Nevada District Court Dismisses Case in Construction Defect Coverage Suit
August 16, 2012 — CDJ Staff
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…
Construction Law Client Alert: Hirer Beware - When Exercising Control Over a Job Site’s Safety Conditions, You May be Held Directly Liable for an Independent Contractor’s Injury
April 6, 2011 — April 6, 2011 - By Mark VonderHaar and Yvette Davis in the Haight Brown & Bonesteel Blog
On February 24, 2011, the California Court of Appeal held in Jeffrey Tverberg, et al v. Fillner Construction, Inc. that the imposition of direct liability on a hirer turns on whether the hirer exercised retained control of worksite safety in such a manner that affirmatively contributed to the independent contractor’s injury. Twice, Tverberg, an independent contractor hired by a general contractor's subcontractor, asked the general contractor to make the job site safe by covering up open holes created by another unrelated subcontractor while Tverberg was working at the site. After Tverberg was injured at the site by falling in a hole, he sued both the general contractor and the subcontractor which had hired him.
The Court of Appeal reasoned that when the general contractor instructed another subcontractor to create a condition that was potentially dangerous (i.e., creating open and uncovered bollard holes), and simultaneously required Tverberg to perform unrelated work near the open holes, the general contractor s conduct may have constituted a negligent exercise of its retained control which affirmatively contributed to Tverberg’s injury. The Court also reasoned that the general contractor affirmatively assumed responsibility for the safety of the workers near the holes by only requiring stakes and safety ribbon, and negligently discharged that responsibility which resulted in injury.
Read the full story...
Reprinted courtesy of Mark VonderHaar and Yvette Davis of Haight Brown & Bonesteel. Mr. VonderHaar can be contacted at mvonderhaar@hbblaw.com and Ms. Davis at ydavis@hbblaw.com.
Orange County Home Builder Dead at 93
April 25, 2012 — CDJ Staff
Randall E. Presley was a homebuilder in Southern California for more than thirty years, acting as head of Presley Development Company from 1956 until selling the firm to Lyon Homes in 1987. The two companies merged in 1991 as the Presley Cos. Mr. Presley saw the need in the 1950s to provide people in Southern California with low- to medium-priced quality homes.
His firm built more than 160 communities and was among the ten largest homebuilding firms in the country, expanding beyond California. Mr. Presley was 93 when he succumbed to pneumonia. He is survived by a wife, three children, seven grandchildren, and 11 great-grandchildren.
Read the full story…
Nevada Supreme Court Reverses Decision against Grader in Drainage Case
June 30, 2011 — CDJ Staff
The Nevada Supreme Court has issued an opinion in the case of Rayburn Lawn & Landscape Designers v. Plaster Development Corporation, reversing the decision of the lower court and remanding the case for a new trial.
The case originated in a construction defect suit in which Plaster Development Corporation was sued by homeowners. Plaster filed a third-party complaint against its subcontractor, Reyburn. The testimony of Reyburn’s owner was considered to be admission of liability and so the court limited the scope of Reyburn’s closing argument and did not allow the jury to determine the extent of Reyburn’s liability. Reyburn appealed.
Plaster, in their case, cited California’s Crawford v. Weather Sheild MFG, Inc. The court held the application of these standards, but noted that the “an indemnitor’s duty to defend an indemnitee is limited to those claims directly attributed to the indemnitor’s scope of work and does not include defending against claims arising from the negligence of other subcontractors and the indemnittee’s own negligence.”
On the matter of law against Reyburn, the court concluded, “Given the conflicting evidence at trial as to whether Reyburn’s work was implicated in the defective retaining walls and sidewalls, and viewing the evidence and inferences in Reyburn’s favor, we conclude that a reasonable jury could have granted relief in favor of Reyburn.” The Nevada Supreme Court conduced that the district court should not have granted Plaster’s motion for judgement.
Further, the Nevada Supreme Court found that the district court should have apportioned the fees and costs to those claims directly attributed to Reyburn’s scope of work, “if any,” and should not have assigned all attorney costs and court fees to Reyburn.
