Important Information Regarding Colorado Mechanic’s Lien Rights.
November 7, 2012 — David McLain, Colorado Construction Litigation
With payment problems in the construction economy having accelerated over the past few years, there has been a substantial increase in mechanic’s lien activity and associated litigation. The typical mechanic’s lien claimant is a material supplier, a trade subcontractor, or even a general contractor that has not been paid by the developer/owner of the construction project. The reason for filing a mechanic’s lien claim is that it offers the prospect in many cases to make the unpaid construction professional a priority creditor, with a lien on the real estate that is superior to the construction lender.
One of the primary rules governing a mechanic’s lien claim is that the creditor’s formal written “Notice of Intent to File a Mechanic’s Lien” (hereafter “Lien Notice”) must be (1) served on the owner of the property for which the work was done or the materials used, and (2) served at the same time on the general contractor who has handled the construction project. After the creditor has made service of the lien claim by USPS certified mail (using the green return receipt card for proof of service) or separate personal delivery of the notice to the property owner and general contractor, ten full days must pass (not including the date of mailing of the notices) before the lien notice is filed in the public records.
After ten days have expired following the date of mailing using certified mail, or personal delivery of the notice to the property owner and the general contractor, the lien notice can be filed to make the lien valid.
Reprinted courtesy of David M. McLain, Higgins, Hopkins, McLain & Roswell, LLC. Mr. McLain can be contacted at mclain@hhmrlaw.com
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Georgia Law: “An Occurrence Can Arise Where Faulty Workmanship Causes Unforeseen or Unexpected Damage to Other Property”
March 5, 2011 — By
CDCoverage.com, March 5, 2011
In American Empire Surplus Lines Ins. Co. v. Hathaway Development Co., Inc., No. S10G0521 (Ga. March 7, 2011), insured plumbing subcontractor Whisnant was sued by general contractor Hathaway seeking damages for costs incurred by Hathaway in repairing damage to property other than Whisnant’s plumbing work resulting from Whisnant’s negligently performed plumbing work on three separate projects. On one project, Whisnant installed a pipe smaller
Read the full story... Reprinted courtesy of CDCoverage.com
LEED Certified Courthouse Square Negotiating With Insurers, Mulling Over Demolition
June 6, 2011 — Douglas Reiser in the Builders Counsel Blog
Apparently, Courthouse Square is still unresolved. The County hasnow hired an attorney to handle its insurance claim against Affiliated FM. Is there a lawsuit coming?
Right now, no lawsuit is expected. According to officials, the insurer has been acting in good faith. But, its been quite a while since Salem officials learned that the Courthouse Square building had significant concrete issues that would result in probable demolition of the LEED certified building.
If you have yet to hear about Courthouse Square, let me fill you in briefly. The Salem building was substantially completed in 2000 and LEED certified by the US Green Building Council in 2002. The project cost more than $30 Million to complete and the building was revered for its innovation as a crowning achievement for city leaders.
But, structural problems in the building’s core were discovered as early as 2002, writes Chris Cheatham of Green Building Law Update. Final tests earlier in the year, determined that the building had to be vacated. The building has been clear since July 2010.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Gilroy Homeowners Sue over Leaky Homes
February 10, 2012 — CDJ Staff
Two years into a lawsuit against Shapell Homes, the builder of a subdivision called Eagle Ridge in Gilroy, California, homeowners have joined or left the lawsuit. About fifty homeowners are still in the suit, which contends that construction defects have lead to water intrusion in their homes. The lawyer for the homeowners contends that more than a hundred homes have construction defects.
One homeowner said that soon after he joined the suit, Sharpell sent workers to his home who repaired problems to his satisfaction. “They came in within two weeks and fixed everything,” said Frank Lowry. Another homeowner, Wilson Haddow, said that he was “quite happy” after Shapell repaired problems.
Others weren’t quite so happy. Greg Yancey said that problems had “been a nightmare” and that “it just doesn’t feel like home.” He said that his “house is possessed,” with problems that include walls that bow out and a balcony that drips rainwater to the front door. His home is currently worth far less than the $700,000 he paid in 2007.
