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.
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Florida Construction Defect Case Settled for $3 Million
June 19, 2012 — CDJ Staff
The Runaway Beach Club Condominium Association of Kissimmee, Florida has settled its construction defect claims against the parties involved in the construction and development of the buildings. The association claimed that defective roofs and improperly installed windows had lead to leaks and associated damages. A trial date had been set, but parties involved were able to reach this settlement instead.
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Supreme Court of Oregon Affirms Decision in Abraham v. T. Henry Construction, et al.
April 20, 2011 — April 20, 2011 Beverley BevenFlorez - Construction Defect Journal
After reviewing the decision in Abraham v. T. Henry Construction, et al., the Oregon Supreme Court affirmed that a tort claim for property damage arising from construction defects may exist even when the homeowner and the builder are in a contractual relationship.
When the case was initially filed, the plaintiffs alleged breach of contract and negligence. The defendants moved for summary judgment arguing that one, the claim was barred by the six-year statute of limitations and two, no special relationship (such as one between a doctor and patient) existed. The court agreed with the defendants. However, the Court of Appeals while affirming the trial court’s decision on breach of contract reversed the decision on negligence. The Court of Appeals stated that an administrative or statute rule could establish a standard of care independent from the contract.
The Oregon Supreme Court gave an example of cases where a tort claim could exist when a contract is present: “If an individual and a contractor enter into a contract to build a house, which provides that the contractor will install only copper pipe, but the contractor installs PVC pipe instead (assuming both kinds of pipe comply with the building code and the use of either would be consistent with the standard of care expected of contractors), that failure would be a breach of contract only. […] If the failure to install the copper pipe caused a reduction in the value of the house, the plaintiff would be able to recover that amount in an action for breach of contract. […] On the other hand, if the contractor installed the PVC pipe in a defective manner and those pipes therefore leaked, causing property damage to the house, the homeowner would have claims in both contract and tort. […] In those circumstances, the obligation to install copper instead of PVC pipe is purely contractual; the manner of installing the pipe, however, implicates both contract and tort because of the foreseeable risk of property damage that can result from improperly installed pipes.”
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Arbitrator May Use Own Discretion in Consolidating Construction Defect Cases
September 1, 2011 — CJD Staff
The Mississippi Court of Appeals has ruled in the case of Harry Baker Smith Architects II, PLLC v. Sea Breeze I, LLC. Sea Breeze contracted with Harry Baker Smith Architects II, PLLC (HBSA) to design a condominium complex, which would be built by Roy Anderson Corporation. All parties agreed to arbitration.
Subsequently, Sea Breeze alleged defects and sought arbitration against the architectural firm and started a separate arbitration proceeding against the contractor. The special arbitrator appointed by the American Arbitrators Association determined that it would be proper to consolidate the two actions “since they arose from a common question of fact or law.” HBSA filed in chancery court seeking injunctive relief and a reversal of the decision. Sea Breeze and Roy Anderson filed a motion to compel the consolidated arbitration.
The court noted that the special arbitrator “established that the contract between Sea Breeze and Roy Anderson expressly allowed for consolidation of the two cases.” Further, the arbitrator “concluded that HBSA expressly agreed to consolidation by written consent through its 2008 letter, through which it insisted upon Roy Anderson’s involvement ‘in any mediation and/or arbitration.’”
The court concluded that the chancery court “did not have the power to fulfill HBSA’s request.” The court affirmed the chancery court’s judgment.
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Construction Company Head Pleads Guilty to Insurance and Tax Fraud
December 20, 2012 — CDJ Staff
The former head of Orients Construction Company and of Melrose Construciton Company, Herlindo Garcia-Merlos, has entered a guilty plea to charges that the gave false informoation to his insurer, New Jersey Manufacturers Insurance Group, for more than three years in order to lower his workers compensation payments. Mr. Garcia-Merlos was able to underpay by more than $315,000 as a result of this deception.
Mr. Garcia-Merlos additionally failed to file tax returns for his companies and underreported his wages on his own tax returns. The State of New Jersey is seeking an eight-year prison term and restitution of more than $400,000.
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New Safety Standards Issued by ASSE and ANSI
March 28, 2012 — Melissa Dewey Brumback, Construction Law North Carolina
The American National Standards Institute (ANSI) and the American Society of Safety Engineers (ASSE) have recently announced their approval of two new safety standards to enhance construction site safety.
