West Hollywood Building: Historic Building May Be Defective
August 16, 2012 — CDJ Staff
The Sunset Lanai apartment building in West Hollywood, California has its fans, it also has its detractors. Designed by Edward H. Flickett and built in 1952 by George Alexander, the building isn’t wearing its years lightly. Its owner has opposed a move by the West Hollywood Preservation Commission that the building is a “local cultural resource.” Instead, Edwin Silver, the building’s owner says the group has overstated the building’s significance. His lawyer points to “design and construction flaws,” and says the building is prone to flooding and leaks. Repairs to the building have an estimated cost of $2.3 million, according to the L.A. Times.
The West Hollywood City Council decided to table the question of a historical designation as that might impede repairs. However, they did decide that if Silver seeks to demolish the building, they will grant the protection.
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New Buildings in California Soon Must Be Greener
June 19, 2012 — CDJ Staff
The California Energy Commission has approved new energy efficiency standards for new homes and commercial buildings. The 2013 Building Energy Efficiency Standards are set to go into effect on January 1, 2014, and will require 30% more energy efficiency for non-residential construction and 25% more for homes. The standards do not affect hospitals, nursing homes, or prisons.
Buildings covered under the standard will have to have roofs that ready for the installation of solar panels. Additionally, non-residential buildings will require high-performance windows, advanced lighting controls, and cool-roof technologies. Residential requirements include insulated hot-water pipes, whole house fans, and more efficient windows.
The new standards are expected to add 3,500 new building industry jobs. One thing these construction workers won’t be building are power plants, since over the next thirty years, the standards are expected to save as much as six power plants.
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Residential Construction: Shrinking Now, Growing Later?
August 17, 2011 — CDJ Staff
Jim Haugey, the Chief Economist for Reed Construction Data noted that new residential construction spending fell 0.2% in June and a slightly larger drop of 0.5% in residential remodeling. While economic growth is still low, Haugey states that homebuilders have “record low inventories.” He forecasts a shrinkage of 1.5% in 2011, followed by about 20% growth in 2012.
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New OSHA Fall Rules to Start Early in Minnesota
June 14, 2011 — CDJ Staff
Minnesota has elected to implement the new OSHA rules concerning fall prevention in residential construction on June 20, well before OSHA’s September 15 deadline. Brian Johnson, reporting in Finance and Commerce, quotes Pam Perri, the executive vice president of the Builders Association of Minnesota, “this is the worst time to implement a new rule.” Ms. Perri notes “In Minnesota, education time for the residential construction industry is between November and March 1, not in the middle of the construction season.”
Mike Swanson of Rottlund Homes estimated that the new regulations would add between $200 to $500 to the cost of a house and that he felt the current safety regulations were adequate. OSHA officials are quoted that there continues “to be a high number of fall-related deaths in construction.”
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Harmon Towers Case to Last into 2014
December 20, 2012 — CDJ Staff
Don’t expect a fast resolution to the Harmon Tower case in Las Vegas. The latest schedule sets trial for the construction defect claims in January 2014. Previously, these claims were going to be heard during the trial set to start in June 2013. Now the June trial will be over payment issues only.
Don’t expect the building to come down soon either. While CityCenter claims the building could come down in an earthquake, Judge Elizabeth Gonzalez had determined that as the structural testing was not random; its results cannot be extrapolated through the entire structure. As a result, CityCenter has elected to do more testing, holding off on demolishing the building. They are appealing Gonzalez’s order to the Nevada Supreme Court.
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California Appeals Court Remands Fine in Late Completion Case
November 18, 2011 — CDJ Staff
The California Court of Appeals in Stanislaus County has reversed the decision of the lower court in Greg Opinski Construction Inc. v. City of Oakdale. The earlier court had awarded the city of judgment of $54,000 for late completion, $3,266 for repair of construction defects and interest, and $97,775 in attorneys’ fees. The late completion of the project was due to actions by the City of Oakdale, however, the court rejected Opinski’s argument that the California Supreme Court decision in Kiewit did not allow this, as his contract with the city established a procedure for claiming extensions.
The appeals court noted that the Kiewit decision has been “criticized as an unwarranted interference in the power of contracting parties to shift the risk of delays caused by one party onto the other party by forcing the second party to give the first notice of any intention to claim an extension of time based on delays caused by first.” They cited Sweet, a professor at Boalt Hall, UC Berkeley’s law school, that Kiewit “gutted” the “provision that conditions the contractor’s right to claim an extension of time for delays beyond his control.”