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Brown Paint Doesn’t Cover Up Construction Defects
April 25, 2012 — CDJ Staff
In a decision that describes the case as illustrating “the perils that real estate brokers and their agents assume when acting as a dual listing agent to both the buyers and sellers of the same house,” the California Court of Appeals has issued a decision in William L. Lyon & Associates v. The Superior Court of Placer County. Lyon & Associates sought summary judgment to dismiss the claims of the Henleys who bought a home in a transaction where a Lyon agent represented both sides.
The prior owners of the home, the Costas, had used a Lyon agent in purchasing their home. When they later sought to sell it, that agent “became aware of some of the house’s defects and problems.” In response, the Costas sought the help of another agent, Connie Gidal, also of Lyons & Associates. Photos taken in the presence of Ms. Gidal show defects of the paint and stucco. The Costas also took the step of painting the house dark brown. During the sale process, “rain caused many of the painted-over defects to reappear.” The Costas “purchased more dark brown paint and covered up the newly visible damage prior to inspection by the Henleys.”
With the damage concealed, the Henleys bought the home in May 2006. The agreement with Lyons & Associates noted that “a dual agent is obligated to disclose known facts materially affecting the value or desirability of the property to both parties.” Escrow closed on May 9, 2006. The contract with the broker included a two-year limit on the time to bring legal action.
The Henleys moved in during June 2006, and “began to discover construction defects that had been concealed by the Costas.” In addition to the painted-over stucco problems, the Henleys found that the Costas had “installed quartzite stone overlays on the backyard steps in a manner that caused water intrusion on the house’s stucco walls.”
In May 2009, the Henleys sued the Costas, Ron McKim Construction, Lyons & Associates, and Ms. Gidal. Their complaint alleged that Lyons & Associates had committed breach of contact, negligence, fraud, breach of fiduciary duty, and negligent nondisclosure in connection with the construction defects. The Costas named Lyons in a cross complaint. Lyons moved for summary judgments on the grounds that the two-year statute of limitations had expired before the complaint and cross-complaint were filed. Both the Henleys and the Costas opposed this claim. The court denied the motion and Lyons appealed.
The appeals court upheld the denial, noting that the both California Supreme Court decision and later action by the legislature compels real estate brokers and salespersons “to conduct a reasonably competent and diligent visual inspection of the property offered for sale.” The court noted that under California law, brokers have responsibilities to both sellers and buyers. The section of law cited by Lyons applies to seller’s agents. The court rejected the contention by Lyons that they were “cooperating brokers.” The Henleys were “not constrained by the two-year statute of limitations.”
Lyons contended that even if California’s statute did not apply, there was a contractual limit of two years. The court also rejected this, agreeing with the Henleys that “the two-year limitation period must be extended by the discovery rule.”
The court noted that “Lyon & Associates may not reap the benefit of a shortened contractual limitation period when its own alleged malfeasance contributed to the delay in the discovery of the buyer’s injury.” The court found that the Henleys could proceed with their breach of contract claim, because, “when a breach of contract is committed in secret, such as the intentional nondisclosure of a real estate broker regarding a previously visible construction defect, the contractual limitations period is properly held subject to the discovery rule.” The court felt that the interpretation favored by the California Association of Realtors would “halve the applicable statute of limitations period.”
In addition to rejecting Lyon request for summary judgment on the claims made by the Henleys, the court also rejected the request of summary judgment on the claims made by the Costas, concluding that neither claim is time-barred. Costs were awarded to both the Henleys and Costas.
Read the court’s decision…
Yellow Brass Fittings Play a Crucial Role in Baker v Castle & Cooke Homes
May 10, 2012 — CDJ Staff
Baker v Castle & Cooke Homes Hawaii, et al. is a “class action filed by homeowners who allege that their homes have a construction defect. They allege that their plumbing systems include brass fittings susceptible to corrosion and likely to cause leaks. They bring this action against the developer of their homes and the manufacturers of the brass fittings.”
Zurn, the manufacturer of the allegedly defective brass fittings, sought a dismissal, or if that could not be achieved, then “a more definite statement, of five of the six claims.” Zurn moved for summary judgment on the sixth claim, or alternately sought “summary judgment on one of the five claims it” sought to dismiss.” The court granted in part the motion, and denied the motion for summary judgment.
