ANAHEIM CALIFORNIA CONSTRUCTION EXPERT WITNESS
DIRECTORY AND CAPABILITIES

Construction Defects Not Occurrences under Ohio Law

Concluding the “claims of defective construction or workmanship brought by a property owners are not claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy,” the Supreme Court of Ohio has ruled in Westfield Insurance Co. v. Custom Agri Systems, Inc. In the underlying case, Custom Agri Systems, Inc. built a grain bin as a subcontractor to Younglove Construction, LLC. Younglove had been contracted by PSD Development, which withheld payment, claiming it had suffered damages due to defects in Custom Agri System’s work. Younglove filed a complaint against Custom Agri, which filed complaints against its subcontractors. Custom Agri also requested that its insurer, Westfield Insurance Company, defend and indemnify it. Westfield claimed that it had no such duty. The Ohio Supreme Court concurred.

The decision notes that “Custom was being sued under two general theories: defective construction and consequential damages resulting from the defective construction.” Westfield argued that none of the claims were “for ‘property damage’ caused by an ‘occurrence” and therefore none of the claims were covered under the CGL policy.” Further, Westfield argued that “even if the claims were for property damage caused by an occurrence, they were removed from coverage by an exclusion in the policy.”

The case was filed in the US District Court which issued a summary judgment for Westfield. The plaintiff appealed and Sixth Circuit Court of Appeals certified the questions to the Supreme Court of Ohio.

The court noted that “all of the claims against which Westfield is being asked to defect and indemnify Custom relate to Custom’s work itself.” And so, the court concluded that they “must decide whether Custom’s alleged defective construction of and workmanship on the steel grain bin constitute property damage caused by an ‘occurrence.’” However, the court noted that under the terms of the insurance contract, an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” and the court noted that the “natural and commonly accepted meaning” of “accident” is something “unexpected, as well as unintended.”

The Ohio Supreme Court also looked at court decisions in other places, and found that in many similar cases, courts have concluded that construction defects are not occurrences.

In a dissenting opinion, Justice Pfeifer argues that “if the defective construction is accidental, it constitutes an ‘occurrence’ under a CGL policy.” Justice Pfeifer characterized the majority’s definition of “accidental” as “broad, covering unexpected, unintentional happenings.”

Read the court’s decision…

Colorado “occurrence”

In Greystone Construction, Inc. v. National Fire & Marine Insurance Co., No. 09-1412 (10th Cir. November 1, 2011), general contractors Greystone and Branan were each sued by purchases of homes built by each alleging defective construction performed by subcontractors. CGL insurer American Family Mutual Insurance Company defended both Greystone and Brannon while co-insurer National Fire & Marine Insurance Company denied a defense. Greystone, Branan, and American Family sued National Fire for contribution towards defense costs. The federal district trial court entered summary judgment for National Fire.

Read the full story…

Reprinted courtesy of CDCoverage.com

Kentucky Court Upholds Arbitration Award, Denies Appeal

The Kentucky Court of Appeals has ruled in Lake Cumberland Community Action Agency v. CMW, Inc. affirming the arbitration award. CMW, Inc. was responsible for the construction of a facility to be used for pre-school students and the housing of Alzheimer patients and senior citizens. An agreement was made that any disputes would be heard by an arbitrator selected by the construction industry.

The plaintiff alleged that there were design and construction defects in the building trusses, violation of the Kentucky Building Code, and problems with the HVAC system. The arbitrator awarded $106,000 to the plaintiff which then sought to vacate the award. The circuit court upheld the arbitrator’s decision.

The Court of Appeals found that there was no basis for rejecting the arbitrator’s decision, noting “there is nothing to show that there was any fraud or bias on the part of the arbitrator.” The appeals court, with all three judges concurring, upheld the arbitration award.

Read the court’s decision

Florida “get to” costs do not constitute damages because of “property damage”

In Palm Beach Grading, Inc. v. Nautilus Ins. Co., No. 10-12821 (11th Cir. July 14, 2011), claimant general contractor Palm Beach Grading (?PBG?) subcontracted with insured A-1 for construction of a sewer line for the project.   A-1 abandoned its work and PBG hired another subcontractor to complete construction of the sewer line.   The new subcontractor discovered that A-1?s work was defective requiring repair and replacement of portions of the sewer line which also required the destruction and replacement of surrounding work.

