ANAHEIM CALIFORNIA CONSTRUCTION EXPERT WITNESS
DIRECTORY AND CAPABILITIES

OSHA Extends Temporary Fall Protection Rules

OSHA announced that its current rules on fall protection for residential construction will remain in place until September 15, 2012. The current measures became effective in June 2011. Under the new rules, falls must be prevented by fall protection measures unless the measures can be shown to be unfeasible or even hazardous.

Under the extension of the temporary enforcement measures, contractors who ask for compliance assistance with OSHA are given top priority and penalties can be reduced. OSHA has conducted more than 1,000 outreach sessions on the new rules.

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Florida Chinese drywall, pollution exclusion, “your work” exclusion, and “sistership” exclusion.

In Auto-Owners Ins. Co. v. American Building Materials, Inc., No. 8:10-CV-313-T-24-AEP (M.D. Fla. May 17, 2011), insured drywall supplier ABM was sued by general contractor KB Homes seeking damages because property damage to houses built by KB Homes using defective Chinese drywall supplied by ABM. ABM’s CGL insurer Auto-Owners defended ABM under a reservation of rights and filed suit against ABM and KB Homes seeking a judicial declaration of no to duty to defend or indemnify ABM against the KB Homes lawsuit. On cross motions for summary, the federal district trial court directed entry of judgment in favor of ABM and KB Homes and against Auto-Owners, holding that Auto-Owners had a duty to defend and indemnify ABM against the KB Homes lawsuit.

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Reprinted courtesy of CDCoverage.com

Wine without Cheese? (Why a construction contract needs an order of precedence clause)(Law Note)

For today’s law note, I’m addressing a comment that came to me last week from Dave O’Hern of Miller O’Hern Construction.  Dave writes:

I am a general contractor doing a fuel tank replacement project for our county. In the specifications there is a spec for a UL 142 tank, on the plans the spec references UL 2085 ? a much more expensive tank. My subcontractor bid the UL 142 tank. The specifications state that the specs and plans are on the same level of precedence.

The county wants me to furnish the more expensive tank without compensation citing the clause that states the plans and specs are complementary and what is called for by one is binding as if called by all and the most stringent requirement will apply.

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

Colorado Court of Appeals Rejects Retroactive Application of C.R.S. § 13-20-808.

In TCD, Inc. v. American Family Mutual Insurance Company, TCD appealed the district court’s summary judgment ruling in favor of American Family. TCD, Inc. v. American Family Mutual Insurance Company Colo. App. No. 11CA1046 (April 12, 2012). TCD was the general contractor on a project to construct a building for Frisco General Gateway Center, LLC (“Gateway”). TCD subcontracted with a roofer named Petra Roofing and Remodeling Company (“Petra”) to performing the roofing work for the building. The subcontract required Petra to defend and indemnify TCD and to name TCD as an additional insured under its CGL policy. American Family issued a CGL policy to Petra that named TCD as an additional insured from 2006-2007.

TCD filed suit against Gateway seeking payment for its work at the project. Gateway counterclaimed against TCD for breach of contract, negligence, and violation of the CCPA. TCD demanded that American Family defend it from the counterclaims pursuant to Petra’s policies. American Family denied coverage and a separate coverage suit ensued. At the trial court level, the court entered summary judgment for American Family because the counterclaims of Gateway did not trigger the duty to defend or indemnify TCD as an additional insured.

On appeal, TCD argued that: 1) the counterclaims raise a genuine issue of material fact regarding American Family’s duty to defend; 2) the court should hear evidence beyond the four corners of the complaint; and, 3) the court should apply C.R.S. § 13-20-808 retroactively.

Reprinted courtesy of Chad W. Johnson of Higgins, Hopkins, McClain & Roswell, LLC. Mr. Johnson can be contacted at johnson@hhmrlaw.com.

No Coverage For Construction Defects When Complaint Alleges Contractual Damages

The underlying plaintiff’s allegations contended the contractor was in breach of contract for construction defects caused in building her home. Accordingly, the court found no coverage.See Nat’l Builders and Contractors Ins. Co. v. Slocum, 2011 U.S. Dist. LEXIS 81694 (S.D. Miss. July 26, 2011).

Slocum Construction LLC sold a home it built to Laura Peterson. Subsequently, Peterson filed suit, alleging a breach of the contract and seeking rescission and cancellation of the contract. Peterson further alleged at least thirty-three specific defects in the construction of the house.

Slocum tendered to its insurer, National Builders and Contractors Insurance Company (NBCI). NBCI filed suit for a declaratory judgment.

