washington
On a property loss or actual cash value calculation, the question of whether labor can be depreciated alongside materials decides a large share of the number. Roofing is the standard illustration: the shingles have a measurable useful life, but the labor to install them does not wear out. A growing group of states have concluded by statute, regulation or decision that depreciating it is improper.
The mechanisms differ and that matters when you challenge it. Some states bar it by statute. Others do it through an insurance regulation or a departmental bulletin, which is enforceable against a carrier but is not the same as a statute. Others have only appellate authority and a handful have nothing on point at all, in which case the policy language governs and the argument runs on ordinary contract interpretation.
This is also the field where published fifty-state charts most often disagree with each other. Ten jurisdictions here carry a genuine live conflict, with competing authority on each side. If a report states the position flatly for one of those states without acknowledging the conflict, it is overstating its own certainty.
What to ask for. Whether labor was depreciated, at what rate and the authority relied on. If the authority is a bulletin rather than a statute, ask whether it binds the party in question.
4. Is the no-damages-for-delay clause actually enforceable here?
15 jurisdictions void or limit these clauses by statute: Arizona, California, Colorado, Kansas, Kentucky, Louisiana, Minnesota, Missouri, Nevada, New Jersey, North Carolina, Ohio, Oregon, Virginia and Washington
A contractor's delay claim is often met with the contract's no-damages-for-delay provision as a complete answer. In many states it is not a complete answer. The statutory limitations vary in scope and the scope is what decides the argument: several states void the clause only on public work, some only where the owner or agency caused the delay and at least one reaches private contracts as well where the delay was within the owner's control.
Where no statute voids the clause, it is usually enforceable but subject to judicially created exceptions, most commonly active interference, bad faith, fraud, or delays not contemplated by the parties. Those exceptions are not uniform either. Some states require a showing of willfulness and bad faith rather than mere negligence, which is a materially harder standard than "the owner interfered".
Check the project type before anything else. A report that treats a public-works project as private, or the reverse, may have applied the wrong rule to the entire delay claim.
What to ask for. Whether the project is public or private, the clause language relied on and the authority for enforceability or non-enforceability in this state for that project type.
5. Is the claim inside the deadline and is there a separate repose period?
Contract filing deadlines here range from 3 years to 10. A statute of repose can bar a claim before the filing deadline has run
Nine jurisdictions give only three years on a written construction contract claim: Alaska, Colorado, Delaware, the District of Columbia, Maryland, Mississippi, New Hampshire, North Carolina and South Carolina. Twenty-two give six. Nine give ten: Illinois, Indiana, Iowa, Kentucky, Louisiana, Missouri, Rhode Island, West Virginia and Wyoming. Montana is the outlier at eight.
The trap is that the limitations period is not the only clock. A statute of repose runs from the defendant's act or omission, or from substantial completion, rather than from accrual or discovery and it can extinguish a claim that is comfortably inside the limitations period. Iowa is the cleanest illustration: a written contract claim has ten years, but an improvement to real property that is not residential is barred at eight years from the act or omission. A reviewer working only from the limitations period reaches the wrong answer on a commercial project.
The reverse case is worth knowing too. Maine provides no statute of repose for builders at all. Only design professionals get one and the parties can contract around even that. So in Maine a contractor has the limitations period and nothing behind it and a late-accruing injury claim can arrive many years after the work finished.
What to ask for. The accrual date asserted, the limitations period relied on and whether a repose period was considered at all. Silence on repose is common and is worth probing.
Errors specific to the type of damages claimed
Once the five general checks are clear, these are the failure modes that belong to each calculation.
Delay and extended overhead (Eichleay and its alternatives)
Eichleay allocates unabsorbed home office overhead to a delayed project. It has preconditions and reports frequently assert the formula without establishing them. The contractor generally must show a government-caused or owner-caused suspension of uncertain duration, that it was required to remain on standby and that it was practically unable to take on replacement work during the suspension. A contractor who kept bidding and winning work through the delay period has a standby problem and that is a documentary question you can test.
Separate the three things that often get merged: extended field general conditions, which are actual costs of staying on site longer; unabsorbed home office overhead, which is the Eichleay allocation; and lost productivity or labor inefficiency, which is a different calculation again with its own measured-mile or industry-study methodology. A report that presents a single blended "overhead and inefficiency" figure has made the components impossible to test, which is itself a reason to press.