Read the full story…

Reprinted courtesy of CDCoverage.com

Bar to Raise on Green Standard

Next June, members of the U.S. Green Building Council will be voting on changes to the LEED green building standard. “The bar is getting raised,” said Navad Malin of BuildingGreen, a consulting and publishing firm, in an article in USA Today. Under the proposed guidelines, builders would have to project energy and water use for five years as part of the certification process. However, if the occupants aren’t as green as the builders anticipated, the buildings will not lose their certification.

The new rules will include higher energy standards, award points for avoiding potentially hazardous materials, and even determine what kind of plumbing items can be used.

Read the full story…

Lawsuit over Construction Defects Not a Federal Case

The United State District Court in California has dismissed the claims of a contractor against the United States government, on the grounds that it was not within the subject matter jurisdiction of the court. The origins of the case are in a related construction defect claim. The current plaintiff, Performance Contracting, Inc., did the lath and plaster work for a building for the Department of Veterans Affairs. After the building was completed, the Veterans Affairs complained to the general contractor, Wynema, Inc., of water intrusion problems.

Wyema and Performance conducted testing and the water intrusion was found to be due to “a variety of design defects and omissions, including: 1) omission of proper window flashing; 2) inadequate waterproof membrane around the windows; 3) inadequate T-molding around the windows; 4) lack of a window sill pan for the windows; 5) lack of any backing in the window framing; 6) lack of any backing for the stucco expansion joints and seams; and 7) failure to require that a performance mock-up of the window assembly and adjacent areas be built and water tested.” Wyema filed a construction defect action against Performance and other subcontractors.

In the current case, Performance claims that Veteran Affairs was negligent, that it “breached its duty to Plaintiff when it provided deficient plants and specifications” and “failed to properly oversee construction and inspect Project work.” The court determined that it could not hear this case, noting that “Federal Courts are presumptively without jurisdiction over civil actions.”

Performance raised its claims under the Federal Tort Claims Act. The judge was not persuaded by this claim, noting that the FTCA does not apply to purported breach of the General Contract. The FTCA waives the government’s sovereign immunity in cases of “injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of an employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.”

Performance was unable to pursue its claims in the Court of Federal Claims as there was no contract between Performance and the government. However, the court noted that Performance’s inability to file suit in the Court of Federal Claims does not open up a path to the District Court. “Litigants are not guaranteed a forum in which to sue the United States.” The court further noted that “if this Court were to accept Plaintiff’s logic, non-parties to contracts, but not parties, would be free to pursue contract claims in the fora of their choosing.”

Read the court’s decision…

Water District Denied New Trial in Construction Defect Claim

The United District Court in Tampa, Florida has rejected the motion by Tampa Bay Water for a new trial in their claims that HDR Engineering negligently designed the C.W. Bill Young Regional Reservoir. The claims went to a jury trial, at the end of nineteen days, the jury deliberated for four hours, finding for HDR Engineering. In rejecting Tampa Bay’s motion, the judge noted that “on close examination, TBW’s contentions have little to do with the factual determinations of the jury, which evidently concluded that TBW did not meet its burden of proof, an unsurprising conclusion, considering HDR’s evidence and the weaknesses in TBW’s evidence.”

The court cited an earlier decision that “a new trial may be granted where the jury’s ‘verdict is against the great, not merely the greater weight of the evidence.’” However, the court found that the jury’s verdict “was well supported by the evidence” and that “TBW’s case showed signs of weakness at virtually every turn.” TBW’s expert “changed his opinion late in the case concerning the culpability of the contractor.” As a result, “Brumund’s change in opinions effectively bolstered HDR’s faulty construction defense.”

TBW also raised claims a pre-trial order prevented it “from introducing evidence that HDR did not fulfill its contractual quality control responsibilities” and that evidentiary rulings prevented “TBW from introducing evidence concerning quality control.” However, TBW dismissed its claims over quality control, then “attempted no less than three times during ?Ķ testimony to introduce evidence of the purpose of the quality control requirement and quality control assurance.”

TBW also contended “that it was precluded from introducing evidence that HDR’s inspectors never reported that the protective layer exceeded three feet after inspecting the work as part of HDR’s quality control duties.” The court noted that “TBW asked these very questions of HDR’s Engineer of Record.” The court also found that testimony regarding photographs of the construction was properly excluded as TBW never entered the photos into evidence.

