Damage During Roof Repairs Account for Three Occurrences
August 2, 2012 — Tred Eyerly, Insurance Law Hawaii
Southgate Gardens Condominium had buildings damaged by Hurricane Wilma in 2005. See Mid-Continent Cas. Co. v. Basedeo, 2012 U.S. App. LEXIS 11864 (11th Cir. June 12, 2012). First State Development Corporation was hired by Southgate to do repairs.
On November 1, 2005, First State completed tarping on the buildings. Thereafter, on November 11, 2005, First State contracted with Southgate to remove and replace the roofs of the Southgate Buildings.
The tarps placed by First State were inadequate and allowed water to enter the unit of Wayne Basdeo and cause damage. Further, when it attached the tarps, First State caused holes to be made in the roofs of buildings, leading to additional damage. First State also left open the mansards (a type of roof which has two slopes on all all sides, but with the lower slope steeper that the upper one). Finally, the peeled-back condition of the roofing allowed rain to enter.
Basdeo filed a claim with Mid-Continent.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Mississippi exclusions j(5) and j(6) “that particular part”
June 7, 2011 — CDCoverage.com
In Lafayete Ins. Co. v. Peerboom, No. 3:10cv336 (S.D. Miss. June 2, 2011), claimant homeowner Peerboom hired insured contractor Absolute to raise Peerboom’s house two feet to avoid future flooding. While Absolute was raising the house, it fell, resulting in physical injury to the home. Peerboom sued Absolute for negligence, breach of contract, and fraud, seeking damages for the destruction of the home. Absolute’s CGL insurer Lafayette defended under a reservation of rights and filed a declaratory judgment action.
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Reprinted courtesy of CDCoverage.com
Ensuing Loss Provision Does Not Salvage Coverage
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
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
Damron Agreement Questioned in Colorado Casualty Insurance v Safety Control Company, et al.
February 10, 2012 — CDJ Staff
Safety Control and EMC appealed the judgment in Colorado Casualty Insurance Company versus Safety Control Company, Inc., et al. (Ariz. App., 2012). The Superior Court in Maricopa County addressed “the validity and effect of a Damron agreement a contractor and its excess insurer entered into that assigned their rights to sue the primary insurer.” Judge Johnsen stated, “We hold the agreement is enforceable but remand for a determination of whether the stipulated judgment falls within the primary insurer’s policy.”
The Opinion provides some facts and procedural history regarding the claim. “The Arizona Department of Transportation (“ADOT”) hired DBA Construction Company (“DBA”) to perform a road-improvement project on the Loop 101 freeway. Safety Control Company, Inc. was one of DBA’s subcontractors. As required by the subcontract, Safety Control purchased from Employer’s Mutual Casualty Company (“EMC”) a certificate of insurance identifying DBA as an additional insured on a policy providing primary coverage for liability arising out of Safety Control’s work.”
A collision occurred on site, injuring Hugo Roman. Roman then sued ADT and DBA for damages. “Colorado Casualty tendered DBA’s defense to the subcontractors, including Safety Control. Safety Control and EMC rejected the tender. Roman eventually settled his claims against DBA and ADOT. DBA and ADOT stipulated with Roman for entry of judgment of $750,000; Roman received $75,000 from DBA (paid by Colorado Casualty) and $20,000 from ADOT, and agreed not to execute on the stipulated judgment. Finally, DBA, ADOT and Colorado Casualty assigned to Roman their rights against the subcontractors and other insurers.”
Colorado Casualty attempted to recover what “it had paid to defend DBA and ADOT and settle with Roman. However, Roman intervened, and argued that “Colorado Casualty had assigned its subrogation rights to him as part of the settlement agreement.” The suit was not dismissed, but the Superior Court allowed Roman to intervene. “Roman then filed a counterclaim against Colorado Casualty and a cross-claim against the subcontractors.”
All claims were settled against all of the defendants except Safety Control and EMC. “The superior court ruled on summary judgment that EMC breached a duty to defend DBA and that as a result, ‘DBA was entitled to settle with Roman without EMC’s consent as long as the settlement was not collusive or fraudulent.’ After more briefing, the court held the stipulated judgment was neither collusive nor procured by fraud and that EMC therefore was liable to Roman on the stipulated judgment and for his attorney’s fees. The court also held Safety Control breached its subcontract with DBA by failing to procure completed-operations insurance coverage and would be liable for damages to the extent that EMC did not satisfy what remained (after the other settlements) of the stipulated judgment and awards of attorney’s fees.” Safety Control and EMC appealed the judgment.