Check the delay is on the critical path and that the schedule analysis supports it. Concurrent delay attributable to the claimant reduces or defeats the claim in most jurisdictions and a report that does not address concurrency at all has left out the first thing the other side will raise.
Fully burdened labor rate
Burden stacks quickly and each layer is checkable. Unemployment insurance is charged at the employer's own experience rate, not a state average and new employers in construction frequently pay a much higher new-employer rate than other industries in the same state. If the report used a generic state figure rather than the employer's actual rate notice, the burden may be materially wrong in either direction.
Workers' compensation is where the state matters most. Five states run monopolistic funds with no private market: Montana, North Dakota, Ohio, Washington and Wyoming. Eight more set rates through an independent rating bureau rather than NCCI: California, Indiana, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania and Wisconsin. A rate pulled from an NCCI loss-cost table for one of those thirteen jurisdictions is coming from the wrong source entirely.
Then check the class code actually used, the experience modification factor and whether prevailing wage applies. Prevailing wage thresholds vary widely and some states have repealed their law altogether, so a report applying a prevailing wage rate should identify the funding source and the threshold that triggered it.
Property loss, ACV and recoverable depreciation
First establish which valuation standard governs. Some states define actual cash value by statute as replacement cost less depreciation. Others apply the broad evidence rule, under which the fact-finder weighs all relevant evidence including market value, original cost, age and condition, rather than applying a fixed formula. Those two standards can produce very different numbers on the same loss and a report that applies a mechanical replacement-cost-less-depreciation formula in a broad evidence state has adopted a methodology the state does not require.
Then check depreciation itself: what was depreciated, over what useful life and on what basis. Useful-life assumptions are frequently asserted without support. Ask for the schedule.
Finally, recoverable depreciation. Withheld depreciation is typically released once repairs are complete, but the conditions and any deadline for claiming it are state-specific and sometimes absent entirely. Where a state sets no deadline by statute, the policy governs and policy deadlines are often much shorter than people assume.
Claim interest
Beyond the rate and accrual date covered above, check the compounding method. Simple and compound interest diverge sharply over a multi-year claim and the statutes are specific. Some states compound annually, some compute simple interest daily to the date of payment and at least one compounds only at judgment on prior accrued prejudgment interest. Check also whether a contract rate displaces the statutory rate, which many states allow up to a usury ceiling.
Watch for interest claimed on components that do not bear it. Future damages are commonly excluded from prejudgment interest by statute and interest on an unliquidated sum is treated differently from interest on a liquidated one in a number of jurisdictions.
On public projects, check whether a prompt payment statute adds a penalty on top of ordinary interest. Maine, for example, imposes 1% per month on sums wrongfully withheld, expressly as a penalty in addition to other damages, which is a 12% annual add-on that sits on top of statutory interest rather than replacing it. A report that omits it understates the claim.
Construction site injury and third-party claims
The comparative fault rule decides how much of the number survives. Five jurisdictions still apply contributory negligence, under which any fault at all by the injured worker defeats the claim outright: Alabama, the District of Columbia, Maryland, North Carolina and Virginia. Most states apply a modified comparative rule with a threshold at 50% or 51%, a smaller group applies pure comparative and South Dakota alone uses a slight-versus-gross standard.
The threshold is only half of a modified rule. The statute also fixes what that share is measured against: in some states the parties actually sued, in others everyone at fault whether sued or not and in at least one, each defendant taken separately. On a site accident, where the injured worker's employer is normally immune under workers' compensation, those produce opposite results on identical facts. A worker carrying a third of the fault can recover in full in one state and nothing in its neighbour. No fifty-state chart records which rule a state uses, because the chart format has only one column for it.
Read the threshold carefully rather than assuming a flat 50% line. Iowa, for instance, bars recovery only where the claimant's fault exceeds the combined fault of the defendants, third-party defendants and any released parties. On a multi-party site that distinction does real work, because fault allocated to a party who settled out counts on the defence side of the comparison rather than against the worker.
Then check the exclusivity analysis. Whether a general contractor can be reached, whether statutory employer immunity extends up the chain and whether the state recognises an intentional-tort or gross-negligence exception are all state-specific and frequently assumed rather than researched. Some states give an employer blanket immunity with no intentional-tort exception at all, which changes the entire structure of the claim.
