Construction Disputes Expected to Rise in 2026

2026-02-18 economy

New York, Wednesday, 18 February 2026.
Commercial construction faces a surge in disputes and litigation in 2026, driven by economic shifts and new tech like AI. Experts are being brought in earlier to resolve issues.

Economic Instability and Sector Divergence

As of February 18, 2026, the commercial construction landscape is grappling with a paradoxical environment that is ripe for conflict. According to a new analysis released today by Resolution Management Consultants (RMC), the industry is bracing for a marked increase in disputes throughout the year, driven largely by persistent inconsistencies in the market [1]. While the American Institute of Architects (AIA) forecasts limited overall growth for the U.S. construction industry following a sluggish 2025, the sector is experiencing a sharp divergence in performance [1]. Bright spots are emerging in healthcare, education, infrastructure, and data centers, yet these are contrasted by slow or negative growth trajectories for office buildings, residential projects, and retail spaces [1]. This uneven terrain is further complicated by macroeconomic pressures; U.S. construction spending had already shown signs of contraction the previous year, falling approximately -1.917% from its December 2024 peak of $2.191 trillion to $2.149 trillion by May 2025 [2].

The Digital Disconnect and Contractual Gaps

Beyond economic headwinds, the rapid integration of advanced technologies is introducing novel legal risks. Artificial Intelligence (AI) and Building Information Modeling (BIM) gained significant momentum in 2025 and are projected to be broadly utilized this year for scheduling, maintenance, and safety operations [1]. While these tools promise efficiency, they are outpacing the legal frameworks governing them. Analysis indicates that outdated contract language regarding data ownership, privacy, and cybersecurity is becoming a critical liability [1]. Furthermore, the insurance market is reacting to these technological shifts; while cyber insurance pricing has been competitive, rising claim frequency is exerting upward pressure on rates, and litigation following cyber incidents is becoming increasingly common as of February 2026 [2].

Judicial Precedents and Funding Risks

Recent court rulings have underscored the severity of the legal risks facing developers, particularly regarding project financing and contractual rights. In a significant decision on February 2, 2026, the Eighth Circuit Court of Appeals affirmed a jury verdict in Selective Ins. Co. of Am. v. Heritage Const. Cos., finding a developer liable for fraud after misrepresenting the availability of construction funding [3]. The developer had assured a contractor that $7 million was available when, in reality, only $1.2 million was secured [3]. The court held that misrepresenting the present existence of committed financing constitutes actionable fraud, rejecting the defense that such statements were merely optimistic predictions [3]. This ruling signals a heightened standard of accountability for developers communicating with contractors about capital availability.

Strategic Shifts in Resolution

In response to rising litigation costs, industry participants are altering their approach to conflict resolution. Although the absolute number of disputes is forecast to grow in 2026, the number of cases proceeding to full trial may actually decrease [1]. The high cost of litigation is driving parties toward earlier settlements and the utilization of alternative dispute resolution mechanisms [1]. Experts are increasingly being brought into the process at earlier stages to facilitate quicker resolutions outside the courtroom [1]. This aligns with a broader international trend where dispute boards are evolving from simple contractual tools into standard mechanisms for global project management, helping to maintain project momentum despite conflicts [5].

Sources

Construction litigation Risk management