Court finds subcontractor responsible for defending claim
May 18, 2011 — May 18, 2011 - CDJ Staff
In an unpublished decision, the California Fourth Appellate District Court has reversed the judgment of Judge Linda B. Quinn of the Superior Court of San Diego. In the case Inland California, Inc. v. G.A. Abell, Inland, a general contractor had subcontracted with Apache Construction and Precision Electric Company (G.A. Abell).
Apache alleged that extra demolition and drywall work was needed due to Precision’s electrical work. Inland tendered a defense of Apache’s claims. However, Precision did not provide any defense. Inland withheld payment from Precision.
At trial, Inland “conceded Precision earned the $98,000 in progress payments Inland withheld.” They were obligated to additionally pay Precision’s costs and attorney fees.
The Fourth Appellate District court has overturned this and remanded the case back to the lower court. The judges determined that Precision was obligated to defend itself against the claims raised by Apache and therefore vacated the judgment against Inland.
Read the court’s decision…
Cleveland Condo Board Says Construction Defects Caused Leaks
March 1, 2012 — CDJ Staff
A Cleveland condo association has sued the developer of their building, claiming that construction defects resulted in water intrusion. The K&D Group, which still owns forty units in the 160-unit building, claim that it’s a maintenance issue that they’d like to see fixed, but it’s their responsibility as the developer. Doug Price, CEO of K&D calls it a “frivolous lawsuit.” He blames a “hostile board” and told The Plain Dealer “there’s simple maintenance that they refuse to do.”
An outside company evaluated Stonebridge Towers. According to the condo board’s lawyer, Laura Hauser, the building design and construction are to blame for the water intrusion. Hauser said that the board’s “goal through this litigation is to find a resolution for the association, the building and the owners.”
David Kaman, a Cleveland attorney not involved in the lawsuit, told the Plain Dealer that construction litigation in the Cleveland area had fallen off from 2007, but he sees it on the rise, which he attributes to cost-cutting on recently finished projects. “If an owner moves in and two years later the wallpaper needs to be replaced because the wall is leaking, that’s a construction defect.”
Read the full story…
Pennsylvania Court Extends Construction Defect Protections to Subsequent Buyers
December 20, 2012 — CDJ Staff
The Pennsylvania courts have long held that there is an implied warranty of habitability for the initial purchaser of a home. Now, as some defects may not immediately show up, the court has extended that implied warranty to second and subsequent purchasers. As Marc D. Brookman, David I. Haas, and Christopher Bender of Duane Morris note, “this judicially created doctrine shifts the risk of a latent defect in the construction of a new home from the purchaser to the builder-vendor.”
The Pennsylvania Supreme Court concluded that a contractual relationship is not needed for an implied warranty of habitability. The court’s concern was inequalities would result when a home was sold while other homes were protected by being within the statute of repose.
Read the full story…
Park District Sues over Leaky Roof
August 2, 2012 — CDJ Staff
The Glen Ellyn Park District has filed suit against multiple firms over the leaks in the Ackerman Sports and Fitness Center. The district alleges at least twenty leaks can be found throughout the facility. In order to prevent further damage, they have put in a system of “buckets, tarps and flexible piping.”
According to the Chicago Daily Herald, the park district has most recently added the project construction manager, the building designer, and insurer that issued a performance bond on the builder. T.A. Bowman Constructors, the builder of the project, sued the park district. They were first name in the district’s countersuit.
The park district isn’t waiting for the outcome of the suit to repair the roof. Instead, they are using existing funds to pay for roof repairs.
Read the full story…
OSHA Extends Temporary Fall Protection Rules
March 1, 2012 — CDJ Staff
OSHA announced that its current rules on fall protection for residential construction will remain in place until September 15, 2012. The current measures became effective in June 2011. Under the new rules, falls must be prevented by fall protection measures unless the measures can be shown to be unfeasible or even hazardous.
Under the extension of the temporary enforcement measures, contractors who ask for compliance assistance with OSHA are given top priority and penalties can be reduced. OSHA has conducted more than 1,000 outreach sessions on the new rules.
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.
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…
Failure to Meet Code Case Remanded to Lower Court for Attorney Fees
May 24, 2011 — CDJ Staff
Judge Patricia J. Cottrell, ruling on the case Roger Wilkes, et al. v. Shaw Enterprises, LLC, in the Tennessee Court of Appeals, upheld the trial court’s conclusion that “the builder constructed the house in accordance with good building practices even though it was not in strict conformance with the building code.” However, Judge Cottrell directed the lower court to “award to Appellants reasonable attorneys' fees and costs incurred in their first appeal, as determined by the trial court.”
