When a construction contract is breached, determining the appropriate measure of damages can be almost as important as establishing the breach itself. In many cases, the non-breaching party seeks the cost of completing, repairing or replacing the work that was promised but not performed. But what happens when the cost of performance is substantially greater than the resulting increase in the property’s value?
A recent decision from the Supreme Court of Appeals of West Virginia provides important guidance. In Corotoman, Inc. v. Central West Virginia Regional Airport Authority, Inc., No. 24-661 (W. Va. 2026), the court recognized that the gross disproportionality rule may apply in a breach of a construction contract. However, the court also made clear that the party who breached the contract bears the burden of proving that the rule applies.
The decision provides an important lesson for owners, contractors and other construction professionals: establishing a breach does not necessarily establish the amount of damages, but a breaching party cannot simply assert that the requested damages are excessive. The party invoking gross disproportionality must prove it.
The Gross Disproportionality Rule
The gross disproportionality rule is sometimes referred to as the economic waste doctrine. It provides an alternative to the traditional cost-of-performance measure of damages when the cost of completing the contracted work bears no reasonable relationship to the resulting value of the property.
As the appellate court explained, the economic waste doctrine provides a justification for using diminution in value as an alternative measure of damages when the preferred measure—the cost of performance—has no rational relationship to the objective or market value that the work would achieve. The doctrine has most commonly been applied in construction contract disputes.
The distinction between the two approaches can be significant.
Under a cost-of-performance approach, damages generally are measured by the reasonable cost of completing or correcting the work required by the contract.
Under a diminution-in-value approach, damages are measured by the difference between:
-
The value of the property or structure as it exists without the contracted work; and
-
The value of the property or structure as it would have existed had the contracted work been performed.
Thus, gross disproportionality is determined by comparing the cost of performing the contractual obligation with the value that performance would add to the property.
The Facts of Corotoman
The dispute arose from an agreement between Corotoman, Inc., the landowner, and the Central West Virginia Regional Airport Authority.
The Airport Authority wanted to remove a large hill, or knoll, located at the end of an airport runway. The Authority initially offered the owner $260,125 for the property—an amount significantly greater than its appraised value. The owner rejected the offer.
The parties ultimately entered into an agreement that allowed the Airport Authority to enter the property and remove the knoll.
The agreement, however, required more than simply removing the hill. After removing the knoll, the Airport Authority was required to overblast the property, lowering the elevation an additional 35 feet. The work was intended to make the property flatter and more suitable for development.
The Airport Authority completed the knoll-removal portion of the project but did not perform the required overblasting.
Overblasting involves drilling holes to a specified depth and placing explosives in those holes. The explosives are then detonated to loosen and break up the underlying material.
The landowner subsequently sued, alleging that the Airport Authority breached the agreement by failing to perform the required overblasting.
The district court agreed. It granted the landowner partial summary judgment, concluding that the Airport Authority breached the contract and that no valid defense excused its failure to perform.
The remaining question was damages.
The Cost of Completing the Work
Expert witnesses presented evidence concerning the cost of performing the overblasting that the Airport Authority had failed to complete.
The parties ultimately agreed that the cost would be approximately $4,381,080.
The district court concluded that this amount was grossly disproportionate to the value of the land. In the court’s view, requiring the Airport Authority to pay the full cost of the work would effectively penalize the Authority and provide the landowner with a windfall.
The district court therefore determined that damages should instead be measured by the diminution in value of the property.
There was, however, a problem.
The landowner had not presented sufficient evidence from which the court could determine the property’s diminution in value.
As a result, despite finding that the Airport Authority had breached the agreement, the district court awarded only nominal damages.
The landowner appealed.
The Appellate Court Reversed
The Supreme Court of Appeals of West Virginia agreed that the gross disproportionality rule may apply to construction contract disputes. But it disagreed with the district court’s application of the rule in this case.
The critical issue was who had the burden of proving gross disproportionality.
The appellate court held that once the non-breaching party establishes a breach, the breaching party bears the burden of proving that the cost-of-performance measure is grossly disproportionate to the resulting value.
In other words, a breaching party cannot simply argue that the requested cost of repair or completion is too high. It must present evidence establishing the disparity between the cost of performance and the property’s resulting value.
The appellate court concluded that the Airport Authority failed to meet that burden.
Because gross disproportionality had not been proven, the court held that the landowner was entitled to rely on its proven measure of damages.
Diminution in Value Is Not Automatically the Default Measure
The decision is particularly significant because it clarifies that the gross disproportionality rule does not automatically convert every construction damages dispute into a diminution-in-value case.