Read the court’s decision…
Virginia Homebuilding Slumps After Last Year’s Gain
June 19, 2012 — CDJ Staff
As of May, only 61 residential construction permits have been issues in Roanoke County, Virginia, leaving officials doubtful that this year will meet last year’s mark of 179 permits. Residential construction was at its highest in the county in 2004. The worst year since then was 2009, when the county issued 143 permits. The county is in the western end of the state, near the border with West Virginia, and far from the D.C. metropolitan area.
Arnold Covey, the Director of Community Development for the county said that “it may be until 2014 before we really see a difference. The article by WDBJ7.com notes that a “key part” of the county budget comes from real estate.
Read the full story…
Insurer Beware: Failure to Defend Ends with Hefty Verdict
June 1, 2011 — Douglas Reiser in the Builders Counsel Blog
Served with a lawsuit that you turned over to your insurer? Insurer refusing to defend you? Well, find some hope in this news. Washington’s IFCA has the claws to ensure that insurers perform their duties.
Contractors heavily rely on the defense provisions of their Commercial General Liability (CGL) policies. In construction, a legal dispute can easily rear its head when you least expect it. Luckily, Washington registered contractors are required to maintain CGL insurance. That insurance often provides contractors with adequate legal defense in the event that they are sued.
But, what if your insurer turns down the defense request? They might be staring at massive damages. A current Reiser Legal client, Australia Unlimited, Inc., recently won a large verdict against Hartford Insurance, after the insurer unreasonably denied their claim. The firm who represented Australia Unlimited Inc. in that case, Hackett Beecher and Hart, were successful in procuring a $5.43 Million verdict
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Condominium Communities Must Complete Construction Defect Repairs, Says FHA
July 10, 2012 — CDJ Staff
Laura K. Sanchez of HindmanSanchez writes that the FHA “will not approve or recertify” any condominium community “where there are any pending or incomplete repairs within the community which are a result of a construction defect claim, regardless of whether the litigation has been resolved and regardless of whether there are funds in the bank paid by the developer to pay for the repairs.” The FHA notes that failure to complete or fund repairs could “put FHA insured loans at risk.” Communities must disclose all maintenance and repair issues to the FHA. Sanchez notes that the FHA has stated that incomplete repairs could put FHA-insured loans at risk.
Read the full story…
No-Show Contractor Can’t Hide from Construction Defect Claim
June 19, 2012 — CDJ Staff
The failure of R. J. Haas to produce documents or make himself available for deposition has worn out the patience of the US District Court in San Jose. Judge Howard Lloyd issued a ruling inProbuilders Specialty Ins. Co. v. Valley Corp. (N.D. Cal., 2012).
Probuilders issued an insurance policy covering Haas for their work on the construction of a single-family home for Ty and Karen Levine. The Levines sued Haas for “shoddy and incomplete work.” Probuilders contends that Haas “made material misrepresentations with respect to verifying that the subcontractors had insurance.” Since November 2011, Haas has been without legal counsel in this matter.
Despite Probuilder’s attempts, the court noted that “Hass any not provided any documents in response to the plaintiff’s three sets of requests for production of documents.” Haas also “has refused to make himself available for deposition.” Haas was first scheduled for deposition in September, 2011. Subsequently, Haas has rescheduled his deposition repeatedly, postponing it to January 4, then February 13, and then agreed to be deposed “before the then-scheduled March 15 mediation,” after which he said he would “be unavailable to be deposed before April.
The court noted that although Haas “hay have had legitimate reasons for wishing to continue his deposition, such as illness and his attempt to retain new counsel,” however, the court concluded that “Haas has had ample time to retain new counsel and prepare for deposition.
The court also found fault with Haas’s objections to certain terms in the Request for Admissions, among them “named,” “independent contractor,” and “work,” noting that Haas called these “vague and ambiguous.” The court called it “quibbling,” and noted that the federal courts disfavor this. Later in the decision, the court made it clear that Haas “is obligated under the Federal Rules of Civil Procedure to respond to discovery requests.” And concludes, “that he has apparently been seeking to retain new counsel for over five months does not give him license to ignore plaintiff’s discovery requests entirely.
The court granted Probuilders the option of filing a motion for sanctions. Mr. Haas did not attend or participate.
