Boston Tower Project to Create 450 Jobs
November 18, 2011 — CDJ Staff
Continuing the development of Boston’s Theater District, Millennium Partners broke ground for the building of Hayward Place, a 15-story residential tower with street-level shops. The project is expected to take two years to complete and will employ about 450 construction workers.
Thomas Menino, the mayor of Boston said that the “ground breaking of Hayward Place is another sign of economic growth and forward progress on the revitalization of this area.” The project will be built by Suffolk Construction. John Fish, their CEO, said they were “fortunate as a contractor to be the beneficiary of this.”
The report in the Boston Herald notes that a few blocks away, the site of the former Filenes department store is still “an empty eyesore.” Menino joked, “anyone want to bid for it?” He promised that site would also be developed.
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The U.S. Tenth Circuit Court of Appeals Rules on Greystone
November 18, 2011 — Derek J. Lindenschmidt, Higgins, Hopkins, McLain & Roswell, LLC
On November 1, 2011, the Tenth Circuit Court of Appeals ruled on the certified question of whether property damage caused by a subcontractor’s faulty workmanship is an “occurrence” for purposes of a commercial general liability (CGL) insurance policy. In Greystone Const., Inc. v. National Fire & Marine Ins. Co., No. 09-1412 (10th Cir. Nov. 1, 2011), the Tenth Circuit determined that because damage to property caused by poor workmanship is generally neither expected nor intended, it may qualify under Colorado law as an occurrence and liability coverage should apply. Id. at 2.
The short history of the Greystone case is as follows. In Greystone Const., Inc. v. National Fire & Marine Ins. Co., 649 F. Supp. 2d 1213 (D. Colo. 2009), two contractors and one of their insurers brought an action against a second insurer after the second insurer refused to fund the contractors’ defense in construction defect actions brought by separate homeowners. Id. at 1215. The U.S. District Court for the District of Colorado, relying on General Sec. Indem. Co. of Arizona v. Mountain States Mut. Cas. Co., 205 P.3d 529 (Colo. App. 2009), granted summary judgment in favor of the second insurer on the basis that the homeowners’ complaints did not allege accidents that would trigger covered occurrences under the second insurer’s policies. Id. at 1220. Notably, the Greystone, General Security, and other similar decisions prompted the Colorado General Assembly to enact C.R.S. § 13-20-808, which was designed to provide guidance for courts interpreting perceived coverage conflicts between insurance policy provisions and exclusions. The statute requires courts to construe insurance policies to favor coverage if reasonably and objectively possible. C.R.S. § 13-20-808(5).
The Tenth Circuit began its analysis by determining whether C.R.S. § 13-20-808, which defines the term “accident” for purposes of Colorado insurance law, would have a retroactive effect, and thereby settle the question before the court. The Tenth Circuit gave consideration to several Colorado district court orders issued since the enactment of C.R.S. § 13-20-808 which have suggested that the statute does not apply retroactively, including Martinez v. Mike Wells Constr., No. 09cv227 (Colo. Dist. Ct., Mar. 1, 2011), and Colo. Pool. Sys., Inv. V. Scottsdale Ins. Co., No. 09cv836 (Colo. Dist. Ct., Oct. 4, 2010). The Tenth Circuit also attempted to ascertain the General Assembly’s intent behind the term “all insurance policies currently in existence...” Greystone, No. 09-1412, at 12. The Tenth Circuit determined that the General Assembly would have more clearly stated its intentions for the term if it was supposed to apply retroactively to expired policies, rather than those still running. Id. at 12-13. Ultimately, the Tenth Circuit decided that C.R.S. § 13-20-808 did not apply retroactively, but noted that “the retrospective application of the statute is not necessarily unconstitutional.” Id. at 9, 11-14. As such, the Tenth Circuit advised that it was required to decide the question presented in the appeal under the principles of Colorado insurance law. Id. at 15.
