Insurer’s Discovery Requests Ruled to be Overbroad in Construction Defect Suit
October 28, 2011 — CDJ Staff
The US District Court has ruled in the case of D.R. Horton Los Angeles Holding Co. Inc. v. American Safety Indemnity, Co. D.R. Horton was involved in a real estate development project. Its subcontractor, Ebensteiner Co., was insured by ASIC and named D.R. Horton as an additional insured and third-party beneficiary. D.R. Horton, in response to legal complaints and cross-complaints, filed for coverage from ASIC under the Ebensteiner policy. This was refused by ASIC. ASIC claimed that “there is no potential coverage for Ebensteiner as a Named Insurer and/or D.R. Horton as an Additional Insured.” They stated that “the requirements for coverage are not satisfied.”
The case same to trial with the deadline for discovery set at March 1, 2011. ASIC stated they were seeking the developer’s “job file” for the Canyon Gate project. D.R. Horton claimed that ASIC’s discovery request was overbroad and that it would be “unduly burdensome for it to produce all documents responsive to the overbroad requests.”
D.R. Horton did agree to produce several categories of documents, which included:
“(1) final building inspection sign-offs for the homes that are the subject of the underlying litigation;(2) an updated homeowner matrix for the underlying actions; (3) the concrete subcontractor files; (4) the daily field logs for D.R. Horton’s on-site employee during Ebensteiner’s work; (5) documents relating to concrete work, including documents for concrete suppliers; (6) documents relating to compacting testing; (7) documents relating to grading; and (8) D.R. Horton’s request for proposal for grading”
The court found that the requests from ASIC were overbroad, noting that the language of the ASIC Request for Production of Documents (RFP) 3-5 would include “subcontractor files for plumbing, electric, flooring, etc. - none of these being at issue in the case.” The court denied the ASIC’s motion to compel further documents.
The court also found fault with ASIC’s RFPs 6 and 7. Here, D.R. Horton claimed the language was written so broadly it would require the production of sales information and, again, subcontractors not relevant to the case.
Further, the court found that RFPs 8, 10, 11, and 13 were also overbroad. RFP 8 covered all subcontractors. D.R. Horton replied that they had earlier complied with the documents covered in RFPs 10 and 11. The court concurred. RFP 13 was denied as it went beyond the scope of admissible evidence, even including attorney-client communication.
The court denied all of ASIC’s attempts to compel further discovery.
Read the court’s decision…
Policyholder Fails to Build Adequate Record to Support Bad Faith Claim
May 19, 2011 — May 19, 2011 -
Tred R. Eyerly,
Insurance Law HawaiiThe importance of careful preparation and documentation was the take away lesson in a Texas bad faith case, C.K. Lee v. Catlin Specialty Ins. Co., 2011 U.S. Dist. LEXIS 19145 (S.D. Tex. Feb. 28, 2011).
C.K. Lee owned a commercial shopping center in Houston. Catlin issued a commercial property policy to Lee. On September 12, 2008, Hurricane Ike hit and caused substantial property damage throughout the Texas Gulf Coast area. On September 24, 2008, Lee submitted a claim for damage to the roof of his shopping center to Catlin.
Catlin hired Engle Martin to represent its interests in adjusting the claim. Engle Martin eventually adjusted over 200 Ike-related claims for Catlin.
In November 2008, Engle Martin and Emergency Services Inc., retained by Lee, inspected Lee’s property. Engle Martin observed evidence of roof repairs that had apparently been made both before and after Hurricane Ike. Engle Martin decided it was necessary to use an infrared scan of the roof to help identify which damages, if any, were attributable to wind and which, if any, were attributable to sub par, prior repairs or natural deterioration.
Engle Martin retained Project, Time & Cost (PT&C) to conduct the infrared inspection. PT&C’s inspection determined there was no wind-related damage to the roof and no breaches or openings created by wind. Instead, the roof had exceeded its life expectancy and was in need of replacement due to normal wear and weathering. Consequently, Catlin decided that the damage to Lee’s roof was not caused by winds from Hurricane Ike.
Meanwhile, Lee’s contractor, Emergency Services, prepared a report estimating that the total cost of repairing the roof would be $871,187. Engle Martin’s estimate for repair of the roof was $22,864.
