ANAHEIM CALIFORNIA CONSTRUCTION EXPERT WITNESS
DIRECTORY AND CAPABILITIES

Avoid Gaps in Construction Defect Coverage

The language may be standardized, but the way different states’ courts interpret it is not. That’s the problem discussed by William F. Knowles and Brendan Winslow-Nason in an article in Business Insurance. One of the major issue through the country is whether a construction defect claim and the resultant damage are an occurrence. Additionally, there are questions whether certain exclusions apply, such as “your work” or “your product” exclusions. They note that many courts “ agree that they are intended to exclude defective construction itself, while providing coverage for unintended consequences.” They further note that these are not the only insurance issues, “making it difficult for construction companies operating across state lines to ensure adequate coverage.”

Their recommendations to contractors are that they pay careful attention to where they’ve done business and “if the states have issued decisions or if there is legislation in place address the scope of coverage under additional insured endorsements.” Additionally, they suggest determining whether a contractor can negotiate a choice of law provision in their policy. The conclude that “construction companies can take proactive steps to protect themselves by identifying the applicable states’ laws, determining whether insurance is adequate under those laws, and then taking steps to resolve any gaps in their coverage.”

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Plaintiff Not Entitled to Further Damages over Defective Decking

The Court of Appeal of the State of California, Third Appellate District has rejected an appeal from the successful plaintiff of a construction defect case in Evilsizor v. Calaveras Lumber Company. John Evilsizor hired Scott Hunton to remove and replace the deck at the rear of his home. Subsequently, the deck, which had been constructed with a product called SmartDeck, a product of the subsequently bankrupt US Plastic Lumber, exhibited problems. Hunton made some repairs. Calaveras Lumber offered replacement decking if Evilsizor would pay the difference in price. Mr. Evilsizor hired another contractor to replace the decking and then sued for lost use and compensation for the amount he paid the second contractor. Replacing the deck a second time cost Mr. Evilsizor $113,065.44.

During the trial, the defendant conceded that the planking was defective. It has been recalled by the manufacturer. Additionally, the jury heard testimony from a construction and building codes consultant, Lonne Haughton, however the trial court found that Mr. Haughton did not have sufficient expertise in wood-plastic composite materials. Further, Haughton had been a California contractor for only three years, and though he claimed a college degree, this was “‘a distance learning diploma’ that required no in-class work.” The appeals court upheld the decision that Mr. Haughton was not qualified to testify as an expert about wood-plastic materials.

The court also upheld the trial court’s exclusion of two pieces of evidence. One was a list of SmartDeck sales. However, the witness asked about it was not able “to testify who prepared it or confirm that it had been prepared by a Cascade employee.” Further, “the fact defendant bought and sold SmartDeck was not disputed.” The other was an e-mail in which US Plastics said they had “some bad product in the field.” This e-mail went to Westmark & Associates, and the plaintiff did not establish that it was ever sent to the defendant.

Though the defense has suggested an award of $18,000 plus loss-of-use damages for one year and an additional $4,000 if the jury believed that leftover material from the front deck was used in the rear. As the plaintiff requested $100 per month of loss of use, this would have totaled $34,000. The jury awarded the cost of the decking, $6,275,82. The court cites earlier decision that the amount of the award is “a question of fact to be determined by the jury.”

In conclusion, Mr. Evilsizor was not only unable to receive a larger award, but the court ruled that he must pay the defendant’s cost on appeal.

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Construction Firm Sues City and Engineers over Reservoir Project

The city of Fremont, Ohio and Arcadis have been sued by Trucco Construction. Trucco had been hired by the city to build a reservoir designed by Arcadis, the News-Messenger reports. Peter Welin, attorney for Trucco, said that he found “startling evidence of the company’s negligence” when he deposed Arcadis engineers. “This project could never be built the way they bid it.”

Their suit alleges that Arcadis and the city were aware that the site was not conducive to construction and also that Arcadis failed to be a neutral party in discussions between Trucco and the city regarding compensation.

Sam Wamper, an attorney for Fremont, said he was going to file a motion which would include “quite an interesting story,” but declined to elaborate.

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After Construction Defect Case, Repairs to Austin Building

The Austin Business Journal reports that remediation is about to begin on Met Center 10, a building that was “at the center of a complex structural defect case.” Claims were made that Grubb & Ellis failed to disclose known structural defects to a group of investors who purchased the building. The brokerage was ordered to pay $6.75 million. Repairs will take an estimated six months at a cost of $3.7 million.