TBW had made an argument for a jury view. Prior the trial “after discussion, and to their credit, the parties agreed to a jointly-prepared helicopter ‘flyover’ video.” The court noted that “the size and physical characteristics of the reservoir were adequately and effectively depicted in the video.” The hazards the jury did not, then, have to encounter included the narrow, unpaved rim of the reservoir, snakes, and alligators.

Read the court’s decision…

Construction Defects Are Occurrences, Says South Carolina High Court

The South Carolina Supreme Court has left the legislature’s new, expanded definition of “occurrence” in place, declining to declare it unconstitutional. South Carolina included faulty workmanship as an occurrence in response to a Supreme Court decision, which the court later reversed. One of the parties in that earlier decision, Harleysville Insurance, challenged the new law, claiming that the legislature didn’t have the power to pass a law to overturn a court ruling. The court did not concur.

However, the court did determine that the law was not retroactive and covered only claims filed after the law became effective in May 2011. The Chief Justice of South Carolina noted that “insurance coverage for construction liability lacks clarity, particularly with respect to whether construction defects constitute ‘occurrences’ under construction general insurance policies.”

Read the full story…

Changes To Indemnification Statute Are Here! Say Hello To Defense Duties

A months back, I discussed the passage of SHB 1559. The law changes the existing statutory indemnification regulation to include the costs of defense and to rid contracts of unfair indemnification for someone else’s sole negligence. The law went into effect last week!

Check back to my recent article on the changes set forth in the new law. The amendments to RCW 4.24.115 will broaden the existing law and clarify what types of indemnification are unenforceable. In short, an “up the chain” contractor (such as a general contractor) cannot expect to pass 100% of the defense and indemnification obligations downward if it is partially liable.

Read the full story…

Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com

BHA Expands Construction Experts Group

Bert L. Howe & Associates, Inc., one of the nation’s leading construction forensics firms is pleased to announce the expansion of the company’s civil and structural engineering capabilities.

JERRY M. MILES, PE - Mr. Miles has been a licensed civil engineer in California since 1987 and has served as the lead civil engineer on many projects in several states. His experience includes contract administration services as the owner’s representative on a variety of projects including mastered planned communities, residential subdivisions, shopping centers and multi-family residential projects. He has also been involved in providing water quality management plans and storm water pollution prevention plans. Mr. Miles has also served on the Town of Apple Valley’s Building Department Dispute Resolution Board.

His more than 26 years of engineering experience includes geotechnical evaluations, structural design of wood-framed, masonry, and concrete tilt-up buildings, small and large subdivision engineering construction/improvements plans, hydrology/hydraulic reports and design, forensic investigation and expert witness testimony. Mr. Miles has qualified as an expert in numerous jurisdictions and Federal court. He has been called upon to provide deposition testimony on more than twenty-five occasions and has successfully testified at arbitration and trial. Click here to view Mr. Miles’ Current CV.

MATTHEW J. STIEFEL, PE - With a background that spans a multitude of design and new construction projects to catastrophic claims analysis, Mr. Stiefel brings a unique set of credentials and experience to the construction experts group at Bert L. Howe & Associates. Mr. Stiefel has more than 13 years’ experience in civil, structural, and geotechnical engineering; providing design and construction consulting services on a variety of projects that include multi-family and single family dwellings, commercial buildings, transportation facilities, industrial facilities, storm drain channels, water and wastewater pipelines. His engineering experience encompasses multiple disciplines of civil engineering including geotechnical design and evaluation, foundation design, structural design of wood-framed buildings, preparation of grading plans and site drainage analysis. He has provided cause and origin analysis for insurance adjusters on many residential and commercial sites related to issues involving moisture intrusion and mold, foundation movement, site drainage, soil movement, wind damage, and other various losses. Click here to view Mr. Stiefel’s Current CV.

Renovation Contractors: Be Careful How You Disclose Your Projects

In Palu and Beyer v. Toney, 2011 WL 2560249 (Bankr. D. Colo.), the United States Bankruptcy Court for the District of Colorado determined that a Colorado District Court order granting summary judgment in favor of plaintiff home buyers was binding on the Bankruptcy Court in the defendant contractor’s bankruptcy proceeding based on issue preclusion.

Pertinent to this column is the subject matter of the summary judgment motion: Colorado’s Seller’s Property Disclosure (Form LC-18-5-04). In the underlying state court action, the plaintiff home buyers filed a motion for summary judgment contending that the defendant contractor represented to them, through the Seller’s Property Disclosure, that there were no present or past conditions involving moisture or water problems, roof problems or leaks, skylight problems, or gutter downspout problems.