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Reprinted courtesy of Higgins, Hopkins, McLain & Roswell, LLC. Mr. Lindenschmidt can be contacted at lindenschmidt@hhmrlaw.com
CC&Rs Not the Place for Arbitration Agreement, Court Rules
May 24, 2011 — CDJ Staff
In January, the California Court of Appeals ruled that an arbitration clause inserted in a development’s CC&Rs by the developer could not be enforced. The case, Villa Vicenza Homeowners Association v. Noble Court Development, involved a case in which, according to the opinion, “following the first sale Nobel controlled the board of directors of the Association and because the initial condominium buyers noticed defects in common areas and common facilities and did not believe Nobel had provided a reserve fund sufficient to repair the defects, the condominium owners brought a derivative action on behalf of the Association against Nobel.”
The court concluded, “The use of CC&R's as a means of providing contractual rights to parties with no interest in or responsibility for a common interest development is also problematic from the standpoint of determining what if any consideration would support such third-party agreements. By their terms the CC&R's bind all successors, even those with whom a third party such as Nobel has never had any contractual relationship and to whom Nobel has not provided any consideration.” The court determined that “the trial court did not err in denying Nobel's motion to compel arbitration.”
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Surveyors Statute Trumps Construction Defect Claim in Tennessee
June 19, 2012 — CDJ Staff
The Tennessee Court of Appeals has issued an opinion in the case of Dale v. B&J Enters. (Tenn. App., 2012), affirming the ruling of the Chancery Court for Knox County. The homeowners purchased properties in Knoxville, Tennessee in 2007 and 2008. Subsequently, according to the complaint, they found “significant sink holes and depressions throughout the subdivision.” The plaintiffs determined that a previous developer in 2004 had been aware of the sink holes. The Knox County Metropolitan Planning Commission, upon giving approval, made requirements that included that sink holes, even if they were filled, had to be designated on the site plans. The developer did not indicate these locations on the final plans. The plaintiffs made claims of “failure to disclose, misrepresentation, misrepresentation by concealment, and violation of the Tennessee Consumer Protection Act.” They filed their suit in June 2009.
The defendants in the initial case, argued that they did not create the final plat, the site plan indicating the features and lot lines. This had been the work of the previous developer. In September, 2009, the plaintiffs amended their complaint to include the previous developer and its engineering firm. The engineering firm disavowed any responsibility. The developer noted that the surveyor, Benchmark Associates, had “failed to properly include the sink holes and/or depressions on the final plat.” In June, 2010, the plaintiffs added Benchmark.
Benchmark argued that the plaintiffs’ claims should be dismissed, as Tennessee has a four-year statute of limitations on claims against surveyors. The final plat was recorded on May 19, 2006, and the plaintiff filed their claims against Benchmark on June 16, 2010, slightly less than a month over four years. The plaintiffs argued that “the real issue [was] the tortious misrepresentation by Benchmark.” The Chancery Court found for Benchmark.
On appeal, the plaintiffs raised three issues. They argued that the trial court applied the wrong section of the law, and should have applied the section applying to construction and not surveyors. They also argued that the timeliness of the claim should be based on when the defects were discovered. The also raised the question of whether the laws concerning surveyors bar claims for misrepresentation. The appeals court upheld the decision of the Chancery Court.
For the plaintiff’s first claim, although the statute addressing deficiencies in construction mentions surveying, an earlier court ruling found that the legislature had removed a reference to surveyors in one part of the statute, but failed to do so in the second part. The earlier court had concluded that the “obvious intent of the legislature was to place all limits on actions against surveyors into the new statute.” As the applicable statute states that “any such action not instituted within this four (4) year period shall be forever barred,” the court held that the plaintiffs’ claims must be time barred. Further, as the intent of the legislature was determined to “place all limits on actions against surveyors into one statute,” the court felt that it could not apply the Consumer Protection Act.
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Housing Market on Way to Recovery
October 23, 2012 — CDJ Staff
Bloomberg News reports that new home purchases neared a two-year high, with July sales being the strongest since April 2010. Economists polled by Bloomberg expected an annual pace of 380,000 sales, the current levels are at 373,000. Strongest sales gains were in the Northeast, with a 20 percent jump. The Midwest and Western regions had small gains, and the South saw a drop of 4.9 percent. As the Northeast’s home prices are highest and the South’s the lowest, the pattern of sales lead to a sharp increase in median sales price.
