GOODELL IOWA CONSTRUCTION EXPERT WITNESS
DIRECTORY AND CAPABILITIES

Badly Constructed Masonry Walls Not an Occurrence in Arkansas Law

The US District Court for Maryland has granted a summary judgment in the case Konover Construction Corp. v. ATC Associates to Massachusetts Bay Insurance Company and denied a request for dismissal from ACT. Konover (KBE) was contracted by Wal-Mart to build a Wal-Mart store and a Sam’s Club in Port Covington, Maryland. Superus, Inc. was hired by KBE to build the masonry walls. Superus purchased a policy from Massachusetts Bay Insurance which named KBE as an additional insured. Wal-Mart hired ATC Associates to independently test and inspect the concrete structural steel, and masonry.

After the building was in use, a large crack appeared which was attributed a latent construction defect. Other cracks were discovered. Upon investigation, it was discovered that there were “voids or foam in the concrete block surrounding the reinforcing steel that should have been filled with grout,” and in some cases, “reinforcing steel was missing or not installed in accordance with the specifications.” KBE paid for the repair and remediation and Wal-Mart assigned all rights and interests against ATC to KBE.

KBE filed suit against ATC. ATC called for dismissal on the grounds that Wal-Mart had no claims as the problems had been remediated. Wal-Mart then provided KBE with additional agreements to give them enforceable rights against ATC and Superus. KBE filed a fourteen claims against ATC, Superus, and Massachusetts Bay. In the current case, Massachusetts Bay sought summary judgment and ATC sought dismissal of all claims against it.

Massachusetts Bay claims that they need not indemnify Superus, as “there is no evidence adequate to establish that Superus’ defective work caused any collateral and/or resulting damage that was not subject to an Impaired Property exclusion, and that, in any event, no damage occurred during the policy period.”

As Wal-Mart is headquarted in Arkansas, certain contracts were under Arkansas law. Under the Arkansas courts, “defective workmanship, standing alone and resulting in damages only to the work product itself, is not an ‘occurrence.’” The court determined that collateral or resultant damage would be covered. The court found that “it is clear under Arkansas law, and the parties appear to agree, that Massachusetts Bay is not obligated to indemnify KBE for any repairs to the masonry walls themselves, including any cracks or gaps in the walls.” The court also found that “there is no evidence adequate to prove that any allegedly resultant property damage was caused by Superus’ faulty construction of the walls.” The court also noted that “if the building code violation and structural integrity problem were ‘property damage,’ insurance coverage would be barred by the Impaired Property Exclusion.” Based on these findings, the court concluded that Massachusetts Bay is entitled to summary judgment.

While the court dismissed the case against Massachusetts Bay, the court declined ATC’s motion to dismiss. The court noted that ACT’s alleged negligence in conducting inspections “created only a risk of economic loss for KBE.” Although hired by Wal-Mart, ATC “transmitted its daily testing and inspection reports of the Wal-Mart and Sam’s Club projects directly to KBE.” The court found that “KBE has made a plausible claim.”

ATC also claimed that KBE contributed to the negligence due to the negligence of its subcontractor. The court concluded that it was plausible that “ATC will not be able to carry its burden of proving KBE was contributorily negligent.” The court was less sanguine about KBE’s fraud claim, but though it “may not now appear likely to have merit, it is above the ‘plausibility’ line.”

In conclusion, KBE may not continue its case against Massachusetts Bay. However, the judge allowed the other proceedings to continue.

Read the court’s decision…

Background Owner of Property Cannot Be Compelled to Arbitrate Construction Defects

In Truppi v. Pasco Engineering, John Quattro sued Property Management Contractors, Inc. over construction defects in William Truppi’s home. All parties are named in the suit. The California Court of Appeals ruled that Property Management Contractors, Inc. (PMCI) could not compel Mr. Quattro to arbitration.

The background of the case involves two houses built in Encinitas, California by PCMI: one for Mr. Truppi at 560 Neptune, and one for Mr. Quattro at 566 Neptune. Both contracts contained an arbitration provision. Mr. Quattro signed the contract for his residence and Mr. Truppi signed the other. Mr. Quattro then sued PCMI and its principal, William Gregory. Mr. Quattro claimed to be the true contracting party for the 560 Neptune residence and a third party beneficiary of the contract Mr. Truppi signed, and stated that PCMI was aware of this.

