Plaintiff Not Entitled to Further Damages over Defective Decking
August 2, 2012 — CDJ Staff
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.
Read the court's decision…
Eleventh Circuit Asks Georgia Supreme Court if Construction Defects Are Caused by an "Occurrence"
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
The Eleventh Circuit certified a question to the Georgia Supreme Court, asking whether property damage can constitute an "occurrence" under a CGL policy where its effects are not felt on "other property." HDI-Gerling Am. Ins. Co. v. Morrison Homes, Inc., 2012 U.S. App. Ct. LEXIS 23813 (11th Cir. Nov. 19, 2012).
The general contractor, Taylor Morrison Services, Inc., was covered by a CGL policy issued by Gerling. The policy excluded "expected or intended injury," contractual liability," and business risk exclusions. Morrison was sued by homeowners in a class action suit. Morrison had allegedly omitted four inches of gravel required beneath the base of the concrete foundations by the Uniform Building Code. Thereafter, the houses sustained water intrusion, cracks in the floors and driveways, and warped and buckling flooring.
Gerling defended, but sued Morrison for a declaratory judgment.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Ensuing Loss Provision Does Not Salvage Coverage
December 9, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Water intrusion caused by a construction defect was not covered under the all risk policy’s ensuing loss provision. See Friedberg v. Chubb & Son, Inc., 2011 U.S. Dist. LEXIS 123582 (D. Minn. Oct. 25, 2011).
Extensive water damage was discovered in the insureds’ home when a small hole in the exterior wall was being repaired. Chubb’s adjuster and an expert found water intrusion causing rot, mold, and damage to the home’s wood framing and insulation. Chubb denied coverage because water intruded through the roof and wall, resulting in gradual deterioration. The insureds filed suit.
The policy excluded coverage for construction defects, but insured "ensuing covered loss unless another exclusion applies."
The court agreed there was a prima facie case for coverage because the home suffered a physical loss.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Will They Blow It Up?
March 28, 2012 — CDJ Staff
The issues concerning the Harmon Towers building in Las Vegas continue to make their way through the courts. As we noted in a previous piece, Cook County building officials stated that the building could be a hazard if Las Vegas were struck by an earthquake. The question of whether the building will continue to stand is just one of the issues in front of a judge.
MGM Resorts International argued at a March 13 hearing for permission to implode the Harmon hotel building. They claim that more than 1,700 defects have been discovered in the building and that the building is a public safety hazard. Arguing against demolition, Perini Building Company, the general contractor for the hotel, and its subcontractors are claiming that imploding the building would destroy evidence and prejudice juries in the ongoing construction defect claims. They claim that MGM Resorts wishes to abandon the building due to the economic slowdown. Perini Corp, the contractor for the project, claims that the building can be fixed. Perini claims that MGM’s position in the construction trial would be improved if the building is demolished.
After Judge Elizabeth Gonzalez heard the four days of testimony on the Harmon Towers building and whether it should be demolished, she scheduled more testimony, with two days in April and an entire week in July. Judge Gonzalez will be deciding whether the building will be torn down, imploded, or left in place.
Read the full story…
Read the full story…
A Loud Boom, But No Serious Injuries in World Trade Center Accident
March 1, 2012 — CDJ Staff
The Wall Street Journal reports that nearly twenty tons of steel fell forty stories at the World Trade Center site on February 16. One person was checked by medical personnel. One person who works in the Financial District said it was “almost like thunder.” Frank Pensabene, one of the ironworkers on the site said that after “loud boom,” “all hell broke loose.” The steel beams and cables fell onto a flatbed truck, which was not occupied at the time.
Read the full story…
Amerisure Case to be Heard by Texas Supreme Court
August 16, 2012 — CDJ Staff
The Fifth Circuit Court of Appeals has withdrawn its decision in Ewing Construction Company Inc. v. Amerisure Insurance Company, according to Insurance Developments. The Fifth Circuit had concluded that “a contractor’s obligation to perform its contact in a workmanlike manner constituted an ‘assumption of liability.’” Two questions have now been certified to the Texas Supreme Court. The dissent in the case argued the majority had misread Texas Supreme Court precedent. The court will now have the opportunity to clarify this matter.
