“Details Matter” is the Foundation in a Texas Construction Defect Suit
March 1, 2012 — CDJ Staff
The Court of Appeals of Texas has ruled in the case of Barzoukas v. Foundation Design. Mr. Barzoukas contracted with Heights Development to build a house. He subsequently sued Heights Developments and “numerous other defendants who participated in the construction of his house.” Barzoukas eventually settled with all but two defendants, one who went bankrupt and Foundation Design, the defendant in this case. In the earlier phase, Barzoukas made claims of “negligence, negligent misrepresentation, fraud, fraudulent inducement, conspiracy, and exemplary damages in connection with the foundation.”
Foundation Design had been hired to install 15-foot piers to support the foundation. The engineer of record, Larry Smith, sent a letter to Heights Development noting that they had encountered hard clay stone when drilling. Smith changed the specifications to 12-foot piers. Initially, the City of Houston called a halt to work on the home when an inspector concluded that the piers were too shallow. Heights Development later convinced the city to allow work to continue. Subsequently, experts concluded that the piers were too shallow.
Foundation Design filed a motion for summary judgment. The trial court granted this, “without specifying the basis for its ruling.” Barzoukas contends the court was in error. Foundation Design contends that “Barzoukas failed to proffer competent evidence establishing that their conduct proximately caused damages.” Further, they did not feel that Smith’s letter gave “rise to viable claims for fraud and fraudulent inducement.”
One problem the court had was a lack of evidence. The court noted that “the purported subcontract is entirely missing” in the pleadings. The court has no contract between Bazourkas and Heights Development, nor one between Heights Development and either Foundation Design or Smith. The court underscored the importance of this, writing, “details matter.” They found that “the details are largely missing here.” Without the contract, the court found it impossible to determine if “Smith or an entity related to him agreed to indemnify Heights Development for damages arising from Smith’s negligent performance.”
As the material facts are in dispute, the appeals court found that there were no grounds for a summary judgment in the case. “Pointing to the existence of a contract between Heights Development and Barzoukas, or to the existence of a subcontract, is the beginning of the analysis ? not the end.”
Foundation Design and Smith also claimed that Barzoukas’s expert did not proffer competent evidence and that the expert’s opinions were conclusory. The trial court did not rule on these claims and the appeals court has rejected them.
Finally, Barzoukas made a claim that the trial court should not have rejected his argument of fraud and fraudulent inducement. Here, however, the appeals court upheld the decision of the lower court. “Barzoukas did not present evidence supporting an inference that Smith or Foundation Design made a purposeful misrepresentation.
The court remanded the case to the trial court for reconsideration. One member of the panel, Judge Charles Seymore, upheld the entire decision of the trial court. He dissented with the majority, finding that the economic loss rule foreclosed the claim of negligence.
Read the court’s decision…
Virginia Homebuilding Slumps After Last Year’s Gain
June 19, 2012 — CDJ Staff
As of May, only 61 residential construction permits have been issues in Roanoke County, Virginia, leaving officials doubtful that this year will meet last year’s mark of 179 permits. Residential construction was at its highest in the county in 2004. The worst year since then was 2009, when the county issued 143 permits. The county is in the western end of the state, near the border with West Virginia, and far from the D.C. metropolitan area.
Arnold Covey, the Director of Community Development for the county said that “it may be until 2014 before we really see a difference. The article by WDBJ7.com notes that a “key part” of the county budget comes from real estate.
Read the full story…
Judge Concludes Drywall Manufacturer Sold in Florida
September 13, 2012 — CDJ Staff
A Florida judge has concluded that the Chinese drywall manufacturer Taishan actively sought to sell its products in Florida and cannot now claim that it was not involved. Judge Joseph Farnia also noted that the main distributor of the drywall was, as noted in the Miami Herald, an arm of the company. Lennar Hones has sued the firm after installing drywall manufactured by the company in hundreds of homes.
Taishan’s activities in Florida included not only distributing samples, but also hosting tours of their plants in China for construction executives, and even making customized runs. According to other reports, has lost past cases over defects in their drywall.
Read the full story…
Mark Van Wonterghem To Serve as Senior Forensic Consultant in the Sacramento Offices of Bert L. Howe & Associates, Inc.
March 1, 2012 — CDJ Staff
Sacramento, CA — Bert L. Howe and Associates, Inc., is pleased to announce that Mark Van Wonterghem - General Contractor, has joined the firm as Senior Forensic Consultant. Mark will be responsible for leading the firm’s expansion in the newly formed Sacramento headquarters.