Lee filed suit for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code. Catlin moved for summary judgment on all claims but breach of contract, arguing that because there was a bona fide dispute concerning the cause of the damages and whether they were covered under the policy, there was no evidence of bad faith or violations of the Texas Insurance Code.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Excess Carrier Successfully Appeals Primary Insurer’s Summary Judgment Award
December 9, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the excess carrier was given inadequate notice of the underlying arbitration, the trial court determined it shared responsibility with the primary carrier for the arbitration award. Finding disputed issues of fact, the Washington Court of Appeals reversed in Am. States Ins. Co. v. Century Surety Co., 2011 Wash. App. LEXIS 2488 (Wash. Ct. App. Oct. 31, 2011).
The primary insurer, American States, issued two liability policies to Professional Home Builders (PHB), a siding contractor. The policies were for successive years, 1998-1999 and 1999-2000. Each policy had annual limits of $1 million per occurrence. PHB also had a commercial excess liability policy for 1999-2000 with Century Surety Company.
PHB was sued by Residential Investment Partners (RIP) for construction defects after moisture entered the building envelope, causing decay and damage. Century’s expert determined the decay started before the 1999-2000 policy period.
RIP and PHB went to arbitration.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Illinois Court Determines Insurer Must Defend Negligent Misrepresentation Claim
December 9, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the insureds disclosed flooding problems in the basement, the buyers purchased their home. USAA Cas. Ins. Co. v. McInerney, 2011 Ill. App. LEXIS 1130 (Ill Ct. App. Oct. 31, 2011). In a supplemental disclosure, the insureds reported that during heavy rains light seepage occurred in the basement.
After moving in, the buyers experienced significant water infiltration and flooding in the basement. The buyers and their children also began to experience mold-related illnesses.
The buyers sued for rescission of the contract or, in the alternative, damages. They alleged breach of contract, fraudulent misrepresentation and negligent misrepresentation. In the claim for negligent misrepresentation, the buyers alleged that the insureds carelessly omitted the fact that there were material defects in the basement and foundation when they should have known of such defects.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Homeowner Has No Grounds to Avoid Mechanics Lien
September 1, 2011 — CDJ Staff
The California Court of Appeals has rejected a motion by a homeowner in a dispute with the contractor who built an extension to his home. In McCracken v. Pirvulete, Mr. McCracken filed a mechanics lien after Mr. Pirvulete failed to complete payment. The matter went to trial with a series of exhibits that showed “the contractual relationship was strained and the parties disagreed over performance and payment.” As a result of the trial, the court awarded Mr. McCracken, the contractor, $1,922.22.
Mr. Pirvulete appealed, contending that the court had not allowed his daughter to act as a translator, that the court had failed to give him sufficient time to present his case, that the mechanics lien should have been dismissed, and several other claims, all before a formal judgment was issued. After the court formalized its judgment and rejected the appeal, Mr. Pirvulete appealed again.
The appeals court found that Mr. Pirvulete did not provide an adequate record for review. The court dismissed Mr. Pirvulete’s claims. The court notes that Mr. Pirvulete claimed that a request for a discovery period was denied, however, he has provided neither the request nor the denial. The trial court has no record of either.
Nor was there a record of a request that Mr. Pirvulete’s daughter provide translation. The court notes, “so far as we can glean from the record provided, the Register of Actions states, ‘Trial to proceed without Romanian Interpreter for Defendant; Daughter present to interpret if needed.’” Additionally, the court found that “there has been no showing that his facility with the English language is or was impaired in any way or that there was any portion of any proceeding, which he did not understand.”
Further, the appeals court found there were no grounds for a new trial, despite Mr. Pirvulete’s filings. The court concluded, “The owner has failed to provide a record adequate for review of most, if not all, of the claims of error. Some issues are not cognizable because they relate to entirely separate proceedings, and not the trial below. To the limited extent that the claims are examinable, the owner has made no showing of error.” The court affirmed the judgment of the lower court against Mr. Pirvulete.
