Legislatures Shouldn’t Try to Do the Courts’ Job
March 1, 2012 — CDJ Staff
David Thamann, writing in Property Casualty 360, argues that current actions by legislatures on insurance coverage amount to “legislative interference or overreach.” He notes that under current Colorado law, “a court shall presume that the work of a construction professional that results in property damage — including damage to the work itself or other work — is an accident unless the property damage is intended and expected by the insured.” He argues that here legislators are stepping into the role of the courts. “Insureds and insurers are not always going to be pleased with a court ruling, but that is the system we have.”
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Texas Windstorm Insurance Agency Under Scrutiny
April 5, 2011 — April 5, 2011 Beverley BevenFlorez - Construction Defect Journal
Representative Larry Taylor has introduced a bill in the Texas Legislature (HB 2818) that would further regulate the Texas Windstorm Insurance Agency (TWIA). According to Taylor, “In order to be adequately prepared for future hurricane seasons, it is imperative that TWIA be operating at maximum efficiency, that the Reserve Trust Fund be solvent and that the agency have adequate management measures in place to protect consumers and ensure that claims are paid in a timely manner. House Bill 2818 is an important step in the right direction toward restoring public confidence in TWIA.”
HB 2818 includes measures that would create an expert panel that would advise the commissioner on how to evaluate loss from the storm, and a greater transparency of TWIA Board meetings and actions.
In addition, the Texas Department of Insurance (TDI) has placed TWIA on Administrative Oversight. According to TDI, “While under Administrative Oversight, the Department may require its prior review and approval of executive decisions, certain expenditures, and other transactions. The insurer is required to fully cooperate with the Department and provide complete and timely disclosure of all information responsive to Department requests.”
Read the full story (Rep. Taylor’s Press Release)...
Read the full story (Texas Department of Insurance’s Press Release)...
South Carolina Contractors Regain General Liability Coverage
May 20, 2011 — CDJ Staff
PR Newswire reports that the Carolinas Associated General Contractors (CAGC) have successfully persuaded the South Carolina legislature to pass a bill restoring commercial general liability (CGL) coverage. Governor Nikki Hartley signed the legislation on May 17.
A South Carolina Supreme Court decision given on January 7, 2011, had ended commercial general liability coverage in the state. Senate Bill 431 addressed this decision, restoring the ability of home builders to obtain CGL coverage.
PR Newswire quotes South Carolina homebuilder, Allen Amsler: “We have seen a lot of legislation with substantial impact to our business over the years. However, I would place this in the same level of importance with the original tort reform legislation. The effects of the Supreme Court’s ruling could have been catastrophic to our industry in South Carolina had it not been for this bill. Thanks to all those in the House, Senate and the Governor’s office who assisted us.”
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New OSHA Fall Rules to Start Early in Minnesota
June 14, 2011 — CDJ Staff
Minnesota has elected to implement the new OSHA rules concerning fall prevention in residential construction on June 20, well before OSHA’s September 15 deadline. Brian Johnson, reporting in Finance and Commerce, quotes Pam Perri, the executive vice president of the Builders Association of Minnesota, “this is the worst time to implement a new rule.” Ms. Perri notes “In Minnesota, education time for the residential construction industry is between November and March 1, not in the middle of the construction season.”
Mike Swanson of Rottlund Homes estimated that the new regulations would add between $200 to $500 to the cost of a house and that he felt the current safety regulations were adequate. OSHA officials are quoted that there continues “to be a high number of fall-related deaths in construction.”
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Homeowner Loses Suit against Architect and Contractor of Resold Home
June 14, 2011 — CDJ Staff
The California Court of Appeals in the case of Kizor v. Architects ruled that Mr. Kizor could not make construction defect claims against the architect and contractor of his home, as the defects had caused significant damage to the former owners, and it was they, not Kizor, who could have asserted those claims.
The background of the case was that John and Miranda Redig hired BRU Architects to design a home. During construction in 2000, they wrote to the roofing supplier complaining about leaks. The leaks were caulked, but the roof continued leaking during rains. The Redigs sold their house to Kizor in 2002, with an addendum to the sale contract protecting themselves from liability for further problems with the roof. “Seller has no responsibility for the condition of the roof and stucco and buyer absolves seller of any liability in connection therewith.”