His focus will continue to be working with construction practice groups and claims professionals in the Sacramento and Bay Area markets. He will utilize the resources of the Construction Experts Group at Bert L. Howe & Associates in furthering the litigation support needs attendant to the firm’s Northern California clientele.
Mr. Van Wonterghem possesses extensive consulting and testimony experience. Through 32 years of experience in the construction industry he leverages extensive practical experience with multiple trades including concrete foundations, walls and flatwork, structural wood and steel framing, finish carpentry, drywall, lath & plaster/stucco, window & door installations, deck coating systems, metal and membrane flashings and above/below grade waterproofing. This trade experience encompasses both the commercial and residential construction sectors and has been vital in his ability to provide concise explanation of construction industry standards, as well as trade-specific standards of care.
Mr. Van Wonterghem has broad experience with all types of building construction ranging from concrete and steel commercial construction to high-end custom residential construction.
In connection with the Construction Experts Group at BHA, Mr. Van Wonterghem provides construction consulting and litigation support services to a wide variety of recognized construction claims professionals, owners, and publicly traded builders.
The firm’s Sacramento offices are located at the Gateway Oaks III office complex, 2520 Venture Oaks Way, Suite 435, Sacramento, CA 95833. Mr. Van Wonterghem can be reached via e mail at mvanwonterghem@berthowe.com or at (800) 783-1822.
Window Manufacturer Weathers Recession by Diversifying
October 28, 2011 — CDJ Staff
American Openings, a Tuscon-based window manufacturer, has responded to the loss of its sales of windows for new home construction by moving into new markets. The Arizona Daily Star reports that American Openings used to see providing windows for new homes as half their business. Now, Tom Regina, the founder and president says “single family is just dead.”
Their products are insulated windows, designed to comply with Energy Star standards. Without new homes being built, now the company is focusing on homeowners and building owners looking for more energy efficient windows. As the windows have two or three panes and special coatings, homeowners using them are eligible for tax credits.
One of their newer products combines their energy-saving coatings with “break resistant” glass. The article notes that the windows repel “all but the most determined burglars.” However, the company is still awaiting special equipment to cut the glass.
Read the full story...
Construction Defect Case Not Over, Despite Summary Judgment
November 7, 2012 — CDJ Staff
The Supreme Court of Oregon has concluded in an en banc decision that a motion to reconsider a summary judgment is not a motion for a new trial. In coming to their conclusion the court overturned an earlier Oregon Supreme Court case, Carter v. U.S. National Bank. Although the decision does not bear on construction defects, the underlying case did. Due to the decision, these claims can now be evaluated in a trial.
The case, Association of Unit Owners of Timbercrest Condominiums v. Warren, came about after an apartment complex was converted into condominium units. The developers hired Big Al’s Construction for some of the remodeling work. The condominium association later sued the developer and the contractor over claims of construction defects. The defendants filed a motion for summary judgment, which the court granted.
But that wasn’t the end of things. The plaintiff soon filed a “motion to reconsider,” noting that the summary judgment seemed to be in conflict with both law and other recent rulings, and additionally, the grounds for the decision were not in the order. The judge then notified the parties that the court had “pulled the trigger too quickly” and had seven questions for the parties to answer.
The court dismissed all claims against the defendants. The defendants filed their responses, objecting that that “‘there is no such thing’ as a motion for reconsideration.” Further, while “the rules do allow for post-judgment review of pre-judgment rulings through a motion for a new trial,” the plaintiffs had not filed for a new trial. But did they need one? They did file an appeal.
The judge in the case admitted that there was no such thing as a motion to reconsider, and felt bad about prematurely signing the judgment. The case was sent to the Court of Appeals to determine if the motion to reconsider was a request for a new trial. The Court of Appeals concurred.
In reviewing the decision, the Oregon Supreme Court concluded that there were a maximum of three questions to address. Was the motion for reconsideration a motion for a new trial? If so, was the later notice of appeal premature? And if so, was the plaintiff required to file a new appeal? The court determined that the answer to the first question was no.
Prior decisions pointed to the conclusion “that a motion for reconsideration of a summary judgment amounts to a motion for a new trial,” but here the court concluded that “our prior cases erred,” and turned to the summary judgment rule for clarification. The court noted that “the rule contemplates that summary judgment and trial are separate and distinct events.” With this conclusion, the Oregon Supreme Court remanded the case to the Court of Appeals for further proceedings.
