Hilton Grand Vacations Defect Trial Delayed
October 23, 2012 — CDJ Staff
A settlement agreement between Conti Electric and Westgate Resorts has lead to a delay in starting the trial over construction defect claims and billing disputes over Hilton Grand Vacations a time share tower in Las Vegas. According to the Las Vegas Review-Journal, the dispute includes claims of $23.3 million owed to the general contractor against which the developer has placed $30 million in construction defect claims.
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Florida Chinese drywall, pollution exclusion, “your work” exclusion, and “sistership” exclusion.
May 26, 2011 — CDCoverage.com
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
Pipes May Be Defective, But Owners Lack Standing
September 13, 2012 — CDJ Staff
The United States District Court in Minnesota has determined that Steven and Cecilia Thundander cannot make a class-action claim against Uponor, Inc. over the plumbing in their home, as they do not have Article III standing. In this situation, the alleged defect is that Uponor made fraudulent claims that the pipes met National Sanitation Foundation (NSF) standards for use in potable water systems. Uponor submitted samples of other pipes, and their substitution was discovered when the NSF made an inspection of the manufacturing facility. The court noted that “the Thunanders contend that Uponor failed to inform homeowners, plumbers and consumers that it had been selling pipe that failed to meet NSF toxicity requirements at the time of sale and installation.”
The Court noted that the Thunanders have not tested their piping to determine if they “demonstrate toxicity or lack of compliance with the NSF 61 standards,” noting also that the Complaint seeks to require Uponor to instruct the plaintiffs on “how to test the piping and water to determine the level of risk.” Lacking testing, the Court could not find that the Thundanders have defective pipes. The Court found that the “Plaintiffs have failed to adequately plead an injury in fact sufficient to confer standing as to their product liability claims.”
The Court also concluded that it could not determine if the Plaintiff’s warranty actions could not be applied, as they “have failed to allege a plausible defect.” Even in the presence of a defect, the Court noted that more than eight years had passed before the filing of the suit, when the warranties under both Indiana and Minnesota law have a four-year statute of limitations. The Court also rejected the Thunanders tort claims, once again because “Plaintiffs have not tested their pipes,” noting that “a tort requires the existence of an injury.”
In conclusion, Judge Nelson rejected the entirety of the complaint, granting the motions to dismiss by the defendants. However, despite the problems with the Thunanders’ claims, she found that they were not “patently frivolous or groundless.” Therefore, she denied attorney fees requested by one of the defendants.
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Town Files Construction Lawsuit over Dust
August 16, 2012 — CDJ Staff
Washington Township in Ohio has filed a lawsuit against Underground Utilities for their handling of construction fill on a road project. The City of Mansfield had hired the firm to improve road safety. The lawsuit is over the company’s actions in processing soil for fill, which they are doing on three vacant lots that are zoned for residential use. Washington Township Trustee Jack Butler told the Mansfield Journal that “what brought the lawsuit to a head was the fact that the contractor did not control the dust.” Subsequent receiving notices of zoning violations, the company began to move its operation to another site.
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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.
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Florida: No Implied Warranties for Neighborhood Improvements
July 10, 2012 — CDJ Staff
A new law in Florida ends suits from homeowners associations from suing over damages from off-site improvements on the basis of implied warranties. Rob Samouch, writing for the Naples Daily News quotes House Biill 1013: “There is no cause of action in law or equity available to a purchaser of a home or to a homeowners’ association based upon the doctrine or theory of implied warranty of fitness and merchantability or habitability for damages to off-site improvements." The off-site improvements are defined as: "The street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is not located on or under the lot on which a new home is constructed.”
Mr. Samouch notes that “there are no statutory warrant rights in homeowner associations of fitness and merchantability or habitability like there is for condominium associations.” He predicts that the Florida legislature will have to address this issue “once new homeowners start screaming and yelling to them about their shoddy infrastructure for which they have no legal remedy.”
The bill took effect on July 1, 2012 and applies to “all cases accruing before, pending on, or filed after July 1, 2012.”
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Defective Grout May Cause Trouble for Bridges
August 16, 2012 — CDJ Staff
Grout, which was used to protect the steel support cables of the Woodrow Wilson Bridge, may lead to problems instead. The Baltimore Sun reports that the Federal Highway Administration is looking at three dozen bridges in twenty-one states that were built with defective grout. The grout contains high levels of chlorides, which can lead to corrosion. The collapse of pedestrian walkway in Concord, North Carolina was attributed to chloride contamination in the grout.
