No Third-Quarter Gain for Construction
November 18, 2011 — CDJ Staff
The Associated Builders and Contractors released their analysis of construction work under contract and found that there was no increase in construction backlog from the second quarter of 2011. There was still improvement, however, over 2010, as the third quarter backlog is 16.3 percent higher than that of a year ago.
The current backlog is 8.1 months, which according to Anirban Basu, the chief economist of the ABC, “is consistent with flat construction spending.” He noted that less than 8 months indicated a decline.
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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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Battle of “Other Insurance” Clauses
March 23, 2011 —
Tred R. Eyerly -
Insurance Law Hawaii - March 23, 2011
The New York Court of Appeals considered the impact of competing “other insurance” provisions located in both a CGL policy and a D&O policy. See Fieldston Property Owners Assoc., Inc. v. Hermitage Ins. Co., Inv., 2011 N.Y. LEXIS 254 (N.Y. Feb. 24, 2011).
In the underlying case, Fieldston’s officers were charged with making false statements and fraudulent claims with respect to a customer's right to access its property from adjacent streets. Suit was eventually filed against Fieldston and its officers, alleging several causes of action including injurious falsehood. Damages were sought.
Fieldston’s CGL policy was issued by Hermitage. The “other insurance” provision stated, “If other valid and collectible insurance is available to the insured for a loss we cover . . . our obligations are limited,” but also stated it would share with all other insurance as a primary policy.
Read the full story... Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
New Jersey Court Rules on Statue of Repose Case
May 26, 2011 — CDJ Staff
A three-judge panel issued a per curium ruling on May 23 in Fairview Heights Condo. v. Investors (N.J. Super., 2011), a case which the members of a condominium board argued: “that the judge erred by: 1) dismissing plaintiff’s claims against RLI based upon the statute of repose; 2) dismissing the breach of fiduciary duty claims against the Luppinos based upon a lack of expert opinion; 3) barring the testimony of Gonzalez; and 4) barring the May 23, 1989 job site report.” The court rejected all claims from the condominium board.
The court found that the building must be unsafe for the statute of repose to apply. They noted, “the judge made no findings on whether the water seepage, or the property damage caused by such seepage, in any way rendered the building, or any of the units, unsafe.” Further, “without a specific finding on the question of whether the defects had rendered the building ‘unsafe,’ defendants were not entitled to the benefit of the ten-year statute of repose.“
On the second point, the court also upheld the lower court’s findings regarding the management company:
“The report submitted by Berman establishes that the EIFS product was defective in its design and would therefore have failed from the outset. The defects in that product were, according to Berman, not prone to repair or other mitigation. Therefore, even if defendants did not appropriately inspect or repair the EIFS, their failure to do so would have had no impact on the long-term performance of the EIFS exterior cladding. As plaintiff failed to raise a genuine issue of material fact on these questions, the judge properly granted summary judgment to the Luppinos on plaintiff’s breach of fiduciary duty claim.”
On the final two points, the judges noted “plaintiff maintains that the judge committed reversible error when he excluded the Gonzalez certification and the 1989 job site report prepared by Raymond Brzuchalski.” They saw “no abuse of discretion related to the exclusion of the Gonzalez certification, and reject plaintiff’s arguments to the contrary.” Of the job site report, they found, “no abuse of discretion in the judge's finding that the Brzuchalski 1989 job site report did not satisfy the requirements of N.J.R.E.803(c)(6).”
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Senate Committee Approves Military Construction Funds
June 29, 2011 — CDJ Staff
With a decrease in funding, as compared to the House bill, the Military Construction and Veteran’s Affairs subcommittee of the Senate moved on a $72 billion construction bill. The House version had approved an additional half billion dollars in funding. Senator Tim Johnson, Democrat of South Carolina, said that he expected easy reconciliation with the House version. The Senate bill will move to the full Senate Appropriations Committee on June 30.
The bill, S 1255, includes funding for construction and remodeling of military housing, as well as construction and remodeling of base facilities.
Read the full story… Read S1255
Wisconsin “property damage” caused by an “occurrence.”
