ANAHEIM CALIFORNIA CONSTRUCTION EXPERT WITNESS
DIRECTORY AND CAPABILITIES

Construction Defect Lawsuits? There’s an App for That

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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More Charges in Las Vegas HOA Scandal

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.

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Insurer Must Cover Construction Defects Claims under Actual Injury Rule

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

Nevada District Court Dismisses Case in Construction Defect Coverage Suit

The United States District Court of Nevada has dismissed a case filed by Maryland Casualty Company against National Fire & Marine Insurance Company. This case follows a case in which National was sued over “200 causes of action arising out of 193 separate insurance coverage disputes related to 75 different insureds and 163 unrelated construction defect or Chapter 40 proceedings across seven states.” The judge in this initial case severed the plaintiffs, as he found that allowing joinder “would make this case impossible to manage.” In this particular instance, National seeks to have the claims made by Maryland Casualty dismissed.

Maryland Casualty alleged that for insurance policies issued to 38 companies, National was obligated to defend the insured. National was, according to the plaintiff, named as defendants in 72 unrelated lawsuits to which National disclaimed coverage. However, the court found that Maryland Casualty failed “to provide enough detail regarding the relevant property damage, policies, claims, and time periods.” The court found that Maryland failed to “state a claim upoin which relief can be granted.

The court also found that “the Complaint lacks any well-pled allegations from which the Court could conclude the Plaintiff has standing since the Complaint is devoid of information about the specific policies at issue.

The court did allow Maryland Casualty up to September 3, 2012 in which to file an amended complaint.

Read the court’s decision…

Does the New Jersey Right-To-Repair Law Omit Too Many Construction Defects?

A post on the blog of Liberty Building Forensics Group find fault with the New Jersey Home Warranty and Builders’ Registration Act for not being stringent enough. The poster notes the coverage given under the bill. In the first year, builders are responsible to remedy faulty workmanship and materials and major structural defects. While other protections expire in the first or second year, there is a ten year coverage of major construction defects.

The blogger finds fault with the exclusion New Jersey law places on these claims, arguing that “due to the stringent definition of ‘major construction defects,” the warranty affords no coverage unless the house is practically collapsing.” The bill excludes leaks, cracks, and mold, and further limits claims if the homeowner has failed to inform the builder or insurer of defects, failure to maintain the home, and alterations made by the homeowner.

The intent of the New Jersey law is given as “requiring that newly constructed homes conform to certain construction and quality standards as well as to provide buyers of new homes with insurance-backed warranty protection in the event such standards are not met.” It’s argued in the piece that it instead serves to “strip homeowners of any meaningful means of recovery for discovered construction defects.”

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The King of Construction Defect Scams

Echoing Businessweek, the Las Vegas Sun agrees that the Nevada HOA scandal is the “king of all Vegas real estate scams,” and says that the Nevada legislatures should take action. The Sun notes that the case involves only 12 out of 2,356 HOAs in Southern Nevada.

To date, 25 people have plead guilty in the case. At the center were an attorney and contractor who allegedly referred work to each other. To enable this, they assembled a wider conspiracy of people who enriched by the process. In the words of the Sun, those involved “upended the concept of a ‘common interest’ community.”

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Certificate of Merit to Sue Architects or Engineers Bill Proposed

North Carolina may become the twelfth state to require a Certificate of Merit to sue an architect or engineer. If North Carolina Senate Bill 435 (SB435) passes, then plaintiffs when filing a complaint will need to also attach an affidavit of a third-party licensed professional engineer or architect stating that the case has merit.

SB435 is a short two pages in its current form. The bill states that the “third-party licensed professional engineer or licensed architect shall (i) be competent to testify and hold the same professional license and practice in the same area of practice as the defendant design professional and (ii) offer testimony based upon knowledge, skill, experience, education, training, and practice. The affidavit shall specifically state for each theory of recovery for which damages are sought, the negligence, if any, or other action, error, or omission of the design professional in providing the professional service, including any error or omission in providing advice, judgment, opinion, or a similar professional skill claimed to exist and the factual basis for each such claim. The third-party licensed professional engineer or licensed architect shall be licensed in this State and actively engaged in the practice of engineering or architecture respectively.”

A few of the amendments allude to disciplining design professionals who certify civil actions that are without merit. The bill has been referred to the Committee on Judiciary I.