Read the court’s decision…
Arizona Court of Appeals Rules Issues Were Not Covered in Construction Defect Suit
December 9, 2011 — CDJ Staff
The Arizona Court of Appeals has ruled in the case of Peters v. Marque Homes. In this case, Walter Peters provided the land and funding for Marque Homes to build a luxury residence in Glendale, Arizona. By the terms of the “Joint Venture Agreement,” Peters provided the land and funding, while Marque would not charge Peters for overhead, profits, or supervision fees. The agreement specified that profits would be divided equally.
Two years later, Marque sued Peters claiming he had breached his obligations by refusing several offers for the home. Peters replied that Marque had “failed to complete the home so it is habitable to prospective purchasers.” Peters stated he had “retained an expert inspector who had identified numerous defects.” The court appointed a Special Commissioner to list the home for sale. Peters purchased the home with two stipulations ordered by the court. At this point, the earlier case was dismissed with prejudice.
Peters then sued Marque “asserting express and implied warranty claims arising out of alleged construction defects in the home.” Marque claimed that Peters’s claims were “precluded by the prior joint venture dispute.” The court granted Marque’s motion.
The appeals court reversed the lower court’s decision, determining that Peters’s claims were not precluded by the agreement. Although there had been a prior case between the two parties, warranty issues did not form a part of that case. “Peters never raised these allegations nor presented this evidence in support of any warranty claim.”
The court also noted that the “parties never agreed to preclude future warranty claims.” Marque and Peters “agreed in the stipulated sale order that ‘the sale of the property to a third party shall be “as is” with a 10-year structural warranty.’” The court noted that the agreement said nothing about one of the parties buying the house.
The appeals court left open a claim by Marque that there are no implied or express warranties available to Peters. They asked the Superior Court to address this.
Read the court’s decision…
Statute of Limitations Upheld in Construction Defect Case
September 30, 2011 — CDJ Staff
The Missouri Court of Appeals has ruled in Ball v. Friese Construction Co., finding that Mr. Ball’s claims were barred by the statute of limitations.
Mr. Ball hired Friese Construction Company to build a single-family home. The sale was completed on March 29, 2001. That December, Mr. Ball complained of cracks in the basement floor. SCI Engineering, n engineering firm, hired by Friese, determined that the home’s footing had settled and recommended that Mr. Ball hire a structural engineer to determine if the footings were properly designed and sized. In September 2002, the structural engineer, Strain Engineering, determined that the cracks were due to slab movement, caused in part by water beneath the slab, recommending measures to move water away from the foundation. In 2005, Mr. Ball sent Friese correspondence “detailing issues he was having with the home, including problems with the basement slab, chimney structure, drywall tape, and doors.” All of these were attributed to the foundation problems. In 2006, Friese stated that the slab movement was due to Ball’s failure to maintain the storm water drains.
In 2009, Ball received a report from GeoTest “stating the house was resting on highly plastic clay soils.” He sued Friese in May, 2010. Friese was granted a summary judgment dismissing the suit, as the Missouri has a five-year statute of limitations. Ball appealed on the grounds that the extent of the damage could not be determined until after the third expert report. The appeals court rejected this claim, noting that a reasonable person would have concluded that after the conclusion of SCI and Strain Engineering that “injury and substantial damages may have occurred.”
The court concluded that as there were not “continuing wrongs causing new and distinct damages,” he should have filed his lawsuit after the first two expert reports, not waiting seven years for a third expert to opine.
Read the court’s decision…
Loose Bolts Led to Sagging Roof in Construction Defect Claim
February 10, 2012 — CDJ Staff
Though the sagging roof is neither leaking nor a safety hazard, the town of Waynesville, North Carolina is suing the builder of its new fire station, as reported in the Smoky Mountain News. The engineers who examined the roof found a substantial number of loose bolts in the roof trusses. Additionally, the trusses themselves have become bent.
Tom Galloway, Waynesville’s Town Manager said “it needs to be remedied and fixed.” He said that the builder, Construction Logic, “never indicated a willingness to fix the roof.” The town is seeking the cost of repair, which Galloway estimated could be $400,000, and an additional $30,000 in damages. The suit states that Construction Logic failed to follow the plan specifications for the roof.