Meanwhile, existing stocks of homes continued to deplete, reaching a record low of 38,000 completed homes on the market. In response, builders are constructing new homes at a pace not seen since April 2010, accord to the Commerce Department.
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HOA Has No Claim to Extend Statute of Limitations in Construction Defect Case
October 28, 2011 — CDJ Staff
The California Court of Appeals ruled on September 20, 2011 in the case of Arundel Homeowners Association v. Arundel Green Partners, a construction defect case involving a condominium conversion in San Francisco. Eight years after the Notice of Completion was filed, the homeowners association filed a lawsuit alleging a number of construction defects, including “defective cabinets, waterproofing membranes, wall-cladding, plumbing, electrical wiring, roofing (including slope, drainage and flashings), fire-rated ceilings, and chimney flues.” Three years of settlement negotiations followed.
Negotiations ended in the eleventh year with the homeowners association filing a lawsuit. Arundel Green argued that the suit should be thrown out as California’s ten-year statute of limitations had passed. The court granted judgment to Arundel Green.
The homeowners then filed for a new trial and to amend its complaint, arguing that the statute of limitations should not apply due to the doctrine of equitable estoppel as Arundel Green’s actions had lead them to believe the issues could be solved without a lawsuit. “The HOA claimed that it was not until after the statute of limitations ran that the HOA realized Arundel Green would not keep its promises; and after this realization, the HOA promptly brought its lawsuit.” The trial court denied the homeowners association’s motions, which the homeowners association appealed.
In reviewing the case, the Appeals Court compared Arundel to an earlier California Supreme Court case, Lantzy. (The homeowners also cited Lantzy as the basis of their appeal.) In Lantzy, the California Supreme Court set up a four-part test as to whether estoppel could be applied. The court applied these tests and found, as was the case in Lantzy, that there were no grounds for estoppel.
In Arundel, the court noted that “there are simply no allegations that Arundel Green made any affirmative statement or promise that would lull the HOA into a reasonable belief that its claims would be resolved without filing a lawsuit.” The court also cited Lesko v. Superior Court which included a recommendation that the plaintiffs “send a stipulation?Ķextending time.” This did not happen and the court upheld the dismissal.
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Cabinetmaker Exceeds Expectations as Conditions Improve
October 23, 2012 — CDJ Staff
American Woodmark, the manufacturer of several national brands of cabinets and vanities, saw greater than anticipated earnings in its most recent quarter. Their revenue was $148.3 million, an increase of 13% over the same quarter a year prior. They saw a 40% increase in sales. As a result, their per-share earnings were 7 cents, instead of the projected loss of 3 cents per share. Forbes reports that the share price for American Woodmark has been rising in August 2012.
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Homeowner may pursue negligence claim for construction defect, Oregon Supreme Court holds
March 1, 2011 — Original Story by Lori Bauman, Ater Wynne LLP,
Northwest Business Litigation BlogIn 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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Ghost Employees Steal Jobs from Legit Construction Firms
September 13, 2012 — CDJ Staff
Firms that skirt labor laws for construction workers can undercut firms that are obeying those laws. In a piece in Raleigh, North Carolina’s News & Observer, Doug Burton, a commercial masonry contractor summed it up: “my competitors are cheating.” The article describes the low-bidding firms “called their workers independent contractors ? or treated them like ghosts, paid under the table and never acknowledged.” The cost to the state is “unpaid medical bills for injured workers, uncollected business and personal taxes, and payments not made to a depleted state unemployment reserve.”
One firm examined in the article, Martin’s Bricklaying, employs mostly immigrant Mexican laborers, many of whom are in the country illegally. One employee told the News & Observer, “we don’t complain.”
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Injured Construction Worker Settles for Five Hundred Thousand
October 28, 2011 — CDJ Staff
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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California Bill Would Notify Homeowners on Construction Defect Options
October 23, 2012 — CDJ Staff
The California Building Industry Association supported Assembly Bill 1892, but its goals of informing homeowners of their rights under SB800 have been accomplished through the administrative process. The Department of Consumer Affairs has now posted text on its web site noting that “prior to pursuing legal action or responding to a construction defect solicitation, you must first contact your home builder.” The text goes on to note that “if the homebuilder fails to follow any of the procedures, the homeowner is entitled to proceed with the filing of an action.”
