The Montrose Language Interpreted: How Many Policies Are Implicated By A Construction Defect That Later Causes a Flood?
March 17, 2011 — By Shaun McParland Baldwin, March 17, 2011
The Court of Appeals of Indiana recently addressed the “Montrose” language added to the CGL ISO form in 2001 in the context of a construction defect claim where a fractured storm drain caused significant flooding a year after the drain was damaged. The insuring agreement requires that “bodily injury or “property damage” be caused by an occurrence and that the “bodily injury or “property damage” occur during the policy period. The Montrose language adds that the insurance applies only if, prior to the policy period, no insured knew that the “bodily injury or “property damage” had occurred in whole or in part. Significantly, it also states that any “bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period known to have occurred, includes a continuation, change or resumption of that “bodily injury” or “property damage” after the end of the policy period.
In Grange Mutual Cas. Co. v. West Bend Mut. Ins. Co., No. 29D04-0706-PL-1112 (Ct. App. IN March 15, 2011), http://www.ai.org/judiciary/opinions/pdf/03151109ehf.pdf, Sullivan was the General Contractor for a school construction project. Its subcontractor, McCurdy, installed the storm drain pipes. One of the storm pipes was fractured in 2005 while McCurdy was doing its installation work. More than a year later, the school experienced significant water damage due to flooding. It was later discovered that the flooding was due to the fractured storm drain. Sullivanrsquo;s insurer paid $146,403 for the water damage. That insurer brought a subrogation claim against McCurdy and its two insurers: West Bend and Grange. West Bend had issued CGL coverage to McCurdy while the construction was ongoing, including the date in which the storm pipe was fractured. Grange issued CGL coverage to McCurdy at the time of the flooding. Those two carriers jointly settled the subrogation claim and then litigated which insurer actually owed coverage for the loss. Significantly, the loss that was paid included only damages from the flooding, not any damages for the cost of repairing the pipe.
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Reprinted courtesy of Shaun McParland Baldwin of Tressler LLP. Ms Baldwin can be contacted at sbaldwin@tresslerllp.com
Preventing Costly Litigation Through Your Construction Contract
August 17, 2011 — Douglas Reiser, Builders Counsel
It’s Tuesday, which means it ’s the middle of your work week. Tuesday is a great time to take an hour to look over your contracts, while the crews are pushing through their scheduled work. Today’s food for thought: How do you use your contract to reduce your litigation burden?
Your contract should do many things. It should discuss the scope of work, scheduling of work, quality of work, coverage for liabilities and conditions and timeliness for payment. But often overlooked is how your contract can lend to dispute resolution.
Commonly, you will see a simple provision that covers governing law, venue for disputes and the awarding of attorneys’ fees. But you can do better. Remember, a contract is enforced to the maximum extent possible in Washington state.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Is There a Conflict of Interest When a CD Defense Attorney Becomes Coverage Counsel Post-Litigation?
September 1, 2011 — Chad Johnson of Higgins, Hopkins, McLain & Roswell, LLC
In Weitz Co., LLC v. Ohio Cas. Ins. Co., the U.S. District Court for the District of Colorado was asked to rule on a motion to disqualify counsel in an insurance coverage action. 11-CV-00694-REB-BNB, 2011 WL 2535040 (D. Colo. June 27, 2011). Motions to disqualify counsel are viewed with suspicion, as courts “must guard against the possibility that disqualification is sought to ‘secure a tactical advantage in the proceedings.’” Id. at *2 (citing Religious Technology Center v. F.A.C.T. Net, Inc., 945 F. Supp. 1470, 1473 (D. Colo. 1996).
Weitz Company, LLC (“Weitz”) is a general contractor and defendant in an underlying construction defect suit which had concluded before the action bringing rise to this order. In the underlying action, Weitz made third-party claims against subcontractors, including NPW Contracting (“NPW”). Weitz was listed as an additional insured under NPW’s policies with both Ohio Casualty Insurance Company and Mountain States Mutual Casualty Company (collectively “the Carriers”). The Carriers accepted Weitz’s tender of defense under a reservation of rights. However, neither insurance carrier actually contributed to Weitz’s defense costs in the underlying action. At the conclusion of the construction defect action, the parties unsuccessfully attempted to apportion the attorney’s fees and costs. Eventually, Weitz brought suit against the recalcitrant carriers. The Lottner firm, which had previously represented Weitz in the underlying construction defect action, continued to represent Weitz in this coverage action.
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Reprinted courtesy of Higgins, Hopkins, McLain & Roswell, LLC. Mr. Johnson can be contacted at johnson@hhmrlaw.com
Construction Demand Unsteady, Gains in Some Regions
June 29, 2011 — CDJ Staff
The Associated General Contractors of America reported Tuesday, June 28 that construction employment increased in 120 of the 337 metropolitan areas surveyed between May 2010 and May 2011.
‘While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist. ‘The close to even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting.”
