There is No Non-Delegable Duty on the Part of Residential Builders in Colorado
August 2, 2012 — Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC
Recently, in the Arapahoe District Court, the Honorable Michael Spear, issued an order holding that builders do not owe a non-delegable duty to homeowners. In Marx and Corken v. Alpert Custom Homes, Inc., et al., Judge Spear’s order came in response to plaintiffs’ motion for determination of question of law seeking a finding that the defendants owed a non-delegable duty to the plaintiffs and thus, to strike defendants’ designation of nonparties at fault. After being fully briefed, Judge Spear, found that such a non-delegable duty does not exist.
The case arises from the construction of a single-family residence in Aurora, Colorado. Through the construction and interaction with Alpert Custom Homes, Inc. and Scott and Sally Alpert, the defendants, Paul Marx and Kay Corken, the plaintiffs claimed they suffered various damages and losses, and brought claims for breach of contract-warranty, breach of contract, violation of the Colorado Consumer Protection Act, breaches of the implied covenant of good faith, promissory estoppel, willful breach of contract, and quantum meruit. During litigation, the defendants filed a designation of nonparties at fault, which named several parties which were at fault for the alleged construction defects at issue in the case. The pertinent nonparties named were subcontractors of defendant Alpert Custom Homes, Inc. during the construction of the residence.
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Reprinted courtesy of Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com
Defect Claims as Occurrences? Check Your State Laws
July 10, 2012 — CDJ Staff
Although four states have defined construction defect claims as occurrences, contractors are still dealing with “coverage gaps for faulty work construction,” says Mike Tsikoudakis in a piece at Business Insurance. He quotes Julian Ehrlich, the senior VP of claims for Aon Risk Services that “one of the interesting and compelling aspects of the issue of coverage for defective construction is that jurisdictions differ, so policyholders don’t know what they’re going to get.” He further notes that “in context of construction defect, the term ‘occurrence’ is ambiguous.”
One problem, as noted by Jeffrey J. Vita, a partner at Saxe Doernberger & Vita, is that construction firms end up needing to simultaneously defend against defect claims and to also file suit to be certain their insurance firms will cover claims. Insurance for construction defect claims is described as “expensive and somewhat limited.” Mr. Vita expects more states to help this situation with new laws, clarifying what is an occurrence.
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Amerisure Case to be Heard by Texas Supreme Court
August 16, 2012 — CDJ Staff
The Fifth Circuit Court of Appeals has withdrawn its decision in Ewing Construction Company Inc. v. Amerisure Insurance Company, according to Insurance Developments. The Fifth Circuit had concluded that “a contractor’s obligation to perform its contact in a workmanlike manner constituted an ‘assumption of liability.’” Two questions have now been certified to the Texas Supreme Court. The dissent in the case argued the majority had misread Texas Supreme Court precedent. The court will now have the opportunity to clarify this matter.
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Largest Per Unit Settlement Ever in California Construction Defect Case?
October 28, 2011 — CDJ Staff
BusinessWire reports that the Chelsea Court Homeowners Association has settled their construction defect case for $5.4 million. That works out to $169,000 per unit, which BusinessWire describes as “California’s largest per-unit recovery known to be on record to date.”
Most of the money in the settlement is coming from insurance companies for the builder and thirteen subcontractors. Issues included roof and window leaks, deck failures, and unsafe walkways.
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An Upward Trend in Commercial Construction?
March 28, 2012 — Melissa Dewey Brumback, Construction Law North Carolina
Year-end economic indicators demonstrate that private commercial construction may be increasing in 2012, primarily as demand grows for new projects built in the United States.
According to an article in Businessweek, the Architecture Billings Index held at 52 in December, indicating a modest expansion in the market. The American Institute of Architects said that the commercial and industrial component of the number climbed to 54.1 in December, the highest in 10 months.
The monthly survey of U.S.-based architecture firms is one of the main indicators of nonresidential construction, and these numbers suggest that modest improvement may be on the horizon.
The information is confirmed by data from the Census Bureau that shows that spending on lodging, office, commercial and manufacturing buildings grew 8.2 percent in November to $9.2 billion from a year ago. These types of commercial and industrial projects are historically canaries in the mine and are usually the first part of the industry to improve as the economy expands.