April 4, 2011 — April 4, 2011 in CDCoverage.com
In American Family Mut. Ins. Co. v. American Girl, Inc., 673 N.W.2d 65 (Wis. 2004), the insured general contractor was hired by the owner to design and build a warehouse on the owner s property. The general contractor hired a soil engineer to do a soil analysis and make site preparation recommendations. The soil engineer determined that the soil conditions were poor and recommended a compression process which the general contractor followed. After the warehouse was completed and the owner took possession, excessive soil settlement caused the foundation to sink which in turn caused structural damage to the warehouse. The warehouse had to be torn down.
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Reprinted courtesy of CDCoverage.com
Sometimes It’s Okay to Destroy Evidence
August 17, 2011 — CDJ Staff
The Minnesota Supreme Court has ruled in the case of Miller v. Lankow that Mr. Miller was within his rights to remediate his home, even though doing so destroyed the evidence of water intrusion.
Linda Lankow built a home in 1992. In 2001 or 2002, Lankow discovered a stucco problem at the garage which she attributed to moisture intrusion. She asked the original contractor to fix the wall. In 2003, Lankow attempted to sell her home, but the home inspection revealed fungal growth in the basement. Lankow made further repairs, including alterations to the landscaping.
In 2004, Lankow put her house on the market once again and entered into an agreement with David Miller. Miller declined to have an independent inspection, as the home had been repaired by professional contractors.
In 2005, Miller put the house on the market. A prospective buyer requested a moisture inspection. The inspection firm, Private Eye, Inc. found “significant moisture intrusion problems.”
Miller hired an attorney who sent letters to the contractors and to Lankow and her husband. Lankow’s husband, Jim Betz, an attorney, represented his wife and sent a letter to Miller’s attorney that Miller had declined an opportunity to inspect the home.
In 2007, Miller’s new attorney sent letters to all parties that Miller had decided to begin remediation work on the house. All stucco was removed. Miller then filed a lawsuit against the prior owners, the builders, and the realtors.
Two of the contractors and the prior owners moved for summary judgment on the grounds that Miller had spoliated evidence by removing the stucco. They requested that Miller’s expert reports be excluded. The district court found for the defendants and imposed sanctions on Miller.
The Minnesota Supreme court found that “a custodial party’s duty to preserve evidence is not boundless,” stating that “it may be particularly import to allow remediation in cases such as the one before us.” Their reasoning was that “remediation of the moisture intrusion problem in the home may be necessary, even essential, to address immediate health concerns.”
Given that Miller needed to remediate the problem in order to continue living there, and that he had given the other parties a “full and fair opportunity to inspect,” the court found that he was within his rights. The court reversed the judgment of the lower court and remanded it to them for review.
Read the court’s decision…
Kentucky Court Upholds Arbitration Award, Denies Appeal
June 15, 2011 — CDJ Staff
The Kentucky Court of Appeals has ruled in Lake Cumberland Community Action Agency v. CMW, Inc. affirming the arbitration award. CMW, Inc. was responsible for the construction of a facility to be used for pre-school students and the housing of Alzheimer patients and senior citizens. An agreement was made that any disputes would be heard by an arbitrator selected by the construction industry.
The plaintiff alleged that there were design and construction defects in the building trusses, violation of the Kentucky Building Code, and problems with the HVAC system. The arbitrator awarded $106,000 to the plaintiff which then sought to vacate the award. The circuit court upheld the arbitrator’s decision.
The Court of Appeals found that there was no basis for rejecting the arbitrator’s decision, noting “there is nothing to show that there was any fraud or bias on the part of the arbitrator.” The appeals court, with all three judges concurring, upheld the arbitration award.
Read the court’s decision
New Web Site Tracks Settled Construction Defect Claims
June 19, 2012 — CDJ Staff
Peter Lissner, a former Nevada homebuilder, has created a new site to help track homes that have been involved in construction defect litigation. His site, housefaxreview.com, collections documentation about homes where claims of construction defects have been made. He told The Builders Magazine concerns about “the number of homes that have been served notices, received compensation, yet the homes weren’t repaired.” On the site, the creator is identified as “a family owned builder.” According to the site, “the builder had no claims until the neighborhood reached the statutory claims limit 10 years.”
