LA Fires: Understanding the Legal Landscape of Likely Construction Delays

By Richard Erickson and Zachary Smith

In January 2025, the world watched in horror as catastrophic wildfires ravaged Los Angeles. The immediate impact on our California community was enormous and heart-rending. According to a recent UCLA report, 29 lives were lost and 16,251 structures destroyed.¹ This same report estimated the total property and capital losses to be between “$76 billion and $131 billion, with insured losses estimated up to $45 billion.” Our friends, family, and neighbors in the Los Angeles region now face a daunting task to rebuild their communities. But time and time again, the people of Los Angeles have demonstrated their resilience, and they are expected to do the same here.

In response to this heroic and massive rebuild effort, the construction industry in California, and likely in neighboring states as well, will face formidable challenges to rebuild expeditiously. Indeed, many experts in the industry predict exorbitant costs and delays based on a mix of the following factors: increased demand for construction materials and labor, supply shortages in these materials and labor, infrastructure damages caused by the fires, regulatory hurdles, and the rising cost and unavailability of insurance.²

One of the most pressing legal issues that this situation will give rise to, and one our clients in the construction industry should be aware of, is who will be liable for such construction delays when they inevitably occur. Additionally, our clients and neighbors rebuilding in California will no doubt want to know how they can contract to lessen the consequences from such delays.

Put simply, delay occurs when the project’s completion date extends beyond the contract’s original completion date. All delays invariably cause loss to all players on a construction project. However, under the law, construction delays can be either excusable or non-excusable, with the availability of remedies based on the type of delay. If the delay is excusable, the contractor will be entitled to an extension of time and will not be liable for delay-related damages. An excusable delay can also be compensable if the owner caused the delay. Conversely, when inexcusable delays occur, the contractor may be obligated to accelerate the work or pay damages for delayed completion.³

First, to know your rights, begin with the contract. Most, if not all, jurisdictions interpret actionable delays and remedies from the contract documents for the project. Excusable delays occur when the delay is not the contractor’s fault or the contractor did not contract for the risk.⁴ Non-excusable delays occur when the delay is the contractor’s fault or the contractor contracted for the risk. Further, most contracts specify delay remedies for a contractor may be a time extension only, or a time extension plus additional general conditions.⁵ Finally, many contracts include a “no damage for delay clause” that limits the remedies available for a contractor’s compensable delays to an extension of time only.⁶ On the other hand, delay damages expressly allowed by the contract — like wages or overtime necessitated by the delays — are usually actionable and recoverable.⁷

Causation is also a key legal element that must be proven in addition to an alleged breach of the contract. Delay damages may only be recoverable if sustained on the “critical path” of the project schedule and were not caused by the claimant.⁸ The term “critical path” is a familiar industry term but not a determinative legal principle. “‘Critical path’ is a term of art, not a legal concept; a project’s critical path is simply a collection of those construction tasks that cannot be delayed without delaying the entire project.”⁹ Or, as the Tenth Circuit explained, “[w]hile [Critical Path Methodology] has generated a technical terminology, the legal requirement that it is used to analyze is general and commonsensical: a contractor must prove that a delay affected not just an isolated part of a project, but its overall completion.”¹⁰

Thus, it is important to distinguish your burden of proving a material and compensable delay from the critical path methodology. Critical path methodology is one means of proving that the delay is actionable, ideally with reliable expert testimony and contemporaneous evidence showing impact on the overall project schedule completion date.

Delay claims equally depend upon comprehensive and timely documentation of the delay. Written correspondence confirming delay causes and consequences should be contemporaneous and immediate. Delay documentation should also be sufficiently detailed and timely to put key players on notice that the delay will impact the critical path, further citing specific contractual provisions that trigger available remedies for the delays. After-the-fact and imprecise documentation of the delay often carries little weight with judges, juries, and arbitrators and tends to suggest that the delay is neither material nor actionable. Proving a material and actionable delay, therefore, usually requires favorable contractual terms, critical path impact, favorable law, and believable documentation demonstrating timely notice and no fault for the delay.

Delays are especially inevitable when the homeowner’s insurer is managing the construction budget, draws, and certification of the contractor’s work. In a separate and forthcoming Legal Alert, we will cover complications and best practices when dealing with insurers covering losses caused by catastrophic loss like those sustained in the L.A. Fires.