In granting plaintiffs’ motion, the state court determined that the defendant contractor made these representations on her Seller’s Property Disclosure despite witnessing water leaking from the skylight onto the floor and being aware of repairs to the roof, skylight, and interior drywall prior to the sale of the property.

Read the full story…

Reprinted courtesy of Derek J. Lindenschmidt of Higgins, Hopkins, McClain & Roswell, LLP. Mr. Lindenschmidt can be contacted at lindenschmidt@hhmrlaw.com

Construction Defect Journal Seeks Article Submissions Regarding SB800 and Other Builders Right to Repair Laws

As we approach the tenth anniversary of the passage and signing of SB800, California’s right-to-repair law, we’d like to hear your reactions to the law, your experiences with it, and your thoughts on it and right-to-repair laws in other states.

We invite you to submit articles either reacting to SB800 or on other matters relevant to construction defect and claims issues. You can promote your firm’s capabilities and get valuable exposure through the publication of your articles. Construction Defect Journal is widely read by our highly targeted audience of decision makers, construction attorneys, builders, owners, and claims professionals.

Articles may contain relevant images, your firm’s name, and links to your corporate website or third parties and can be submitted through e-mail to submitstory@constructiondefectjournal.com. Please remember to include your contact information if you would like it to be published with your content. If you are submitting photos or PDF documents with your article, please send them as e-mail attachments. Items submitted are assumed to be cleared for publishing upon receipt by CDJ.

Normally articles are published in full, although we reserve the right to edit content for space purposes. All articles submitted are considered for publication. For additional questions please contact editor@constructiondefectjournal.com.

Construction Defects in Home a Breach of Contract

The Supreme Court of North Dakota has ruled in Leno v. K & L Homes, affirming the verdict of the lower court. K & L Homes argued that district court had erred in several ways, including by refusing to instruct the jury on comparative fault, denying a request for inspection, and not allowing a defendant to testify on his observations during jury viewing.

The Lenos purchased a home constructed by K & L Homes, after which they alleged they found cracks, unevenness, and shifting, which they attributed to improper construction. They claimed negligence on the part of K & L Homes. K & L Homes responded that the Lenos were responsible for damage to the home. The Lenos dropped their negligence claim, arguing breach of contract and implied warranties.

Before the trial, after the discovery period had passed, K & L Homes requested to inspect the home. This was rejected by the court. Kelly Moldenhauer, the owner of K & L Homes sought to testify about his observations during the jury’s viewing of the house. The court denied this too. The jury found that K & L was in breach of contract and awarded damages to the Lenos.

The North Dakota Supreme Court noted that K & L Homes gave “warranties that the home had been built according to local building codes and laws, and that the house was fit for its particular purpose as a residence.” The court found that a defective home breached this warranty. Further, the home violated an implied warranty of fitness.

The district court had denied K & L’s request to inspect the home, as the discovery period had ended and it would not give the Lenos time to do further discovery of their own. At the time of the request, there was only twenty-two days before the trial. The Supreme Court ruled that this was not an abuse of discretion of the part of the district court.

The Lenos had requested that Moldenhauer’s testimony not be permitted, as it would “have the same effect as if the court had granted K & L Homes’ pretrial request for inspection.” K & L Homes agreed to this in court, replying, “okay.”

The decision affirms the judgment of the district court and the damages awarded to the Lenos by the jury.

Read the court’s decision…

Insurance Company Prevails in “Chinese Drywall” Case

The Louisiana Court of Appeals rejected an appeal to reverse a summary judgment granted to Louisiana Citizens Property Insurance Company. Terrence and Rhonda Ross contracted for a remodel of their home in which Chinese-made drywall was used. When the drywall emitted harmful gasses, the Rosses filed a claim under their insurance policy. This claim was rejected under four exclusions: for faulty materials, latent defect, loss by corrosion, and loss by pollution. After the claim was denied, the Rosses sued Louisiana Citizens.

In April 2010, the lower court granted a summary judgment, followed by a May, 2010 order dismissing the Rosses’ claims against Louisiana Citizens. The Rosses appealed this decision. In the court’s review, they agreed with Louisiana Citizens and the lower court on all counts. Although the Rosses maintained that the drywall was not defective (as it still functioned as drywall), the court ruled that its emission of sulfuric gases was a defect. Further, as it was in place for two years before this became evident, it was also a latent defect. Damage to the Rosses’ home consisted of corrosion damage caused by the pollutants in the drywall.