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Arbitrator May Use Own Discretion in Consolidating Construction Defect Cases
September 1, 2011 — CJD Staff
The Mississippi Court of Appeals has ruled in the case of Harry Baker Smith Architects II, PLLC v. Sea Breeze I, LLC. Sea Breeze contracted with Harry Baker Smith Architects II, PLLC (HBSA) to design a condominium complex, which would be built by Roy Anderson Corporation. All parties agreed to arbitration.
Subsequently, Sea Breeze alleged defects and sought arbitration against the architectural firm and started a separate arbitration proceeding against the contractor. The special arbitrator appointed by the American Arbitrators Association determined that it would be proper to consolidate the two actions “since they arose from a common question of fact or law.” HBSA filed in chancery court seeking injunctive relief and a reversal of the decision. Sea Breeze and Roy Anderson filed a motion to compel the consolidated arbitration.
The court noted that the special arbitrator “established that the contract between Sea Breeze and Roy Anderson expressly allowed for consolidation of the two cases.” Further, the arbitrator “concluded that HBSA expressly agreed to consolidation by written consent through its 2008 letter, through which it insisted upon Roy Anderson’s involvement ‘in any mediation and/or arbitration.’”
The court concluded that the chancery court “did not have the power to fulfill HBSA’s request.” The court affirmed the chancery court’s judgment.
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No Coverage Under Ensuing Loss Provision
September 9, 2011 — Tred Eyerley, Construction Law Hawaii
The cost of removing and replacing cracked flanges to prevent future leakage was not covered as an ensuing loss under a builder’s risk policy in RK Mechanical, Inc. v. Travelers Prop. Casualty Co. of Am., 2011 U.S. Dist. LEXIS 83958 (D. Colo. Aug. 1, 2011).
The insured, RK Mechanical Inc., was a subcontractor hired to install plumbing for a residential construction project. RK was an additional insured on the general contractor’s policy with Travelers. RK installed approximately 170 CPVC flanges on the project. Subsequently, two of the flanges cracked, allowing water to overflow and causing water damage to the project. Travelers was notified of the flange failure and resulting water damage.
RK subsequently removed and replaced the two cracked flanges and began water remediation. Travelers paid for the cost of the water damage due to the cracked flanges.
RK then examined all of the flanges installed in the project and discovered many were cracked and/or showed signs of potential failure. RK removed and replaced the cracked flanges. RK tendered a claim and demand for indemnity to Travelers for these repair costs. Travelers denied the claim. RK then sued for breach of contract and declaratory relief. The parties filed cross motions for summary judgment.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Texas contractual liability exclusion
May 18, 2011 — May 18, 2011 - CDCoverage.com
In Ewing Construction Co., Inc. v. Amerisure Ins. Co., No. C-10-256 (S.D. Tex. April 28, 2011), insured Ewing was the general contractor for an athletic facility constructed for a school district. The school district sued Ewing alleging defective construction of the project. The underlying complaint included contract and negligence causes of action, and sought damages for the repair of the damages and loss of the use of the project. The complaint did not allege damage to any property other than the project itself. Ewing tendered its defense to its CGL insurer Amerisure. Amerisure denied a defense and Ewing filed suit against Amerisure. The federal district trial court entered summary judgment for Amerisure. Applying Texas law, the court held that all of the damages fell within the “contractual liability†exclusion precluding any duty to defend or indemnify.
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Reprinted courtesy of CDCoverage.com
Mortar Insufficient to Insure Summary Judgment in Construction Defect Case
January 6, 2012 — CDJ Staff
The US District Court of Nevada issued a summary judgment in the case of R&O Construction Company V. Rox Pro International Group, Ltd. on December 19, 2011. The case involved the installation of stone veneer at a Home Depot location (Home Depot was not involved in the case). R&O’s subcontractor, New Creation Masonry, purchased the stone veneer from Arizona Stone. Judge Larry Hicks noted that “the stone veneer failed and R&O was forced to make substantial structural repairs to the Home Depot store.”
