What damages can a plaintiff recover under Tennessee law for construction defects? The answer is that a plaintiff can recover either the amount it will take to remedy or repair the defects or the difference in value between the structure had the work been done correctly and its value considering the defective work. The later method of damages is sometimes referred to as “diminution in value” or “diminution” damages.
Construction defect cases almost always are breach of contract cases where a project owner or homeowner has sued a contractor with which it had a written or verbal contract. Thus, although there are some unique considerations in construction defect cases, basic principles of Tennessee contract law apply to them. The purpose of breach of contract damages is, first and foremost, to attempt to put the plaintiff, as near as possible, in the same position in which he or she would have been had the defendant not breached. The plaintiff should not receive a windfall nor should the plaintiff receive less than what it will take to be made whole.
A plaintiff in a breach of contract case with a contractor must be mindful that, under Tennessee law, the plaintiff bears the burden of proving damages. Practically speaking, lawyers representing plaintiffs in construction defect cases must be strategic and proactive from the very beginning of the case about the proof needed to ensure that their client receives a recovery. More than a few construction defects cases have foundered at the damages stage after a plaintiff has proven liability.
Who determines, in a construction defect case, which of the above two methods of calculating damages applies? In Tennessee, the judge does. How does the judge decide which method to apply? Probably, the seminal and most informative Tennessee case addressing that question is GSB Contractors, Inc. v. Hess (Tenn. Ct. App. 2005).