No Choice between Homeowner Protection and Bankrupt Developers?
February 10, 2012 — CDJ Staff
Donna DiMaggio Berger, writing in the Sun Sentinel argues those may be the only current choices in Florida. A recent court case, Lakeview Reserve HOA v. Maronda Homes has caused a swift response from the legislators. Ms. Berger notes that the construction defect bill, HB 1013, “would take away a homeowner’s rights to pursue a developer for defects to the driveways, roads, sidewalks, utilities, drainage areas and other so-called ‘off-site’ improvements.” The alternative? She notes that applying the Maronda decision would “bankrupt developers who don’t build defect-free roads and sidewalks.”
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Ensuing Loss Provision Found Ambiguous
April 25, 2012 — Tred Eyerly, Construction Law Hawaii
After the insurer denied coverage in a homeowner’s policy for construction defects under various exclusions, the court found the ensuing loss provision was ambiguous.Kesling v. Am. Family Mut. Ins. Co., 2012 U.S. Dist. LEXIS 38857 (D. Colo. March 22, 2012).
After purchasing a home from the sellers, the insureds noticed problems with the deck of the home. Massive cracking appeared, causing lifting and leaking on the deck and water running through the exterior foundation wall into the home. There was also damage to the roof and crawlspace.
The insureds had a homeowner’s policy with American Family, which covered accidental direct physical loss to property described in the policy unless the loss was excluded. They requested coverage for "conditions, defects and damages." American Family denied coverage because wear and tear, as well as damage to foundations, floors and roofs were excluded. The policy did provide coverage, however, for "any resulting loss to property described . . . above, not excluded or excepted in this policy.
When coverage was denied, the insureds sued American Family.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
After $15 Million Settlement, Association Gets $7.7 Million From Additional Subcontractor
November 7, 2012 — CDJ Staff
The stucco subcontractor for a condominium complex did not join in with the other defendants in a settlement of more than $15 million, preferring to take the case to a jury trial. That jury has found the stucco installer liable for $7.7 million to make repairs. Mark Wiechnik of Herrick Feinstein LLP wrote about the case on the Lexology web site. Mr. Wiechnik notes that the jury was shown “samples of rotted wood taken from the property as well as numerous pictures of damage resulting from the various defects.”
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Increased Expenditure on Injuries for New York City School Construction
August 16, 2012 — CDJ Staff
You can buy a lot of bandages for $270 million, but even though the expenses are related to the New York City schools, the money is being budgeted by the School Construction Agency as what they expect to pay for injuries and liability expenses related to school construction. The New York Post notes that this is nearly ten times what the city spent in 2000 on workers' compensation and liability claims. Michael Elmdendorf of the General Contractors Association likened injury compensation to a broken slot machine, telling the Post, "when you pull that lever, you win." A spokesperson from the Department of Education, Margie Feinberg, attributed the rise to higher medical care costs.
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Another Guilty Plea in Las Vegas HOA Scandal
December 20, 2012 — CDJ Staff
A twenty-eighth person has plead guilty in the ongoing Las Vegas HOA scandal. Dax Louderman, who had been a construction company manager had acknowledged that he stole more than $495,000 from his former employers, Alpha 1 Construction and the Stone Canyon Homeowners Association, and further that he did not report this improper income on his tax returns. He has agreed to work with prosecutors and to pay $134,860 to the IRS. His actual sentencing will happen on June 24.
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Florida “get to” costs do not constitute damages because of “property damage”
August 11, 2011 — CDCoverage.com
In Palm Beach Grading, Inc. v. Nautilus Ins. Co., No. 10-12821 (11th Cir. July 14, 2011), claimant general contractor Palm Beach Grading (?PBG?) subcontracted with insured A-1 for construction of a sewer line for the project.  A-1 abandoned its work and PBG hired another subcontractor to complete construction of the sewer line.  The new subcontractor discovered that A-1?s work was defective requiring repair and replacement of portions of the sewer line which also required the destruction and replacement of surrounding work.
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Reprinted courtesy of CDCoverage.com
Faulty Workmanship Causing Damage to Other Property Covered as Construction Defect
September 30, 2011 — Tred Eyerley, Insurance Law Hawaii
In yet another recent construction defect case, the Illinois Court of Appeal found for coverage. See Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 Ill. App. Ct. LEXIS 872 (Ill. Ct. App. Aug. 15, 2011).
