Another Las Vegas Tower at the Center of Construction Defect Claims
November 7, 2012 — CDJ Staff
Accusations are coming from both sides over construction defects at a Las Vegas tower, only this time, it’s not the Harmon Towers, it’s Hilton Grand Vacations, which is part of the Planet Hollywood Resort. The project was originally dubbed PH Towers Westgate, and it was developed by Westgate Resorts, which is suing the contractor, Tutor-Saliba for $10 million over late completion and construction defects.
Among the defects Westgate is claiming are cracked floor tiles in the valet lobby and cracks and delamination of the pool deck. Tutor-Saliba argues that the failure of the valet lobby floor is due to Westgate specifying only 1/16th inch-wide grouting, instead of the specified ¬º inch, and Westgate’s refusal to allow expansion joints on the pool deck has lead to problems there. Westgate’s attorney, Robert Schumacher, attributes the problems to “shoddy construction practices.”
According to the article in the Las Vegas Review Journal, plans were only 60 percent complete when construction began, leading to “thousands of change orders.” Despite not meeting an August completion deadline, Tutor-Saliba is claiming it is owed a $1.5 million bonus nevertheless.
Read the full story…
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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Businesspeople to Nevada: Revoke the Construction Defect Laws
March 1, 2012 — CDJ Staff
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.”
Read the full story…
Construction on the Rise in Denver
September 13, 2012 — CDJ Staff
In another sign of a recovery in the housing industry, the Denver Business Journal reports that the pace of new home construction has accelerated in the Denver area. According to the article, in the first seven months of 2012, forty-eight percent more permits were issued than in the first seven months of 2011. In July, 2012, there were sixty-six percent more permits than a year previously. For the Denver metropolitan area, July was the sixteenth consecutive month in which permits were up from a year previously.
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Condo Board May Be Negligent for not Filing Construction Defect Suit in a Timely Fashion
December 9, 2011 — CDJ Staff
The Maryland Court of Special Appeals has ruled that condominium association boards have a duty to “properly pursue any claims,” overturning the decision of a lower court that said that it had no legal duty to file suit. Tom Schild, writing at Marylandcondominiumlaw.net, writes about Greenstein v. Avalon Courts Six Condominium, Inc.
In this case, the condominium board waited six years after residents complained about water intrusion problems before suing the developer. The court ruled that the suit could not be filed, as the statute of limitations was only three years. After residents were assessed for the repairs, homeowners sued the board, arguing that their delay lead to the need for the special assessment.
After overturning the decision, the Court of Special Appeals has asked the trial court to review the negligence claim.
Read the full story…
Timing of Insured’s SIR Payment Has No Effect on Non-Participating Insurer’s Equitable Contribution to Co-Insurer
April 25, 2012 — Aarti Kewalramani, Gatzke Dillon & Balance LLP
In a case of first impression, the California Court of Appeal, Fourth District, Division One, examined whether a non-participating insurer can evade its defense and indemnity obligations because the insured only paid the policy’s self-insured retention ("SIR") as part of a settlement. In Axis Surplus Lines Insurance Company v. Glencoe Insurance LTD. (April 11, 2012, D058963) __ Cal.App.4th __ [2012 WL 11903203], the critical issue for the Court was whether an insurer, with full notice and continued investigation of a claim, can "hide behind the SIR requirement in its policy." The Court declined to "sanction such gamesmanship."
The dispute involved an equitable contribution claim between two insurers. Axis Surplus Insurance Company provided commercial general liability insurance to Pacifica Pointe L.P. During the same time period, Glencoe Insurance Ltd. provided an owner-controlled insurance policy (i.e., wrap policy) to Pacifica Pointe L.P. Both policies included provisions requiring co-carriers to split the defense and indemnity on equal shares. Pacifica was sued in a construction defect lawsuit, involving alleged resultant damages to condominiums it converted and sold. Pacifica tendered the claim to both Axis and Glencoe. While Axis agreed to defend Pacifica, subject to a reservation of rights, Glencoe declined to participate until Pacifica satisfied the $250,000 SIR on the policy. Glencoe continued to monitor the litigation from the sidelines.
Axis and Pacifica settled the underlying construction defect lawsuit for $1 million. Pacifica advised Glencoe of the settlement, and received Glencoe’s approval to contribute its $250,000 SIR towards the settlement. Axis contributed $750,000 towards the settlement. After the settlement, Axis sued Glencoe for declaratory relief and equitable contribution, to recover a portion of the defense and indemnity it paid. The trial court found in favor of Axis and allocated Glencoe 60% of the settlement payment. Glencoe appealed.