Read the full story…
Rihanna Finds Construction Defects Hit a Sour Note
August 2, 2012 — CDJ Staff
The pop singer Rihanna is suing the former owners of her Beverley Hills home among others in a construction defect lawsuit. She contends that Adriana and Heather Rudomin concealed defects in the home that lead to water leaks and flooding during a 2010 storm. The Beverly Hills Patch noted that the dollar amount of the singer’s suit was not specified.
The most recent court ruling denied a motion from the owners to be dismissed from the lawsuit. They remain part of it, along Landmark Design Group, LLC, which renovated the home before the sale, and Prudential California Realty which sold the home.
Read the full story…
Virginia Chinese Drywall and pollution exclusion
May 27, 2011 — CDCoverage.com
In Nationwide Mut. Ins. Co. v. The Overlook, LLC, No. 4:10cv69 (E.D. Va. May 13, 2011), homeowner Edmonds sued insured developer/general contractor Overlook seeking damages resulting from defective Chinese drywall installed in Edmonds’ home. Overlook’s CGL insurer Nationwide defended Overlook under a reservation of rights and filed a declaratory judgment action. The federal district trial court granted Nationwide’s motion for summary judgment.
Read the full story…
Reprinted courtesy of CDCoverage.com
Hawaii State Senate Requires CGL Carriers to Submit Premium Information To State Legislature
March 20, 2011 — March 20, 2011 Construction Defect Journal Staff
In light of the decision in Hawaii’s Intermediate Court of Appeals in Group Builders, Inc.,v. Admiral Insurance Company, 231 P.3d 67(2010), Hawaii’s state senate is requesting that "every domestic and foreign insurance company that has ever issued commercial general liability policies in the State is requested to submit information to the Legislature on the total premiums received for their commercial general liability policies during the past ten years"
Read Full Text of Hawaii State Senate Resolution
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.
Read the full story…
Insurance Firm Under No Duty to Defend in Hawaii Construction Defect Case
September 13, 2012 — CDJ Staff
The US District Court for Hawaii has granted a motion for summary judgment in Evanston Insurance v. Nagano. The case is related to a construction defect claim, Hu v. Nagano, and the issue at hand is whether Evanston Insurance is obligated to defend the Naganos in the underlying case.
The Hus hired Eric Nagano and his firm PMX to construct a house. Mr. Nagano’s firm was insured by Evanston, however, he lost his contractor’s license in “approximately March 2006.” Mr. Nagano sought the Hus’ authorization to allow HC Builders to take over the contract. HC Builders is headed by Mr. Nagano’s wife, Hiroko, who has held a contractor’s license since “approximately September 2006.” Ms. Nagano and HC Builders were also insured by Evanston Insurance. The house, started by PMX was finished by HC Builders.
The Hus authorized construction to begin in July 2003, but “construction did not commence until approximately October 2004 and, even after commencement, there were numerous delays resulting in months of inactivity on the Project.” The Hus had expressed to Mr. Nagano and PMX “that the construction period could not exceed twelve months after July 1, 2003.” As a result of the delays, “the Hus’ community association fined them because of the prolonged construction and the Hus’ construction lender assessed extension fees and fines for exceeding the term of the loan.”
The Hus noted that the project did not have a licensed contractor from March through September 2006. In the end, the Hus “allege that Defendants did not fulfill the obligations under the Construction Contract,” and that “the Project was ‘grossly delayed’ and the construction was ‘riddled with defects.’” Despite an Owner’s Notice of Completion filed in December 2007, the residence “had no electricity, no hot water, ... no installed appliances” and “parts of the flooring were either missing or incomplete.” And then it leaked.
The Naganos tendered the defense to Evanston. The Naganos “allege the defense is limited because Evanston: allowed default to be entered against the Naganos (the default was later set aside); delayed retaining experts; and limited the ability of the Naganos’ retained counsel to perform necessary actions to advance the case.” Evanston argues that it “does not have a duty to defend or indemnify Defendants against the Hus’ claims,” as the Hus’ claims are not covered under the policy. Further, the PMX policies have an exclusion for breach of contract.
The court concluded that all of the claims made by the Hus were based in contract and therefore were outside of the terms of the Naganos insurance coverage, as the courts have "construed Hawaii law as not providing for insurance coverage for contract related claims." Therefore, Evanston does not have a duty to defend the Naganos.
Read the court’s decision…
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”).