Read the full story…
California Lawyer Gives How-To on Pursuing a Construction Defect Claim
September 13, 2012 — CDJ Staff
On his recently started blog, Harry Kaladjian writes about construction defect litigation in California. He notes that after taking possession, homeowners sometimes notices problems such as “slab cracks in the garage, water leaking through the ceiling, warped floors, improper framing, cracking stucco, etc.” He goes on to note that once that happens, there are series of things homeowners must do.
The first is to be concerned about the statute of limitations. Then, “once it has been established that defects exist, the homeowner must refer to the ‘Right to Repair Act’ and ‘Calderon Procedures.’” These, he notes set out the “pre-litigation procedures prior to filing a lawsuit.”
Read the full story…
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.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Nevada Assembly Sends Construction Defect Bill to Senate
June 6, 2011 — CDJ Staff
In a 26 to 16 vote, the Nevada Assembly has passed Assembly Bill 401, which extends the time limit for legal action over home construction defects. According to the Las Vegas Sun, Assembly member Marcus Conklin, Democrat of Las Vegas, said the bill was about “keeping the consumer whole.” However, Ira Hansen, Republican of Sparks, told the sun that suits are happening before contractors can make repairs. The bill would allow attorney fees even if repairs are made.
Read the full story…
Timing of Insured’s SIR Payment Has No Effect on Non-Participating Insurer’s Equitable Contribution to Co-Insurer
April 25, 2012 — Aarti Kewalramani, Gatzke Dillon & Balance LLP
In a case of first impression, the California Court of Appeal, Fourth District, Division One, examined whether a non-participating insurer can evade its defense and indemnity obligations because the insured only paid the policy’s self-insured retention ("SIR") as part of a settlement. In Axis Surplus Lines Insurance Company v. Glencoe Insurance LTD. (April 11, 2012, D058963) __ Cal.App.4th __ [2012 WL 11903203], the critical issue for the Court was whether an insurer, with full notice and continued investigation of a claim, can "hide behind the SIR requirement in its policy." The Court declined to "sanction such gamesmanship."
The dispute involved an equitable contribution claim between two insurers. Axis Surplus Insurance Company provided commercial general liability insurance to Pacifica Pointe L.P. During the same time period, Glencoe Insurance Ltd. provided an owner-controlled insurance policy (i.e., wrap policy) to Pacifica Pointe L.P. Both policies included provisions requiring co-carriers to split the defense and indemnity on equal shares. Pacifica was sued in a construction defect lawsuit, involving alleged resultant damages to condominiums it converted and sold. Pacifica tendered the claim to both Axis and Glencoe. While Axis agreed to defend Pacifica, subject to a reservation of rights, Glencoe declined to participate until Pacifica satisfied the $250,000 SIR on the policy. Glencoe continued to monitor the litigation from the sidelines.
Axis and Pacifica settled the underlying construction defect lawsuit for $1 million. Pacifica advised Glencoe of the settlement, and received Glencoe’s approval to contribute its $250,000 SIR towards the settlement. Axis contributed $750,000 towards the settlement. After the settlement, Axis sued Glencoe for declaratory relief and equitable contribution, to recover a portion of the defense and indemnity it paid. The trial court found in favor of Axis and allocated Glencoe 60% of the settlement payment. Glencoe appealed.
On appeal, the Court scrutinized whether Glencoe, as the non-participating insurer, had a legal obligation to provide a defense and indemnity to the insured, despite the timing of the SIR’s satisfaction. The Court determined that in an equitable contribution action, the participating insurer has the burden of proving merely the potential for coverage under the non-participating insurer’s policy. On this showing, the burden of proof shifts to the non-participating insurer to prove the absence of actual coverage under its policy. The Court emphasized that the timing of the SIR’s payment was inconsequential to either insurer’s burden. Because Glencoe admitted coverage existed under its policy, the Court affirmed the trial court’s decision.
As a result, the result ultimately turned on whether the non-participating carrier had full notice of the claim and cannot use the timing of the satisfaction of the SIR to shield itself from an equitable contribution claim from the participating co-carrier.