Weather-Tite, Inc. hired Larson as a subcontractor to apply sealant to windows installed by Weather-Tite in a condominium building. The windows subsequently leaked and caused water damage. The homeowner’s association sued Weather-Tite for breach of express and implied warranties. Weather-Tite filed a third-party complaint against Larsen alleging that, if it was liable to the association for breach of warranty, Larsen was liable for contribution as a joint tortfeasor. Weather-Tite and Larsen both tendered defenses to Milwaukee Insurance. The tenders were denied and Milwaukee Insurance filed suit to determine rights under the policy.
Cross-motions for summary judgment were filed by all parties. The trial court granted Milwaukee Insurance’s summary judgment motion as to Weather-Tite, but granted Larsen’s cross-motion against Milwaukee Insurance.
On appeal, the appellate court considered whether the underlying pleadings alleged facts demonstrating "property damage" resulting from an "occurrence" within the terms of the policy.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
General Contractor/Developer May Not Rely on the Homeowner Protection Act to Avoid a Waiver of Consequential Damages in an AIA Contract
August 4, 2011 — Higgins, Hopkins, McLain & Roswell, LLC
Recently, in Caribou Ridge Homes, LLC v. Zero Energy, LLC, et al., Case No. 10CV1094, Boulder County District Court Judge Ingrid S. Bakke entered a ruling and order on the Plaintiff’s Motion for Determination of Question of Law Pursuant to C.R.C.P. 56(h) on Issue of Damages. The Order found that the Plaintiff was not a homeowner intended to be protected by the Homeowner Protection Act (the “HPA”) and thus could not pursue its claims for consequential damages against Defendant.
By way of background, on June 18, 2008, Plaintiff Caribou Ridge Homes, LLC (“Caribou”) entered into a Standard Form Agreement Between Owner and Contractor AIA Document A114-2001 (the “Contract”) with Defendant Zero Energy, LLC (“Zero Energy”). Plaintiff hired Zero Energy to serve as a general contractor for the construction of a single-family home in the Caribou Ridge subdivision in Nederland, Colorado. A provision in the contract contained a mutual waiver of consequential damages (“Waiver”).
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Reprinted courtesy Higgins, Hopkins, McLain & Roswell, LLC
Liability policy covers negligent construction: GA high court
October 31, 2010 — Original article by
Michael Bradford in Business Insurance
ATLANTA—Negligent construction that results in damage to surrounding property constitutes an occurrence under a commercial general liability policy, the Georgia Supreme Court has ruled.
In a 6-1 opinion Monday in
American Empire Surplus Lines Insurance Co. Inc. vs. Hathaway Development Co. Inc., the Georgia high court upheld a lower court ruling that the general contractor’s claim for damage caused by a subcontractor’s faulty plumbing work was covered.
The ruling on construction defects is the latest in number of such cases across the United States
Read Full Story...
Reprinted courtesy of Michael Bradford of Business Insurance.
Don MacGregor To Speak at 2011 West Coast Casualty Construction Defect Seminar
January 1, 2011 — February 08, 2011 CDJ Staff
“Challenges for Experts in Construction Defect Claims and Litigation” will be held Thursday May 13, 2011 between 1:30 and 3:00 PM at this year’s West Coast Casualty Construction Defect Seminar. Among the various topics covered will be of Right to Repair/Opportunity to Repair statutes, improper testing methodologies, new challenges where a case involves a Wrap Policy, OCIPS, CCIPS, and other owner controlled insurance programs, as well as the need for realistic testing protocols for the party the expert is retained to represent.
During the presentation Mr. MacGregor will be working in connection with a group of construction and design experts each of which have extensive experience with construction defect and claims related litigation. This particular session is expected to attract a standing-room only crowd, drawing in excess of 1700 attendees.
The West Coast Casualty Construction Defect Seminar is the largest seminar of its type. This year’s event is scheduled for will take place on May 12 and 13, 2011, at The Disneyland Hotel and Resort. For more information regarding the years event please visit http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
General Contractors Must Plan to Limit Liability for Subcontractor Injury
May 18, 2011 — May 18, 2011 - Douglas Reiser in the Builders Counsel Blog
It takes more than a hard hat, but safety checks, a good policy and a smart contract might save you some problems.If you are a general contractor, you will want to pay close attention to this article. A new Washington appellate decision showcases a general contractor’s liability to subcontractors who are injured on the job, when security barriers fail. But can a general limit this liability? Will its contract help?