Further changes in California law in response to the Kiewit decision lead to the current situation which the court characterized as “if the contractor wished to claim it needed an extension of time because of delays caused by the city, the contractor was required to obtain a written change order by mutual consent or submit a claim in writing requesting a formal decision by the engineer.”
Opinski also argued that the lower court misinterpreted the contract. The Appeals court replied that “Opinski is mistaken.” He cited parts of the contract regarding the increase of time, but the court rejected these, noting that “an inability to agree is not the same as an express rejection.”
The court also rejects Opinski’s appeal that “the evidence the project was complete earlier than September 30, 2005, is weightier than the evidence to the contrary,” which they describe as “not a winning appellate argument.” The court points out that the role of an appeals court is not to reweigh the evidence, but to determine “whether the record contains substantial evidence in support of the judgment.”
The court did side with Opinski on one question of the escrow account. They rejected most of his arguments, repeating the line “Opinski is mistaken” several times. They decided that he was mistaken on the timing of the setoff decision and on whether the city was the prevailing party. However, the appeals court did find that Opinski was not liable for interest on the judgment.
The appeals court rejected the awarding of prejudgment interest to the city as the funds from which the judgment was drawn was held in an escrow account. The court noted that the city had access to the funds and could “access the funds when it determined that Opinski had breached the contract.” The appeals court noted that the judgment exhausted the escrow balance and remanded the case to the lower court to determine the amount own to Opinski.
Read the court’s decision…
Georgia Law: “An Occurrence Can Arise Where Faulty Workmanship Causes Unforeseen or Unexpected Damage to Other Property”
March 5, 2011 — By
CDCoverage.com, March 5, 2011
In American Empire Surplus Lines Ins. Co. v. Hathaway Development Co., Inc., No. S10G0521 (Ga. March 7, 2011), insured plumbing subcontractor Whisnant was sued by general contractor Hathaway seeking damages for costs incurred by Hathaway in repairing damage to property other than Whisnant’s plumbing work resulting from Whisnant’s negligently performed plumbing work on three separate projects. On one project, Whisnant installed a pipe smaller
Read the full story... Reprinted courtesy of CDCoverage.com
School District Marks End of Construction Project by Hiring Lawyers
June 19, 2012 — CDJ Staff
A school district in northeastern Pennsylvania has retained legal services as they approach the end of a construction project. The Mid Valley School Board cited concerns about the project’s budget, but Randy Parry, Superintendent of Mid Valley schools referenced “possible litigation at the end of the project.” Mr. Parry told the Scranton Times Tribune that construction delays could be a reason for litigation.
In addition to approving an additional $20,000 for legal representation, the board also approved $21,579 for additional project costs.
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District Court’s Ruling Affirmed in TCD v American Family Mutual Insurance Co.
May 10, 2012 — CDJ Staff
In the case, TCD, Inc. v American Family Mutual Insurance Company, the district court’s summary judgment was in favor of the defendant. In response, the Plaintiff, TCD, appealed “on the ground that the insurance company had no duty to defend TCD under a commercial general liability (CGL) insurance policy.” The appeals court affirmed the decision.
The appeals ruling provides a brief history of the case: “This case arises out of a construction project in Frisco, Colorado. The developer, Frisco Gateway Center, LLC (Gateway), entered into a contract with TCD, the general contractor, to construct a building. TCD entered into a subcontract with Petra Roofing and Remodeling Company (Petra) to install the roof on the building. The subcontract required Petra to "indemnify, hold harmless, and defend" TCD against claims arising out of or resulting from the performance of Petra’s work on the project. The subcontract also required Petra to name TCD as an additional insured on its CGL policy in connection with Petra’s work under the subcontract.”
Furthermore, “TCD initiated this case against Petra and the insurance company, asserting claims for declaratory judgment, breach of insurance contract, breach of contract, and negligence. The district court entered a default judgment against Petra, and both the remaining parties moved for summary judgment. The court granted summary judgment on the entirety of the action, in favor of the insurance company, concluding that the counterclaims asserted by Gateway against TCD did not give rise to an obligation to defend or indemnify under the CGL policy.”