On appeal, the Court scrutinized whether Glencoe, as the non-participating insurer, had a legal obligation to provide a defense and indemnity to the insured, despite the timing of the SIR’s satisfaction. The Court determined that in an equitable contribution action, the participating insurer has the burden of proving merely the potential for coverage under the non-participating insurer’s policy. On this showing, the burden of proof shifts to the non-participating insurer to prove the absence of actual coverage under its policy. The Court emphasized that the timing of the SIR’s payment was inconsequential to either insurer’s burden. Because Glencoe admitted coverage existed under its policy, the Court affirmed the trial court’s decision.
As a result, the result ultimately turned on whether the non-participating carrier had full notice of the claim and cannot use the timing of the satisfaction of the SIR to shield itself from an equitable contribution claim from the participating co-carrier.
Published courtesy of Aarti Kewalramani of Gatzke Dillon & Balance LLP. Ms. Kewalramani can be contacted at akewalramani@gdandb.com.
Colorado statutory “property damage” caused by an “occurrence”
August 4, 2011 — CDCoverage.com
Colorado General Assembly House Bill 10-1394 was signed into law by the Governor on May 21, 2010, codified at Colo. Rev. Stat. § 13-20-808 (2010)
13-20-808. Insurance policies issued to construction professionals
(1) (a) The general assembly finds and determines that:
(I) The interpretation of insurance policies issued to construction professionals is of vital importance to the economic and social welfare of the citizens of Colorado and in furthering the purposes of this part 8.
(II) Insurance policies issued to construction professionals have become increasingly complex, often containing multiple, lengthy endorsements and exclusions conflicting with the reasonable expectations of the insured.
(III) The correct interpretation of coverage for damages arising out of construction defects is in the best interest of insurers, construction professionals, and property owners.
Read the full story…
Reprinted courtesy of CDCoverage.com
DA’s Office Checking Workers Comp Compliance
February 10, 2012 — CDJ Staff
The San Bernardino office of the California District Attorney is partnering with the California Contractor’s State License Board to check if subcontractors are holding the required workers compensation insurance. The High Desert Daily Press reports that the process of checking at sites has been going on for several months.
Investigators visit sites and ask supervisors to provide a list of subcontractors which the state then checks for compliance. One worker was quoted that insurance inspections were so rare that he had never seen one before, despite 20 years in construction.
On one day, investigators in two teams visited fourteen construction sites and reviewed the insurance status of twenty-two firms. Three were found out of compliance and stop work orders were issued.
Read the full story…
Washington Supreme Court Sides with Lien Claimants in Williams v. Athletic Field
September 30, 2011 — Douglas Reiser, Builders Counsel
The Washington Supreme Court issued their opinion today on Williams v. Athletic Field, perhaps the most talked about construction law case in the past few years. I have discussed this case exhaustively here on Builders Counsel. Today we have a resolution.
In an unanimous opinion issued today, the high court sided with lien filers who followed a sample form provided in RCW 60.04.091. Additionally, the court found that a lien company - and presumably other persons - could sign the lien for the lien claimant, as an agent, without invalidating the lien.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
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.
Read the court’s decision…
Tennessee Court: Window Openings Too Small, Judgment Too Large
November 18, 2011 — CDJ Staff
The Tennessee Court of Appeals has issued a ruling in the case of Dayton v. Ackerman, upholding the decision of the lower court, even as they found that the award was incorrectly computed. The Daytons purchased a house that had been designed and built by the Ackermans, who operated a construction business. The court noted that the warranty with the house promised that “for a period of 60 days, the following items will be free of defects in materials or workmanship: doors (including hardware); windows; electric switches; receptacles; and fixtures; caulking around exterior openings; pluming fixtures; and cabinet work.”
Soon, the Daytons began to experience problems with the house. Many were addressed by the Ackermans, but the Daytons continued to have problems with the windows. Neither side could specify a firm date when the Ackermans were contacted by the Daytons about the window problems. The Ackermans maintained that more than two years passed before the Daytons complained about the windows. The lower court found the Daytons more credible in this.
Initially, the Daytons included the window manufacturer in their suit, but after preliminary investigations, the Daytons dropped Martin Doors from their suit. Martin Doors concluded that the windows were improperly installed, many of them “jammed into openings that were too small for them.”
After the Daytons dismissed Martin Doors, the Ackermans sought to file a third party complaint against them. This was denied by the court, as too much time had elapsed. The Ackermans also noted that not all of the window installations were defective, however, the courts found that the Daytons ought not to have mismatched windows.
Unfortunately for the Daytons, the window repair was done incorrectly and the windows were now too small for the openings. The firm that did the repair discounted the windows and Daytons concealed the problem with plantation shutters, totalling $400 less than the original lowest estimate. However, the appeals court noted that it was here that the trial court made their computation error. Correcting this, the appeals court assessed the Ackermans $12,016.20 instead of $13,016.20.
Finally, the Ackerman’s expert was excluded as he had changed his testimony between deposition and trial. The trial reviewed the expert’s testimony and had it been admissible, it would not have changed the ruling.