Lissner also claims that in many cases, after settling construction defect lawsuits, the homeowners sell to subsequent buyers without disclosing the lawsuit or their failure to repair. “Who is going to let the new homeowner know about the issue?” he asks.
Documents on the site are priced according to their relevance. Lissner notes that those who provide documents to the site will receive free access.
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Delaware “occurrence” and exclusions j(5) and j(6)
June 10, 2011 — CDCoverage.com
In Goodville Mut. Cas. Co. v. Baldo, No. 09-338 (D. Del. June 2, 2011), claimants condominium association and unit owners sued project developer Rehoboth and general contractor Capano seeking damages because of moisture penetration property damage to common elements and individual units resulting from construction defects. Rehoboth and Capano filed a third party complaint against insured property manager Baldo alleging that, if Rehoboth and Capano were liable to claimants, Baldo was also liable because of Baldo’s failure to properly manage, maintain, and repair the property
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Reprinted courtesy of CDCoverage.com
Florida trigger
May 18, 2011 — May 18, 2011 - CDCoverage.com
In Johnson-Graham-Malone, Inc. v. Austwood Enterprises, Inc., No. 16-2009-CA-005750-XXXX-MA (Fla. 4th Cir. Ct. Duval County, April 29, 2011), insured JGM was the general contractor for an apartment project completed in 1998. In 2007, the project owner sued JGM seeking damages for defective construction resulting in moisture penetration property damage. JGM tendered its defense to Amerisure. Amerisure denied a defense. JGM defended and settled the underlying suit and then filed suit against Amerisure seeking recovery of defense and settlement costs. The trial court granted JGM’s motion for partial summary judgment. The court first addressed Amerisure’s duty to defend. Applying Florida law, the court held that, although the underlying complaint alleged that the property damage was not discovered until after expiration of the Amerisure policies
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Reprinted courtesy of CDCoverage.com
Hovnanian Increases Construction Defect Reserves for 2012
January 6, 2012 — CDJ Staff
In their fourth quarter earnings call, executives of Hovnanian Enterprises made some projections for investors, covering the company’s plans for 2012. During the call, Ara K. Hovnanian, the firm’s CEO, discussed their reserves to meet construction defect claims. The firm does an annual actuarial study of their construction defect reserves.
Mr. Hovnanian noted that there have been no changes for the past several years, but this year they are increasing their reserves by about $6.3 million. Additionally, the firm has added $2.5 million to their legal reserves. Mr. Hovnanian stated “we do not anticipate that changes of this magnitude will be recurring as we look forward to 2012.”
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Homeowner Has No Grounds to Avoid Mechanics Lien
September 1, 2011 — CDJ Staff
The California Court of Appeals has rejected a motion by a homeowner in a dispute with the contractor who built an extension to his home. In McCracken v. Pirvulete, Mr. McCracken filed a mechanics lien after Mr. Pirvulete failed to complete payment. The matter went to trial with a series of exhibits that showed “the contractual relationship was strained and the parties disagreed over performance and payment.” As a result of the trial, the court awarded Mr. McCracken, the contractor, $1,922.22.
Mr. Pirvulete appealed, contending that the court had not allowed his daughter to act as a translator, that the court had failed to give him sufficient time to present his case, that the mechanics lien should have been dismissed, and several other claims, all before a formal judgment was issued. After the court formalized its judgment and rejected the appeal, Mr. Pirvulete appealed again.
The appeals court found that Mr. Pirvulete did not provide an adequate record for review. The court dismissed Mr. Pirvulete’s claims. The court notes that Mr. Pirvulete claimed that a request for a discovery period was denied, however, he has provided neither the request nor the denial. The trial court has no record of either.
Nor was there a record of a request that Mr. Pirvulete’s daughter provide translation. The court notes, “so far as we can glean from the record provided, the Register of Actions states, ‘Trial to proceed without Romanian Interpreter for Defendant; Daughter present to interpret if needed.’” Additionally, the court found that “there has been no showing that his facility with the English language is or was impaired in any way or that there was any portion of any proceeding, which he did not understand.”