While North Carolina is considering enacting a Certificate of Merit law, eleven other states already require one, including Arizona, California, Colorado, Georgia, Maryland, Minnesota, New Jersey, Oregon, Pennsylvania, South Carolina, and Texas. Christopher D. Montez, a partner with Thomas, Feldman & Wilshusen, LLP, has written a useful summary for each state’s certificate of merit scheme.

Read the text of SB435

Track the progress of SB435

Read more from Christopher D. Montez’s article on Thomas, Feldman & Wilshusen, LLP site

Steps to Defending against Construction Defect Lawsuits

Writing in Claims Journal, Bryan Rendzio notes that the decline in construction has not been matched by a decline in construction defect lawsuits over condominiums. He reviews the ways in which lawyers representing developers can help protect their clients. He identifies four important considerations in defending developers from claims of construction defects.

He advocates a careful review of the contract. “Under a breach of contract claim, the insured’s duties to the party who brought the claim against the insured flow from the contract. Commonly, construction contracts limit the scope of recoverable damages, such as by waiving consequential damages.’

The next step, according to Rendzio is to check of a settlement agreement is already in place, noting that these are “a familiar occurrence in the construction industry, regardless of any lawsuits having been filed.”

He considers the statute of repose “the single-most decisive weapon an insured possesses in its arsenal during a condo defect lawsuit.” He notes that no lawsuits can be brought for construction defects after the end specified by the statute of repose, and if a lawsuit is brought beforehand, no additional parties can be named once the statute has taken effect.

Finally, he warns adjusters to be suspicious when a condo association requests contractual indemnification. He notes that the pitfall in this is that developers and the subsequent condominium association often have similar names, given the theoretical example of a condo project built by “Fake Lakes LLC” and later run by the “Fake Lakes Condominium Association.” Writing in regards to Florida law, he notes that condominium associations do not have successor interest in contracts developers made with contractors.

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Arizona Supreme Court Confirms Eight-Year Limit on Construction Defect Lawsuits

Acting on the case of Albano v. Shea Homes Ltd. Partnership, the Arizona Supreme Court has ruled that Arizona’s eight-year statute of repose applies. The case was referred to the court by the Ninth Circuit Court of Appeals which had asked for a clarification of Arizona law. The case focused on three questions:

1. Does the filing of a motion for class certification in an Arizona court toll the statute of limitations for individuals, who are included within the class, to file individual causes of action involving the same defendants and the same subject matter?2. If so, does this class-action tolling doctrine apply to statutes of repose, and more specifically, to the statute of repose for construction defects set forth in Arizona Revised Statutes ("A.R.S.") § 12-552?3. If the doctrine applies to statutes of repose, and specifically § 12-552, may a court weigh the equities of the case in determining whether, and to what extent, an action is tolled?

The litigation at hand has a lengthy history, starting with a case referred to as “Hoffman” in 2003. The Albano plaintiffs were not able to join in Hoffman, and they filed their own lawsuit in 2006. An additional lawsuit was filed by the Albano plaintiffs in 2007. The courts decided that the Albano plaintiffs’ lawsuit was untimely.

The Arizona Supreme Court concluded that the statute of repose was the appropriate standard for this case. They noted that “the eight-year statute of repose period began to run on November 6, 1997, the date of the Town of Gilbert’s final inspection. Albano II was filed on November 5, 2007.”

The court found that the plaintiffs had waited too long for start their suit. As a result, they found it unnecessary to answer the first or third questions. Justice A. John Pelander of the Arizona Supreme Court wrote the opinion, dated June 30, 2011.

Read the court’s decision…

New Web Site Tracks Settled Construction Defect Claims

Peter Lissner, a former Nevada homebuilder, has created a new site to help track homes that have been involved in construction defect litigation. His site, housefaxreview.com, collections documentation about homes where claims of construction defects have been made. He told The Builders Magazine concerns about “the number of homes that have been served notices, received compensation, yet the homes weren’t repaired.” On the site, the creator is identified as “a family owned builder.” According to the site, “the builder had no claims until the neighborhood reached the statutory claims limit 10 years.”

Lissner also claims that in many cases, after settling construction defect lawsuits, the homeowners sell to subsequent buyers without disclosing the lawsuit or their failure to repair. “Who is going to let the new homeowner know about the issue?” he asks.

Documents on the site are priced according to their relevance. Lissner notes that those who provide documents to the site will receive free access.