Four reasons were given for the decision of the ruling. First, “the disagreement between Roman and Colorado Casualty does not preclude them from pursuing their claims against EMC and Safety Control.” Second, “the settlement agreement is not otherwise invalid.” Third, “issues of fact remain about whether the judgment falls within the EMC policy.” Finally, “Safety Control breached the subcontract by failing to procure ‘Completed Operations’ coverage for DBA.”
In conclusion, the Superior Court affirmed in part, reversed in part, and remanded . “Although, as stated above, we have affirmed several rulings of the superior court, we reverse the judgment against EMC and remand for further proceedings consistent with this Opinion to determine whether the stipulated judgment was a liability that arose out of Safety Control’s operations. In addition, we affirm the superior court’s declaratory judgment against Safety Control but remand so that the court may clarify the circumstances under which Safety Control may be liable for damages and may conduct whatever further proceedings it deems appropriate to ascertain the amount of those damages. We decline all parties’ requests for attorney’s fees pursuant to A.R.S. § 12-341.01 without prejudice to a request for fees incurred in this appeal to be filed by the prevailing party on remand before the superior court.”
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Remodels Replace Construction in Redding
September 9, 2011 — CDJ Staff
The Record Searchlight reports that while new construction is down in Redding, California, residential and commercial remodel permits are up 17 percent. By August 2010, there had been 63 housing and commercial business starts in Redding, while this year has seen only 15.
One such remodel, that of Parkview Market, will cost about $201,000. Safeway is planning on two $80,000 remodels of its grocery stores in Redding. In all, the 150 building permits for remodels are worth a total of $2.8 million.
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Limitations of Liability in Subcontractors’ Contracts May Not Be Enforceable in Colorado to Limit Claims by Construction Professionals.
October 23, 2012 — Heidi J. Gassman, Higgins, Hopkins, McLain & Roswell
The Colorado Homeowner Protection Act of 2007 (“HPA”), codified at C.R.S. § 13-20-806(7), specifically voids express waivers of, or limitations on, a residential property owner’s ability to enforce any rights, remedies, and damages provided by law in a construction defect case. Practically speaking, this means that limitation of liability provisions in contracts between construction professionals and residential homeowners are void and will not be enforced in Colorado. The HPA can extend even further, however, to subcontractors on residential projects, as seen in a recent District Court ruling.
The HPA was tested in Thacker v. Gallery Homes, et al., v. Terracon Consultants, Inc., et al., Larimer County District Court Case No. 2007CV1195. Gallery Homes hired Terracon to provide geotechnical and structural engineering services at the Colony Ridge subdivision in Loveland, Colorado. Terracon performed work for Gallery Homes under three separate contracts, each of which included a provision limiting Terracon’s total liability to Gallery Homes.
After the project was completed, two homeowners filed suit against Gallery Homes for alleged construction defects involving movement of their basement floor systems and foundations and damage to porches, patios, garages, and driveways. Gallery Homes sued Terracon as a third-party defendant, and Terracon sought to enforce its limitation of liability provisions via a partial summary judgment motion.
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Reprinted courtesy of Heidi J. Gassman, Higgins, Hopkins, McLain & Roswell, LLC. Ms. Gassman can be contacted at gassman@hhmrlaw.com
Boston Tower Project to Create 450 Jobs
November 18, 2011 — CDJ Staff
Continuing the development of Boston’s Theater District, Millennium Partners broke ground for the building of Hayward Place, a 15-story residential tower with street-level shops. The project is expected to take two years to complete and will employ about 450 construction workers.
Thomas Menino, the mayor of Boston said that the “ground breaking of Hayward Place is another sign of economic growth and forward progress on the revitalization of this area.” The project will be built by Suffolk Construction. John Fish, their CEO, said they were “fortunate as a contractor to be the beneficiary of this.”
The report in the Boston Herald notes that a few blocks away, the site of the former Filenes department store is still “an empty eyesore.” Menino joked, “anyone want to bid for it?” He promised that site would also be developed.
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Construction Defect Lawsuits? There’s an App for That
July 10, 2012 — CDJ Staff
The website ebeeky.com reviews Picture It Settled, an app designed to help people engaged in lawsuits figure out where settlement strategies would be most successful. First available for Android and then iOS, the app is now available for Blackberry. One user of the application wrote that “anyone who has set through a construction defect mediation can immediately grasp the value of this app.
The app tracks the negotiation process, allowing users to see a history of bids and counteroffers. It also models the negotiation process in order to predict the ultimate cost of settlement. These numbers are based on past similar negotiations that the user has entered.