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Micropiles for bad soil: a Tarheel victory

Despite foundation challenges, construction is almost complete on the expansion at University of North Carolina’s Kenan stadium. The project started with a deep foundation system from design-build contractor GeoStructures. Known as the Carolina Student-Athlete Center for Excellence, the addition was built on a parcel with a knotty mix of fill soils, subsurface boulders and varying depths to rock. To achieve uniform foundation support, GeoStructures designed a Micropile system (also known as a Mini pile system) which could be drilled into the variable ground conditions.

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Reprinted courtesy of Melissa Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl law.com.

Are Construction Defects Covered by Your General Liability Policy?

Construction firms are finding that their insurers are denying construction defect claims and the courts are siding with the insurers, according to Kelly M. Gindele, writing in the Martindale-Hubble Legal Library. Ms. Gindele notes that when construction defect claims are not covered, firms can end up with “multi-million dollar claims” that it has to pay “out of its own pocket.” She notes that in Kentucky and Ohio, if “the insured’s work causes an unforeseen and unintended event to occur?Ķthere is not occurrence under the policy.” Further, if there is an occurrence, the court will “look for an exception to coverage.”

She also notes that contractors may not hold sufficient coverage, either by limiting the amounts or the time. She notes that while “insurers generally try to limit coverage for defect claims to one year,” that “construction defects may not be found in a year’s time.”

Ms. Ginele recommends that contractors “hire an insurance company with extensive experience in this field” and “independent legal counsel with insurance knowledge,” to avoid finding themselves “with limited or even no coverage when it needs it most.”

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The Montrose Language Interpreted: How Many Policies Are Implicated By A Construction Defect That Later Causes a Flood?

The Court of Appeals of Indiana recently addressed the “Montrose” language added to the CGL ISO form in 2001 in the context of a construction defect claim where a fractured storm drain caused significant flooding a year after the drain was damaged. The insuring agreement requires that “bodily injury or “property damage” be caused by an occurrence and that the “bodily injury or “property damage” occur during the policy period. The Montrose language adds that the insurance applies only if, prior to the policy period, no insured knew that the “bodily injury or “property damage” had occurred in whole or in part. Significantly, it also states that any “bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period known to have occurred, includes a continuation, change or resumption of that “bodily injury” or “property damage” after the end of the policy period.

In Grange Mutual Cas. Co. v. West Bend Mut. Ins. Co., No. 29D04-0706-PL-1112 (Ct. App. IN March 15, 2011), http://www.ai.org/judiciary/opinions/pdf/03151109ehf.pdf, Sullivan was the General Contractor for a school construction project. Its subcontractor, McCurdy, installed the storm drain pipes. One of the storm pipes was fractured in 2005 while McCurdy was doing its installation work. More than a year later, the school experienced significant water damage due to flooding. It was later discovered that the flooding was due to the fractured storm drain. Sullivanrsquo;s insurer paid $146,403 for the water damage. That insurer brought a subrogation claim against McCurdy and its two insurers: West Bend and Grange. West Bend had issued CGL coverage to McCurdy while the construction was ongoing, including the date in which the storm pipe was fractured. Grange issued CGL coverage to McCurdy at the time of the flooding. Those two carriers jointly settled the subrogation claim and then litigated which insurer actually owed coverage for the loss. Significantly, the loss that was paid included only damages from the flooding, not any damages for the cost of repairing the pipe.

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Reprinted courtesy of Shaun McParland Baldwin of Tressler LLP. Ms Baldwin can be contacted at sbaldwin@tresslerllp.com

Minnesota Starts Wide-Ranging Registration of Contractors

Minnesota has replaced its Independent Contractor Exemption Certificate program with the Contractor Registration Pilot Project, according to an article in the Martindale-Hubble Legal Library by Michael B. Lapicola. Mr. Lapicola notes that “it will be a violation of the law to contract with or perform construction services for another person without first being registered with the Pilot Project, or to contract with or pay another person to perform construction services if the other person is not registered with the Pilot Project. There are, however, quite a few exceptions, including those who are currently registered with the earlier program. Additionally, independent contractors who do not register can avoid the fine (up to $2,000) by registering within thirty days of fines being levied. Individuals and firms that do not perform building construction or improvements are exempt from the hiring aspects of the statute.