Further, the appeals court found there were no grounds for a new trial, despite Mr. Pirvulete’s filings. The court concluded, “The owner has failed to provide a record adequate for review of most, if not all, of the claims of error. Some issues are not cognizable because they relate to entirely separate proceedings, and not the trial below. To the limited extent that the claims are examinable, the owner has made no showing of error.” The court affirmed the judgment of the lower court against Mr. Pirvulete.
Read the court’s decision…
Defective Drains Covered Despite Water Intrusion Exclusion
July 10, 2012 — CDJ Staff
The US District Court in Washington State has granted a summary judgment in Hiller v. Allstate Prop. & Cas. Ins. Co. The Hillers bought a new home in Wenatchee, Washington and insured it with an “all risk” policy from Allstate. Subsequently, Mr. Hiller discovered that the carpet in the basement was saturated with water. Hiller notified Allstate who requested that he determine the source of the water intrusion. Hiller poured water into a downspout drain and found this caused water to leak into the home’s basement.
Further investigation with the homes original excavation contractor revealed that “the end of the drain pipe was partially blocked by rocks and had been wrapped with fabric landscaping material.” Additionally, “a ‘T’ pipe installed at the foot of the drain was directing water toward the house’s concrete foundation.” Allstate denied the claim “under the policy’s surface water, subsurface water, inherent vice, and latent defect exlusions.” After the denial, Hiller “discovered that the foundation had not been treated with waterproof sealant and that several concrete form pins were still in place.”
The court noted that “there is no genuine dispute about the cause of the claimed loss.” This left the court concluding that “the only relevant question for the purposes of the instant cross-motions for summary judgment is whether a loss caused by defective construction is covered under the Hillers’ ‘all risk’ insurance policy.” Under Washington’s “efficient proximate cause” rule, “where an insured risk itself sets into operation a chain of causation in which the last step may have en an excepted risk, the excepted risk will not defeat recovery.” The court found that a loss caused by defective construction is in fact covered under the policy, noting that “the policy does not contain an exclusion for defective construction.”
The court concluded that the defective drain was not an inherent vice, as it “cannot properly be characterized as defects ‘inherent [in the] nature of the commodity which will cause it to deteriorate with a lapse of time.” Nor was it a latent defect, “one that could not have been discovered by inspection.” The court concluded that “both of the construction defects at issue could have been discovered by a reasonable inspection.”
With these facts determined, the court found for the Hillers.
Read the court»s decision…
Reference to "Man Made" Movement of Earth Corrects Ambiguity
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
In Pioneer Tower Owners Assn. v. State Farm Fire & Cas. Co., 12 NY3d 302 (2009), the New York Court of Appeals found an "earth movement" exclusion was ambiguous when applied to an excavation. The court now considered whether a similar exclusion, expressly made applicable to "man made" movement of earth, eliminated the ambiguity when loss was created by excavation. Bentoria Holdings, Inc. v. Travelers Indem. Co., 2012 N.Y. LEXIS 3087 (N.Y. Oct. 25, 2012).
Plaintiff's building suffered cracks due to an excavation being conducted on the lot next door. A claim was submitted to Travelers, plaintiff's insurer. Travelers rejected the claim, relying on the earth movement exclusion.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Tucson Officials to Discuss Construction Defect Claim
July 10, 2012 — CDJ Staff
The mayor of Tucson, Arizona and the city council scheduled a meeting on June 26, 2012 in order to consult with the city’s attorneys concerning possible construction defect litigation involving the Martin Luther King, Jr. apartment building in that city. The memorandum was authored by Richard Miranda, the Tucson city manager.
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Southern California Lost $8 Billion in Construction Wages
August 17, 2011 — CDJ Staff
Los Angeles and Orange Counties are first on a list no area wants to be on. According to the Sacramento Bee, reporting on data from the U.S. Bureau of Economic Analysis, LA and Orange Counties saw an $8 billion drop in construction wages in 2010, as compared to 2006. In 2006, the region saw payrolls of $26.8 billion, but in 2010, that was reduced to $18.5 billion.