The developer, Castle & Cooke, sought dismissal of the First Amended Complaint stating “that Plaintiffs have not complied with Hawaii’s Contractor Repair Act, chapter 672E of Hawaii Revised Statutes, which requires, among other things, a plaintiff to give a contractor the results of any testing done before filing an action against that contractor.” The court couldn’t determine “certain facts essential to ruling” on Castle & Cooke’s motion, and therefore denied the motion, but ordered Plaintiffs to submit requested material by the stated deadline.
The Baker v Castle & Cooke case began with the Plaintiffs claim that the use of yellow brass fittings can lead to construction defects. They allege that “yellow brass is particularly susceptible to dezincification, a corrosion process in which zinc leaches into potable water that comes into contact with the brass. According to Plaintiffs, as the brass corrodes, it becomes porous and mechanically weak. Plaintiffs further allege that the PEX systems in the putative class members’ homes have begun to, or are about to, leak water into the walls, ceilings, and floors of their homes. Plaintiffs allege that the leakage will cause water damage and mold growth, exposing the occupants to toxins.”
In response to the plaintiffs’ claims, Zurn argued “because their yellow brass fittings have not failed to date, Plaintiffs fail to allege, and have no evidence showing, that they have suffered any actual injury.” Plaintiffs replied, “even if the fittings have not failed as of today, failure in the future is inevitable.”
However, the court stated, “whether Plaintiffs have suffered any injury, or whether Plaintiffs are attempting to proceed based solely on future injury, implicates Plaintiffs’ standing to bring this action, as well as whether this case is ripe for adjudication.” The court has requested the parties to submit “supplemental briefing on whether this case should be dismissed pursuant to Rule 12(b)(1). In supplemental briefs, Zurn argues that dismissal is appropriate because Plaintiffs lack standing, and Castle & Cooke argues that dismissal is appropriate because Plaintiffs’ claims are not ripe.”
The court continues to discuss the problem of standing: “To establish standing, a plaintiff must demonstrate three things. First, the plaintiff must suffer an "injury-in-fact," which means that there must be a concrete and particularized "invasion of a legally protected interest" and the invasion is actual or imminent. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Second, the injury must be fairly traceable to the challenged action. Third, a favorable decision must be likely to redress the injury. Id. It is the first element (injury-in-fact) that is in issue here.”
The court found that the plaintiffs do have standing: “Even if the court could not rely on the allegations that the pipes will soon leak, the court would conclude that, for standing purposes, Plaintiffs have a sufficient injury-in-fact in the form of their alleged economic loss.” In a hearing, Plaintiffs argued that their homes had decreased in value.
The court also denied Castle & Cooke’s motion to dismiss based on a lack of ripeness, stating “the same reasons Plaintiffs satisfy the injury-in-fact requirement for standing purposes, they satisfy the constitutional ripeness requirement.”
Plaintiffs asserted six counts against Zurn. Zurn, in response, made a motion to dismiss counts VIII, IX, X, XII, and XIII. The court granted Zurn’s motion for Counts VIII, IX, and X only: “Counts VIII (product liability), IX (negligence), and X (strict liability) sound in tort. Zurn argues that, because Plaintiffs allege no injury other than to the PEX systems and the yellow brass fittings themselves, the economic loss rule bars their tort claims. The court agrees.”
The court disagreed with Zurn’s motion regarding Count XII: “Count XII asserts that Zurn has breached the implied warranty of merchantability. Zurn argues that Count XII is barred by the applicable statute of limitations and that Plaintiffs do not sufficiently allege an injury. The court disagrees.”
Zurn’s motion regarding Count XIII was also denied: “Count XIII asserts that Zurn violated section 480-2 of Hawaii Revised Statutes.” Furthermore, “Plaintiffs allege that Zurn ‘engaged in unfair and deceptive acts or practices when [it] designed, manufactured and sold Yellow Brass Fittings.’ Zurn argues that Plaintiffs fail to state a claim under section 480-2(a) because their claims are barred by the statute of limitations and they do not adequately allege reliance or a cognizable injury. The court disagrees.”
The court denied the motion for summary judgment with respect to Counts XI and XII.
Castle & Cooke sought to dismiss “Plaintiffs’ claims against it under section 672E-2 of Hawaii Revised Statutes, which provides for dismissal when claimants fail to comply with chapter 672E.” There was some discussion regarding the test results. Apparently, the plaintiffs had failed to provide a written notice of claim at least 90 days before filing the action. However, it is unclear if the Plaintiffs have since complied with the requirements of the chapter. “The court has received no supplemental information from either party about whether any test results from another case have been turned over or whether those materials are subject to a confidentiality agreement. The record at this point does not establish noncompliance with the requirement in chapter 672E to provide such information. The court therefore denies the motion to dismiss.”