The grout, SikaGrout 300PT, was advertised as "non-corrosive, does not contain chlorides," but later testing showed that it contained levels that exceeded limits by 400 percent. Throughout the country, about 16 million pounds of this were used. Sika Corp. suspended production of the grout in 2010. If repairs need to be made, it is unclear who will pay.
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California insured’s duty to cooperate and insurer’s right to select defense counsel
April 14, 2011 — April 14, 2011 - CDCoverage.com
In Travelers Property Casualty Co. v. Centex Homes, No. C 10-02757 (N.D. Cal. April 1, 2011), general contractor Centex was sued by homeowners for construction defects. Centex tendered its defense to Travelers as an additional insured under policies issued by Travelers to two Centex subcontractors. Travelers agreed to defend Centex under a reservation of rights and selected defense counsel to defend Centex. Centex refused to accept the defense, asserting that it was entitled to select defense counsel. Travelers filed suit against Centex seeking a declaratory judgment that Centex had breached the duty to cooperate condition in the Travelers’ policy.
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Reprinted courtesy of CDCoverage.com
A Call to Washington: Online Permitting Saves Money and the Environment
October 28, 2011 — Douglas Reiser, Builders Counsel
Here’s some good news for Oregon contractors: Electronic Permitting is here. That’s right, no more standing in line with folders full of printed submittals and waiting all day for your permit. The click of a few buttons and you are in business. Great news, right? Unfortunately, Oregon isn’t sharing that celebration with Washington. So I say - why not?
Last week, the State of Oregon released its new ePermitting online interface. The website allows contractors, owners and even local building departments to create an account, submit building plans and procure permits. With your account, you can track the progress of submissions, print documents and get posting information.
The state ran a limited test version in the City of Florence since 2009, working out the kinks. Perhaps the most impressive result of the new system is that Oregon tackled the task of coagulating a local process into one central location.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Record-Setting Construction in Fargo
November 7, 2012 — CDJ Staff
Prairie Business reports that Fargo is experiencing the most new construction it has ever seen, totaling $434 million in value, which exceeds the previous high in 2006 of $428 million. Many of the construction starts are for single family homes, although there is also an increase in construction of apartments and townhomes.
The Home Builders Association of Fargo-Moorhead also noted that there was also a large of remodeling projects. Terry Becker, the president of the HBA, said that “remodeling is just huge right now.”
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Arbitration Clause Not Binding on Association in Construction Defect Claim
June 19, 2012 — CDJ Staff
Determining that a community’s CC&Rs do not form an agreement to arbitrate, the California Court of Appeals has reversed the decision of the Superior Court inVerano Condo. Homeowners the Ass’n v. La Cima Dev., LLC (Cal. App., 2012). La Cima purchased an apartment complex in December 2004, which they converted into condominiums. In the process, La Cima created the CC&Rs, under which the Verano Condominium Homeowners Association came into being. One section of the CC&Rs included arbitration clauses. Additionally, the purchase agreements for individual condominium units also contained arbitration clauses. Subsequently, the owners became aware of construction defect both in units and in the common areas. The Association sued La Cima both in its own interest and on behalf of its members. La Cima moved to compel arbitration, which was denied by the trial court. La Cima appealed.
The court concluded that “CC&Rs are insufficient to form an agreement to arbitrate between La Cima and the Association.” The court noted that “no evidence exists to show the Association consented to the terms of the CC&Rs, either explicitly or implicitly.”
The court agreed with La Cima that the arbitration agreement applied to those owners who had purchased their units directly from La Cima. Moreover, as the conversion to condominiums involved interstate commerce, in part because a Delaware company was selling condominiums located in California, the court held that the Federal Arbitration Act (FAA) applied, and as such “even a state constitutional standard, such as the the jury waiver provision requirements of the California Constitution, cannot be used to circumvent the FAA in the face of an otherwise valid arbitration agreement.”
However, the court also held that there was “no agreement in the CC&Rs between La Cima and owners who did not purchase units directly from La Cima,” adding that “no meeting of the minds between La Cima and these later purchasers and their successors occurred.” The court did not believe that “the Legislature intended that CC&Rs would be used to provide continuing and irrevocable contractual development or role as a representative of the owners of the development.”
The purpose of the CC&Rs, according to the court are to “protect owners from one another and permit enforcement of its terms by the Association.” The court stated that “La Cima relinquished its interests in the land by selling its property and may not assert any rights under the CC&Rs following the transfer of its ownership interest.
In its conclusion, the court determined that claims must be organized in three classes. The claims the association made against La Cima for defects in the common area “are not subject to any valid agreement to arbitrate.” The second category are those owners who did not purchase their units directly from La Cima. Here, also, the court found that the units “are similarly not subject to a valid arbitration agreement.”