The two new standards, which are set to take effect during June 2012, are the ANSI/ASSE A10.1-2011 Pre-Project and Pre-Task Safety and Health Planning for Construction and Demolition Operations, and the ANSI/ASSE A10.26-2011 Emergency Procedures for Construction and Demolition Sites.
The new A10.1-2011 standard was designed to assist construction owners, contractors, and designers by ensuring that safety and health planning were standard parts of their pre-construction planning. It is also intended to help owners of construction sites to establish a process for evaluating constructor candidates with regard to their safety and health performance planning.
The A10.26 standard applies to emergency situations, including fires, collapses, and hazardous spills. The standard deals with emergency rescue, evacuation, and transportation of injured workers, and also plans for coordinating with emergency medical facilities ahead of potential disasters.
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Reprinted courtesy of Melissa Dewey Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
New Construction Laws, New Forms in California
July 10, 2012 — CDJ Staff
New construction laws came into effect in California on July 1. Writing for the Martindale-Hubble Legal Library, Glenn Mau, J. Michael McGuire, and John Tonsing, all of Archer Norris, discuss these changes. They note that the most important part of the changes to California construction law is that “all mechanics liens, stop notices and bond claims recorded after July 1, 2012 must use the new standardized forms and follow the new definitions, notice prerequisites and statutory release form language.”
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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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After $15 Million Settlement, Association Gets $7.7 Million From Additional Subcontractor
November 7, 2012 — CDJ Staff
The stucco subcontractor for a condominium complex did not join in with the other defendants in a settlement of more than $15 million, preferring to take the case to a jury trial. That jury has found the stucco installer liable for $7.7 million to make repairs. Mark Wiechnik of Herrick Feinstein LLP wrote about the case on the Lexology web site. Mr. Wiechnik notes that the jury was shown “samples of rotted wood taken from the property as well as numerous pictures of damage resulting from the various defects.”
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No Coverage for Counterclaim Alleging Construction Defects Pled as Breach of Contract
September 13, 2012 — Tred Eyerley, Insurance Law Hawaii
The Colorado Court of Appeals considered whether counterclaims against the insured for alleged faulty construction work were based in contract or constituted allegations of an "accident" under the policy. TCD, Inc. v. Am. Family Mutual Ins. Co., 2012 WL 1231964 (Colo. Ct. App. April 12, 2012).
The developer, Frisco Gateway Center, LLC, contracted with TCD, the general contractor, to construct a building. TCD, in turn, subcontracted with Petra Roofing to install the roof. The subcontract required Petra to "indemnify, hold harmless, and defend" TCD against claims arising out of resulting from the performance of Petra's work on the project. Petra was also required to name TCD as an additional insured on its CGL policy.
After a dispute arose between TCD and Gateway regarding payment and performance on the project, TCD sued Gateway and other parties seeking payment. Gateway counterclaimed against TCD for breach of contract and negligence. TCD demanded coverage from Petra's insurer, but coverage was denied.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Lockton Expands Construction and Design Team
July 19, 2011 — CDJ Staff
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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Green Buildings Could Lead to Liabilities
March 28, 2012 — CDJ Staff
Attempts to build “green,” reducing energy costs and increasing the use of sustainable building materials, may lead to more lawsuits, according to a report issued by the British Columbia Construction Association. The report warned those who were going to build green look into the implications. The report looked at the result of green building practices and requirements adopted in the United States.
The report warns that “the use of novel, less harmful building material or new construction techniques may give rise to liability due to: contractor inexperience with installation; lack of long-term evaluation of green materials; lack of understanding of how new building materials may impact existing traditional building systems; or warranties provided unintentionally about the durability or effectiveness of unproven materials or techniques.”
Manley McLachlan, president of the BCAA noted that they are aware of “legal action around the performance of the buildings,” noting that while fast-growing trees help toward LEED certification, their wood is more prone to mold. He also felt that low-VOC paints needed more testing to prove their durability as exterior finishes.
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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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Nevada Budget Remains at Impasse over Construction Defect Law
June 1, 2011 — CDJ Staff
Negotiations for the Nevada state budget have stalled over proposals to amend the state’s construction defect laws. Assembly Republicans had offered changes to the law to make it friendlier to contractors; however, after a state Supreme Court ruling that the state could not move a local government entity’s funds into state coffers, pressure has increased on the governor to lift the expiration dates of taxes approved in 2009.