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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com

Seller Cannot Compel Arbitration for Its Role in Construction Defect Case<

The buyer of a leaky home in Venice, California cannot be compelled to arbitration with the seller in a construction defect lawsuit, according to a decision in Lindemann v. Hume, which was heard in the California Court of Appeals. Lindemann was the trustee of the Schlei Trust which bought the home and then sued the seller and the builder for construction defects.

The initial owner was the Hancock Park Trust, a real estate trust for Nicholas Cage. Richard Hume was the trustee. In 2002, Cage agreed to buy the home which was being built by the Lee Group. Cage transferred the agreement to the Hancock Park Trust. Hancock had Richard Nazarin, a general contractor, conduct a pre-closing walk through. They also engaged an inspector. Before escrow closed, the Lee Group agreed to provide a ten-year warranty “to remedy and repair any and all damage resulting from water infiltration, intrusion, or flooding due to the fact that the door on the second and third floors of the residence at the Property were not originally installed at least one-half inch (1/2”) to one inch (1”) above the adjacent outside patio tile/floor on each of the second and third floors.”

Cage moved in and experienced water intrusion and flooding. The Lee Group was unable to fix the problems. Hume listed the home for sale. The Kamienowiczs went as far as escrow before backing out of the purchase over concerns about water, after the seller’s agent disclosed “a problem with the drainage system that is currently being addressed by the Lee Group.”

The house was subsequently bought by the Schlei Trust. The purchase agreement included an arbitration clause which included an agreement that “any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.” The warranty the Lee Group had given to Hancock was transferred to the Schlei trust and Mr. Schlei moved into the home in May 2003.

Lindemann enquired as to whether the work done would prevent future flooding. Nazarin sent Schlei a letter that said that measures had been taken “to prevent that situation from recurring.” In February, 2004, there was flooding and water intrusion. Lindemann filed a lawsuit against the Lee Group and then added the Hancock Park defendants.

The Hancock Park defendants invoked the arbitration clause, arguing that Lindemann’s claims “were only tangentially related to her construction defect causes of action against the Lee Group.” On June 9, 2010, the trial court rejected this claim, ruling that there was a possibility of conflicting rulings on common issues of law. “With respect to both the developer defendants and the seller defendants, the threshold issue is whether there was a problem with the construction of the property in the first instance. If there was no problem with the construction of the property, then there was nothing to fail to disclose.” Later in the ruling, the trial court noted that “the jury could find there was no construction defect on the property, while the arbitration finds there was a construction defect, the sellers knew about it, and the sellers failed to disclose it.” The appeals court noted that while Hancock Park had disclosed the drainage problems to the Kamienowiczs, no such disclosure was made to Sclei.

The appeals court described Hancock Park’s argument that there is no risk of inconsistent rulings as “without merit.” The appeals court said that the issue “is not whether inconsistent rulings are inevitable but whether they are possible if arbitration is ordered.” Further, the court noted that “the Hancock Park defendants and the Lee Group have filed cross-complaints for indemnification against each other, further increasing the risk of inconsistent rulings.”

The court found for Lindemann, awarding her costs.

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Massachusetts Couple Seek to Recuse Judge in Construction Defect Case

After seeing their $1 million jury award overturned on appeal by a judge who called the award “against the weight of evidence and likely due to misapprehension, confusion or passion,” Kathryn and Christian Culley are seeking to have him removed from the case. The Massachusetts Supreme Judicial Court has rejected their claim.

The Culleys claim that Judge Thomas R. Murtagh’s decision was influence by him membership in the Andover Country Club which is represented by the opposing counsel in their construction defect case. Justice Margot G. Botsford had denied the Culley’s request, ruling that they had other remedies available to them.

The SJC noted in their ruling that if the Culleys are alleging judicial misconduct a request must be made to the Commission on Judicial Conduct. Their lawyer plans to file a new motion for recusal with the SJC.

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Businesspeople to Nevada: Revoke the Construction Defect Laws

The Nevada chapter of the National Federation of Independent Businesses has said that Nevada’s construction defect and minimum wage laws are hampering job growth. The organization conducted a survey, and although only about two percent of the members responded, they passed the opinions of the group on to Governor Brian Sandoval. Sandoval has said, according to the report by Fox News Reno, that he wants the state to be more business friendly. He supports reforms to Nevada’s construction defect laws, saying that he’d “like to see some reform” on the issue of mandatory attorney’s fees.

Randi Thompson, the spokesperson for the Nevada chapter of the National Federation of Independent Businesses, said that members of her organization would like to see current Nevada construction defect law revoked. She described current law as “driven towards lawyers and not toward protecting consumers.”