Rox Pro asked the court for a summary judgment, which the court granted only in part. The court looked at two issues in the case, whether the installation instructions constituted a breach of implied warranty of merchantability, and whether there was a breach of an implied warranty of fitness for a particular purpose.
Judge Hicks found that there was a breach of implied warranty of merchantability. The instructions drafted by Real Stone and distributed by Arizona Stone were not sufficient for affixing the supplied stones, according to R&O’s expert, a claim the plaintiffs dispute. “Because there is an issue of material fact concerning the installation guidelines, the court shall deny Arizona Stone’s motion for a summary judgment on this issue.”
On the other hand, the judge did not find that the instructions had any bearing as to whether R&O bought the stone, since the stone was selected by the shopping center developer. This issue was, in the view of the judge, appropriately dismissed.
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Unlicensed Contractors Nabbed in Sting Operation
September 9, 2011 — CDJ Staff
The California State License Board charged sixteen people in the Fresno area with accepting contracting jobs without licenses. The Statewide Investigative Fraud Team of the CSLB set up a sting operation at a home in Clovis, California seeking bids on tree service, painting, and general contracting services. Those who bid for jobs at more than $500 are required under California law to be licensed. Unlicensed contractors can only work on jobs with a cost to the homeowner of less than $500 and must inform the homeowner that they are not licensed.
In addition to citing contractors for not possessing appropriate licenses, the CSLB also cited contractors for failure to carry workers compensation insurance and illegal advertising. Further, California law limits down payments to the lesser of ten percent or $1,000. Two contractors were cited for requesting excessive down payments.
One contractor, an unlicensed tree service contractor, had been cited previously in a sting operation. He failed to show up for his court date.
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Tennessee Court: Window Openings Too Small, Judgment Too Large
November 18, 2011 — CDJ Staff
The Tennessee Court of Appeals has issued a ruling in the case of Dayton v. Ackerman, upholding the decision of the lower court, even as they found that the award was incorrectly computed. The Daytons purchased a house that had been designed and built by the Ackermans, who operated a construction business. The court noted that the warranty with the house promised that “for a period of 60 days, the following items will be free of defects in materials or workmanship: doors (including hardware); windows; electric switches; receptacles; and fixtures; caulking around exterior openings; pluming fixtures; and cabinet work.”
Soon, the Daytons began to experience problems with the house. Many were addressed by the Ackermans, but the Daytons continued to have problems with the windows. Neither side could specify a firm date when the Ackermans were contacted by the Daytons about the window problems. The Ackermans maintained that more than two years passed before the Daytons complained about the windows. The lower court found the Daytons more credible in this.
Initially, the Daytons included the window manufacturer in their suit, but after preliminary investigations, the Daytons dropped Martin Doors from their suit. Martin Doors concluded that the windows were improperly installed, many of them “jammed into openings that were too small for them.”
After the Daytons dismissed Martin Doors, the Ackermans sought to file a third party complaint against them. This was denied by the court, as too much time had elapsed. The Ackermans also noted that not all of the window installations were defective, however, the courts found that the Daytons ought not to have mismatched windows.
Unfortunately for the Daytons, the window repair was done incorrectly and the windows were now too small for the openings. The firm that did the repair discounted the windows and Daytons concealed the problem with plantation shutters, totalling $400 less than the original lowest estimate. However, the appeals court noted that it was here that the trial court made their computation error. Correcting this, the appeals court assessed the Ackermans $12,016.20 instead of $13,016.20.
Finally, the Ackerman’s expert was excluded as he had changed his testimony between deposition and trial. The trial reviewed the expert’s testimony and had it been admissible, it would not have changed the ruling.
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Construction Defects and Contractor-Owners
July 10, 2012 — CDJ Staff
On the expert advice site Avvo.com, a user asks if he can be sued for construction defects by the new owner of a building for which he served as general contractor and then owned for four years. He had construction insurance, but does not think he had construction defect insurance.
A lawyer responding to his question says that “you could be sued.” In the event of a suit, “you would have to bring claims against all of your subcontractors.”
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