The Rosses made an additional claim that since their policy covered smoke damage, this should be covered, as the harm was done by sulfuric gases. The court noted that the contract specifies “fumes or vapors from a boiler, furnace, or related equipment,” none of which apply in this case.

Read the court’s decision

Building Inspector Jailed for Taking Bribes

The LA Times reports that Raoul Germain, a city Los Angeles building inspector has been sentenced to 21 months in prison after pleading guilty to taking bribes. Germain was caught as part of an FBI sting operation in which he approved work in exchange for thousands of dollars in bribes. The Times notes that that in some cases, Germain never visited the construction sites. Germain was offered a chance to cooperate with investigators. His lawyer, Steve Cron asked the Times, “What do you think happens to someone who cooperates?”

In addition to Germain, another city inspector has pleaded guilty to taking bribes and two more employees of the Department of Building and Safety have been fired in connection with the investigation.

Read the full story…

Florida Appeals Court Rules in Favor of Homeowners Unaware of Construction Defects and Lack of Permits

The Florida Court of Appeals has ruled that a homeowner is not liable for defects in unpermitted alterations, reversing a lower court’s decision in Jensen v. Bailey. The Jensens sold their house to the Baileys. During the sale, the Jensens filled out a property disclosure statement, checking “no” to a question about “any improvement or additions to the property, whether by your or by others that have been constructed in violation of building codes or without necessary permits.”

After moving in, the Baileys discovered several problems with the home. One involved a defective sewer connection leading to repeated backups. The Baileys also found problems with remodeling the Jensens had done in the kitchen, master bath, and bedroom. The remodeling work was not done with required permits nor was it up to code.

The court noted that an earlier case, Johnson v. Davis, established four criteria: “the seller of a home must have knowledge of a defect in the property; the defect must materially affect the value of the property; the defect must not be readily observable and must be unknown to the buyer; and the buyer must establish that the seller failed to disclose the defect to the buyer.” The court found that the first of these criteria was crucial to determining the case.

In the Johnson ruling, the then Chief Justice dissented, fearing that the courts “would ultimately construe Johnson’s requirement of actual knowledge to permit a finding of liability based on constructive knowledge,” quoting Justice Boyd, “a rule of constructive knowledge will develop based on the reasoning that if the seller did not know of the defect, he should have known about it before attempting to sell the property.” The Appeals Court concluded that the lower court hit this point in ruling on Jensen v. Bailey.

Citing other Florida cases, the court noted that the Johnson rule does require “proof of the seller’s actual knowledge of the defect.” The court cited a case in which it was concluded that the seller “should have known” that there was circumstantial evidence was that the seller did know about the defects, as the seller had been involved in the construction of the home.

In the case of the Jensens, the lower court concluded that they did not know that the work was defective, nor did they know that they were obligated to obtain permits for it. The Appeals Court found this one fact sufficient to reverse the decision and remand the case to the lower court for a final judgment in favor of the Jensens.

Read the court’s decision…

Construction Defect Journal Marks First Anniversary

November 2011 marked the first anniversary of the Construction Defect Journal. During the first year our staff and contributors in the insurance and legal communities have compiled several hundred articles of interest to the construction defect and claims community.

Each of these articles are maintained in the CDJ archives, and are accessible at http://www.constructiondefectjournal.com/archives.html. Each story in the archives is listed in the order it was posted to the archives. Each story in the archives opens up in its own page, so you can easily locate topics and articles of interest.

If you’re new to Construction Defect Journal, or just want peruse past articles, please take a moment to visit the CDJ Archives page. Also please feel encouraged to submit your firm’s articles or legal publications of interest to the CD community at http://www.constructiondefectjournal.com/submitStory.html.

Oregon agreement to procure insurance, anti-indemnity statute, and self-insured retention

In Continental Casualty Ins. Co. v. Zurich American Ins. Co., No. 09-35484 (9th Cir. Oct. 28, 2010), general contractor TCR was sued by an employee of subcontractor Safeway for bodily injuries suffered while working on the project. In the subcontract, Safeway agreed to procure primary insurance providing coverage for TCR for liability arising out of Safeway’s negligence. Safeway’s CGL policy included a self-insured retention that had to be satisfied before the insurer had a duty to defend. TCR filed suit against Safeway alleging that

Reprinted courtesy of CDCoverage.com