Read the full story…
Reprinted courtesy Higgins, Hopkins, McLain & Roswell, LLC
Defect Claims as Occurrences? Check Your State Laws
July 10, 2012 — CDJ Staff
Although four states have defined construction defect claims as occurrences, contractors are still dealing with “coverage gaps for faulty work construction,” says Mike Tsikoudakis in a piece at Business Insurance. He quotes Julian Ehrlich, the senior VP of claims for Aon Risk Services that “one of the interesting and compelling aspects of the issue of coverage for defective construction is that jurisdictions differ, so policyholders don’t know what they’re going to get.” He further notes that “in context of construction defect, the term ‘occurrence’ is ambiguous.”
One problem, as noted by Jeffrey J. Vita, a partner at Saxe Doernberger & Vita, is that construction firms end up needing to simultaneously defend against defect claims and to also file suit to be certain their insurance firms will cover claims. Insurance for construction defect claims is described as “expensive and somewhat limited.” Mr. Vita expects more states to help this situation with new laws, clarifying what is an occurrence.
Read the full story…
Injured Construction Worker Settles for Five Hundred Thousand
October 28, 2011 — CDJ Staff
An upstate New York man who was injured when an unsecured truss fell off the railings of a scissor lift has settled for $500,000. As the accident happened at the building site for a casino for the Seneca Nation, attorneys for the construction firm had argued that New York labor laws were inapplicable as the injury happened on Seneca Nation land. The state appeals court ruled that as none of the parties involved were Native Americans, it was not internal to the affairs of the Seneca Nation.
Read the full story...
Judge Rejects Extrapolation, Harmon Tower to Remain Standing
November 7, 2012 — CDJ Staff
CityCenter has filed an emergency motion asking the Nevada Supreme Court to intervene in Judge Elizabeth Gonzalez’ order that the building’s defects cannot be extrapolated from those tested. CityCenter’s structural engineering expert “evaluated 397 of the Harmon’s critical structural elements and found all but one defective,” according to the article on Vegas.Inc. Judge Gonzalez would not permit this to be extrapolated to the untested 1,072, as the locations tested were not random.
Judge Gonzalez also ruled that if CityCenter does additional testing, they may not appeal her order that ruled the extrapolation inadmissible. CityCenter argued to the Nevada Supreme Court that “the notion that CityCenter should be forced to incur additional millions of dollars in testing costs and sanctions ?Äì on the condition that it waive its right to appeal this ruling ?Äì just to be permitted to present its own damages evidence, shocks the conscience.”
Gonzalez gave the okay to CityCenter to demolish the building, but its demolition would make any further testing impossible. Under Gonzalez’ ruling, the untested structural elements cannot b assumed to be defective.
Read the full story…
“Other Insurance” and Indemnity Provisions Determine Which Insurer Must Cover
September 1, 2011 — Tred Eyerley, Insurance Law Hawaii
A policy’s “other insurance” clause and a contractual indemnity provision were at the root for determining which of two insurers had to cover for injuries at a construction site. Valley Forge Ins. Co. v. Zurich Am. Ins. Co., 2011 U.S.Dist. LEXIS 76061 (N.D. Calif. July 14, 2011).
Hathaway was the general contractor at a demolition and construction project. Hathaway was insured by Zurich. Reinhardt Roofing was the roofing subcontractor. Reinhardt was insured by Valley Forge under a policy which named Hathaway as an additional insured. The subcontract also required Reinhardt to indemnify Hathaway for acts or omissions arising from Reinhardt’s work unless Hathaway was solely negligent.
Four of Reinhardt’s workers were injured when a canopy roof on which they were working collapsed. At the time of the accident, Hathaway’s on-site supervisor was inspecting a gap in the canopy roof, but did not order Reinhardt’s workers to stop working.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Minnesota Starts Wide-Ranging Registration of Contractors
July 10, 2012 — CDJ Staff
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.”
Read the full story…
The King of Construction Defect Scams
June 19, 2012 — CDJ Staff
Echoing Businessweek, the Las Vegas Sun agrees that the Nevada HOA scandal is the “king of all Vegas real estate scams,” and says that the Nevada legislatures should take action. The Sun notes that the case involves only 12 out of 2,356 HOAs in Southern Nevada.
To date, 25 people have plead guilty in the case. At the center were an attorney and contractor who allegedly referred work to each other. To enable this, they assembled a wider conspiracy of people who enriched by the process. In the words of the Sun, those involved “upended the concept of a ‘common interest’ community.”
Read the full story…