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Insurance for Defective Construction Now in Third Edition
November 7, 2012 — CDJ Staff
Available both in print and online, the International Risk Management Institute, Inc has brought out a third edition of Insurance for Defective Construction. The work is written by Patrick J. Wielinski of Cokinos, Bosien & Young, a Dallas-Fort Worth law firm. Mr. Wielinski practice focuses on insurance coverage. Insurance for Defective Construction is described as “a must read for anyone who buys, sell, or underwrites construction insurance or who becomes involved in construction claims.”
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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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OSHA Extends Temporary Fall Protection Rules
March 1, 2012 — CDJ Staff
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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Construction Spending Dropped in July
September 13, 2012 — CDJ Staff
Bloomberg News reports that after four months of gains in construction spending, July saw a drop of 0.9 percent, wiping out June’s gain of 0.4 percent. Despite the overall decline in spending, there was an increase of 1.5 percent in expenditure on building new single-family homes and 2.8 percent on multifamily residential construction.
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Differing Rulings On Construction Defect Claims Leave Unanswered Questions For Builders, and Construction Practice Groups. Impact to CGL Carriers, General Contractors, Builders Remains Unclear
March 7, 2011 — March 7, 2011 Construction Defect Journal Staff
In the past year a number of state and federal courts have rendered a number of conflicting decisions that promise to alter or perhaps shift entirely the paradigm, of how builders manage risk.
According to a report today by Dave Lenckus in Property Casualty 360 “Nine state and federal courts and one state legislature over the past year have addressed whether a construction defect a defective product or faulty workmanship is fortuitous and therefore an occurrence under the commercial general liability insurance policy. Four jurisdictions determined it is; three said no; two ruled that a construction defect that causes consequential damage to property other than the work product is an occurrence; and one federal court contributed its conflicting case law that has developed in Oregon since its high court ruled in 2000 that a construction defect is not an occurrence”.
The article strongly suggests that in the absence of a clear consensus over what the recent rulings mean for builders and contractors coverage disputes will intensify and continue to proliferate.
Doing this on a state-by-state basis has caused a lot of confusion among buyers and sellers, said Jeffrey A. Segall, a Tampa-based senior vice president and the Florida Construction Practice leader at Willis of Florida, a unit of Willis Group Holdings.
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Plans Go High Tech
April 25, 2012 — CDJ Staff
One construction executive described it as “the wave of the future.” What is it? Accessing building plans on an iPad. According to an article in MacWorld, several companies are now offering solutions to distribute and update construction plans on iPads. Changes to plans and notes can be distributed quickly through cloud computing.
Alan Dillon, a senior superintendent at DPR Construction told MacWorld, “I can take my iPad into the field and have my whole set of drawings.” He described a set of drawings for a large construction project as “five or six inches thick.” Danielle Douthet, of Level 10 Construction said it “can help everyone be on the same page more quickly, and make sure that everybody is working off the most current set of documents.”
And it’s not just building plans. Other firms offer building management applications designed to be taken into the field on mobile devices.
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Construction Company Head Pleads Guilty to Insurance and Tax Fraud
December 20, 2012 — CDJ Staff
The former head of Orients Construction Company and of Melrose Construciton Company, Herlindo Garcia-Merlos, has entered a guilty plea to charges that the gave false informoation to his insurer, New Jersey Manufacturers Insurance Group, for more than three years in order to lower his workers compensation payments. Mr. Garcia-Merlos was able to underpay by more than $315,000 as a result of this deception.
Mr. Garcia-Merlos additionally failed to file tax returns for his companies and underreported his wages on his own tax returns. The State of New Jersey is seeking an eight-year prison term and restitution of more than $400,000.
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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.
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Colorado “occurrence”
January 6, 2012 — CDCoverage.com
In Greystone Construction, Inc. v. National Fire & Marine Insurance Co., No. 09-1412 (10th Cir. November 1, 2011), general contractors Greystone and Branan were each sued by purchases of homes built by each alleging defective construction performed by subcontractors. CGL insurer American Family Mutual Insurance Company defended both Greystone and Brannon while co-insurer National Fire & Marine Insurance Company denied a defense. Greystone, Branan, and American Family sued National Fire for contribution towards defense costs. The federal district trial court entered summary judgment for National Fire.
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Reprinted courtesy of CDCoverage.com
School District Settles Construction Lawsuit
November 7, 2012 — CDJ Staff
The Franklin County, Pennsylvania Public Opinion reports that an area school is coming to an end with its construction lawsuit. The school district was sued by its contractors for a combined $1.4 million, which the school district withheld when the project was not completed on schedule. Lobar Inc. claimed that the district additionally owed interest and should pay attorney fees. The school claimed that only $1.15 million was due under the contract. Under the settlement, they will be paying $1.136 million.
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