The Reno Gazette-Journal quotes John Madole, a construction industry lobbyist, “We agree with them that you have to address the issue of the attorney fees, and for all practical purposes, they are automatically awarded when anybody brings any kind of suit.”
Speaker of the Assembly, John Oceguera, a Democrat, has proposed a bill that “makes it absolutely crystal clear that the only time you get attorney's fees is if you're the prevailing party.”
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Bill Seeks to Protect Legitimate Contractors
December 20, 2012 — CDJ Staff
The California construction industry sees Senate Bill 863 as a needed help to legitimate construction businesses. The bill introduces regulations that will help shut down fraudulent contractors and help reduce workers’ compensation fraud. John Upshaw of the Independent Roofing Contractors of California described the revenue lost to California and other states as “phenomenal,” saying that “we need to continue the coordinated efforts if we are to see true workers’ compensation reform.”
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One Colorado Court Allows Negligence Claim by General Contractor Against Subcontractor
December 20, 2012 — Heather Anderson , Higgins, Hopkins, McLain & Roswell
Judge Paul King of the Douglas County District Court recently confirmed that subcontractors in residential construction owe an independent duty, separate and apart from any contractual duties, to act without negligence in the construction of a home in Colorado. See Order, dated September 7, 2010, Sunoo v. Hickory Homes, Inc. et al., Case No. 2007CV1866; see alsoCosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo. 1983); A.C. Excavating v. Yacht Club II Homeowners Ass’n, Inc., 114 P.3d 862 (Colo. 2005). He also verified that the holding in the B.R.W. Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004)[1] case does not prohibit general contractors, such as Hickory Homes, from enforcing a subcontractor’s independent duty to act without negligence in the construction of a home.
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Reprinted courtesy of Heather Anderson, Higgins, Hopkins, McLain & Roswell, LLC. Ms. Anderson can be contacted at anderson@hhmrlaw.com
Judge Okays Harmon Tower Demolition, Also Calls for More Testing
August 2, 2012 — CDJ Staff
Vegas.Inc reports that Clark County District Court Judge Elizabeth Gonzalez has permitted the demolition the tower, which MGM Resorts has claimed is a safety hazard. Perini Building Co. claims that the building does not need to be demolished. CityCenter claims that repairing the building would take nearly a year longer than a demolition and cost about $200 million. Further, CityCenter assumes that the building’s reputation would cost it another $30 million.
Subsequently, Judge Gonzalez ruled that the pattern of destructive testing would not support a claim that there were an estimated 1,400 defective items in the building. An attorney for CityCenter, Steve Morris, has suggested that they may seek more testing, impossible to do once the building is demolished. CityCenter issued a statement that “nearly every time CityCenter has chipped away concrete to review structural work at the Harmon, we have found defects.” They describe the building as “unusable.”
Tutor Perini contends that it “remains confident that it will prevail when the issues of safety, reparability and responsibility for the issues facing the Harmon tower are considered.
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Discovery Ordered in Nevada Construction Defect Lawsuit
August 16, 2012 — CDJ Staff
Gemstone LVS was sued by the Manhattan Homeowners Association in Las Vegas, after which Chartis Specialty Insurance informed Gemstone that they “had no duty to defend or indemnify Gemstone under the Commercial Umbrella Liability Policy.” Gemstone “asserts that at the time the Policy was purchased, it was understood that Chartis would provide insurance coverage for a construction defect lawsuit” and now seeks discovery “to prove Chartis’ bad faith purpose in drafting an illusory Policy.”
The opinion notes that “the Court conducted a preliminary peek at the pending motion for partial summary judgment and finds that Chartis has not made the strong showing necessary to support the requested stay.” Further, the court notes that “when ambiguity in the language of a policy exists, the court may consider not only the language of the policy but also the ‘intent of the parties, the subject matter of the policy, and the circumstances surrounding its issuance.’” The court concludes that “this type of discovery is relevant to understanding the intent of the parties, more specifically, whether it was understood that Chartis would provide insurance coverage given the construction defect lawsuit.”
Accordingly, the court denied Chartis’ motion for stay of discovery and established a schedule for discovery, expert designations, rebuttal expert designations, and other matters related to the trial.
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