Read the court’s decision…
Webinar on Insurance Disputes in Construction Defects
July 10, 2012 — CDJ Staff
Seth Lamden, of the firm Neal Gerber Eisenberg will be presenting a webinar on “Insurance Coverage Disputes in Construction Defects” on July 17, 2012 at 1 p.m. EDT. Mr. Lamden’s presentation will focus on “handling both the construction and insurance components of construction defect claims.” He will be discussing recent case law and new insurance products. The presentation will present information on evaluating various types of insurance policies, explaining common issues, contract requirement, and the economic loss doctrine. Mr. Lamden will advise attendees on how to avoid getting into a construction defect case. He will conclude his presentation with a brief question-and-answer session.
Read the full story…
Arizona Contractor Designs Water-Repellant Cabinets
September 9, 2011 — CDJ Staff
Dubbing his product “Baltic Duck,” a Mesa, Arizona building contractor is offering household cabinets made with specially treated water-repellent plywood instead of the usual particle board. Pete Celano calls his product Baltic Duck because the plywood is made in the Baltic region of Eastern Europe. To further protect the cabinets from moisture, a silicone-based sealant is applied to the corners and edges.
Celano’s cabinets use standard decorative fronts. The design of the cabinets allows spilled liquids to drain away without encountering the decorative wood.
Read the full story…
Contractor Liable for Soils Settlement in Construction Defect Suit
February 10, 2012 — CDJ Staff
The California Court of Appeals ruled on January 9 in Burrow v. JTL Dev. Corp., a construction defect case in which houses suffered damage due to improperly compacted soil, upholding the decision of the lower court.
Turf Construction entered into a deal with JTL to develop a parcel they acquired. A third firm, Griffin Homes, withdrew from the agreement “when a geotechnical and soils engineering firm reported significant problems with soil stability on 14 of the lots.” Turf Construction then took over compacting and grading the lots. Turf “had never compacted or graded a residential tract before.” Robert Taylor, the owner of Turf, “testified he knew there was a significant problem with unstable soils.”
After homes were built, the plaintiffs bought homes on the site. Shortly thereafter, the homes suffered damage from soil settlement “and the damage progressively worsened.” They separately filed complaints which the court consolidated.
During trial, the plaintiff’s expert said that there had been an inch and a half in both homes and three to five inches in the backyard and pool areas. “He also testified that there would be four to eight inches of future settlement in the next fifteen to twenty years.” The expert for Turf and JTL “testified that soil consolidation was complete and there would be no further settlement.”
Turf and JTL objected to projections made by the plaintiffs’ soil expert, William LaChappelle. Further, they called into question whether it was permissible for him to rely on work by a non-testifying expert, Mark Russell. The court upheld this noting that LaChappelle “said that they arrived at the opinion together, through a cycle of ‘back and forth’ and peer review, and that the opinion that the soil would settle four to eight inches in fifteen to twenty years was his own.”
Turf and JTL contended that the court relied on speculative damage. The appeals court disagreed, stating that the lower court based its award “on evidence of reasonably certain damage.”
Turf also that it was not strictly liable, since it did not own or sell the properties. The court wrote that they “disagree because Turf’s grading activities rendered it strictly liable as a manufacturer of the lots.” The court concluded that “Turf is strictly liable as a manufacturer of the lots.”
Judge Coffee upheld the decision of the lower court with Judges Yegan and Perren concurring.
Read the court’s decision…
Federal District Court Predicts Florida Will Adopt Injury In Fact Trigger
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
The U. S. District Court for the Middle District of Florida was confronted with determining whether Florida would follow the manifestation or injury in fact trigger in Axis Surplus Ins. Co. v. Contravest Constr. Co., 2012 U.S. Dist. LEXIS 104502 (D. Fla. June 5, 2012).
The homeowner's association sued the insureds for alleged negligent construction and development of individual dwelling units and common areas of their condominium. Due to this negligence, severe damage was caused by water intrusion. The Association's members only became aware of the defects through the retention of construction experts.
The insured had CGL coverage with Axis, with policies issued from 2003 to 2007. Coverage was denied for the periods 2003-2004 and 2004-2005. Axis provided a defense under the policies issued for 2005-2006 and 2006-2007, but under a reservation of rights. Axis sought a declaration that it had no duty to defend or indemnify because the damage manifested before its policy periods.