Judge Cottrell cited in her opinion the contract which specified that the house would be constructed “in accordance with good building practices.” However, after the Wilkes discovered water leakage, the inspections revealed that “that Shaw had not installed through-wall flashing and weep holes when the house was built.” The trial court concluded that:
“Separate and apart from the flashing and weep holes, the trial court concluded the Wilkeses were entitled to recover damages for the other defects they proved based on the cost of repair estimates introduced during the first and second trials, which the court adjusted for credibility reasons. Thus, the trial court recalculated the amount the Wilkeses were entitled to recover and concluded they were entitled to $17,721 for the value of repairs for defects in violation of good business practices, and an additional 15%, or $2,658.15, for management, overhead, and profit of a licensed contractor. This resulted in a judgment in the amount of $20,370.15. The trial court awarded the Wilkeses attorneys” fees through the Page 9 first trial in the amount of $5,094.78 and discretionary costs in the amount of $1,500. The total judgment following the second trial totaled $26,973.93.”
In this second appeal, Judge Cottrell concluded, that “the trial court thus did not have the authority to decide the Wilkeses were not entitled to their attorneys” fees and costs incurred in the first appeal.”
Read the court’s decision
Recent Case Brings Clarity and Questions to Statute of Repose Application
August 16, 2012 — Douglas Reiser, Builders Counsel
I have often chatted about the Washington Statute of Repose on this blog. The Statute of Repose prevents construction claims, for the most part, from being raised 6 years from the date of substantial completion or termination. Well, a recent Court of Appeals case dove deep into the specific determinative factors that tell us when to start the clock. It certainly raises questions about how long we really have to file suit.
The Statute of Repose has been a frequent topic here, so I will simply direct you to my prior post for further information on how this law works. A recent post was published about a lawsuit that might raise some questions about when and how the clock begins to roll, and claim periods begin to diminish.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Construction Defect Lawsuits? There’s an App for That
July 10, 2012 — CDJ Staff
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.
Read the full story…
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.
Read the full story…
Construction Defect Claim Did Not Harm Homeowner, Court Rules
September 30, 2011 — CDJ Staff
The Minnesota Court of Appeals has ruled in Creswell v. Estate of Howe, a case in which a woman bought a home and then sued the seller’s estate, both sets of real estate agents, and the homeowner’s association over construction defects. A district court ruled against her, granting summary judgment to the other parties.
After buying a townhome “as is,” Catherine Creswell claims to have shared a thought with her agent that the homeowners association was, in the words of her agent, “trying to hide something.” Later, Creswell found that a few days before her closing, the board had discussed problems with “roofs, siding and soundproofing of the townhomes.” The court noted that “it was clear from the documents that appellant [Creswell] received that the association had known about various construction defects for many years, some of which affected [her] unit.”
Creswell initially sued the estate, the man who negotiated the sale for his mother’s estate, the real estate companies and the agents involved, the homeowners association, and four board members. Later she sued for punitive damages, dropped a claim for interference with contractual relations, and dismissed her claims against the individual board members. The court dismissed all of Creswell’s claims awarding costs to those she sued.
The appeals court has affirmed the decision of lower court, noting that Creswell “did not provide us with any argument why the district court erred in dismissing her unjust-enrichment, breach of contract, or rescission claims against the various respondents.” Nor did she provide evidence to support her claims of “breach of duty, fraud, and violation of consumer protection statutes.”
The court noted that Creswell could not sue the homeowners association over the construction defects because she “failed to prove that she was damaged by the association’s nondisclosure.” The court noted that “there are no damages in this case,” as Creswell “was never assessed for any repairs, she had not paid anything out-of-pocket for repairs, and she has presented no evidence that the value of her individual unit has declined because of the alleged undisclosed construction defects.”
The court granted the other parties motion to dismiss and denied Creswell’s motion to supplement the record. Costs were awarded to the respondents.