Read the court’s decision…
Contractor Manslaughter? Safety Shortcuts Are Not Worth It
August 11, 2011 — Douglas Reiser, Builders Counsel
It’s been a while since I discussed the importance of safety. But, a recent article on ENR.com compelled this brief article. Don’t shortcut safety — you could be facing serious criminal repercussions.
A New York crane company owner and one of his employees are each facing a second-degree manslaughter charge for the death of two construction workers.  The charges stem from the collapse of a crane in New York City. The district attorney determined that the crane owner cut a few corners to reduce its operation costs, significantly sacrificing safety.
Another example was the 2010 trial of another New York crane operator who was charged with manslaughter. In that case, the criminal charges failed to stick, but an administrative judge found that the contractor used a damaged sling to support the steel collar binding the tower-crane mast to the 18th floor of a high-rise building being constructed. The company also used four slings instead of the eight, as specified by the crane manufacturer; improperly attached the slings and failed to pad or soften them.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
South Carolina “occurrence” and allocation
September 1, 2011 — CDCoverage.com
In Crossman Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909 (S.C. Aug. 22, 2011), insured Crossman was the developer and general contractor of several condominium projects constructed by Crossman’s subcontractors over multiple years. After completion, Crossman was sued by homeowners alleging negligent construction of exterior components resulting in moisture penetration property damage to non-defective components occurring during multiple years. Crossman settled the underlying lawsuit and then filed suit against its CGL insurers to recover the settlement amount. Crossman settled with all of the insurers except for Harleysville. Crossman and Harleysville stipulated that the only coverage issue was whether there was an “occurrence.” The trial court subsequently entered judgment in favor of Crossman, determining that there was an “occurrence.” The trial court also ruled that Harleysville was liable for the entire settlement amount without offset for the amounts paid by the other insurers.
Read the full story…
Reprinted courtesy of CDCoverage.com
Destruction of Construction Defect Evidence Leads to Sanctions against Plaintiff
July 10, 2012 — CDJ Staff
Stating that the plaintiff’s actions have left the defendants in a situation where they “cannot properly defend the action,” a judge in the US District Court of New York has sanctioned the plaintiffs in Aktas v. JMC Dev. Co.
The plaintiffs hired JMC Development and Stephen Jung, an architect, to renovate their vacation home in Adirnodack, New York. As work progressed, “due to disagreements regarding the completion date and payments for the project, the relationship began to deteriorate.” The plaintiffs hired George Villar as an owner’s representative who “testified that he deemed the workmanship to be ‘poor.’”
Subsequently, the locks where changed on the home, preventing JMC from performing any additional work, after which drywall was removed, which Villar stated was so that “the engineer come and look at the framing.” Subsequently, Villar sent a letter to JMC stating that the work was “performed in an inadequate, negligent and un-professional manner.” Villar informed JMC that they were not to visit the property. Subsequently, the plaintiffs hired another firm. “Plaintiffs testified that the materials were ‘carted away’ and ‘thrown out.’”
The plaintiffs filed a suit against JMC and others. JMC filed a motion requesting that the plaintiffs be sanctioned for their spoliation of evidence. The court noted that “the plaintiffs recognized that litigation was imminent,” and that they “had a duty to preserve the evidence. As all of JMC’s work was destroyed, there is no evidence of whether or not the work was defective. The court concluded that it will “issue an adverse inference charge that permits the jury to infer that the missing evidence was favorable to the defendants.”
In conclusion, the court granted in part the spoliation sanctions. They granted JMC a summary judgment dismissing the plaintiffs’ claims of fraud.
Read the court’s decision…
Ambitious Building Plans in Boston
November 18, 2011 — CDJ Staff
Although most are unlikely to change the Boston skyline, there are several large projects on the drawing boards. The site BostInnovation covered ten of them in a recent post. Downtown Boston will be the site of several of these large projects, including three towers to be added to the Christian Science Plaza, a 404-unit residential tower in the Theater District, and perhaps the largest of these projects, a 47-story tower to be built over Copley Plaza, which will tower over the adjacent buildings. None of the planned buildings will challenge the Hancock Tower’s 60 stories.