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Ensuing Loss Provision Does Not Salvage Coverage

The insureds' home was built in 1989. In 2006, extensive water damage was found to the house. The insureds notified their carrier, Chubb. The insureds had coverage for all risks unless stated otherwise in the policy or if an exclusion applied.

Chubb hired an adjustor who determined that defective construction had enabled water to enter the wall and beam systems. Chubb denied coverage under the faulty planning, construction or maintenance exclusion.

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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com

Save a Legal Fee: Prevent Costly Lawsuits With Claim Limitation Clauses

Ever had that lingering problem with a contracting partner that went away for awhile and then came back to bite you ? years later? In Washington, construction contract claims can be raised for up to six years after substantial completion. Six years!? Why would I want to wait that long to find out if I have a problem? You don’t have to.

Over the past few years, I have discussed the notion of “contractual claim periods” on The Builders Counsel. For today’s Save a Legal Fee column, I cannot think of a better topic. These provisions are specifically intended to save you from unnecessary legal fees that might arise if a problem goes unnoticed for too long.

Contractual claim periods are simply a way to reduce the amount of time that a contracting party has to raise a claim against its contracting partner. For example, a subcontractor might require that a general contractor raise any claim that it might have ? for defective or incomplete work, injury, damages, etc ? within a particular amount of time or forever lose the ability to raise the claim in a legal proceeding.

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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com

Architect Not Liable for Balcony’s Collapse

The Texas Supreme Court declined to hear an appeal from a woman who was partially paralyzed due to the collapse of a balcony. She had sued the architect of her friends’ home, but the Texas Third Circuit Court of Appeals had reversed a jury ruling against the architect, Sinclair Black. Black’s firm, Black + Vernooy, had designed the home and had supervised “administration of the construction contract.” Despite a contractual obligation to “endeavor to guard the owner against defects and deficiencies,” the balcony builder had not followed the architect’s specifications, including in the construction of the balcony.

While the jury found Black liable for ten percent of the blame, Black argued that he could not be held liable for the contractor’s negligence, nor did he have any duty to third parties.

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Appeals Court Reverses Summary Judgment over Defective Archway Construction

A judge has ruled that a plaintiff can go forward with her suit that she was injured by a defective archway during a birthday party. A three-judge panel of the California Court of Appeals issued this ruling on January 23, 2012, in the case of Trujillo v. Cosio.

Ms. Trujillo attended a birthday party at the home of Maria Cosio and Joel Verduzco. A piñata was hung between a tree and a brick archway. Ms. Trujillo went to get candy that had fallen from the piñata, during which the archway fell on her hand. Subsequent examination of the archway showed that it had not been “properly anchored to the supporting pillars to protect the arch from falling.”

Ms. Cosio and Mr. Verduzco argued that they could not have been aware of the defective nature of the archway’s construction, as it had been built at the request of the prior property owner. The structure was constructed without building permits. Mark Burns, a civil engineer testifying for the plaintiff, said that “a reasonable property owner would have thoroughly tested the archway to ensure it was capable of withstanding such horizontal forces before allowing children to enter into the area.” Mr. Burns noted that twenty rope pulls would have been sufficient to demonstrate the structure’s instability.

The trial court rejected Mr. Burn’s statements, finding that the respondents did not have any knowledge of the defect and that a visual inspection should have sufficed. The court noted that this a triable issue, whether visual inspection suffices, or whether the property owners should have done as Mr. Burns suggested and yank a rope twenty times. The court noted that “although a jury may ultimately disagree with Burn’s opinion, it was supported by sufficient foundation and was not speculative.”

The opinion was written by Judge Flier, with Judges Rubin and Grimes concurring.

Read the court’s decison…

Surveyors Statute Trumps Construction Defect Claim in Tennessee

The Tennessee Court of Appeals has issued an opinion in the case of Dale v. B&J Enters. (Tenn. App., 2012), affirming the ruling of the Chancery Court for Knox County. The homeowners purchased properties in Knoxville, Tennessee in 2007 and 2008. Subsequently, according to the complaint, they found “significant sink holes and depressions throughout the subdivision.” The plaintiffs determined that a previous developer in 2004 had been aware of the sink holes. The Knox County Metropolitan Planning Commission, upon giving approval, made requirements that included that sink holes, even if they were filled, had to be designated on the site plans. The developer did not indicate these locations on the final plans. The plaintiffs made claims of “failure to disclose, misrepresentation, misrepresentation by concealment, and violation of the Tennessee Consumer Protection Act.” They filed their suit in June 2009.