In summary, “Zurn’s motion to dismiss is granted as to Count VIII, Count IX, and Count X. Zurn’s motion to dismiss is denied with respect to Plaintiffs’ other claims. Zurn’s request for a more definite statement and its summary judgment motion are denied. Plaintiffs are given leave to file an amended Complaint no later than May 21, 2012.” Furthermore, “the court denies Castle & Cooke’s motion, but directs Plaintiffs to file, within two weeks, either a certificate of compliance with section 672E-3(c), or an explanation as to why they have not complied. Castle & Cooke may submit a response within two weeks of Plaintiffs’ submission. Each party’s submission is limited to 1000 words.”
Read the court’s decision…
Going Green for Lower Permit Fees
October 23, 2012 — CDJ Staff
Clay County, Kansas is offering rebates on building permits for green homes. According to the Kansas City Star, building permits in the county are typically $2,500. The county will rebate anything from half to all of the permit fee, depending on how well the builder meets green standards. The county will monitor and inspect the process to make certain that builders adhere to their promises for green construction. The county hopes this will encourage green building by offsetting the cost.
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Texas exclusions j(5) and j(6).
April 27, 2011 — April 27, 2011, by CDCoverage.com
In Evanston Ins. Co. v. D&L Masonry of Lubbock, Inc., No. 07-10-00358-CV (Tex. Ct. App. April 18, 2011), insured masonry subcontractor D&L sued its CGL insurer Evanston to recover costs incurred by D&L for the replacement of window frames damaged by D&L while performing masonry work adjacent to the window frames. The trial court granted summary judgment for D&L.
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Reprinted courtesy of CDCoverage.com
Mark Van Wonterghem To Serve as Senior Forensic Consultant in the Sacramento Offices of Bert L. Howe & Associates, Inc.
March 1, 2012 — CDJ Staff
Sacramento, CA — Bert L. Howe and Associates, Inc., is pleased to announce that Mark Van Wonterghem - General Contractor, has joined the firm as Senior Forensic Consultant. Mark will be responsible for leading the firm’s expansion in the newly formed Sacramento headquarters.
His focus will continue to be working with construction practice groups and claims professionals in the Sacramento and Bay Area markets. He will utilize the resources of the Construction Experts Group at Bert L. Howe & Associates in furthering the litigation support needs attendant to the firm’s Northern California clientele.
Mr. Van Wonterghem possesses extensive consulting and testimony experience. Through 32 years of experience in the construction industry he leverages extensive practical experience with multiple trades including concrete foundations, walls and flatwork, structural wood and steel framing, finish carpentry, drywall, lath & plaster/stucco, window & door installations, deck coating systems, metal and membrane flashings and above/below grade waterproofing. This trade experience encompasses both the commercial and residential construction sectors and has been vital in his ability to provide concise explanation of construction industry standards, as well as trade-specific standards of care.
Mr. Van Wonterghem has broad experience with all types of building construction ranging from concrete and steel commercial construction to high-end custom residential construction.
In connection with the Construction Experts Group at BHA, Mr. Van Wonterghem provides construction consulting and litigation support services to a wide variety of recognized construction claims professionals, owners, and publicly traded builders.
The firm’s Sacramento offices are located at the Gateway Oaks III office complex, 2520 Venture Oaks Way, Suite 435, Sacramento, CA 95833. Mr. Van Wonterghem can be reached via e mail at mvanwonterghem@berthowe.com or at (800) 783-1822.
Colorado statutory “property damage” caused by an “occurrence”
August 4, 2011 — CDCoverage.com
Colorado General Assembly House Bill 10-1394 was signed into law by the Governor on May 21, 2010, codified at Colo. Rev. Stat. § 13-20-808 (2010)
13-20-808. Insurance policies issued to construction professionals
(1) (a) The general assembly finds and determines that:
(I) The interpretation of insurance policies issued to construction professionals is of vital importance to the economic and social welfare of the citizens of Colorado and in furthering the purposes of this part 8.