Read the full story…
Limiting Plaintiffs’ Claims to a Cause of Action for Violation of SB-800
November 18, 2011 — Samir R. Patel, Esq. and Todd E. Verbick, Esq., Lorber, Greenfield & Polito, LLP
There has been a fair share of publicity about the SB-800 amendments to the Civil Code (Civil Code section 896, et seq.) that codified construction defect litigation in 2002. Most of the publicity is geared toward the pre-litigation standards allowing a builder the right to repair before litigation is commenced by a homeowner. Less focus and attention has been given to the fact that violation of the SB-800 performance standards is being used by plaintiff’s counsel as an additional tool in the plaintiff’s pleading tool box against builders. Closer scrutiny to SB-800 reveals that those provisions should in fact act as a limitation to the pleading tools available to plaintiffs and an additional tool for builders in the defense of cases governed by SB-800.
The typical construction defect complaint contains the boiler plate versions of numerous causes of action. These causes of action include Strict Liability, Negligence, Negligence Per Se, Breach of Contract, Breach of Contract – Third-Party Beneficiary, Breach of Express Warranties, Breach of Implied Warranties, among others. The wide array of causes of action leave a defendant “pinned to the wall” because they require a complex defense on a multitude of contract and tort related causes of action. Furthermore, the statutes of limitations as to these claims widely differ depending upon if the particular defect is considered latent or patent. The truth of the matter remains, no matter what the circumstances, if a construction defect matter ultimately goes to trial, it is inevitable that plaintiffs will obtain a judgment on at least one of these causes of action.
On its own, the Strict Liability cause of action can be a thorn in a defendant’s side. A builder is obviously placing a product into the stream of commerce and strict liability is a tough standard to defend against, particularly when it concerns intricate homes comprised of multiple components that originally sold for hundreds of thousands of dollars. A Negligence cause of action can also be difficult to defend because the duty of care for a builder is what a “reasonable” builder would have done under the circumstances. An interpretation of this duty of care can easily sway a jury that will almost always consist of sympathetic homeowners. A Negligence Per Se cause of action can also leave a defendant vulnerable to accusations that a builder violated the Uniform Building Code or a multitude of other obscure municipal construction-related code provisions during the construction of the home. Lastly, the Breach of Contract cause of action leaves a builder relying on dense and intricate purchase and sale agreements with dozens of addenda which leave the skeptical jurors turned off by what they view as one-side, boilerplate provisions. Ultimately, when a matter is about to go to trial, the complexity of these complaints can benefit a plaintiff and increase a plaintiff’s bargaining power against a defendant who is attempting to avoid a potentially large judgment.
Enter the SB-800 statutes. The SB-800 statutes apply to all homes sold after January 1, 2003. Civil Code section 938 specifically states that “[t]his title applies only to new residential units where the purchase agreements with the buyer was signed by the seller on or after January 1, 2003.” (Civil Code §, 938.) As time progresses, more residential construction defect cases will exclusively fall under the purview of SB-800. Slowly but surely more SB-800 governed litigation is being filed, and its exclusive application is looming on the horizon.
On its surface, this “right to repair” regime has left builders with a lot to be desired despite the fact that it is supposed to allow the builder the opportunity to cure any deficiencies in their product before litigation can be filed by potential plaintiffs. However, the application of the time line for repair has shown to be impractical for anything but the most minor problems involving only small numbers of residential units. Moreover, the fact that the fruits of the builder’s investigation into the claimed defects in the pre-litigation context can freely be used as evidence against it in litigation makes builders proceed with trepidation in responding with a repair. For these reasons, more SB-800 litigation can be expected to result due to the shortcomings of the pre-litigation procedures, and savvy defense counsel should anticipate the issues to be dealt with in presenting the defense of such cases at trial.
This fact should not necessarily be met with fear or disdain. Within the SB-800 statutes, the legislature made it clear that they were creating a new cause of action for construction defect claims, but it further made it clear that this cause of action is a plaintiff’s exclusive remedy. The legislature giveth, but at the same time, the legislature taketh away. Throughout numerous provisions within the SB-800 statutes, the Civil Code states that claims for construction defects as to residential construction are exclusively governed by the Civil Code, and that the Civil Code governs any and all litigation arising under breaches of these provisions. Civil Code section 896 specifically states:
In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction … the claimant’s claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title. (Civil Code §, 896.)