The largest number of jobs created was in the Dallas, Texas region, with 5,600 new jobs, a five percent increase. The northern Massachusetts/southern New Hampshire region near Haverhill saw the greatest percentage increase, although that twenty-two percent increase represents only 800 new jobs. The Chicago, Illiinois area added 4,600 jobs, a four percent increase.
Other regions were not so lucky. The Atlanta, Georgia area saw a loss of 7,400 jobs, an eight percent loss. Las Vegas also lost 7,400 jobs, which there represented a sixteen percent decline. The New York City area lost 6,700 jobs, a six percent reduction. The Riverside, California area lost 5,300 jobs, a nine percent loss.
Stephen E. Sandherr, the association’s chief executive officer, blamed a combination of regulation and budget squeezes. "Some in Washington never met a regulation they didn’t like and others never found a penny they didn’t want to pinch. Together that makes for a bad way to boost employment and a great way to stifle the private sector and neglect critical economic infrastructure.”
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New Apartment Tower on the Rise in Seattle
September 13, 2012 — CDJ Staff
The Seattle Times reports that groundbreaking is planned for a forty-story tower in Seattle. The building process will take at least five years, during which time, according to the paper, there will be nearly eight thousand new apartments in Seattle. The planned tower will add another 386 units to that.
The developer, Holland Partner Group, has four other apartments buildings planned or in construction currently, which will account for more than a thousand of the units being added to the city’s apartment stock.
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Loss Caused by Seepage of Water Not Covered
July 10, 2012 — Tred Eyerly, Insurance Law Hawaii
The anti-concurrent clause in a homeowner’s policy barred coverage for damage caused by hidden seepage. Boazova v. Safety Ins. Co., 2012 Mass. LEXIS 462 (Mass. May 29, 2012).
The insured had a concrete patio built along the rear wall of her house at a grade higher than the home’s foundation. Years later, severe deterioration was discovered in the floor joists, wall studs and other parts of the home. The insured held a homeowner’s policy with Safety. An inspector hired by Safety determined the deterioration was caused by the placement of the concrete patio slab adjacent to the wall of the house, allowing water to seep onto the top of the foundation.
Safety denied coverage because the damage was caused by a combination of surface water, deterioration, settling and improper construction of the concrete patio.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
New Washington Law Nixes Unfair Indemnification in Construction Contracts
April 25, 2012 — Douglas Reiser, Builders Cousel
Contractual fairness ? it is part of my mantra. If you read the blog, you probably know that I preach brevity, balance and clarity in contracting. The State of Washington did well to finally eliminate something that has angered me for quite some time ? unfair indemnification.
One of my favorite construction contract revisions is mutual indemnification. Many “up the chain” contractors and owners are going to stick you with a unilateral indemnification clause that protects them for just about everything, including their own fumbling of a project. Adding mutual indemnification provides some balance, and keeps parties reliant upon each other for success on the job site.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Surveyors Statute Trumps Construction Defect Claim in Tennessee
June 19, 2012 — CDJ Staff
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…
Ambitious Building Plans in Boston
November 18, 2011 — CDJ Staff
Although most are unlikely to change the Boston skyline, there are several large projects on the drawing boards. The site BostInnovation covered ten of them in a recent post. Downtown Boston will be the site of several of these large projects, including three towers to be added to the Christian Science Plaza, a 404-unit residential tower in the Theater District, and perhaps the largest of these projects, a 47-story tower to be built over Copley Plaza, which will tower over the adjacent buildings. None of the planned buildings will challenge the Hancock Tower’s 60 stories.
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Lower Court “Eminently Reasonable” but Wrong in Construction Defect Case
July 10, 2012 — CDJ Staff
Noting that “circuit court’s orders are eminently reasonable, logical and just” the Supreme Court of Appeals of West Virginia has granted a writ to halt enforcement of these orders and to compel arbitration instead in the case of State v. Tucker. The initial case concerned claims that an HVAC system had been improperly designed, constructed, manufactured, or maintained, leading to serious problems. Glenmark Holding, the owner of the Suncrest Executive Plaza brought a lawsuit against seven defendants. Three of the defendants, Morgan Keller, Inc, York International Corporation, and Johnson Controls, Inc. argued that Glenmark was obligated to enter into arbitration.
Glenmark and the other defendants argued that the motions for arbitration should be denied “so all the claims and cross-claims of the parties could be litigated in one forum, in one proceeding.” The circuit court noted that arbitration is preferred over litigation because of its supposed “expeditious, economic resolution of issues,” but that in this case, “the petitioners would expend additional, not fewer resources responding to the parties’ claims and cross-claims.” As “compulsory arbitration would be insufficient and inequitable” the court denied the request, finding the arbitration clauses “unconscionable and, therefore, unenforceable.”