In 2006, Kizor sued the architects, contractor, and subcontractor. The defendants moved for summary judgment which was granted. Kizor appealed, and in this current court case, appeal was denied.
Read the court’s decision
Granting Stay, Federal Court Reviews Construction Defect Coverage in Hawaii
January 6, 2012 — Tred Eyerly, Insurance Law Hawaii
The federal district court ultimately stayed a construction defect case, but offered comments on the current status of coverage disputes for such defects in Hawaii. See National Union Fire Ins. Co. of Pittsburgh, Pa. v. Simpson Mfg. Co., 2011 U.S. Dist. LEXIS 128481(D. Haw. Nov. 7, 2011).
National Union filed a complaint for declaratory relief to establish it had no duty to defend or to indemnify Simpson Manufacturing Company in four actions pending in the Hawaii state courts. The state court actions concerned allegedly defective hurricane strap tie hold downs that were manufactured and sold by Simpson. The hurricane ties allegedly began to prematurely corrode and rust, causing cracking, spalling and other damage to homes.
National Union contended the underlying allegations did not constitute "property damage" caused by an "occurrence," as defined in the policies.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
No Duty to Indemnify When Discovery Shows Faulty Workmanship Damages Insured’s Own Work
November 7, 2012 — Tred Eyerly, Insurance Law Hawaii
Our post last week addressed the duty to defend when alleged faulty workmanship caused loss to property adjacent to where the insured was working. See Pamerin Rentals II, LLC v. R.G. Hendricks & Sons Constr., Inc., 2012 Wis. App. LEXIS 698 (Wis. Ct. App. Sept. 5, 2012) [post here]. Today, we report on recent developments in the same case where the court determined, despite earlier finding the insurer owed a defense, it had no duty to indemnify. Pamperin Rentals II, LLC v. R.G. Hendricks & Sons Constr., Inc., 2012 Wisc. App. LEXIS 793 (Wis. Ct. App. Oct. 10, 2012).
Hendricks contracted to “prepare the site and supply and install concrete, tamped concrete, and colored concrete” at several service stations. The owner sued Hendricks, alleging the concrete “was defective and/or the work performed was not done in a workman-like manner and resulted in damages, and will require replacement.”
Pekin Insurance Company agreed to defend Hendricks subject to a reservation of rights.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Faulty Workmanship Causing Damage to Other Property Covered as Construction Defect
September 30, 2011 — Tred Eyerley, Insurance Law Hawaii
In yet another recent construction defect case, the Illinois Court of Appeal found for coverage. See Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 Ill. App. Ct. LEXIS 872 (Ill. Ct. App. Aug. 15, 2011).
Weather-Tite, Inc. hired Larson as a subcontractor to apply sealant to windows installed by Weather-Tite in a condominium building. The windows subsequently leaked and caused water damage. The homeowner’s association sued Weather-Tite for breach of express and implied warranties. Weather-Tite filed a third-party complaint against Larsen alleging that, if it was liable to the association for breach of warranty, Larsen was liable for contribution as a joint tortfeasor. Weather-Tite and Larsen both tendered defenses to Milwaukee Insurance. The tenders were denied and Milwaukee Insurance filed suit to determine rights under the policy.
Cross-motions for summary judgment were filed by all parties. The trial court granted Milwaukee Insurance’s summary judgment motion as to Weather-Tite, but granted Larsen’s cross-motion against Milwaukee Insurance.
On appeal, the appellate court considered whether the underlying pleadings alleged facts demonstrating "property damage" resulting from an "occurrence" within the terms of the policy.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Judge Kobayashi Determines No Coverage for Construction Defect Claim
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
Judge Kobayashi of the U.S. District Court, District of Hawaii, largely followed earlier precedent established by Judge Mollway in finding no coverage for construction defect claims. See Evanston v. Nagano, 2012 WL 3800320 (D. Hawaii Aug. 31, 2012).