Civil Code section 896 then provides approximately fifty-plus standards by which a construction defect claim is assessed under that provision. Civil Code section 896 covers everything from plumbing to windows, and from foundations to decks, and in several instances expressly dictates statutes of limitations as to specific areas of construction that severely truncate the 10-year latent damage limitations period. As for any construction deficiencies that are not enumerated within Civil Code section 896, Civil Code section 897 explicitly defines the intent of the standards and provides a method to assess deficiencies that are not addressed in Civil Code section 896. Civil Code section 897 states:
Intent of Standards
The standards set forth in this chapter are intended to address every function or component of a structure. To the extent that a function or component of a structure is not addressed by these standards, it shall be actionable if it causes damage. (Civil Code §, 897.)
Therefore, Civil Code section 897 acts as a catch-all by which defects that are not covered within Civil Code section 896 can be evaluated on a damage standard mirroring the Aas case (damages must be present and actual). The result of sections 896 and 897 being read in combination is a comprehensive, all-inclusive set of performance standards by which any defect raised by Plaintiffs can be evaluated and resolved under a single SB-800 based cause of action.
Civil Code section 943 makes clear that a cause of action for violation of SB-800 performance standards is a plaintiff’s sole remedy for a residential construction defect action. Specifically, Civil Code section 943 states:
Except as provided in this title, no other cause of action for a claim covered by this title or for damages recoverable under 944 is allowed. In addition to the rights under this title, this title does not apply to any action by a claimant to enforce a contract or express contractual provision, or any action for fraud, personal injury, or violation of a statute. (Civil Code §, 943.)
Civil Code section 944 provides the method for computing damages within a construction defect action, as follows:
If a claim for damages is made under this title, the homeowner is only entitled to damages for the reasonable value of repairing any violation of the standards set forth in this title, [and] the reasonable cost of repairing any damages caused by the repair efforts… . (Civil Code §, 944.)
A cursory review of these statutes yields the conclusion that the legislature was attempting to create an exclusive cause of action that trumps all other causes of action where SB-800 applies. The remedy available to plaintiffs is limited to that allowed by the Civil Code. As noted above, “[n]o other cause of action for a claim covered by this title…is allowed.” (Civil Code §, 943.) Therefore, Civil Code sections 896, 897, 943, and 944 specifically prohibit the contract-based and tort-based causes of action typically pled by plaintiffs.
Plaintiff’s counsel has seized upon the language of section 943 to advance the argument that SB-800 still allows a plaintiff to advance typical contract and tort based causes of action. On the surface, this argument may seem compelling, but a minimum of scrutiny of the express language of section 943 dispels this notion. Section 943 says that it provides rights “[i]n addition” to those under the SB-800 Civil Code provisions. Clearly, the language in section 943 is intended to expressly underscore the fact that a plaintiff is not precluded from seeking relief in addition to that allowed under SB-800 for damages not arising from a breach of the SB-800 standards or for damages in addition to those recoverable under Section 944. This language does not provide an unfettered license to bring a Strict Liability, Negligence or other cause of action against a builder where SB-800 applies.
In fact, this language only keeps the door open for plaintiffs to pursue such causes of action not arising from a breach of the SB-800 standards should there be such supporting allegations. For example, if a plaintiff alleges that a builder breached an “express contractual provision” related to the timing of the completion of the home and close of escrow, and the contract specifies damages in this regard, a plaintiff may have a viable separate cause of action for Breach of Contract for recovery of those damages precisely because that is not an issue expressly dealt with in SB-800 in the performance standards under sections 896 and 897, or in the damage recovery terms under 944. As it stands, the vast majority of complaints are seeking redress for violation of the same primary right; that is, defects specifically outlined in Section 896 and 897 or which result in damages as stated in Section 944.
So, how does a builder defend against a complaint that contains multiple causes of action regarding construction defects for a home sold after January 1, 2003? There are numerous ways to approach this. First and foremost, these superfluous and improper causes of action can be attacked by demurrer seeking dismissal of all causes of action other than the cause of action alleging violation of SB-800. If the the time period within which to file a demurrer has passed already, a motion for judgment on the pleadings can be utilized to attack the improper causes of action in the same way as a demurrer can be used for this purpose.