Minnesota’s goal is to “assist state agencies to investigate employee misclassification in the building industry.” Employees of construction firms do not individually register. Rather, the intent of the of law is to stop those who would “require any individual through coercion, misrepresentation or fraudulent means to adopt independent contractor status” or to “knowingly misrepresent or misclassify an individual as an independent contractor.”

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US Courts in Nevada Busy with Yellow Brass

Judge Robert C. Jones, the chief judge of the United States District Court of Nevada, and Judge Peggy A. Leen, a magistrate judge with the same court, have issued orders in cases involving allegations of high-zinc yellow brass plumbing components. Judge Jones issued orders on Waterfall Homeowners Association v. Viega, Inc. and Greystone Nevada, LLC v. Anthem Highlands Community Association on July 9, 2012. Judge Leen issued orders on Southern Terrace Homeowners Association v. Viega, Inc. on July 10, and The Seasons Homeowners Association, Inc. v. Richmond American Homes of Nevada, Inc. on July 19.

Chief Judge Jones held an omnibus hearing on Waterfall v. Viega on June 12. During that hearing “Chief Judge Jones had already agreed that the claims against the product manufacturers should be be severed from the majority of the other claims and that discovery should proceed on different tracks.” Judge Leen ordered that the Southern Terrace claims be referred to Chief Judge Jones to determine if it should be consolidated with other yellow brass cases.

Chief Judge Jones’s decision in Greystone Nevada rests on issues of whether the affected homeowners had signed arbitration agreements. The judge found that the “Defendant’s claims that the seven homeowners they have identified are subsequent purchasers who need not arbitrate with Greystone is definitively refuted by the evidence.”

Judge Leen cites the Greystone decision in her ruling on Seasons Homeowners Association v. Richmond American Homes of Nevada. Richmond seeks to compel individual arbitration, stating that “the arbitration clause used singular rather than plural terms, and therefore, class arbitration was foreclosed.” Judge Leen determined that “under Nevada law, a homeowners association has statutory authority to represent homeowners associations in these types of actions. She did, however, accept Richmond’s argument that they could compel arbitration.

The Waterfall order involves an attempt by two homeowners associations to seek a class action against seventeen defendants, the first twelve of whom are described as “the Viega Defendants” and “the Uponor Defendants.” Chief Judge Jones notes that “many of these Defendants have been sued in identical class actions by the same law firms, but with different named defendants.” The homeowner association seek to “represent their own 998 members directly but also wish to represent up to 10,000 homeowner associations representing up to 250,000 similarly situated homeowner members throughout the Las Vega area via this class action.”

The judge has denied the Viega Defendants’ attempt to deny class certification, noting that the plaintiffs “argue that they intend to argue for class certification under Rule 23(b)(3). He also denied the motions by the two groups of the Viega Defendants. The U.S. Viega Defendants sought to be dismissed from the case for a variety of reasons. The judge noted of the claim that the plaintiffs had no injury of fact and are not alleging actual damage is contradicted by the allegations of actual damage made by the plaintiffs. ”They have alleged that the parts are defective and have already begun to corrode in at least a few sample circumstances, even if they have not yet failed.” To the argument that there re not particular claims made against defendants, the judge notes, “it is clear from the Complaint which Defendants are alleged to have manufactured and sold which brands of allegedly defective products, and which Defendants are alleged to have installed them.”

The German Viega firms also sought to be dismissed from the suit, noting that “they have no property, employees, accounts, advertisements, etc. in Nevada and have not sold any products in Nevada.” However, the judge notes that “at least Waterfall, and perhaps Red Bluff, was still under construction when Viega, Inc. became the sole shareholder of Vanguard Industries, Inc.”

Finally, both of Chief Judge Jones’s rulings cite a related case in the U.S. District Court for the District of Minnesota involving a class action settlement for those with F1807 systems. He notes in both these cases that “Plaintiffs disclaimed any claims based upon F1807 components.”

Read the courts' decisions…

Waterfall Homeowners Association v. Viega, Inc.

Greystone Nevada, LLC v. Anthem Highlands Community Association

Southern Terrace Homeowners Association v. Viega, Inc.

The Seasons Homeowners Association, Inc. v. Richmond American Homes of Nevada, Inc.