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Illinois Court Determines Insurer Must Defend Negligent Misrepresentation Claim

Although the insureds disclosed flooding problems in the basement, the buyers purchased their home. USAA Cas. Ins. Co. v. McInerney, 2011 Ill. App. LEXIS 1130 (Ill Ct. App. Oct. 31, 2011). In a supplemental disclosure, the insureds reported that during heavy rains light seepage occurred in the basement.

After moving in, the buyers experienced significant water infiltration and flooding in the basement. The buyers and their children also began to experience mold-related illnesses.

The buyers sued for rescission of the contract or, in the alternative, damages. They alleged breach of contract, fraudulent misrepresentation and negligent misrepresentation. In the claim for negligent misrepresentation, the buyers alleged that the insureds carelessly omitted the fact that there were material defects in the basement and foundation when they should have known of such defects.

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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com

Court Will Not Compel Judge to Dismiss Construction Defect Case

The Fourteenth Court of Appeals of Texas has denied a petition for a writ of mandamus. The parties involved, Bonner Ball, Thomas Zenner, and Rallin Welch, are lmited partners of Black Diamond Builders, LLP. Black Diamond is the recipient of a lawsuit from Grier and Camille Patton, for whom Black Diamond built a home. The Pattons are alleging construction defects.

The Black Diamond partners argue that Judge Jeff Shadwick, presiding judge of the 55th District Court of Harris County, Texas should have granted their motion to dismiss. They sought to have the Fourteenth Court of Appeals compel that action.

The Black Diamond Partners claims that “the homowners failed to satisfy statutory prerequisites before filing suit, and dismissal of the suit was automatic under the applicable statues in effect at the time the Pattons noticed alleged defects in their home.”

The court noted that “a trial court will be held to have abused its discretion only if the party requesting mandamus relief establishes that the trial court could have reached but one decision.” The court did not concur with this and denied the petition for a writ of mandamus.

Read the court's decision…

Don MacGregor To Speak at 2011 West Coast Casualty Construction Defect Seminar

“Challenges for Experts in Construction Defect Claims and Litigation” will be held Thursday May 13, 2011 between 1:30 and 3:00 PM at this year’s West Coast Casualty Construction Defect Seminar. Among the various topics covered will be of Right to Repair/Opportunity to Repair statutes, improper testing methodologies, new challenges where a case involves a Wrap Policy, OCIPS, CCIPS, and other owner controlled insurance programs, as well as the need for realistic testing protocols for the party the expert is retained to represent.

During the presentation Mr. MacGregor will be working in connection with a group of construction and design experts each of which have extensive experience with construction defect and claims related litigation. This particular session is expected to attract a standing-room only crowd, drawing in excess of 1700 attendees.

The West Coast Casualty Construction Defect Seminar is the largest seminar of its type. This year’s event is scheduled for will take place on May 12 and 13, 2011, at The Disneyland Hotel and Resort. For more information regarding the years event please visit http://www.westcoastcasualty.com/dyncat.cfm?catid=3322

Lockton Expands Construction and Design Team

Lockton Companies, LLC, the largest privately held independent insurance broker, has announced that it is expanding its construction and design team with the hiring of Karen Erger and Tom Miller.

Ms. Erger will provide professional liability practice management, loss prevention, contract and complex claims management consulting services to Lockton's architectural, engineering and construction clients in her role as Vice President, Director of Practice Management. Her background includes construction litigation at a leading construction law firm, professional liability claims defense and claims consulting for major professional liability underwriters.

Miller joins Lockton as a Senior Vice President within the Design and Construction Unit. His role will be dedicated to serving the needs of engineering, architecture and construction firms performing services around the globe. He has spent more than 15 years concentrating on professional liability for design professionals and contractors in multiple roles. He previously managed the professional liability underwriting of one of the largest construction insurers and has developed numerous manuscript insurance products as well as focused on strategic planning to enhance business unit opportunities.

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Developer’s Fraudulent Statements Are His Responsibility Alone in Construction Defect Case

The Texas Court of Appeals ruled on December 21 in the case of Helm v Kingston, a construction defect case. After purchasing what was described as “an extremely well-built” two-bedroom townhouse, Mr. Kingston made complaints of construction defects. Greenway Development did not repair the defects to Kingston’s satisfaction, and he filed notice of suit. In his suit, he claimed that GDI and its president, John Helm, had committed fraud and negligent misrepresentation. Kingston claimed that Helm “fraudulently induced Kingston to believe that the townhouse evidenced the highest quality of workmanship when in fact the quality of workmanship was atrocious.” Helms brought a counterclaim that Kingston’s suit was frivolous.