The limitation to a demurrer or motion for judgment on the pleadings is that the judge is restricted to viewing only the four corners of the pleading when making a ruling. It is typical for plaintiffs’ counsel to cleverly (or one might even say, disingenuously) leave the complaint purposely vague to avoid a successful defense attack on the pleadings by not including the original date the residence was sold. In that instance, a motion for summary adjudication can be used to attack a plaintiff’s complaint. By simply providing evidence that the homes were originally sold after January 1, 2003, the improper causes of action should be subject to dismissal by summary adjudication. If the plaintiff is a subsequent purchaser, the builder still has recourse to enforce the pleading limitations under SB-800. Civil Code section 945 states that “[t]he provisions, standards, rights, and obligations set forth in this title are binding upon all original purchasers and their successors-in-interest.” (Civil Code §, 945.)
Attacking a plaintiff’s complaint to eliminate multiple causes of action can have numerous benefits. The practical result is that a plaintiff will only have one viable cause of action. The advantage is that the SB-800 performance standards include the defined performance standards and shortened statutes of limitations periods with regard to specific issues. Furthermore, as to defects which are not specifically provided for in Civil Code section 896, Civil Code section 897 requires a proof of actual damages. Therefore, a plaintiff must provide evidence of current damages and not simply conditions that may potentially cause damage in the future.
The Appellate Courts have yet to directly address and interpret these SB-800 provisions. The time for that is undoubtedly drawing near. For now, however, plaintiffs will have to find ways to accurately plead construction defect claims within the confines of one cause of action for breach of the performance standards enumerated within the Civil Code.
Printed courtesy of Lorber, Greenfield & Polito, LLP. Mr. Patel can be contacted at spatel@lorberlaw.com and Mr. Verbick at tverbick@lorberlaw.com.
Is Construction Heading Off the Fiscal Cliff?
December 20, 2012 — CDJ Staff
After a period of growth, the construction industry lost 20,000 jobs in November, based on the federal jobs data. Damon Scott of New Mexico Business Weekly suggests that contractors may have laid off employees in anticipation of the “fiscal cliff.” Ken Simpson, the chief economist of the National Association of Home Builders said in a press release that “it is discouraging that construction employment is still struggling after three years of expansion in the overall economy.”
Read the full story…
Texas Construction Firm Files for Bankruptcy
December 20, 2012 — CDJ Staff
A Texas construction firm, founded in 1937, filed for bankruptcy, bringing twenty-two projects to a sudden halt, and resulting in the loss of jobs for hundreds of employees. Ballenger Construction told its employees to go home, as it could not complete the jobs. In some cases, work will need to be done to ensure that the work sites do not cause public safety hazards.
Read the full story…
Death of Construction Defect Lawyer Ruled a Suicide
June 19, 2012 — CDJ Staff
The Clark County Coroner’s Office has concluded that Nancy Quon, the construction defect attorney implicated in the wide-ranging HOA scandal, died by her own hand. The cause of death was a combination of anti-anxiety and insomnia medication mixed with alcohol. Quon survived an earlier incident in which she took GHB and her apartment was set on fire. Quon denied that it was a suicide attempt.
Read the full story…
Anti-Concurrent Causation Clause Bars Coverage for Landslide and Water Leak
June 19, 2012 — Tred Eyerly, Insurance Law Hawaii
The insured unsuccessfully attempted to get around the policy’s anti-concurrent causation clause by arguing a covered cause of loss was a contributing factor. See Stor/Gard, Inc. v. Strathmore Ins. Co., 2012 U.S. Dist. LEXIS 63217 (D. Mass. May 4, 2012).
A building at the insured’s storage facility was damaged when heavy rain caused a mass of soil to slide down a slope, causing soil and a retaining wall to fall on the building. The accident caused a partial collapse of the building. The insurer hired two soil engineers, each of whom concluded that a landslide caused the accident. The reports also noted, however, that a leak from the property’s drainage system resulted in a very small percentage of water infiltrating the ground.
The insurer denied coverage based upon an exclusion for landslides.
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Read the full story…
Claims Under Colorado Defect Action Reform Act Count as Suits
July 10, 2012 — CDJ Staff
The Colorado Court of Appeals has affirmed the judgment of the lower court in Melssen v. Auto-Owners Insurance. The Melssens built a custom home for the Holleys, during which time the Melssens retained a comprehensive general liability policy from Auto-Owners, which “obligated Auto-Owerns to defend the Melssens with respect to any ‘suit’ seeking damages for ‘property damage’ during the policy period.” Soon after the house was constructed, cracks developed in the drywall, then outside stucco and basement slab. The Holleys contended that “approximately $300,000 of damages to the Holleys’ property was caused by the Melssens’ engineering and construction defects” and filed a claim under the Colorado Defect Action Reform Act (CDARA). The Melssens “demanded Auto-Owners defend and indemnify the Melssens and forwared Auto-Owners the notice of claim.”