Morgan Keller, York, and Johson argued that “the interpretation of arbitration clauses is governed exclusively by the Federal Arbitration Act.” The appeals court found that “the circuit court was within its authority to consider Glenmark’s claim that the arbitration clauses were unenforceable.” However, the appeals court rejected the circuit court’s conclusion about the “piecemeal” resolution of the conflict, as it contradicts a Supreme Court ruling. The Supreme Court stated in 1983 that the FAA “requires piecemeal resolution when necessary to give effect to an arbitration agreement.” In a 1985 decision, the Court held that a court could “not substitute [its] own views of economy and efficiency.”
Nor could the court find the arbitration clause to be unconscionable or unenforceable. The court noted that the contract was a standard AIA form, and was amended by the parties involved, whom the court characterized as “commercially sophisticated.” The court found that the agreement limited the rights of all parties and was not one-sided.
As the arbitration clause was neither unconscionable nor unenforceable, and Supreme Court rulings preclude a court from substituting its own procedures, even when these are “eminently reasonable, logical and just,” the appeals court halted the order of the circuit court, sending the matter to arbitration.
Read the court’s decision…
Homeowners Sue Over Sinkholes, Use Cash for Other Things
January 6, 2012 — CDJ Staff
Quoting one homeowner as saying that his house “can fall in the ground for all I care, I made my money,” the Tampa Bay Times looks at the issue of sinkhole claims in Florida. Homeowners “have paid off mortgages, put in pools, replaced roofs, or otherwise used money from sinkhole claims to do something besides fix sinkhole damage.
It’s been tough for insurance companies. Citizens Property Insurance took in $32 million in premiums for sinkhole coverage in 2010, but paid out $245 million in sinkhole claims. The Tampa Bay Times notes that some of those claims come from settling problems caused by their repairs, including one settlement of $350,000 for repairs to a house worth $39,000.
One couple, after receiving $217,000 from Citizens, sold the house to a company that bought unrepaired sinkhole homes for $190,000. The home has been sold since and remains unrepaired.
Sometimes the preferred solution by the insurance company isn’t the cheapest either. One couple was informed that Citizens was going to spend $150,000 to have the hole filled with grout. After they settled with the insurance company, they fixed the problem by installing steel piers, at a cost of about $45,000.
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Ninety-Day Extension Denied to KB Home in Construction Defect Insurance Claim
July 10, 2012 — CDJ Staff
A magistrate judge has denied a request by KB Home Nevada to extend the time for service an additional ninety days. KB claims that St. Paul Fire & Marine Insurance Company has failed to defend them in a construction defect claim. However, the judge did grant KB an additional twenty days to effectuate service, noting that the request for additional time may be renewed.
Read the court’s decision…
Firm Sued For Construction Defects in Parking Garage
October 23, 2012 — CDJ Staff
Northhampton County, Pennsylvania is suing a contractor who resurfaced a parking garage in 2009. According to the Express-Times, three years later, the surface is cracked and the county is seeking $700,000 for repairs. Additionally, they have withheld $44,000 of the $2.2 million contract because of the problems. John Stoffa, Northampton County Executive, says that the garage is stable, but not up to safety standards.
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Official Tried to Influence Judge against Shortchanged Subcontractor
February 10, 2012 — CDJ Staff
A contractor testified in the trial of former Cuyahoga County Commissioner Jimmy Dimora. According to Fox 8 in Cleveland, Ohio, Sean Newman, the president of Letter Perfect testified that his company was a subcontractor on the reconstruction of the locker rooms at the Cleveland Browns Stadium. Newman said his company was paid only $400,000 of their $650,000 bid. When Letter Perfect sued the contractor, D.A.S. Construction, Dimora called the judge to influence her to rule in favor of D.A.S.
The judge in the earlier case, Bridgett McCafferty, has been found guilty of lying to the FBI during their investigation and is serving a 14-month prison sentence.
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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
Read Her Lips: “No New Buildings”
November 18, 2011 — CDJ Staff
Martha Johnson, the head of the General Services Administration, has said that her agency will not be building any new buildings in the near future. Among other duties, the GSA is responsible for the building, renovating, and leasing of federal office space. The White House had proposed $840 million in new construction, the Senate only $56 million. The House did not appropriate any money for the agency to use for new construction.
In addition to cutbacks on new buildings, Congress is suggesting only $280 million in repairs of existing government buildings. In order to cut back, the GSA has dropped plans to renovate their own offices in favor of renovations at the Department of Homeland Security and the Food and Drug Administration.
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State Audit Questions College Construction Spending in LA
August 17, 2011 — CDJ Staff
A state audit of the Los Angeles Community College District found many problems with their construction spending. Their report, as described in the Los Angeles Times, found construction money spent for other purposes, such as promotional photography and public relation tours, $28.3 million spent on projects that were later cancelled, and oversight committees that provided no oversight.
Earlier this year, the LA Times ran a series of articles detailing problems with the Los Angles Community College District’s construction program. The LA Times reported that the State Controller’s audit reached many of the same conclusions.
The Community College District disputed the findings.
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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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