About four years after Kingston purchased the townhome, the suit proceeded to trial. The trial court determined that Helm was not “liable in his individual capacity,” but this was reversed at appeal.

A second trial was held ten years later on the question of whether Kingston’s unit was a townhome or an apartment. A jury found that Helm “engaged in a false, misleading or deceptive act or practice that Kingston relied on to his detriment.” Kingston was awarded $75,862.29 and an additional $95,000 in attorney fees by the jury. Helms made an unsuccessful appeal to the Appeals Court, after which Kingston was awarded an additional $10,000. Helms then made an unsuccessful appeal to the Texas Supreme Court, which lead to an additional $3,000 for Kingston. There was also a verdict of $48,770.09 in pre-judgment interest and “five percent post-judgment interest accruing from the date of the judgment until the time the judgment is paid. Helm appealed.

In his appeal, Helm raised seven issues, which the court reorganized into five Kingston raised one issue on cross-appeal.

Helms’ first claim was that Kingston “failed to satisfy the requirement of” Texas’s Residential Construction Liability Act and that by not filing under the RCLA, Kingston’s fraud and misrepresentation claims were preempted. Further Helms claimed that the RCLA limited Kingston’s damages. The court rejected this, as the RCLA deals with complaints made to a contractor and not only did Helm fail to “conclusively establish” his “status as a ‘contractor’ under the statutory definition,” Helm testified that he was “not a contactor” at the pre-trial hearing.

Helms’s second claim was that Kingston’s later claim of a misconstructed firewall should be barred, claiming that Kingston “‘had knowledge of a defect in the firewall’ as early as 1997 but did not assert them until 2007.” The court rejected this because Kingston’s claim was that “Helm ‘fraudulently induced Kingston to believe that the townhouse evidenced the highest quality of workmanship when in fact the quality of the workmanship was atrocious.’”

Helms also challenged whether his statements that the residence was of “good quality” constituted fraud and misrepresentation under Texas’s Deceptive Trade Practices-Consumer Protection Act. The court concluded that Helm was in a position to make knowledgeable statements and further that “residential housing units are not artistic works for which quality is inherently a matter of subjective judgment.” Helm also claimed that Kingston could have avoided certain repair expenses through the “exercise of reasonable care.” Helms argued that the repairs could have been made for $6,400. The court disagreed, as these claims were cited only to invoke the DTPA, and that later petitions established additional defects.

Helms’s next claim was that he was not allowed to designate responsible third parties. The court rejected this because there GDI represented matters concerning the residence only through Helm’s statements. The court noted that “Helm is correct that?third parties may be liable for fraud if they ‘participated in the fraudulent transactions and reaped the benefits,’” but they note that “Helm never specifically alleged that GDI or CREIC participated in Helm’s alleged fraudulent transactions.

The final issue in the decision was about court costs, and here the court denied claims on both sides. Helm argued that the award of legal fees were excessive, as they exceeded the actual damages. The court noted that they “may not substitute our judgment for that of the jury,” and also that “the ratio between the actual damages awarded and the attorney’s fees is not a factor that determines the reasonableness of the fees.” But the court also rejected Kingston’s claim for post-judgment interest on $10,312.30 that Helm had deposited in the trial court’s registry. The court noted that the monies were to be paid out upon final judgment, but the mandate did not include any reference to interest.

Read the court’s decision…

Construction Defects Leave Animal Shelter Unusable

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.

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Former New York Governor to Head Construction Monitoring Firm

David Paterson, who succeeded Eliot Spitzer as Governor of New York, has started a new venture after leaving the Governor’s office in construction integrity monitoring. WNYC reports that Paterson will be the majority owner of Icon Compliance Services, LLC, which will both conduct investigations and work with law enforcement officials. Paterson says that in government projects “often concessions are made for political reasons in the public sector and then you never really get a product that you paid for.”

Paterson will be working with a former vice president of Bovis Construction, Brian Aryai, who is also a former U.S. Treasury Agent. Aryai said that “it is astounding that some of the fraud that has come to the surface in the recent past,” and describes it as “almost laughable they were not detected.” Aryai tipped federal prosecutors that Bovis had been over billing on projects for at least a decade.

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Construction Defect Destroys Home, Forty Years Later

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.

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