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Reprinted courtesy of Melissa Dewey Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
Insurer Must Defend Claims for Diminution in Value of Damaged Property
June 19, 2012 — Tred Eyerly, Insurance Law Hawaii
The insurer’s duty to defend a developer sued by purchasers of homes for damages for diminution in value of homes was at issue in Mid-Continent Cas. Co. v. Academy Dev., Inc., 2012 WL 1382459 (5th Cir. April 20, 2012).
In the underlying action, plaintiffs alleged the developer knew when it sold the homes that the lake walls were falling and that water was leaking from the lakes onto adjacent home sites. They sought damages for diminution in the value of their homes resulting from the defective lakes. The action was tried in 2008, and the jury returned a verdict for the developer.
Mid-Continent initially defended under a reservation of rights.
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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Demand for Urban Living Leads to Austin Building Boom
August 16, 2012 — CDJ Staff
The New York Times reports that Austin is undergoing a building boom as a high-tech firms, including Facebook and Google, have moved into the downtown area. With them, comes a need for more apartment buildings and more retail space. Mike Kennedy, the president and chief executive of an Austin real estate firm, told the Times “the office space was here, the housing came, and retail is arriving last to the scene.” Currently, two large projects that will add about 500 apartment units is underway, including a 222-unit, 18-story building, and another that will contain 277 units. Apartment occupancy in Austin is at ninety-seven percent.
Developers also have hotels and more office space planned. The area has about 6,000 hotel rooms with an additional 2,000 planned, but events in Austin can bring in more people than the city’s 30,000 hotel rooms can accommodate. Office space is eighty-eight percent occupied, and a lack of office space could cause firms to look elsewhere.
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Court Consolidates Cases and Fees in Soil Construction Defect Case
August 16, 2012 — CDJ Staff
The California Court of Appeals has ruled in Burrow v. JTL Development. JTL Development had appealed a judgement in a construction defect case in which JTL Development and Highland Development were found liable for damage due to homes built on unstable and improperly compacted soil. The two companies were sued by the two sets of homeowners, the Burrows and the Balls, and their cases were consolidated at trial. Each family was awarded $700,000 in damages. This judgement had also been appealed and affirmed by the appeals court. In the current case, an additional $235,800 in cost-of-proof sanctions had been awarded to the two families.
Before the trial, Dale Burrows, Charles Ball, and Laurie Ball “asked JTL and Highland to admit that they ‘approved grading plans’ for the Burrows’ and Balls’ properties; ‘had knowledge that the [properties] contained improperly compacted fill’; ‘had knowledge that the [properties were’ not properly prepared for structures’; and ‘did not provide Plaintiffs with a complete soils report’ prepared by Gorian & Associates.” These were requests 14, 19, 20, and 22. JTL and Highland denied all of these.
At trial, the Burrows and Balls proved that all these were true. JTL and Highland’s geotechnical subcontractor, Gorian & Associates, had “recommended that Highland remove and re-compact the entire tract to a depth of 25 feet.” JTL and Highland did not follow this recommendation, “in order to avoid expense.”
After judgment, the Burrows and Balls moved for $582,587.45 for “attorneys’ fees and costs incurred proving the truth of requests for admission.” JTL and Highland claimed that only Dale Burrows could recover fees, but that also the fees were not recoverable. Joe Lynch of Highland “declared that he always believed the soils under the Burrows and Balls homes were properly compacted.” The Burrows and Balls responded with six identical sets of requests for admissions and the court awarded each of them twenty-five percent of $235,800, with JTL and Highland each responsible for fifty percent.
The appeals court noted that JTL and Highland filed a timely appeal and goes on to notes the four circumstances under which a responding party does not have to pay costs and fees. The court concluded that none of these were met. Instead of waiving the request, JTL and Highland denied the request, stating “without in any manner waiving the foregoing objection, responding party denies the request for admission.”
Nor was the admission “of no substantial importance,” instead the court said that the matters were of “substantial importance,” and the “trial would have been shortened by their admission. Highland and JTL “relied on Gorian when it denied the request,” but the trial court “discredited Lynch’s assertions,” finding that “Highland knew the soil was improperly compacted.”