PCMI in a demurrer stated that Quattro “had only a ‘prospective beneficial interest in the property upon its eventual sale or lease.’” Mr. Quattro amended his complaint to account for the issues raised by PCMI. The court rejected PCMI’s demurrer to the amended complaint.

Finally, PCMI and Gregory asserted that Quattro was “not the real party in interest” and could not sue. PCMI continues to assert that Quattro lacks standing, but their attorney sent Quattro an e-mail stating, “While my client disputes that you are a party, and that you lack standing to assert the claim, to the extent you do so I believe you are obligated to proceed by way of arbitration.”

The court did not cover the issue of Quattro’s standing in the case, only if he could be compelled to arbitration. The court affirmed the lower court’s finding that Quattro could not be compelled to arbitrate the construction defect claim as neither he nor Gregory signed the contract in an individual capacity. Further, the court noted that PCMI and Gregory “denied the existence of an agreement between themselves and Quattro on the 560 contract,” and cannot compel arbitration on a non-existent agreement. And while non-signatories can, in some situations be compelled to arbitrate, the court found that “these cases are inapplicable because here they seek to have the alleged third party beneficiary (Quattro) compelled by a nonsignatory (Gregory).” The arbitration clause in question “expressly limited its application to persons or entities that signed the 560 contract.”

As Mr. Quattro was not a signatory to that agreement, the court found that he could not be held to its arbitration provision.

Read the court’s decision…

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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Texas “your work” exclusion

In American Home Assurance Co. v. Cat Tech, L.L.C., No. 10-20499 (5th Cir. Oct. 5, 2011), claimant Ergon hired insured Cat Tech to perform service on a reactor at Ergon’s refinery. During a start-up of the reactor after Cat Tech had completed its work, the reactor suffered damage. Cat Tech performed additional service and repairs. However, again upon start-up of the reactor, it suffered additional damage. Ergon hired another contractor to repair the reactor. Ergon initiated arbitration proceedings against Cat Tech. Cat Tech’s CGL insurer American Home defended Cat Tech against the Ergon arbitration under a reservation of rights.

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Reprinted courtesy of CDCoverage.com

Homeowner may pursue negligence claim for construction defect, Oregon Supreme Court holds

In Abraham v. T. Henry, Oregon’s court of appeals held that a Oregon’s court of appeals holds that a homeowner may sue builder for common law negligence absent a contractual provision that forecloses such a claim. Plaintiff homeowners hired defendant contractors to build a house. When plaintiffs discovered defects in the construction years later, they sued for negligence.

The Court of Appeals held that the parties’ contractual relationship did not prevent a negligence claim, and that plaintiffs were entitled to pursue a negligence per se claim based on a violation of the Oregon Building Code.

The Supreme Court affirmed, but on a somewhat different basis. First, according to the Court, a construction defect claim concerns damage to property — and not mere economic losses — and thus is not barred by the economic loss doctrine. Second, the existence

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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

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.

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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.

Is Construction Heading Off the Fiscal Cliff?

After a period of growth, the construction industry lost 20,000 jobs in November, based on the federal jobs data. Damon Scott of New Mexico Business Weekly suggests that contractors may have laid off employees in anticipation of the “fiscal cliff.” Ken Simpson, the chief economist of the National Association of Home Builders said in a press release that “it is discouraging that construction employment is still struggling after three years of expansion in the overall economy.”

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Injured Construction Worker Settles for Five Hundred Thousand

An upstate New York man who was injured when an unsecured truss fell off the railings of a scissor lift has settled for $500,000. As the accident happened at the building site for a casino for the Seneca Nation, attorneys for the construction firm had argued that New York labor laws were inapplicable as the injury happened on Seneca Nation land. The state appeals court ruled that as none of the parties involved were Native Americans, it was not internal to the affairs of the Seneca Nation.

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Contractor Convicted of Additional Fraud

A Pennsylvania contractor in prison for fraud has been convicted with insurance fraud. The York Daily Record reports that Steven D. Gebhart was already in jail for fraud for about $350,000 for work he either failed to finish or even start or by using substandard materials and practices when he was convicted of insurance fraud. Gebbert’s offices were destroyed in a fire that was later determined to be arson. He was not charged with this, but instead for overestimating his losses to the insurance company. Sentencing for the fraud charge will be on December 21.