Colorado “property damage” caused by an “occurrence” and exclusions j(5) and j(6) “that particular part”

In Continental Western Ins. Co. v. Shay Construction, Inc., No. 10-cv-02126 (D. Col. July 28. 2011), general contractor Milender White subcontracted with insured Shay for framing work.   Shay in turn subcontracted some of its work to others.  When Shay?s subcontractors filed suit against Shay and Milender White seeking payment for their work, Milender White cross-claimed against Shay for breach of contract alleging that,Milender White notified Shay during construction that some of Shay?s work was defective and that when Shay repaired its defective work, it damaged work performed by others.  Shay’s CGL insurer Continental Western filed suit against Milender White and Shay seeking a judicial declaration of no coverage.  The federal district trial court granted Continental Western?s motion for summary judgment.

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Reprinted courtesy of CDCoverage.com

Vegas Hi-Rise Not Earthquake Safe

If an earthquake hit Las Vegas, the Harmon Tower would not withstand it. A report from Weidlinger Associates told MGM Resorts that “in a code-level earthquake, using either the permitted or current code specified loads, it is likely that critical structural members in the tower will fail and become incapable of supporting gravity loads, leading to a partial or complete collapse of the tower.” The inspection came at the request of county officials, according to the article in Forbes.

According to Ronald Lynn, directory of the building division in the county’s development services division, “these deficiencies, in their current state, make the building uninhabitable.” The county is concerned about risks to adjacent buildings.

MGM Resorts is currently in litigation, separate from the stability issues, with Perini Corp., the builders of Harmon Tower.

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Failure to Meet Code Case Remanded to Lower Court for Attorney Fees

Judge Patricia J. Cottrell, ruling on the case Roger Wilkes, et al. v. Shaw Enterprises, LLC, in the Tennessee Court of Appeals, upheld the trial court’s conclusion that “the builder constructed the house in accordance with good building practices even though it was not in strict conformance with the building code.” However, Judge Cottrell directed the lower court to “award to Appellants reasonable attorneys' fees and costs incurred in their first appeal, as determined by the trial court.”

Judge Cottrell cited in her opinion the contract which specified that the house would be constructed “in accordance with good building practices.” However, after the Wilkes discovered water leakage, the inspections revealed that “that Shaw had not installed through-wall flashing and weep holes when the house was built.” The trial court concluded that:

“Separate and apart from the flashing and weep holes, the trial court concluded the Wilkeses were entitled to recover damages for the other defects they proved based on the cost of repair estimates introduced during the first and second trials, which the court adjusted for credibility reasons. Thus, the trial court recalculated the amount the Wilkeses were entitled to recover and concluded they were entitled to $17,721 for the value of repairs for defects in violation of good business practices, and an additional 15%, or $2,658.15, for management, overhead, and profit of a licensed contractor. This resulted in a judgment in the amount of $20,370.15. The trial court awarded the Wilkeses attorneys” fees through the Page 9 first trial in the amount of $5,094.78 and discretionary costs in the amount of $1,500. The total judgment following the second trial totaled $26,973.93.”

In this second appeal, Judge Cottrell concluded, that “the trial court thus did not have the authority to decide the Wilkeses were not entitled to their attorneys” fees and costs incurred in the first appeal.”

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Arizona Court of Appeals Rules Issues Were Not Covered in Construction Defect Suit

The Arizona Court of Appeals has ruled in the case of Peters v. Marque Homes. In this case, Walter Peters provided the land and funding for Marque Homes to build a luxury residence in Glendale, Arizona. By the terms of the “Joint Venture Agreement,” Peters provided the land and funding, while Marque would not charge Peters for overhead, profits, or supervision fees. The agreement specified that profits would be divided equally.

Two years later, Marque sued Peters claiming he had breached his obligations by refusing several offers for the home. Peters replied that Marque had “failed to complete the home so it is habitable to prospective purchasers.” Peters stated he had “retained an expert inspector who had identified numerous defects.” The court appointed a Special Commissioner to list the home for sale. Peters purchased the home with two stipulations ordered by the court. At this point, the earlier case was dismissed with prejudice.

Peters then sued Marque “asserting express and implied warranty claims arising out of alleged construction defects in the home.” Marque claimed that Peters’s claims were “precluded by the prior joint venture dispute.” The court granted Marque’s motion.

The appeals court reversed the lower court’s decision, determining that Peters’s claims were not precluded by the agreement. Although there had been a prior case between the two parties, warranty issues did not form a part of that case. “Peters never raised these allegations nor presented this evidence in support of any warranty claim.”