As all plaintiffs had identical discovery requests, the court rejected the claim that only Dale Burrows was entitled to an award.
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Illinois Court Determines Insurer Must Defend Property Damage Caused by Faulty Workmanship
July 11, 2011 — Tred R. Eyerly, Insurance Law Hawaii
The Illinois Court of Appeals determined the insurer must defend allegations of property damage arising from faulty workmanship. Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 Ill. App. Unpub. LEXIS 1443 (Ill. Ct. App. June, 20, 2011).
Larsen was a subcontractor for Weather-Tite in a condominium building. Weather-Tite installed windows on the project and hired Larsen to apply sealant to the windows. The windows subsequently leaked and caused water damage within the complex.
The homeowner’s association sued Weather-Tite for breach of express and implied warranties. Weather-Tite filed a third-party complaint against Larsen, seeking contribution and alleging that Larsen was in breach of contract by failing to add Weather-Tite as an additional insured under Larsen’s CGL policy.
Both Weather-Tite and Larsen tendered to Larsen’s insurer. Both tenders were denied because the insurer contended the complaints alleged only construction defects, and not “property damage” or an “occurrence” within the terms of the policy.
The insurer filed suit for a declaratory judgment. The trial court granted the insurer’s motion as to Weather-Tite, but granted Larsen’s cross-motion for summary judgment.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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.
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Construction Worker Dies after Building Collapse
November 18, 2011 — CDJ Staff
A Bronx construction worker died when the pillars gave way in the basement where he was working. The two-story commercial building collapsed, burying Mr. Kebbeh under about six feet of rubble. The New York Times reports that firefighters dug him out with their bare hands. Mr. Kebbeh was taken to Jacobi Medical Center where he died. Two other construction workers escaped unharmed.
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Good and Bad News on Construction Employment
February 10, 2012 — CDJ Staff
The construction industry hit a two-year high in January, with 21,000 jobs added that month. The mild winter is assumed to have helped. According to the General Contractors of America, the construction industry currently employs about 5.57 million people. This is a 21 percent gain over January 2010. Ken Simonson, the chief economist of GCA, noted that “the unemployment rate in construction is still double that of the overall economy.” He said it was not currently clear if “the recent job growth reflects a sustained pickup or merely acceleration of homebuilding and highway projects that normally halt when the ground freezes in December and January.”
Stephen Sandherr, the chief executive officer of the GCA, said that the federal government had to make infrastructure funding a top priority. “Without adequate long-term funding for infrastructure, competitive tax rates and fewer costly regulatory hurdles, the construction industry may lose some of the jobs it gained in the last year.”
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Court Sends Construction Defect Case from Kansas to Missouri
August 2, 2012 — CDJ Staff
The United State Court of Appeals for the Tenth Circuit has ruled in Mid-Continent Casualty Company v. The Village at Deer Creek Homeowners Association. The prior case was heard by the United States District Court for the District of Kansas. In this appeal, Mid-Continent sought a declaratory judgement. The Village at Deer Creek Homeowners Association moved to dismiss, and the district court had granted this, giving jurisdiction to the Missouri state courts.
The homeowners association had sued Greater Midwest Builders, Ltd., who had constructed the subdivision, in the Kansas state courts. The suit ended with a verdict against Greater Midwest for more than $7 million. The association and other plaintiffs in that case filed for equitable garnishment against State Auto, Mid-Continent, and Greater Midwest. State Auto removed the garnishment action to federal court in Missouri. Mid-Continent moved to sever the actions against it and transfer the case to the District of Kansas.
Subsequently, the plaintiffs filed a notice of voluntary dismissal in the Western District of Missouri. A second garnishment action followed in which Mid-Continent was named as an additional plaintiff. State Auto again removed to the Western District of Missouri, while Mid-Continent moved to sever and transfer to the District of Kansas. The Kansas court granted the association’s motion to dismiss.
In the appeal, Mid-Continent sought a declaratory judgment. This was denied by the appeals court. The district court “concluded that the Missouri courts were better situated to provide complete relief to all parties involved in the coverage dispute.” The appeals court affirmed the association’s movement to dismiss. Mid-Continent’s motion was denied as moot.