In Wrought Corporation, Inc., Appellant V. Mario Interiano (quick note: this opinion is unpublished, but we are here to talk about an issue that was not determined on appeal – WISHA compliance), a subcontractor was injured when a security barrier failed and he fell into an elevator shaft.
A jury awarded a $1.56 million verdict against the general contractor, and the court of appeals affirmed on the basis that the general contractor has a non-delegable duty to ensure compliance with the Washington Industrial Safety and Health Act of 1973, codified under RCW 49.17 (WISHA).
Read the full story… Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Colorado Statutes of Limitations and Repose, A First Step in Construction Defect Litigation
December 20, 2012 — CDJ Staff
Grund Dagner, a law firm operating in Denver and Boulder, Colorado notes on their blog that when defending a construction defect claim, one of their first steps is to determine if the claims are affected by the statutes of limitations or repose, and that they “have had much success raising these defenses with the court before trial.”
Colorado has a two-year statute of limitations, starting from when the homeowner discovers the defect. Further, Colorado’s statute of repose precludes lawsuits beginning “more than six years after the substantial completion of the improvement to the real property.”
Grund Dagner notes that they “recently obtained dismissal of claims related to eight of 22 buildings in a condominium project, where the homeowners in those building observed the defects more than two years before the HOA initiated its claims against our client.”
Read the full story…
Court Orders House to be Demolished or Relocated
April 26, 2011 — April 26, 2011 Beverley BevenFlorez - Construction Defect Journal
Decision Affirmed in Central Arkansas Foundation Homes, LLC v. Rebecca Choate
The Arkansas Court of Appeals affirmed the decision by the trial court in Central Arkansas Foundation Homes, LLC v. Rebecca Choate. In the trial case, Central Arkansas Foundation Homes (CAFH) sought payment for a home built for Choate, while Choate alleged that the builders committed multiple construction defects including using the wrong foundation materials and positioning the house in the wrong direction.
After the house was built, CAFH contacted Choate regarding payment, however, Choate alleged that the finished product did not match the contract. “ After CAFH completed construction, it obtained permanent home financing for Choate and tried to contact her to close the transaction. Choate did not respond until October 2005, when she sent CAFH a list of alleged construction defects, including that the house was facing in the wrong direction; that it was not built on a slab; and that the fireplace, garbage disposal, driveway, and storage area were missing. CAFH replied to Choate in writing, telling her that she had until January 6, 2006, to close on the house or CAFH would sell it. The correspondence enclosed worksheets showing that the amount Choate would owe at closing exceeded $94,000, which included interest that had accrued on the as-yet unpaid construction loan.”
Initially, the court found in favor of CAFH. “On April 18, 2007, Choate’s attorney withdrew from representing her. Soon thereafter, CAFH’s attorney asked the court to set a final hearing on the case. The attorney purportedly sent Choate a letter by regular mail on May 15, 2007, advising her that the case was set for trial on July 9, 2007. Choate, however, did not appear. CAFH did appear, and its general manager, John Oldner, testified to events leading up to the case and the amount of damages claimed. According to Oldner, the interest on the construction loan had accrued to the point that CAFH now sought $104,965.88 from Choate. The court found in favor of CAFH and entered judgment for that amount, plus attorney fees, on July 18, 2007. The court ruled that CAFH could sell the house and either remit any excess to Choate or look to Choate for the deficiency if the sales price did not cover the judgment.”
However, Choate successfully argued that she did not receive notice of the trial. A new trial was ordered, and the outcome was quite different. “On June 6, 2008, the circuit court entered judgment for Choate, ruling that the house was not in substantial compliance with the parties’ contract and that the contract should be rescinded. The court found that the house suffered from numerous construction defects, that the contract contemplated a slab rather than a concrete-pier foundation, and that CAFH ignored Choate’s complaints that the house was facing the wrong way. The judgment directed CAFH to hold Choate harmless on the construction loan, to deed Choate’s two acres back to her, and to remove the house from Choate’s property.”
The Court of Appeals “found that Choate would be unjustly enriched by retaining the benefit of the septic systems and utility lines that CAFH installed on her land. The court therefore awarded $5340 to CAFH as a quantum-meruit recovery for the value of that work. CAFH contends that the award is not sufficient, but we see no clear error.” In the end, the Court of Appeals provided this reason for declining to reverse the trial court’s decision: “The court in this case apparently concluded that the house constructed by CAFH was so fundamentally at odds with Choate’s contractual expectations that she was not unjustly enriched and should simply be, as nearly as possible, returned to the status quo ante. Accordingly, the court ordered the house removed from her property and permitted CAFH to either relocate the house or salvage the house’s materials and unused appliances. We decline to reverse the court’s weighing of the equities in this manner.”