(II) Insurance policies issued to construction professionals have become increasingly complex, often containing multiple, lengthy endorsements and exclusions conflicting with the reasonable expectations of the insured.
(III) The correct interpretation of coverage for damages arising out of construction defects is in the best interest of insurers, construction professionals, and property owners.
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Reprinted courtesy of CDCoverage.com
Know the Minnesota Statute of Limitations for Construction Defect Claims
July 10, 2012 — CDJ Staff
Writing on the Benson Kerrane Storz Nelson web site, Alex Nelson gives an overview of the Minnesota laws covering statutes of limitation and repose. He notes that frequently when his firm declines to take a construction defect case its’ over a missed statute of limitation. He describes the time periods as both “short” and “ambigious.” The briefest limit is that a homeowner “has only 6 months within which to give written notice of the defect to the builder once the defect has manifested itself.” Any legal action must commence within two years of the same point.
The Minnesota statutes also have a six-year limitation, which starts for a single home at transfer of title to the first purchaser or when the purchaser takes possession, whichever happens first. For a condo, it is the last of “completion of the common element,” first unit sale or “Termination of Declarant control.” Fraud or misrepresentation also has a six-year limit, while negligence claims are limited to within the first two years “after the manifestation of the defect.”
The statues of repose also provide limits to filing construction defect lawsuits. Mr. Nelson points out that the longest are for negligence, fraud, and “major construction defects,” all of which have a ten-year limit. On the other hand, claims against general workmanship and materials must be made in the first year.
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Court Strikes Down Reasonable Construction Defect Settlement
December 20, 2012 — CDJ Staff
The Court of Appeals of Washington has struck down a construction defect settlement between a building owner and the companies she hired to repair the siding, among other repairs to bring the building up to code. Yuan Zhang hired Hawk Construction LLC to do repair work. Hawk, in turn, hired Ready Construction LLC for some aspects of the project. Hawk and Ready were both insured by Capital Specialty Insurance Corporation.
There were several problems with Ready’s work. After removing old siding, they did not protect the building, nor did they remove all of the damaged layers. Ready covered, but did not fix, a mildew problem under the old siding. When new siding was reattached, the nails used were too short to adequately attach it.
After paying for an inspection of the work, Zhang had Hawk and Ready begin the repairs again, but the work was abandoned without being completed. Zhang sued Hawk for breach of contract. Hawk then sued Ready, claiming that “Ready was liable to Hawk to the extent that Hawk was liable to Zhang.” Capitol retained defense for both contractors.
Zhang settled with Hawk, in an agreement that gave her “the right to collect and/or pursue all costs and attorney fees paid by Hawk or its insurance company defending against the Zhang’s claims and pursuing claims against Ready.” Subsequently, she also settled with Ready. Both companies ceased operations.
Zhang had the settlements reviewed by a court, which concluded that the settlements were reasonable. Capital was allowed to appeal, claiming that the settlement included costs that were Zhang’s responsibility. The appeals court did not examine the question of the reasonableness of the settlement, concluding that Capitol’s interests were relevant only to “questions of bad faith, collusion, and fraud.”
In the case of Zhang, the court concluded that the relationship between Zhang and her former contractors was collusive. The court noted that “bad faith or collusion may exist when the evidence indicates a joint effort to create, in a non-adversarial atmosphere, a resolution beneficial to both parties, yet highly prejudicial to the insurer as intervener.” The court noted that both companies had minimal assets which were, in any case, exempted from the agreement. Further, the court found that the agreements failed to determine “what amount of the repairs related to preexisting water damage.” Zhang’s calculation of costs also included her expenses for architectural and engineering services, which the court points out, “where always Zhang’s costs to bear.”
The court concluded that “the overall structure of the settlements is highly probative of collusion, fraud, or bad faith.” Zhang’s agreements with Hawk and Ready allowed her to collect compensation from Hawk and then collect Ready’s compensation to Hawk for their portion of the settlement, allowing Zhang to collect the monies twice. Further, she was allowed to pursue Capitol for Hawk’s attorney expenses, even though Hawk had none. “The right to recover Hawk’s fees merely set up a windfall recovery for Zhang.” The court described the agreements among Zhang, Hawk, and Ready as “precisely the type of manipulation [the law] is intended to preclude.”