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No Third-Quarter Gain for Construction
November 18, 2011 — CDJ Staff
The Associated Builders and Contractors released their analysis of construction work under contract and found that there was no increase in construction backlog from the second quarter of 2011. There was still improvement, however, over 2010, as the third quarter backlog is 16.3 percent higher than that of a year ago.
The current backlog is 8.1 months, which according to Anirban Basu, the chief economist of the ABC, “is consistent with flat construction spending.” He noted that less than 8 months indicated a decline.
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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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California Appeals Court Remands Fine in Late Completion Case
November 18, 2011 — CDJ Staff
The California Court of Appeals in Stanislaus County has reversed the decision of the lower court in Greg Opinski Construction Inc. v. City of Oakdale. The earlier court had awarded the city of judgment of $54,000 for late completion, $3,266 for repair of construction defects and interest, and $97,775 in attorneys’ fees. The late completion of the project was due to actions by the City of Oakdale, however, the court rejected Opinski’s argument that the California Supreme Court decision in Kiewit did not allow this, as his contract with the city established a procedure for claiming extensions.
The appeals court noted that the Kiewit decision has been “criticized as an unwarranted interference in the power of contracting parties to shift the risk of delays caused by one party onto the other party by forcing the second party to give the first notice of any intention to claim an extension of time based on delays caused by first.” They cited Sweet, a professor at Boalt Hall, UC Berkeley’s law school, that Kiewit “gutted” the “provision that conditions the contractor’s right to claim an extension of time for delays beyond his control.”
Further changes in California law in response to the Kiewit decision lead to the current situation which the court characterized as “if the contractor wished to claim it needed an extension of time because of delays caused by the city, the contractor was required to obtain a written change order by mutual consent or submit a claim in writing requesting a formal decision by the engineer.”
Opinski also argued that the lower court misinterpreted the contract. The Appeals court replied that “Opinski is mistaken.” He cited parts of the contract regarding the increase of time, but the court rejected these, noting that “an inability to agree is not the same as an express rejection.”
The court also rejects Opinski’s appeal that “the evidence the project was complete earlier than September 30, 2005, is weightier than the evidence to the contrary,” which they describe as “not a winning appellate argument.” The court points out that the role of an appeals court is not to reweigh the evidence, but to determine “whether the record contains substantial evidence in support of the judgment.”
The court did side with Opinski on one question of the escrow account. They rejected most of his arguments, repeating the line “Opinski is mistaken” several times. They decided that he was mistaken on the timing of the setoff decision and on whether the city was the prevailing party. However, the appeals court did find that Opinski was not liable for interest on the judgment.
The appeals court rejected the awarding of prejudgment interest to the city as the funds from which the judgment was drawn was held in an escrow account. The court noted that the city had access to the funds and could “access the funds when it determined that Opinski had breached the contract.” The appeals court noted that the judgment exhausted the escrow balance and remanded the case to the lower court to determine the amount own to Opinski.
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Quarter Four a Good One for Luxury Homebuilder
December 20, 2012 — CDJ Staff
Toll Brothers has announced that their fourth-quarter net income is $2.35 per share, which they attribute in part to an income tax benefit. Their revenue, at $632.8 million, easily exceeded analysts’ projections of $565.1 million. Additionally, their number of signed contracts jumped seventy percent while their cancellation rate dropped nearly half to 4.9 percent.
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Insurers Reacting to Massachusetts Tornadoes
August 11, 2011 — CDJ Staff
The Patriot-Ledger reports that insurers could pay out as much as $200 million to cover homes damaged or destroyed in the tornadoes that hit central and southern Massachusetts in June, 2011. Joseph Murphy, Commissioner of the State Division of Insurance didn?t foresee problems with insurers covering these claims. “At this point, there doesn’t seem to be any one company overexposed in that area,” he told the Patriot-Ledger.
Insurance executives did not think the tornadoes would cause them to raise rates. Steve Chevalier, CEO of NLC Companies, said, “it’s a major event for those impacted by it, but it’s not close to a financial hit to us.”
One insurer noted that the winter weather generated more claims; however the cumulative value of those claims was $15 million.
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