This was not the largest percentage change. Of the metropolitan areas with the largest declines in construction earnings, Las Vegas saw a $3.6 billion drop, however that represented half of their 2006 totals of $7.2 billion. Conversely, a $3.3 billion drop in the New York area represented only 10% of what had been $33.8 billion in payroll in 2006.
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Water Drainage Case Lacks Standing
March 28, 2012 — CDJ Staff
The Texas Court of Appeals has ruled in the case La Tierra de Simmons Familia Ltd. V. Main Event Entertainment, LP. The trial court had found for Main Event. On appeal, the court threw out some of the grounds on which the trial court had reached its decision.
The case involved two commercial lots in northwest Austin, Texas. The uphill tract (Phase III of the Anderson Arbor development) diverts its runoff onto the lower tract (the “Ballard tract”). The owners of the Ballard tract claim that “the drainage system was designed or constructed in a manner that has damaged and continues to damage the Ballard tract.”
Both tracts have undergone changes of ownership since the construction of the drainage system in 2004. At the time the drainage system was constructed, the parcel was owned by Sears Roebuck and Co. Sears later sold the property. Main Event Entertainment is the current tenant. Likewise, the Ballard tract was previously owned by the Ballard Estate which sold the property to La Tierra on an “as is” basis in 2007.
After La Tierra bought the Ballard tract, La Tierra’s engineer “witnessed and videotaped what he described as ‘flooding’ on the Ballard tract caused by storm water discharge from the Anderson Arbor drainage system during a rainfall event.” La Tierra determined that an adequate drainage system would cost about $204,000. Development plans were put on hold.
La Tierra sued Main Event and various other parties associated with the uphill tract, seeking “actual damages for (1) decrease and loss in rental income due to delay in obtaining the development permit, (2) interest on carrying costs during that time period, (3) the cost to build a water conveyance system on the Ballard tract, (4) engineering fees incurred to redesign the water conveyance system, (5) unspecified out-of-pocket real estate expenses, and (6) property devaluation occasioned by the need to construct an expensive water conveyance system.” The trial court never reached these claims, ruling instead that La Tierra lacked standing, that its claims were barred under the statute of limitations, and that there was no evidence of damage.
La Tierra appealed, arguing that “(1) the summary-judgment evidence does not conclusively establish that property damage claims accrued or were discovered prior to September 11, 2007, which is within the limitations period and was after La Tierra purchased the property; (2) even if the property was damaged before La Tierra acquired ownership of the Ballard tract, standing exists based on the assignments of interest from the Ballard Estate heirs, and the discovery rule tolls limitations until the injury was discovered on September 11, 2007; (3) limitations does not bar La Tierra's request for injunctive relief; (4) La Tierra's water code claim against Main Event and M.E.E.P. is viable based on their control over the drainage system, which makes them necessary and indispensable parties for injunctive relief; (5) La Tierra presented more than a scintilla of evidence to raise a fact issue on damages, causation, and other essential elements of its causes of action; and (6) the trial court abused its discretion when it sustained the defendants' objections to La Tierra's summary-judgment evidence.”
The appeals court concluded that La Tierra’s second claim was irrelevant to standing, as La Tierra “obtained assignments from the Ballard Estate heirs ? nearly one year after the lawsuit was initially filed.” Nor did the court accept their first point. The water system had been operating unaltered since January, 2004, with monthly maintenance and inspection to maintain its designed operation. Further, a feasibility report La Tierra received stated that “over sixteen acres drain into those ponds, and thus onto this site.” The court noted that “the underlying facts giving rise to a cause of action were known before La Tierra acquired ownership of the Ballard tract.”
The court concluded that the drainage issue is a permanent injury, but that it “accrued before La Tierra acquired an ownership interest in the property.” As La Tierra has standing, the appeals court ruled that it was improper for the trial court to rule on the issues. The appeals court dismissed the questions of whether the case was barred under the statute of limitation and also the question of whether or not La Tierra had damages.
As the issue of standing would not allow La Tierra to bring the suit, the appeals court found for the defendants, dismissing the case for this single reason, and otherwise affirming the ruling of the lower court.
Read the court’s decision…