Evanston issued several liability policies to the insured contractor from 2002 and 2011. The insured entered a contract to build a residence in Honolulu. The homeowners were not happy with their home after the work was completed. They filed suit, alleging that the project was delayed and the construction was "riddled with defects." The complaint included claims for breach of contract and breach of warranties. Negligence was not alleged. Evanston defended, but under a reservation of rights.
Evanston filed suit for a declaratory judgment and moved 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
Policing Those Subcontractors: It Might Take Extra Effort To Be An Additional Insured
June 14, 2011 — Douglas Reiser, Builders Council Blog
I just came across a case that I think truly paints the insurance dilemma for contractors. Thanks to this recent Illinois case, I don’t have to make up any factual scenarios—so kudos to Attorney Robert Boylan for posting it.
In reading over my RSS feeds this weekend, I noticed a great writeup on long-time blogger Josh Glazov’s Construction Law Today. Attorney Robert Boylan’s post describes a recent Illinois case where a general contractor was denied its additional insured status on a second-tier subcontractor’s insurance. The reason for the denial: the general contractor failed to procure an agreement in writing with the second-tier subcontractor, requiring it to be listed as an additional insured.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Virginia Chinese Drywall and pollution exclusion
May 27, 2011 — CDCoverage.com
In Nationwide Mut. Ins. Co. v. The Overlook, LLC, No. 4:10cv69 (E.D. Va. May 13, 2011), homeowner Edmonds sued insured developer/general contractor Overlook seeking damages resulting from defective Chinese drywall installed in Edmonds’ home. Overlook’s CGL insurer Nationwide defended Overlook under a reservation of rights and filed a declaratory judgment action. The federal district trial court granted Nationwide’s motion for summary judgment.
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Reprinted courtesy of CDCoverage.com
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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Another Colorado District Court Refuses to Apply HB 10-1394 Retroactively
October 28, 2011 — David M. McLain, Colorado Construction Litigation
In Martinez v. Mike Wells Construction Company, 09CV227, Teller County District Court Judge Edward S. Colt refused to apply C.R.S. § 13-20-808 retroactively to provide coverage for the underlying construction defect allegations. According to the recitation of facts in Judge Colt’s March 2011 order, Martinez contracted with Mike Wells Construction to serve as the general contractor for the construction of a home. At that time, Mike Wells Construction was insured through ProBuilders Specialty Insurance Company, RRG. Disputes arose between Martinez and Mike Wells Construction, resulting in Martinez ordering it off of the project in mid-November 2007 and terminating its right to work there by letter dated November 28, 2007.
Mike Wells, the owner of the corporation, subsequently died. Martinez sued Mike Wells Construction in July 2009 for breach of contract and various claims relating to alleged defecting workmanship. Martinez provided notice of the suit to the special administrator of the probate estate. No answer having been filed, the court entered a default judgment against Mike Wells Construction and Martinez sought to garnish Mike Wells Construction’s ProBuilders insurance policy.
Read the full story...
Reprinted courtesy of Higgins, Hopkins, McLain & Roswell, LLC. Mr. McClain can be contacted at mclain@hhmrlaw.com
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
Application of Efficient Proximate Cause Doctrine Supports Coverage
January 6, 2012 — Tred Eyerly, Insurance Law Hawaii
Relying on the efficient proximate cause doctrine, the court determined coverage potentially existed for damage caused by water. Union Sav. Bank v. Allstate Indem. Co., 2011 U.S. Dist. LEXIS 134398 (S.D. Ind. Nov. 21, 2011).
The Tods purchased property that was mortgaged by Union Savings. The Tods obtained a Landlords Policy for the property from Allstate. When the Tods were in default on their loan, Union Savings notified them that foreclosure proceedings would commence. Union Savings sent an appraiser to the property who discovered water in the basement. Water and electricity to the building were off. Union Savings notified Allstate and later filed a formal claim under the mortgagee clause in the Landlords Policy. This clause stated, "A covered loss will be payable to the mortgagees named on the policy declaration. . . ."