The appeals court rejected each contention made by TCD in turn. First, “TCD contend[ed] that Gateway’s counterclaims constitute[d] an allegation of ‘property damage,’ which is covered under the CGL policy.” The appeals court disagreed. Next, “TCD argue[d] that [the court] should broaden or extend the complaint rule, also called the ‘four corners’ rule, and allow it to offer evidence outside of the counterclaims to determine the insurance company’s duty to defend in this case.” The appeals court was not persuaded by TCD’s argument.
The judgment was affirmed. Judge Roman and Judge Miller concur.
Read the court’s decision…
Alabama “occurrence” and subcontractor work exception to the “your completed work” exclusion
November 18, 2011 — CDCoverage.com
In Town & Country Property, LLC v. Amerisure Ins. Co., No. 1100009 (Ala. Oct. 21, 2010), property owner Town & Country contracted with insured general contractor Jones-Williams for the construction of a car dealership. All of the construction work was performed by Jones-Williams subcontractors. After completion, Town & Country sued Jones-Williams for defective construction. Jones-Williams’ CGL insurer Amerisure defended. The case was tried and a judgment was entered against Jones-Williams in favor of Town & Country. After Amerisure denied any obligation to pay the judgment, Town & Country sued Amerisure in a statutory direct action.
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Reprinted courtesy of CDCoverage.com.
Environment Decision May Expand Construction Defect Claims
August 16, 2012 — CDJ Staff
Could a California Supreme Court decision on environmental claims have an effect on construction defect cases? Jonathan B. Sokol, a lawyer at Greenberg Glusker argues just that in a post on his firm’s blog. He notes that the California Supreme Court has held that “the ‘all sums” method of allocation applies in California” and that “an insurer cannot limit its liability to just the amount of loss that occurred in its particular policy period.” While his focus is on environmental cases, he says that “the decision could also potentially expand the scope of coverage for construction defect claims and other claims involving continuous and progressive property damage and bodily injury.
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California Supreme Court to Examine Arbitration Provisions in Several Upcoming Cases
December 9, 2011 — CDJ Staff
Glen C. Hansen, writing on Abbott & Kinderman’s Land Use Law Blog looks at several cases pending before the California Supreme Court which ask if a developer can insist on arbitration of construction defect claims, based on provision in the CC&Rs. Currently, there is a split of opinions in the California appeals courts on the issue.
Four of the cases are in California’s Fourth Appellate District. In the earliest case, Villa Milano Homeowners Association v. Il Davorge, from 2000, the court concluded that the arbitration clause was sufficient to require that construction defect claims undergo arbitration. However, the Fourth Appellate District Court concluded in three later cases that the arbitration clauses did not allow the developer to compel arbitration. In two cases, argued in 2008 and 2010, the court concluded that to do otherwise would deprive the homeowners of their right to a jury trial. In the most recent case, Villa Vicenza Homeowners Association v. Nobel Court Development, the court decided that the CC&Rs did not create contractual rights for the developer.
The Second Appellate District Court came to a similar decision in Promenade at Playa Vista Homeowners Association v. Western Pacific Housing, Inc. In their decision, the court noted that CC&Rs could be enforced by homeowners and homeowners associations, but not developers.
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Fourteen More Guilty Pleas in Las Vegas Construction Defect Scam
June 19, 2012 — CDJ Staff
The ongoing case over claims that a group fixed homeowner board elections in order to supply the conspirators with a stream of construction defect cases and repairs has lead to fourteen guilty pleas. The judge recently issued charges against fifteen of the accused; one defendant did not join in the group as he was recovering from pneumonia. The prosecutors have asked the judge to delay sentencing, as the investigation is continuing. Prosecutors note that another dozen people may be indicted.
Along with an earlier group who plead guilty, this brings the total number of guilty pleas in the case to twenty-five. All have promised to cooperate with authorities.
The case has also involved four deaths, although authorities have not suspected foul play in the deaths. Nancy Quon, one of the four, was the construction defect attorney suspected to be at the center of the conspiracy.
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Quarter Four a Good One for Luxury Homebuilder
December 20, 2012 — CDJ Staff
Toll Brothers has announced that their fourth-quarter net income is $2.35 per share, which they attribute in part to an income tax benefit. Their revenue, at $632.8 million, easily exceeded analysts’ projections of $565.1 million. Additionally, their number of signed contracts jumped seventy percent while their cancellation rate dropped nearly half to 4.9 percent.