The defendants in the initial case, argued that they did not create the final plat, the site plan indicating the features and lot lines. This had been the work of the previous developer. In September, 2009, the plaintiffs amended their complaint to include the previous developer and its engineering firm. The engineering firm disavowed any responsibility. The developer noted that the surveyor, Benchmark Associates, had “failed to properly include the sink holes and/or depressions on the final plat.” In June, 2010, the plaintiffs added Benchmark.

Benchmark argued that the plaintiffs’ claims should be dismissed, as Tennessee has a four-year statute of limitations on claims against surveyors. The final plat was recorded on May 19, 2006, and the plaintiff filed their claims against Benchmark on June 16, 2010, slightly less than a month over four years. The plaintiffs argued that “the real issue [was] the tortious misrepresentation by Benchmark.” The Chancery Court found for Benchmark.

On appeal, the plaintiffs raised three issues. They argued that the trial court applied the wrong section of the law, and should have applied the section applying to construction and not surveyors. They also argued that the timeliness of the claim should be based on when the defects were discovered. The also raised the question of whether the laws concerning surveyors bar claims for misrepresentation. The appeals court upheld the decision of the Chancery Court.

For the plaintiff’s first claim, although the statute addressing deficiencies in construction mentions surveying, an earlier court ruling found that the legislature had removed a reference to surveyors in one part of the statute, but failed to do so in the second part. The earlier court had concluded that the “obvious intent of the legislature was to place all limits on actions against surveyors into the new statute.” As the applicable statute states that “any such action not instituted within this four (4) year period shall be forever barred,” the court held that the plaintiffs’ claims must be time barred. Further, as the intent of the legislature was determined to “place all limits on actions against surveyors into one statute,” the court felt that it could not apply the Consumer Protection Act.

Read the court’s decision…

The King of Construction Defect Scams

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.”

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New Jersey Court Rules on Statue of Repose Case

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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Housing Prices Up through Most of Country

Home prices in October were up more than six percent compared with prices in October 2011. The LA Times noted that some of the strongest gains were in California and Arizona. The Phoenix metropolitan area saw a 24.5% rise in home prices. In California, Riverside and Los Angeles were just above the national average, at 7.3% and 6.4%, contributing to the state’s overall nine percent increase.

The news wasn’t good throughout the entire country, as five states did not see any price increases. Mark Fleming, the chief economist at CoreLogic, a research firm in Irvine, California said that “the housing recovery that started earlier in 2012 continues to gain momentum.

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Construction Defect Lawsuit Stayed by SB800

The California Court of Appeals has reversed the decision of the lower court and has stayed, instead of dismissed, a claim of construction defects. A group of Victorville homeowners sued their homebuilder, K. Hovnanian Communities on a claim of construction defects. Hovnanian argued that under the procedures set forth in SB800, the suit should be dismissed, and that the claims should undergo arbitration. The trial agreed, dismissing the claims of 82 plaintiffs under a first motion, and then granted a second motion to dismiss, which affected a further 21 plaintiffs. The homeowners appealed.

The Court noted that “the parties disagree about the standard of review,” with the Court determining that as the facts were not in dispute, they would use “an independent standard of review.”

Reviewing the relevant statues, the Court concluded that the terms of the limited warranty set out the pre-litigation procedure, noting that “plaintiffs admit they did not comply with the limited warranty because they challenge its validity and enforceability.” The Court concluded that “plaintiffs’ action was premature.”

The Court further noted that “a civil action will not be filed until after the contractual procedures have been followed.” Until these procedures have been followed, the Court said that they “decline to resolve issues about validity and enforceability.” However, as these issues could arise after the limited warranty procedures, the court stayed, rather than dismissed the claims.

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Construction Defect Not Occurrences, Says Hawaii Court

Some insurers in Hawaii have made it clear that they will be covering construction defects, despite a court ruling concluding that defects are not occurrences, under Hawaii law. The case, heard by Hawaii’s Intermediate Court of Appeals found that “breach-of-contract claims based on allegations of shoddy performance are not covered under CGL policies and that tort-based claims derivative of such breach of contract claims also are not covered.”

Writing in Business Insider, Michael Bradford notes that the case, Group Builders Inc. and Tradewind Insurance Co. Ltd. vs. Admiral Insurance Co., involved improperly installed insulation at the Hilton Hawaiian Village’s Kalia Tower. Hilton was forced to close 21 floors due to extensive mold in guest rooms. Although the court did recognize this property damage, they did not feel it triggered insurance coverage, noting that if disputes over the quality of work were covered, CGL policies would become professional liability policies or performance bonds.

One critic of the decision, Warren C. Perkins, the risk manager at Boh Bros. Construction of New Orleans, noted that under the decision, “it doesn’t matter what the policy says and there is no need to investigate the policy wording.”

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