Fireman sprays water on a fire at a construction jobsite

A fire at a residential construction site in Jefferson County, Colorado, on November 15, 2021, reportedly caused at least $2 million in damage as flames “gutted” multiple townhome units in construction. Similarly, a major fire on December 1, 2021, destroyed a portion of an under-construction apartment complex in Upland, California, with exposed lumber allegedly contributing to the damage or destruction of eight in-progress units.

According to the National Fire Protection Association, from 2013 to 2017 fire departments nationwide responded to an average of 3,840 fires at construction sites per year. Another 2,580 fires hit renovation sites, pushing the average number of jobsite fires over 6,000 annually. It’s a significant risk. 

When damage occurs to a construction project-in-progress, contractors are often concerned about the impact on payments they’re owed for work that was destroyed. Similarly, business owners are worried about recoup their losses so they can repair the damage or rebuild.

Contractors are entitled to their contractual payment regardless of disasters. “At the end of the day, the project owner is ultimately responsible for the damages done by a fire on their project,” construction writer Dawn Killough notes in “How a Construction Fire Affects Contractor Payments.” Just because there’s been damage, it doesn’t mean that individual contractors should lose out on what they earned.

”When a fire occurs on a project, you may have materials and work completed on-site that you haven’t been paid for yet,” Killough adds. “Just because that work or those materials were destroyed doesn’t mean that the owner is off the hook for the payment.”

There are lots of things, though, that individual contractors need to keep in mind when there’s been a fire on a project. Given the expense put into equipment and tools on any given project, it’s imperative that contractors first keep track of what’s kept on a job site for the purpose of any insurance claims and recouping lost value on a project.

However, perhaps even more important than this is making sure that your business will be properly paid for your work, and making sure what lien rights you have in case you don’t get proper payment.

“You have the right to file a mechanics lien (or a bond claim if you’re on a public project) to protect your right to be paid for that work, even if it was destroyed in the fire,” Killough notes.

Contractors can take measures to protect payment rights by sending the proper notices prior to the beginning of any project, as well as ensuring that liens are filed correctly before any requisite deadlines.

It may be important for contractors to have backup plans for payment, as well. Though the project owner’s insurance will usually be responsible for paying out any damages, these payments can be held up significantly and take much more time than most contractors are able to go without payment.

It’s reasonable for contractors to question how insurance issues may affect payment. “Potential suits will be liability suits against various insurance companies for whomever is at fault for the destruction,” says construction lawyer Mark Montiel, “[or] claims against various policies depending on whether the contracts require certain parties to be additional insureds under the policy.”

“A lot of [payments] will be governed by the contracts and what insurance is required of each subcontractor and supplier depending on size,” Montiel continues. “Usually, this is a fight between the construction professionals.”

Despite the moves that contractors can take to protect themselves, there’s recent precedent for things going wrong for contractors looking to secure payment in these situations.

After a January 2020 fire partially or completely destroyed two construction sites in New Jersey, five different project subcontractors were left without payment. They fired back with $1,706,957.62 in total mechanics lien claims against the Meridian Downtown apartment complex by April 2020.

A fairly obvious, yet important, aspect of ensuring payment is making sure the contractor is properly licensed for the job. Needless to say, improper licensing can result in any number of problems for contractors — extending to not only fines but jail time — but it can become really serious following disasters. For example, in a particularly serious event, in March 2021 a California contractor faced felony fraud charges after operating under a false contractor license and working on a project that resulted in a fatal fire in 2015.