Although the Melssens notified Auto-Owners in June 2008, it was not until October 2008 that Auto-Owners denied coverage stating that the claims were sustained outside the policy period. The Melssens filed an action against Auto-Owners. At trial, the jury ruled in favor of the Melssens awarding them damages, to which the trial court added costs and attorney fees.
On appeal, Auto-Owners contended that the trial court erred in allowing the Melssens to argue that the CDARA notice of claim “was the functional equivalent of a complaint commencing a suit.” The appeals court found that “the CDARA notice of claim process constituted an alternative dispute resolution proceeding under the policy.” The court agreed that jury should not have been asked to determine if a CDARA action is a “suit,” but as the jury found for the Melssens, the concluding it “constituted harmless error.” Further, the court found that an action under the CDARA satisfied the definition of a “suit.”
The court found for the Melssens, affirming the lower court’s decision and remanding the case to the lower court for the awarding of appeals costs to the Melssens.
Read the court’s decision…
Background Owner of Property Cannot Be Compelled to Arbitrate Construction Defects
November 7, 2012 — CDJ Staff
In Truppi v. Pasco Engineering, John Quattro sued Property Management Contractors, Inc. over construction defects in William Truppi’s home. All parties are named in the suit. The California Court of Appeals ruled that Property Management Contractors, Inc. (PMCI) could not compel Mr. Quattro to arbitration.
The background of the case involves two houses built in Encinitas, California by PCMI: one for Mr. Truppi at 560 Neptune, and one for Mr. Quattro at 566 Neptune. Both contracts contained an arbitration provision. Mr. Quattro signed the contract for his residence and Mr. Truppi signed the other. Mr. Quattro then sued PCMI and its principal, William Gregory. Mr. Quattro claimed to be the true contracting party for the 560 Neptune residence and a third party beneficiary of the contract Mr. Truppi signed, and stated that PCMI was aware of this.
PCMI in a demurrer stated that Quattro “had only a ‘prospective beneficial interest in the property upon its eventual sale or lease.’” Mr. Quattro amended his complaint to account for the issues raised by PCMI. The court rejected PCMI’s demurrer to the amended complaint.
Finally, PCMI and Gregory asserted that Quattro was “not the real party in interest” and could not sue. PCMI continues to assert that Quattro lacks standing, but their attorney sent Quattro an e-mail stating, “While my client disputes that you are a party, and that you lack standing to assert the claim, to the extent you do so I believe you are obligated to proceed by way of arbitration.”
The court did not cover the issue of Quattro’s standing in the case, only if he could be compelled to arbitration. The court affirmed the lower court’s finding that Quattro could not be compelled to arbitrate the construction defect claim as neither he nor Gregory signed the contract in an individual capacity. Further, the court noted that PCMI and Gregory “denied the existence of an agreement between themselves and Quattro on the 560 contract,” and cannot compel arbitration on a non-existent agreement. And while non-signatories can, in some situations be compelled to arbitrate, the court found that “these cases are inapplicable because here they seek to have the alleged third party beneficiary (Quattro) compelled by a nonsignatory (Gregory).” The arbitration clause in question “expressly limited its application to persons or entities that signed the 560 contract.”
As Mr. Quattro was not a signatory to that agreement, the court found that he could not be held to its arbitration provision.
Read the court’s decision…
Defective Grout May Cause Trouble for Bridges
August 16, 2012 — CDJ Staff
Grout, which was used to protect the steel support cables of the Woodrow Wilson Bridge, may lead to problems instead. The Baltimore Sun reports that the Federal Highway Administration is looking at three dozen bridges in twenty-one states that were built with defective grout. The grout contains high levels of chlorides, which can lead to corrosion. The collapse of pedestrian walkway in Concord, North Carolina was attributed to chloride contamination in the grout.
The grout, SikaGrout 300PT, was advertised as "non-corrosive, does not contain chlorides," but later testing showed that it contained levels that exceeded limits by 400 percent. Throughout the country, about 16 million pounds of this were used. Sika Corp. suspended production of the grout in 2010. If repairs need to be made, it is unclear who will pay.
Read the full story…