For coverage to exist, "property damage" must have "occurred" during Axis' policy period.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Hawaii Building Codes to Stay in State Control
March 1, 2012 — CDJ Staff
The Hawaii State Senate voted down Senate Bill 2692. Had it been passed, the State Building Code Council would have been abolished and building codes would have become the responsibility of county governments. The bill was opposed by the Insurance Institute for Business and Home Safety. Their director of code development, Wanda Edwards said that the bill “would have undermined key components that are essential to an effective state building code regime.”
Read the full story…
Follow Up on Continental Western v. Shay Construction
March 28, 2012 — Brady Iandiorio, Colorado Construction Litigation
Writing in Construction Law Colorado, Brady Iandiorio revisits the case Continental Western v. Shay Construction. He promises to continue to follow cases dealing with Colorado HB 10-1394.
Recently the Court ruled on two Motions to Reconsider filed by Defendants Milender White and Shay Construction.
Procedurally, the Motions to Reconsider were ruled on by the Honorable William J. Martinez, because the day after the motions were filed the action was reassigned to Judge Martinez. In the short analysis of the Motion to Reconsider, the court leaned on Judge Walker D. Miller’s ruling on the summary judgment and his analysis of the (j)(5) and (j)(6) exclusions.
As a quick refresher regarding the grant of summary judgment, Judge Miller agreed with Continental Western’s argument that the asserted claims were excluded under the “damage to property” exclusion. The policy’s exclusions state: “(j) Damage to Property . . . (5) that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations; or (6) that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” Judge Miller found that both exclusions (j)(5) and (6) applied to both Shay’s allegedly defective work.
Read the full story…
Reprinted courtesy of Brady Iandiorio of Higgins, Hopkins, McClain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com.
South Carolina Legislature Defines "Occurrence" To Include Property Damage Arising From Faulty Workmanship
May 26, 2011 — Tred R. Eyerly, Insurance Law Hawaii
On May 17, 2011, South Carolina passed legislation to combat the restrictive interpretation of what constitutes an "occurrence" under CGL policies. S.C. Code Ann. sec. 38-61-70.
The legislation reversed a decision by the state's Supreme Court issued earlier this year. See Crossman Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 2011 W.L. 93716 (S.C. Jan. 7, 2011). Crossman had overruled an earlier decision by the South Carolina Supreme Court that holding that defective construction was an “occurrence.” Crossman, however, reversed course, holding that damages resulting from faulty workmanship were the “natural and probable cause” of the faulty work and, as such, did not qualify as an “occurrence.”
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Faulty Workmanship Exclusion Does Not Bar Coverage
November 18, 2011 — Tred Eyerley, Insurance Law Hawaii
The court determined that the Faulty Workmanship Exclusion only barred coverage for damages arising from problems with the property under construction itself and not to losses incurred to correct damage from accidents during construction. See 1756 First Associates, LLC v. Continental Casualty Co., 2011 U.S. Dist. LEXIS 117100 (S.D.N.Y. Oct. 3, 2011).
A tower crane collapsed at the construction site, causing damage. First Associates tendered the claim to its insurer, Continental. Continental reimbursed First Associates for certain costs arising from damage to and cleanup of the construction site and building stemming from the crane collapse. Continental refused, however, to reimburse First Associates for costs associated with construction delays resulting from the collapse.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
No “Special Relationship” in Oregon Construction Defect Claim
July 10, 2012 — CDJ Staff
Writing on his firm’s blog, Justin Stark discusses recent changes in construction defect claims in Oregon where, as he points out, “courts in Oregon have been lowering legal hurdles that construction defect plaintiffs must overcome in bringing their cases.” He cites a case in which water damage was discovered more than six years after construction was complete. The owners claimed breach of contract and negligence. The trial court found for the contractor, who argued “that there was no ‘special relationship’ with the owners that could support the negligence claim.”
This was overturned on appeal, with the court concluding that if there was a violation of the building code, then the negligence claim could stand. This was appealed to the Oregon Supreme court which concluded that “neither a special relationship nor a statutory standard of care, such as the building code, is necessary to bring a negligence claim here.”