Read the court’s decision…
Florida Construction Defect Case Settled for $3 Million
June 19, 2012 — CDJ Staff
The Runaway Beach Club Condominium Association of Kissimmee, Florida has settled its construction defect claims against the parties involved in the construction and development of the buildings. The association claimed that defective roofs and improperly installed windows had lead to leaks and associated damages. A trial date had been set, but parties involved were able to reach this settlement instead.
Read the full story…
Ohio “property damage” caused by an “occurrence.”
May 18, 2011 — May 18, 2011 - CDCoverage.com
In JTO, Inc. v. State Automobile Mut. Ins. Co., No. 2010-L-062 (Ohio Ct. App. March 25, 2011), general contractor JTO was sued by hotel project owner Marriott for breach of contract and warranties seeking damages for the repair of construction defects resulting in moisture penetration property damage to interior components. JTO filed a third party complaint against subcontractor Farizel and also tendered its defense as an additional insured under Farizel’s State Auto CGL policy.
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Reprinted courtesy of CDCoverage.com
Census Bureau, HUD Show Declines in Residential Construction
May 17, 2011 – CDJ Staff
The U.S. Census Bureau and the Department of Housing and Urban Development released their summary of residential construction for April 2011 on May 17.
Building permits for privately owned housing units were down 4% from last month and 12% from last year. Similarly, privately-owned housing starts were down 10% from March and 23% below the previous year.
For further details, read the Census Bureau/HUD report
More Charges in Las Vegas HOA Scandal
September 13, 2012 — CDJ Staff
The indictments continue in the Las Vegas HOA scandal. A lawyer for the Justice Department told the judge in the case that “we expect several indictments before the end of the year.” According to the Las Vegas Review Journal, “a dozen or more” additional people will be charged in the conspiracy.
The judge in the case, Senior U.S. District Judge Lloyd George, told prosecutors that he wanted to address the issue of compensation for homeowners. Currently, defendants have agreed to pay $1.5 million to compensate homeowners associations and banks. Vistana homeowners have claimed that the conspirators got the bulk of a $19 million construction defect settlement.
Read the full story…
Insurer Must Cover Construction Defects Claims under Actual Injury Rule
March 1, 2012 — Tred Eyerly, Insurance Law Hawaii
The Texas Court of Appeals held that the insured need not prove the exact dates physical damage occurred in order to trigger defense and indemnity coverage. Vines-Herrin Custom Homes, LLC v. Great Am. Lloyds Ins. Co., 2011 Tex. App. LEXIS 10027 (Tex. Ct. App. Dec. 21, 2011).
In 1999, the insured built a home. He was insured under a CGL policy issued by Great American from November 9, 1998 to November 9, 2000. Thereafter, the insured held a CGL policy issued by Mid-Continent from November 9, 2000 to September 18, 2002.
After construction was completed, the insured sold the house to the buyer in May 2000. After moving in, the buyer found numerous construction defects in the home, including water entering cracks in the home, and sinking and sagging of parts of the house. The buyer sued the insured, who sought coverage under the two policies. When the insurers refused to defend the underlying suit, the insured sued for a declaratory judgment.
The underlying case went to arbitration and an award of $2.4 million was granted to the buyer. The insured assigned to the buyer his claims against the insurers.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Appropriation Bill Cuts Military Construction Spending
June 15, 2011 — CDJ Staff
The Hill reports that HR 2055, the Military Construction, Veterans Affairs (VA) and Related Agencies bill, has passed with only five votes in opposition. The bill cuts the budget for military construction spending by $2.6 billion due to anticipated base closures.
The bill includes $186 million for family housing construction by the Army, $100 million for family housing construction by the Navy and Marines, and $84 million for family construction by the Air Force, with an additional $50 million allocated for the DOD outside the military branches. By the act, these funds will remain available until September 30, 2016.
Read the full story…
Read HR 2055
Construction Defects Leave Animal Shelter Unusable
October 23, 2012 — CDJ Staff
The Press Democrat reports that the Healdsburg Animal Shelter is proceeding in its lawsuit against the architect, general contractor, and subcontractors of its unfinished new facility. Shelter officials described the building as “effectively uninhabitable,” and the board has suggested that the building might have to be demolished. The chair of the shelter board told donors that “your investment is protected.”
The defects in the building include cracked concrete slabs and gaps around windows. However, even without these defects, the shelter alleges that the architect failed to correct design flaws.
Read the full story…
Construction Defect Destroys Home, Forty Years Later
June 19, 2012 — CDJ Staff
Fire investigators in Monroe, North Carolina have blamed a nail as the source of a fire that lead to a home being declared a total loss. The nail, part of the original construction, nicked a wire within a wall, causing a short, which started a fire. The home was built in the late 1960s.
WBTV reported that the homeowner was awakened by a power outage. He went outside and saw flames coming from a vent in the roof. He was unable to contain the fire with a garden hose. Neighbors called firemen who were able to stop the blaze.
Read the full story…