Read the court’s decision…
Firm Sued For Construction Defects in Parking Garage
October 23, 2012 — CDJ Staff
Northhampton County, Pennsylvania is suing a contractor who resurfaced a parking garage in 2009. According to the Express-Times, three years later, the surface is cracked and the county is seeking $700,000 for repairs. Additionally, they have withheld $44,000 of the $2.2 million contract because of the problems. John Stoffa, Northampton County Executive, says that the garage is stable, but not up to safety standards.
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Coverage Exists Under Ensuing Loss Provision
July 10, 2012 — Tred Eyerly, Insurance Law Hawaii
Finding coverage under the ensuing loss provision, the Washington Supreme Court overruled a Court of Appeals decision we previously reported here. Vision One, LLC v. Philadelphia Indem. Ins. Co., 276 P.3d 300 (Wash. 2012).
Vision developed a condominium project. Before concrete was poured, a subcontractor supplied the shoring to temporarily support the poured concrete slabs. After the shoring installation was completed, concrete was poured on the first floor. When the pouring was finished, the shoring gave way. The framing, rebar and newly poured concrete came crashing down onto the the lower level parking area, where the wet concrete eventually hardened. It took several weeks to clean up the debris and repair the damage.
Vision had a builders’ risk policy with Philadelphia. The policy excluded losses caused by or resulting from deficient design or faulty workmanship. Collapse, however, was not listed as an excluded event. Further, the exclusion for faulty workmanship contained a resulting loss clause providing that "if loss or damage by a Covered Cause of Loss results, [Philadelphia] will pay for the loss or damage caused by that Covered Cause of Loss."
Philadelphia denied coverage under the faulty workmanship exclusion.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Florida Chinese drywall, pollution exclusion, “your work” exclusion, and “sistership” exclusion.
May 26, 2011 — CDCoverage.com
In Auto-Owners Ins. Co. v. American Building Materials, Inc., No. 8:10-CV-313-T-24-AEP (M.D. Fla. May 17, 2011), insured drywall supplier ABM was sued by general contractor KB Homes seeking damages because property damage to houses built by KB Homes using defective Chinese drywall supplied by ABM. ABM’s CGL insurer Auto-Owners defended ABM under a reservation of rights and filed suit against ABM and KB Homes seeking a judicial declaration of no to duty to defend or indemnify ABM against the KB Homes lawsuit. On cross motions for summary, the federal district trial court directed entry of judgment in favor of ABM and KB Homes and against Auto-Owners, holding that Auto-Owners had a duty to defend and indemnify ABM against the KB Homes lawsuit.
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Reprinted courtesy of CDCoverage.com
Contractor Sues Supplier over Defective Products
June 28, 2011 — CDJ Staff
Fast Track Specialties has sued RJF International after needing to remove wall protection units at Methodist West Houston Hospital, according to an article in the Houston Chronicle. Fast Track claims that contractors had to disconnect gas, water, and electric from the area to facilitate removal of corner guards, handrails, and crash guards from the hospital. This cost the contractor more than $135,000.
Fast Track is claiming that RJD International has committed breach of contract, breach of warranty, and negligent representation.
Read the full story…
The Complete and Accepted Work Doctrine and Construction Defects
August 16, 2012 — CDJ Staff
Matthew C. Bouchard of Lewis & Roberts PLLC, writes how North Carolina is “bucking the trend” on the “complete and accepted work doctrine.” As he notes, in most states “a contractor can be found liable for personal injuries suffered by third parties from accidents occurring after the contractor’s work is completed and accepted.” But one exception is North Carolina.
He gives the example of a case, Lamb v. D.S. Duggins Welding, Inc., in which a site superintendent was “injured by the alleged negligence of the project’s steel deck installer, a sub-subcontractor in the contractual chain” “after the sub-sub’s work had been completed and accepted.” The trial court held that the “completed and accepted work doctrine” ended the subcontractor’s liability. The case noted that “employees of the general contractor had modified the installation of the perimeter safety cable in question after the sub-sub had demobilized from the site.”
Mr. Bouchard notes that “once a project is accepted and turned over, the contractor typically loses control over maintenance of the new facility.” However, he notes that “where the contractor’s work constitutes negligence ?Ķ the doctrine may not apply.” Nor does it end breach of contract claims. It only covers third parties.
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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.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