The third category, however, was “owners who purchased units directly from La Cima.” The court held that these arbitration agreements were valid, and if the claims were to be taken up by the association, the association could only submit these claims to arbitration. The lower court was instructed to separate these claims, as here La Cima’s motion could be granted.
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Harmon Tower Construction Defects Update: Who’s To Blame?
August 17, 2011 — CDJ Staff
Reporting on the site VegasInc.com, Liz Benton notes that “nobody wants to take the fall for what happened at Harmon.” Work on the Harmon hotel building in Las Vegas’s CityCenter stopped in 2008 after 26 of the planned 49 stories were completed. Lorence Slutzky, a construction law professor at John Marshall Law School and a partner with the Chicago firm Robbins Schwartz Nicholas Lifton & Taylor told Benton that while inspectors and others are complicit, “the real responsibility rests with Perini, which has an obligation to comply with the plan specifications.” Perini’s claim is that they were given faulty design drawings. MGM disputes this.
Perini has offered to repair the building defects, however MGM has released a statement that they have “zero confidence or trust that Perini can and will properly fix a building it has so badly constructed thus far.” One MGM spokesperson likened these requests from Perini to “the director of ‘Ishar’ demanding a sequel.” “Ishtar,’ cost Columbia Pictures $55 million dollars and earned only $4.2 million in its initial run. Perini claims that MGM halted work because of the economy.
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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
Ohio Adopts Energy-Efficient Building Code
June 19, 2012 — CDJ Staff
In a compromise between environmental groups, who were looking for stricter standards, and homebuilders, who were trying to contain building costs, the state of Ohio has adopted buildings codes that will increase the energy efficiency of new homes. The estimated costs are about $1,100 with estimated annual savings of $230. According to Corey Roblee of the International Code Council, “It’s something needed in the state of Ohio.”
The Ohio Home Builders Association opposed a proposal to adopt the guidelines of the International Code Council. Builders will be able to either follow the ICC guidelines or they can use the Ohio guidelines to meet the same energy efficiency. Vincent Squillace, the executive vice president of the OHBA, said, “We came up with an equivalent code that’s more strict but is about $2,000 cheaper per home to implement than the original code.”
The new code will require that at least 75% of lighting must be high efficiency, increases the degree of insulation, and specifies more efficient windows, among other changes.
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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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Ensuing Loss Provision Found Ambiguous
April 25, 2012 — Tred Eyerly, Construction Law Hawaii
After the insurer denied coverage in a homeowner’s policy for construction defects under various exclusions, the court found the ensuing loss provision was ambiguous.Kesling v. Am. Family Mut. Ins. Co., 2012 U.S. Dist. LEXIS 38857 (D. Colo. March 22, 2012).
After purchasing a home from the sellers, the insureds noticed problems with the deck of the home. Massive cracking appeared, causing lifting and leaking on the deck and water running through the exterior foundation wall into the home. There was also damage to the roof and crawlspace.
The insureds had a homeowner’s policy with American Family, which covered accidental direct physical loss to property described in the policy unless the loss was excluded. They requested coverage for "conditions, defects and damages." American Family denied coverage because wear and tear, as well as damage to foundations, floors and roofs were excluded. The policy did provide coverage, however, for "any resulting loss to property described . . . above, not excluded or excepted in this policy.
When coverage was denied, the insureds sued American Family.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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.
Federal District Court Continues to Find Construction Defects do Not Arise From An Occurrence
May 10, 2012 — CDJ Staff
Coverage for construction defects continues to be hotly contested in Hawaii state and federal courts. In a recent decision, Judge Mollway felt bound to follow the Ninth Circuit’s decision in Burlington Ins. Co. v. Oceanic Design & Constr., Inc., 383 F.3d 940, 944 (9th Cir. 2004), where the court found construction defect claims arise from breach of contract, not from an occurrence. Judge Mollway’s most recent decision on the issue is Illinois Nat. Ins. Co. v. Nordic PCL Constr., Inc., 2012 U.S. Dist. LEXIS 58464 (D. Haw. April 26, 2012).
Nordic constructed a grocery store for Safeway. In addition to the grocery store, Nordic built a 165-space rooftop parking deck, retail shops and related improvements. After opening for business in 2007, Safeway experienced significant leaks. Safeway demanded that Nordic repair the parking deck. Nordic sent the demand letter to the insurer, who agreed to appoint counsel subject to a reservation of rights.
Safeway filed suit against Nordic in state court alleging, among other things, breach of contract and negligence. The insurer provided Nordic with a defense, but Nordic hired independent counsel.
The insurer filed for declaratory relief in federal district court.
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