Read the court’s decision…
South Carolina “occurrence” and allocation
September 1, 2011 — CDCoverage.com
In Crossman Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909 (S.C. Aug. 22, 2011), insured Crossman was the developer and general contractor of several condominium projects constructed by Crossman’s subcontractors over multiple years. After completion, Crossman was sued by homeowners alleging negligent construction of exterior components resulting in moisture penetration property damage to non-defective components occurring during multiple years. Crossman settled the underlying lawsuit and then filed suit against its CGL insurers to recover the settlement amount. Crossman settled with all of the insurers except for Harleysville. Crossman and Harleysville stipulated that the only coverage issue was whether there was an “occurrence.” The trial court subsequently entered judgment in favor of Crossman, determining that there was an “occurrence.” The trial court also ruled that Harleysville was liable for the entire settlement amount without offset for the amounts paid by the other insurers.
Read the full story…
Reprinted courtesy of CDCoverage.com
North Carolina Exclusion j(6) “That Particular Part”
February 10, 2012 — CDCoverage.com
In Alliance Mutual Insurance Co. v. Dove, 714 S.E.2d 782 (N.C. Ct. App. 2011), claimant Murphy-Brown hired insured Dove to repair a broken elevator belt in a grain elevator in Murphy-Brown’s feed mill. The elevator was inside a metal duct and, to access the broken belt, Dove had to cut out a section of the duct. After replacing the belt, Dove welded the metal section back to the duct. Immediately after Dove completed the welding, dust inside the duct ignited, causing an explosion in the elevator, resulting in property damage to the elevator and other property. Murphy-Brown sued Dove for negligence seeking damages for the repair and replacement of the elevator, repair and replacement of the other property, increased grain handling costs during the repairs, and loss of use.
Read the full story…
Reprinted courtesy of CDCoverage.com
Ohio “property damage” caused by an “occurrence.”
May 18, 2011 — May 18, 2011 - CDCoverage.com
In JTO, Inc. v. State Automobile Mut. Ins. Co., No. 2010-L-062 (Ohio Ct. App. March 25, 2011), general contractor JTO was sued by hotel project owner Marriott for breach of contract and warranties seeking damages for the repair of construction defects resulting in moisture penetration property damage to interior components. JTO filed a third party complaint against subcontractor Farizel and also tendered its defense as an additional insured under Farizel’s State Auto CGL policy.
Read the full story…
Reprinted courtesy of CDCoverage.com
Census Bureau, HUD Show Declines in Residential Construction
May 17, 2011 – CDJ Staff
The U.S. Census Bureau and the Department of Housing and Urban Development released their summary of residential construction for April 2011 on May 17.
Building permits for privately owned housing units were down 4% from last month and 12% from last year. Similarly, privately-owned housing starts were down 10% from March and 23% below the previous year.
For further details, read the Census Bureau/HUD report
San Diego Construction Defect Claim Settled for $2.3 Million
July 10, 2012 — CDJ Staff
The Nauman Law firm has settled the lawsuit by the Latitude Owners Association against CS-Crossroads and others, as reported in the Sacramento Bee from a press release by the firm. The owners at Latitude, a condominium community in San Diego, found that hillside crawl spaces were not property waterproofed, leading to rotting plywood, water intrusion, and pipe leaks. There were additional problems with retrofitted windows and repairs of outside decks. The case was filed in San Diego Superior Court, but settled after multiple mediations.
Read the full story…
Court Rules on a Long List of Motions in Illinois National Insurance Co v Nordic PCL
May 10, 2012 — CDJ Staff
The case Illinois National Insurance Co. v Nordic PCL, et al. “involves a dispute about whether insurance benefits are available to a general contractor who built structures that allegedly have construction defects. Plaintiffs Illinois National Insurance Company (‘Illinois National’) and National Union Fire Insurance Company of Pittsburgh, PA (‘National Union’) (collectively, the ‘Insurers’), commenced this action for declaratory relief against Defendant Nordic PCL Construction, Inc., f/k/a Nordic Construction, Ltd. ("Nordic"), on August 23, 2011.”
The court was asked to rule on a long list of motions: “Counterclaim Defendants’ Request for Judicial Notice in Support of Their (1) Motion to Dismiss the Counterclaim and (2) Motion to Strike Portions of the Counterclaim, ECF No. 16 (‘Request for Judicial Notice’); Counterclaim Defendants’ Motion to Dismiss Counterclaim Filed October 24, 2011, ECF No. 14 (‘Motion to Dismiss Counterclaim’); Counterclaim Defendants’ Motion to Strike Portions of the Counterclaim Filed October 24, 2011, ECF No. 15 (‘Motion to Strike’); Third-Party Defendant Marsh USA, Inc.’s Motion to Dismiss or, in the Alternative, Stay Proceedings in Favor of Pending State Action, ECF No. 33 (‘Marsh’s Motion To Dismiss Or Stay’); Defendant and Third-Party Plaintiff Nordic PCL Construction, Inc., f/k/a Nordic Construction Ltd.’s Substantive Joinder to Third-Party Defendant Marsh USA Inc.’s Motion to Dismiss or, in the Alternative, Stay Proceedings in Favor of Pending State Action, ECF No. 36 (‘Nordic’s Joinder’); and Third-Party Defendant Marsh USA, Inc.’s Motion for Judgment on the Pleadings on Counts V and VI of Defendant/Third-Party Plaintiff Nordic PCL Construction, Inc.’s Third-Party Complaint, ECF No. 29 (‘Marsh’s Motion for Judgment on the Pleadings’).”