Published courtesy of Aarti Kewalramani of Gatzke Dillon & Balance LLP. Ms. Kewalramani can be contacted at akewalramani@gdandb.com.
Changes To Indemnification Statute Are Here! Say Hello To Defense Duties
June 19, 2012 — Douglas Reiser, Builders Counsel
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
Can Negligent Contractors Shift Blame in South Carolina?
July 10, 2012 — CDJ Staff
Clay Olson looks back to a 1991 Carolina case, Nelson v. Concrete Supply Company. The court concluded in that case that “a plaintiff in South Carolina may recover only if his/her negligence does not exceed that of the defendant’s and amount of plaintiff’s recovery shall be reduced in proportion to amount of his or her negligence; if there is more than one defendant, plaintiff’s negligence shall be compared to combined negligence of all defendants.” In 2005, he reports, as part of tort reform in South Carolina, the legislature further addressed this.
He then suggests a possible outcome of this is that negligent contractors may be able to shift some of the blame (and cost of the settlement) to other defendants who may not be to blame. He offers a scenario in which a contractor is sued for construction defects and a jury has to allocate responsibility for indivisible damage. “A jury need only find the two subcontractors to have each contributed 15% of the indivisible damage.” He adds in another 15% for claims against the architect. Minor blame is given to the manufacturers, and suddenly the negligent contractor is paying less than 50% of the total settlement.
He notes that the previous system in place also had its problems, but notes that this one may not be “fair and equitable.”
Read the full story…
Harsh New Time Limits on Construction Defect Claims
April 26, 2011 — April 26, 2011 by Scott F. Sullan, Esq., Mari K. Perczak, Esq., and Leslie A. Tuft, Esq. of
Sullan2, Sandgrund, Smith & Perczak, P.C. in the
HindemanSanchez blogA recent Colorado Supreme Court decision, Smith v. Executive Custom Homes, Inc., 230 P.3d 1186 (Colo. 2010), considerably shortens the time limit for bringing many construction defect lawsuits. Homeowners and homeowner associations risk losing the right to seek reimbursement from builders, developers and other construction professionals unless they carefully and quickly act upon discovery of evidence of any potential construction defect.
The Statute of Limitations for Construction Defect Claims
Colorado’s construction defect statute of limitations limits the time for homeowners and homeowners associations to bring lawsuits for construction defects against “construction professionals,” including developers, general contractors, builders, engineers, architects, other design professionals, inspectors and subcontractors. The statute requires homeowners and associations to file suit within two years “after the claim for relief arises.” A claim for relief “arises” when a homeowner or association discovers or reasonably should have discovered the physical manifestation of a construction defect.
The two-year time limitation applies to each construction defect separately, and will begin to run upon the appearance of a “manifestation” of a construction defect (which may include, for example, a condition as simple as a roof leak or drywall cracks), even if the homeowner or association does not know the cause of the apparent problem.
The Smith Opinion and its Effect on the Statute of Limitations
In Smith v. Executive Custom Homes, Inc., the plaintiff homeowner, Mrs. Smith, slipped on ice that had accumulated on her sidewalk because of a leaking gutter and suffered injury. When she first noticed the leak, she reported it to her property manager, who reported it to the builder. The builder attempted to repair the gutter, unbeknownst to Mrs. Smith, and she did not notice further problems until approximately one year after she first observed the leak, when she fell and suffered serious injury. She sued the builder within two years of her injury, but nearly three years after she first learned of the leak.
The Colorado Supreme Court dismissed Mrs. Smith’s claims as untimely and held that under the construction defect statute of limitations, the two-year period for suing for injuries due to construction defects begins when the homeowner first observes the physical manifestation of the defect, even if the resulting injury has not yet occurred. The court acknowledged that this ruling could result in “unfair results,” especially if a serious and unforeseeable injury occurs more than two years after the first time the homeowner noticed the problem, and as a result the victim is unable to seek redress from those responsible for the defect.
Read the full story…
Reprinted courtesy of Scott F. Sullan, Esq., Mari K. Perczak, Esq., and Leslie A. Tuft, Esq. of Sullan2, Sandgrund, Smith & Perczak, P.C., and they can be contacted through their web site.