Stark notes that “many forms of construction contract incorporate the phrase ‘workmanlike,’ which implicates the ‘common law standard of care’ in negligence law.
Read the full story…
Unit Owners Have No Standing to Sue under Condominium Association’s Policy
February 10, 2012 — Tred Eyerly, Insurance Law Hawaii
If a condominium owner suffers damage caused by a leak from another unit, may it sue the insurer for the Association of Apartment Owner (AOAO) for coverage? The federal district court for Hawaii said "no" in a decision by Judge Mollway. See Peters v. Lexington Ins. Co., 2011 U.S. Dist. LEXIS 148734 (D. Haw. December 27, 2011).
Two cases were consolidated. In each case, Plaintiffs owned condominium units at the Watercrest Resort on Molokai. Water leaking from another unit damaged Plaintiffs’ units.
Watercrest Resort was insured by Lexington pursuant to a policy maintained by the AOAO. Plaintiffs filed claims with Lexington. Lexington hired an adjustor.
Unhappy with the adjustment of their claims, Plaintiffs sued Lexington and the adjustor.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Does the New Jersey Right-To-Repair Law Omit Too Many Construction Defects?
January 6, 2012 — CDJ Staff
A post on the blog of Liberty Building Forensics Group find fault with the New Jersey Home Warranty and Builders’ Registration Act for not being stringent enough. The poster notes the coverage given under the bill. In the first year, builders are responsible to remedy faulty workmanship and materials and major structural defects. While other protections expire in the first or second year, there is a ten year coverage of major construction defects.
The blogger finds fault with the exclusion New Jersey law places on these claims, arguing that “due to the stringent definition of ‘major construction defects,” the warranty affords no coverage unless the house is practically collapsing.” The bill excludes leaks, cracks, and mold, and further limits claims if the homeowner has failed to inform the builder or insurer of defects, failure to maintain the home, and alterations made by the homeowner.
The intent of the New Jersey law is given as “requiring that newly constructed homes conform to certain construction and quality standards as well as to provide buyers of new homes with insurance-backed warranty protection in the event such standards are not met.” It’s argued in the piece that it instead serves to “strip homeowners of any meaningful means of recovery for discovered construction defects.”
Read the full story…
Don MacGregor To Speak at 2011 West Coast Casualty Construction Defect Seminar
January 1, 2011 — February 08, 2011 CDJ Staff
“Challenges for Experts in Construction Defect Claims and Litigation” will be held Thursday May 13, 2011 between 1:30 and 3:00 PM at this year’s West Coast Casualty Construction Defect Seminar. Among the various topics covered will be of Right to Repair/Opportunity to Repair statutes, improper testing methodologies, new challenges where a case involves a Wrap Policy, OCIPS, CCIPS, and other owner controlled insurance programs, as well as the need for realistic testing protocols for the party the expert is retained to represent.
During the presentation Mr. MacGregor will be working in connection with a group of construction and design experts each of which have extensive experience with construction defect and claims related litigation. This particular session is expected to attract a standing-room only crowd, drawing in excess of 1700 attendees.
The West Coast Casualty Construction Defect Seminar is the largest seminar of its type. This year’s event is scheduled for will take place on May 12 and 13, 2011, at The Disneyland Hotel and Resort. For more information regarding the years event please visit http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
Insurer Not Entitled to Summary Judgment on Construction Defect Claims
February 10, 2012 — Tred Eyerly, Insurance Law Hawaii
The insurer unsuccessfully moved for summary judgment, contending it had no obligation to defend two related underlying construction defect cases. Amerisure Ins. Co. v. R.L.Lantana Boatyard, Ltd., 2012 U.S. Dist. LEXIS 2466 (S.D. Fla. Jan. 9, 2012).
An engineering report noted design construction defects and deficiencies in visible, physical improvements at The Moorings at Lantana Condominium. In two lawsuits, The Moorings sued the developer, R.L. Lantana Boatyard ("RLLB"), and the contractor, Current Builders of Florida.
Current Builders was insured by Amerisure. RLLB was named as an additional insured under the Amerisure policy.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