Read the court’s decision…
Construction Defect Lawsuits? There’s an App for That
July 10, 2012 — CDJ Staff
The website ebeeky.com reviews Picture It Settled, an app designed to help people engaged in lawsuits figure out where settlement strategies would be most successful. First available for Android and then iOS, the app is now available for Blackberry. One user of the application wrote that “anyone who has set through a construction defect mediation can immediately grasp the value of this app.
The app tracks the negotiation process, allowing users to see a history of bids and counteroffers. It also models the negotiation process in order to predict the ultimate cost of settlement. These numbers are based on past similar negotiations that the user has entered.
Read the full story…
Federal District Court Predicts Florida Will Adopt Injury In Fact Trigger
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
The U. S. District Court for the Middle District of Florida was confronted with determining whether Florida would follow the manifestation or injury in fact trigger in Axis Surplus Ins. Co. v. Contravest Constr. Co., 2012 U.S. Dist. LEXIS 104502 (D. Fla. June 5, 2012).
The homeowner's association sued the insureds for alleged negligent construction and development of individual dwelling units and common areas of their condominium. Due to this negligence, severe damage was caused by water intrusion. The Association's members only became aware of the defects through the retention of construction experts.
The insured had CGL coverage with Axis, with policies issued from 2003 to 2007. Coverage was denied for the periods 2003-2004 and 2004-2005. Axis provided a defense under the policies issued for 2005-2006 and 2006-2007, but under a reservation of rights. Axis sought a declaration that it had no duty to defend or indemnify because the damage manifested before its policy periods.
For coverage to exist, "property damage" must have "occurred" during Axis' policy period.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
State Audit Questions College Construction Spending in LA
August 17, 2011 — CDJ Staff
A state audit of the Los Angeles Community College District found many problems with their construction spending. Their report, as described in the Los Angeles Times, found construction money spent for other purposes, such as promotional photography and public relation tours, $28.3 million spent on projects that were later cancelled, and oversight committees that provided no oversight.
Earlier this year, the LA Times ran a series of articles detailing problems with the Los Angles Community College District’s construction program. The LA Times reported that the State Controller’s audit reached many of the same conclusions.
The Community College District disputed the findings.
Read the full story…
Alaska Supreme Court Dismisses Claims of Uncooperative Pro Se Litigant in Defect Case
August 11, 2011 — CDJ Staff
The Alaska Supreme Court found that in the case of Khalsa v. Chose, Ms. Khalsa? failure to cooperate with the courts has obligated them to dismiss her claims against Mr. Chose. Ms. Khalsa bought a home kit from Mandala Custom Homes of Nelson, British Columbia, Canada. Mr. Chose, one of the owners of Mandala was paid by Ms. Khalsa to supervise assembly in Fairbanks. After construction, the roof developed leaks. Ms. Khalsa stated that when climbing a ladder to inspect a skylight leak, she fell and injured herself.
During the subsequent suit, Khalsa proved uncooperative. She skipped a pretrial conference. She attended a hearing that set discovery deadlines but then did not comply with discovery, including her failure to provide medical records documenting her injuries. She eventually said that she would only be able to travel from Arizona to Alaska if the defendants paid for her and her caretaker?s expenses.
When finally deposed, Khalsa terminated the deposition after five minutes, alleging the deposition was “intentionally designed to cause [her] to endure further emotional distress, due to the psychological trauma . . . that was caused or contributed to by the defendants.”
Eventually, the lower court sanctioned her twice. In July, 2008, the court concluded that her failure to provide medical records required dismissal of her injury lawsuit. In October of that year, the court dismissed all remaining claims due to her “pattern of excuses and long delays in providing information for discovery culminating in her refusal to participate in her deposition by the defendants.” Further, Khalsa has argued that the trial court displayed “prejudice and bias toward the pro se plaintiff.”
The Alaska Supreme Court rejected all of Ms. Khalsa?s claims, dismissing her case. They did, however, note that she has thirty days to file an appeal.
Read the court’s decision…
The Montrose Language Interpreted: How Many Policies Are Implicated By A Construction Defect That Later Causes a Flood?
March 17, 2011 — By Shaun McParland Baldwin, March 17, 2011
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