The starting point remains the damages resulting from the breach.
If a construction contract requires particular work and the contractor or other contracting party fails to perform, the non-breaching party may seek the reasonable cost of completing or correcting the work.
The breaching party may invoke the gross disproportionality rule to argue that the cost-of-performance measure is economically wasteful or bears no reasonable relationship to the value the completed work would provide.
But the burden matters.
The breaching party must prove the gross disproportionality.
If it fails to do so, the non-breaching party’s proven measure of damages applies.
That distinction prevented the Airport Authority in Corotoman from shifting the burden to the landowner and then benefiting from the landowner’s failure to establish a diminution-in-value figure.
Why the Burden of Proof Matters
The allocation of the burden of proof has practical consequences in construction litigation.
Consider a hypothetical project in which a contractor fails to perform a specific contractual obligation. The owner establishes that completing the work would cost $2 million.
The contractor argues that the work would add only $200,000 to the property’s market value and therefore claims that the owner’s requested damages are grossly disproportionate.
Under the approach described in Corotoman, the contractor cannot merely make that assertion. It must present competent evidence establishing the alleged disparity.
That may require valuation evidence, expert testimony and other evidence addressing the property’s value with and without the required work.
If the contractor cannot establish gross disproportionality, the owner’s otherwise proven measure of damages remains applicable.
Implications for Construction Professionals
The Corotoman decision offers several practical lessons for owners, contractors, design professionals and their insurers.
Contractual Obligations Matter
Parties should carefully document the scope of work and the specific obligations undertaken under a construction agreement.
When a dispute arises, the precise language of the contract may determine whether a party performed what it promised and what consequences follow from a failure to perform.
Damages Require Evidence
A party cannot assume that the cost of completing defective or incomplete work will automatically be awarded. Likewise, a breaching party cannot assume that a court will reduce damages simply because the requested amount appears high.
Both sides should develop evidence supporting their respective damages theories.
For an owner seeking cost-of-performance damages, that may include reliable estimates, contractor bids, expert opinions and documentation establishing the reasonable cost of completing the work.
For a party asserting gross disproportionality, evidence concerning the property’s market value with and without the contracted work may be essential.
The Timing of Valuation Evidence Matters
Because the gross disproportionality analysis focuses on the relationship between cost and value, valuation evidence can become a critical component of construction litigation.
Parties should consider these issues early rather than waiting until the damages phase of litigation. A failure to develop appropriate valuation evidence can materially affect the available damages remedy.
Breaching Parties Cannot Rely on a Damages Gap They Created
Perhaps the most important practical lesson from Corotoman is that a breaching party cannot simply create uncertainty about the alternative measure of damages and then benefit from that uncertainty.
The Airport Authority argued that the cost of performance was grossly disproportionate. But it failed to prove the factual basis for that argument.
Because the Authority did not establish gross disproportionality, the appellate court held that the landowner’s proven measure of damages should apply.
A Clear Rule for Construction Disputes
The Corotoman decision establishes a straightforward framework for analyzing this issue:
-
The non-breaching party must establish the breach.
-
The non-breaching party may establish its applicable measure of damages, such as the reasonable cost to repair, replace or complete the required work.
-
If the breaching party invokes gross disproportionality, it bears the burden of proving that the cost-of-performance measure is grossly disproportionate to the resulting value.
-
Gross disproportionality is evaluated using a diminution-in-value analysis—the difference between the property’s value without the contracted work and its value if the contracted work had been performed.
-
If the breaching party fails to prove gross disproportionality, the non-breaching party’s proven measure of damages applies.
This framework is important because it prevents the gross disproportionality doctrine from becoming an automatic limitation on construction damages.
The Bottom Line
Corotoman, Inc. v. Central West Virginia Regional Airport Authority, Inc. illustrates an important principle in construction contract litigation: the cost of performance may be limited when it is grossly disproportionate to the value obtained, but the party seeking that limitation has the burden of proving it.
The decision also reinforces the importance of developing a strong evidentiary record on damages. Owners should be prepared to establish the reasonable cost of completing or correcting the contracted work. Parties asserting gross disproportionality should be prepared to substantiate the property’s value both with and without the required work.
Ultimately, the gross disproportionality rule is designed to prevent economic waste—not to provide a windfall to a party that breached its contractual obligations.
For construction professionals, owners and insurers, Corotoman serves as a reminder that contract disputes are often won or lost not only on the question of whether a breach occurred, but also on the quality of the evidence supporting the resulting damages.
For additional information please click HERE