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BUILD Act Inching Closer To Reality

A select group of Senators have launched a marketing campaign for the BUILD Act. If this is the first you are hearing about the BUILD Act, do not fret. The Act still has a long way to go, but if successful it would bring a national infrastructure bank.

I have been fascinated with the concept of a national infrastructure bank for quite some time. The idea has been around since the Clinton years ? and perhaps beyond. The Act’s purpose is to create a national bank (American Infrastructure Financing Authority) to provide loans and loan guarantees to encourage private investment in upgrading America’s infrastructure. For a number of years, we have seen similar legislation float around Congress. But, none of those initiatives have gained as much traction as BUILD.

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

Conspirators Bilked Homeowners in Nevada Construction Defect Claims

Courthouse News has a summary of the current lawsuit over a Nevada conspiracy to defraud homeowners by taking control of homeowner boards and then providing inadequate repairs. Homeowners in eight Las Vegas area communities are involved in the suit, which claims that the conspirators purchased units in the communities and then transferred fractional interests to others to allow them to run for HOA board elections. The suit claims that David Amesbury and his firm helped manipulate the elections.

Once homeowner boards were controlled by the conspirators, Nancy Quon, the construction defect attorney whose recent death appears to be by suicide, handled the litigation against homebuilders. She would settle out of court, engaging Silver Lining Construction to “do very minor and superficial repairs” to the homes. The remainder of the money was split by the conspirators. The suit also notes that the construction defect claims were “frivolous,” and?in addition to the negative publicity?caused the homes to lose at least 5% of their value.

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Statute of Limitations Upheld in Construction Defect Case

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…

Largest Per Unit Settlement Ever in California Construction Defect Case?

BusinessWire reports that the Chelsea Court Homeowners Association has settled their construction defect case for $5.4 million. That works out to $169,000 per unit, which BusinessWire describes as “California’s largest per-unit recovery known to be on record to date.”

Most of the money in the settlement is coming from insurance companies for the builder and thirteen subcontractors. Issues included roof and window leaks, deck failures, and unsafe walkways.

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Defective Grout May Cause Trouble for Bridges

Grout, which was used to protect the steel support cables of the Woodrow Wilson Bridge, may lead to problems instead. The Baltimore Sun reports that the Federal Highway Administration is looking at three dozen bridges in twenty-one states that were built with defective grout. The grout contains high levels of chlorides, which can lead to corrosion. The collapse of pedestrian walkway in Concord, North Carolina was attributed to chloride contamination in the grout.

The grout, SikaGrout 300PT, was advertised as "non-corrosive, does not contain chlorides," but later testing showed that it contained levels that exceeded limits by 400 percent. Throughout the country, about 16 million pounds of this were used. Sika Corp. suspended production of the grout in 2010. If repairs need to be made, it is unclear who will pay.

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Harmon Hotel Construction Defect Update

Coverage of the ongoing litigation concerning the Harmon Hotel continues to proliferate. Architectural Record and a number of other news outlets continue to provide additional details and coverage of the matter. Chief among the conditions alleged are improperly installed reinforcing steel inside link beams on 15 floors. MGM Claims that the conditions amount to hundreds of millions of dollars in damages, while Perini (the builder) indicated in a July 12th statement that the buildings problems are related to the design, and the they are “fixable.”

There is significant speculation that MGM Resorts International isn’t interested in repairing the hotel due to a glut of hotel rooms attendant to the troubled economy. In a statement Tuesday Perini reportedly stated that “Repairing and opening the Harmon would only create a greater glut of unused hotel rooms for MGM,” “If market conditions were better and MGM found that demand existed for the Harmon hotel rooms, MGM would not be claiming that the Harmon is unstable.”

MGM asserts that Perini failed to ”properly construct” the project. Clark County’s Department of Development Services has reportedly asked MGM to provide a plan to fix the project by August 15th.

The Harmon is part of the $8.5 billion CityCenter project that opened in the fourth quarter of 2009 and is jointly owned by MGM Resorts and Dubai World.

Prior reports indicated that the owner (MGM) had considered razing the entire project. The future of the project remains uncertain.