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Ninety-Day Extension Denied to KB Home in Construction Defect Insurance Claim
July 10, 2012 — CDJ Staff
A magistrate judge has denied a request by KB Home Nevada to extend the time for service an additional ninety days. KB claims that St. Paul Fire & Marine Insurance Company has failed to defend them in a construction defect claim. However, the judge did grant KB an additional twenty days to effectuate service, noting that the request for additional time may be renewed.
Read the court’s decision…
South Carolina Legislature Redefining Occurrences to Include Construction Defects in CGL Policies
April 1, 2011 — April 1, 2011 Beverley BevenFlorez - Construction Defect Journal
The question of what circumstances must be in place for construction defects to be covered in a general commercial liability (CGL) policies is being raised by the courts and the legislature in South Carolina. The Insurance Journal reports that the American Insurance Association as well as the Property and Casualty Insurers Association of America are speaking out on the issue.
The problem seems to be centered on what defines an “occurrence.” CGL policies were not meant to cover faulty workmanship, according to the filing by the South Carolina Supreme Court. In January of this year, the South Carolina Supreme Court reversed the ruling in Crossmann Communities v Harleysville Mutual declaring that “Respondents cannot show the damage here was the result of an occurrence. Rather, the damage was a direct result and the natural and expected consequence of faulty workmanship; faulty workmanship did not cause an occurrence resulting in damage.” They focused their attention on the word “accident,” stating that there is a fortuity element that is not diminished.
The South Carolina legislature reacted by producing a bill that would add new language directly negating the ruling by the Supreme Court. The South Carolina bill S-431 would change the definition of an occurrence in regards to construction defects as follows: “For a liability insurance policy issued to a construction professional, an ‘occurrence’ means, at a minimum: (1) an accident; or (2) continuous or repeated exposure to substantially the same general harmful condition or substance. No additional requirement of a fortuitous event is needed to constitute an ‘occurrence.’”
S-431 is currently residing in the House Committee on Labor, Commerce and Industry.
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North Carolina Exclusion j(6) “That Particular Part”
February 10, 2012 — CDCoverage.com
In Alliance Mutual Insurance Co. v. Dove, 714 S.E.2d 782 (N.C. Ct. App. 2011), claimant Murphy-Brown hired insured Dove to repair a broken elevator belt in a grain elevator in Murphy-Brown’s feed mill. The elevator was inside a metal duct and, to access the broken belt, Dove had to cut out a section of the duct. After replacing the belt, Dove welded the metal section back to the duct. Immediately after Dove completed the welding, dust inside the duct ignited, causing an explosion in the elevator, resulting in property damage to the elevator and other property. Murphy-Brown sued Dove for negligence seeking damages for the repair and replacement of the elevator, repair and replacement of the other property, increased grain handling costs during the repairs, and loss of use.
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Reprinted courtesy of CDCoverage.com
Construction Law Client Alert: Hirer Beware - When Exercising Control Over a Job Site’s Safety Conditions, You May be Held Directly Liable for an Independent Contractor’s Injury
April 6, 2011 — April 6, 2011 - By Mark VonderHaar and Yvette Davis in the Haight Brown & Bonesteel Blog
On February 24, 2011, the California Court of Appeal held in Jeffrey Tverberg, et al v. Fillner Construction, Inc. that the imposition of direct liability on a hirer turns on whether the hirer exercised retained control of worksite safety in such a manner that affirmatively contributed to the independent contractor’s injury. Twice, Tverberg, an independent contractor hired by a general contractor's subcontractor, asked the general contractor to make the job site safe by covering up open holes created by another unrelated subcontractor while Tverberg was working at the site. After Tverberg was injured at the site by falling in a hole, he sued both the general contractor and the subcontractor which had hired him.
The Court of Appeal reasoned that when the general contractor instructed another subcontractor to create a condition that was potentially dangerous (i.e., creating open and uncovered bollard holes), and simultaneously required Tverberg to perform unrelated work near the open holes, the general contractor s conduct may have constituted a negligent exercise of its retained control which affirmatively contributed to Tverberg’s injury. The Court also reasoned that the general contractor affirmatively assumed responsibility for the safety of the workers near the holes by only requiring stakes and safety ribbon, and negligently discharged that responsibility which resulted in injury.
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Reprinted courtesy of Mark VonderHaar and Yvette Davis of Haight Brown & Bonesteel. Mr. VonderHaar can be contacted at mvonderhaar@hbblaw.com and Ms. Davis at ydavis@hbblaw.com.