In result, the court reached the following decisions: “The court GRANTS IN RELEVANT PART the Insurers’ Request for Judicial Notice to the extent it covers matters relevant to these motions; GRANTS IN PART the Insurers’ Motion to Dismiss Counterclaim, but gives Nordic leave to amend the Counterclaim in certain respects; DENIES the Insurers’ Motion to Strike; DENIES Marsh’s Motion To Dismiss Or Stay and Nordic’s Joinder; and GRANTS Marsh’s Motion for Judgment on the Pleadings.”
The court provides a bit of background on the case: “This action arises out of alleged construction defects involving two projects on which Nordic acted as the general contractor. Nordic is a defendant in a pending state court action with respect to one of the projects and says it spent more than $400,000 on repairs with respect to the other project. Nordic tendered the defense of the pending state court action to the Insurers and sought reimbursement of the cost of repairs already performed. The Insurers responded by filing this action to determine their rights under the insurance policies issued to Nordic.”
Furthermore, the court presented a brief procedural history: “The Insurers commenced this declaratory action in this court on August 23, 2011. The Complaint asserts two claims, one seeking a declaration that the Insurers have no duty to provide a defense or indemnification regarding the Safeway Action, the other seeking such a declaration regarding the Moanalua Claims. Along with its Answer, Nordic filed a Counterclaim against the Insurers. The Counterclaim asserts breach of contract, breach of the covenant of good faith and fair dealing, misrepresentations and omissions of material fact, and bad faith, and seeks declaratory relief against the Insurers.”
The procedural history continues: “Nordic also filed a Third-Party Complaint against Marsh, the broker that had procured the Policies from the Insurers for Nordic. Nordic alleges that it reasonably believed that the Policies would provide completed operations insurance coverage for the types of construction defects alleged in the Safeway Action and Moanalua Claims. The Third-Party Complaint asserts breach of contract, negligence, promissory estoppel, breach of fiduciary duties, implied indemnity, and contribution and equitable subrogation.”
In conclusion, “The court GRANTS IN RELEVANT PART the Insurers’ Request for Judicial Notice. With regard to the Insurers’ Motion to Dismiss Counterclaim, the court GRANTS the motion as to Count I (breach of contract), Count II (duty of good faith and fair dealing), Count III (fraudulent and negligent misrepresentation), the portion of Count IV (bad faith) premised on fraud, and Count IV (declaratory relief). The court DENIES the motion as to Count IV (bad faith) that is not premised on fraud. Except with respect to the "occurrence" issue, which the court disposes of here on the merits, and Count V, which concerns only a form of relief, Nordic is given leave to amend its Counterclaim within three weeks of the date of this order. The court DENIES the Insurers’ Motion to Strike, DENIES Marsh’s Motion to Dismiss or Stay and Nordic’s Joinder, and GRANTS Marsh’s Motion for Judgment on the Pleadings with respect to Counts V and VI of the Third-Party Complaint.”
Read the court’s decision…
Contractual Liability Exclusion Bars Coverage
August 2, 2012 — Tred Eyerly, Insurance Law Hawaii
The Fifth Circuit Court of Appeals considered whether coverage existed for a defectively built tennis court in light of a contractual liability exclusion. Ewing Construction Company, Inc. v. Amerisure Ins. Co., 2012 U.S. App. LEXIS 12154 (5th Cir. June 15, 2012).
Ewing Construction Company entered a contract with the School District to construct tennis courts at a school. After completion, the School District complained that the courts were cracking and flaking, rendering them unfit for playing tennis. The School District filed suit, seeking damages for defective construction. It alleged that Ewing breached its contract and performed negligently.
Ewing tendered the underlying lawsuit to Amerisure. Amerisure denied coverage and Ewing filed suit.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