Allstate denied coverage, citing exclusions for water damage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Courts Are Conflicted As To Whether "Good Faith" Settlement Determinations Can Be Reviewed Via Writ Petition Or Appeal
July 10, 2012 — Stephen A. Sunseri and Aarti Kewalramani, Gatzke Dillon & Ballance LLP
The Court of Appeal, Second District, Division Three, ruled in Oak Springs Villas Homeowners Association v. Advanced Truss Systems, Inc., et al., (June 14, 2012, B234568) __ Cal.App.4th __ [2012 WL 2149923], that a non-settling defendant cannot appeal a trial court's good faith settlement determination. Instead, a non-settling defendant may only file a petition for writ of mandate pursuant to Code of Civil Procedure section 877.6 to challenge a good faith determination. This decision comes on the heels of a 2011 ruling in Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, which found that a writ petition is not the sole means of challenging a trial court's good faith settlement determination.
In Oak Springs Villas, supra, the condominium homeowners' association sued a developer, general contractor, and various subcontractors for alleged construction deficiencies and resultant property damage. The association eventually settled with the developer, but not with a truss manufacturer. The trial court approved the developer's motion for good faith settlement determination, and the truss manufacturer immediately appealed, instead of filing a writ petition. On appeal, the developer argued the good faith determination was not an appealable order. The truss manufacturer argued Cahill applied, as well as an older case, Justus v. Atchison (1977) 19 Cal.3d 564, which allowed for appeals when no remaining issues exist as to the appealing party.
The Court of Appeal ruled in the developer's favor and declined to follow Cahill, stating the truss manufacturer should have filed a writ petition, as expressly required under Section 877.6, subdivision (e). The Court also believed Justus was inapplicable because a non-settling party should not be allowed to have two review opportunities ?Äì one after an adverse good faith ruling, and then another after the ultimate conclusion of the case.
However, the greater effect is that Cahill and Oak Springs Villas simultaneously stand in conflict and appear to be valid law. One case allows for an appeal of a good faith settlement determination, while the other requires strict adherence to the statute. The Supreme Court is likely to review the issue. In the meantime, parties challenging good faith rulings are advised to consult the statutory requirements under Section 877.6, subdivision (e).
Printed courtesy of Stephen A. Sunseri and Aarti Kewalramani, Gatzke Dillon & Ballance LLP. Mr. Sunseri can be contacted at ssunseri@gdandb.com and Ms. Kewalramani can be contacted at akewalramani@gdandb.com.
Australian Developer Denies Building Problems Due to Construction Defects
June 15, 2011 — CDJ Staff
The Sunland Group, the developer, is objecting to claims that it is responsible for corrosion damage in a residential building in Gold Coast, Australia, as reported in the Courier & Mail. Residents of Q1, the world’s tallest residential tower, are suing the developer, claiming that defects and corrosion “compromise the long-term durability and appearance of” the six-year-old building.
The developer has not only denied that there are defects in the building, but has also stated that the construction contract “did not warrant that the construction would be defects-free.” Sunland claimed that corrosion was due to the homeowners association having “failed to carry out the maintenance requirements.”
Repair of the building is expected to cost millions of dollars. Sunland denies that it should pay any of that.
Read the full story…
Nevada Construction Defect Lawyers Dead in Possible Suicides
March 28, 2012 — CDJ Staff
A number of news sources have reported on the recent death of Nevada construction defect attorney, Nancy Quon. Ms. Quon was implicated in a recent scandal in which a group conspired to control homeowner associations in order to divert construction defect lawsuits to the members of the conspiracy.
Ms. Quon was found dead in her bathtub. The details are still under investigations. She and her boyfriend were accused of a failed arson/suicide scheme in 2010. Ms. Quon survived an attempt to burn down her home. Subsequently, her boyfriend obtained some gamma-hydroxybutyric acid (GBH) for her, as part of another failed suicide attempt.
Subsequent to Ms. Quon’s death, David Amesbury was found in California dead by hanging. Mr. Amesbury took a plea deal in the case, and he had admitted his role in providing legal and construction contracts to firms in the conspiracy. He was accused of fixing HOA elections.
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