The court also noted that the “parties never agreed to preclude future warranty claims.” Marque and Peters “agreed in the stipulated sale order that ‘the sale of the property to a third party shall be “as is” with a 10-year structural warranty.’” The court noted that the agreement said nothing about one of the parties buying the house.

The appeals court left open a claim by Marque that there are no implied or express warranties available to Peters. They asked the Superior Court to address this.

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Geometrically Defined Drainage Cavities in EIFS as a Guard Against Defects

The blog Stucco & Insulation Contractor writes up some details on a “relatively new modification to modern Exterior Insulation Finish Systems,” known as “geometrically defined insulation boards.” They note that the insulation has grooves cut in the back to provide a route for water to drain, instead of getting trapped. They note that when EIFS is installed by a skilled applicator, this is unnecessary. However, with less experienced (and cheaper) installers, problems are more likely.

By cutting these channels, the application of EIFS is rendered “idiot proof,” as they note. Their preference would be that EIFS installers take the time to do the job right, but call this “a step in the right direction.”

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Florida Construction Defect Case Settled for $3 Million

The Runaway Beach Club Condominium Association of Kissimmee, Florida has settled its construction defect claims against the parties involved in the construction and development of the buildings. The association claimed that defective roofs and improperly installed windows had lead to leaks and associated damages. A trial date had been set, but parties involved were able to reach this settlement instead.

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California Assembly Bill Proposes an End to Ten Year Statute of Repose

California Assemblyman Furutani has introduced a bill that if passed would eliminate the ten year statute of repose in certain construction defect cases. The statute of repose would not apply when “an action in tort to recover damages for damage to real or personal property, or for personal injury or wrongful death from exposure to hazardous or toxic materials, pollution, hazardous waste, or associates environmental remediation activities,” according to the latest amended version of AB 1207.

When Furutani first introduced the bill, it was aimed at small businesses only. However, the description of the bill, which read, “An act to amend Section 14010 of the Corporations Code, relating to small businesses” has been stricken from the bill, and it has been amended to read, “An act to amend Section 337.15 of the Code of Civil Procedure, relating to civil actions.”

The change in the bill’s intent has caused some outcry among attorneys in the blogosphere. For instance, Sean Sherlock of Snell & Wilmer stated that “the proposed amendment is unnecessary, and would upset nearly 50 years of deliberative legislation and judicial precedent on construction defects liability and the 10–year statute — all apparently motivated by a decision in a single, isolated Superior Court lawsuit that has not yet been reviewed by the court of appeal.” Sherlock is referring to Acosta v. Shell Oil Company, in which the Superior Court agreed to dismiss the plaintiffs’ claims against the developer based in part on the ten year statute of repose. AB 1207 was amended five days after the ruling in Acosta v. Shell Oil Company.

California AB 1207 has been re-referred to the Judiciary Committee.

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Another Las Vegas Tower at the Center of Construction Defect Claims

Accusations are coming from both sides over construction defects at a Las Vegas tower, only this time, it’s not the Harmon Towers, it’s Hilton Grand Vacations, which is part of the Planet Hollywood Resort. The project was originally dubbed PH Towers Westgate, and it was developed by Westgate Resorts, which is suing the contractor, Tutor-Saliba for $10 million over late completion and construction defects.

Among the defects Westgate is claiming are cracked floor tiles in the valet lobby and cracks and delamination of the pool deck. Tutor-Saliba argues that the failure of the valet lobby floor is due to Westgate specifying only 1/16th inch-wide grouting, instead of the specified ¬º inch, and Westgate’s refusal to allow expansion joints on the pool deck has lead to problems there. Westgate’s attorney, Robert Schumacher, attributes the problems to “shoddy construction practices.”

According to the article in the Las Vegas Review Journal, plans were only 60 percent complete when construction began, leading to “thousands of change orders.” Despite not meeting an August completion deadline, Tutor-Saliba is claiming it is owed a $1.5 million bonus nevertheless.

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Going Green for Lower Permit Fees

Clay County, Kansas is offering rebates on building permits for green homes. According to the Kansas City Star, building permits in the county are typically $2,500. The county will rebate anything from half to all of the permit fee, depending on how well the builder meets green standards. The county will monitor and inspect the process to make certain that builders adhere to their promises for green construction. The county hopes this will encourage green building by offsetting the cost.

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