Is Construction Heading Off the Fiscal Cliff?
December 20, 2012 — CDJ Staff
After a period of growth, the construction industry lost 20,000 jobs in November, based on the federal jobs data. Damon Scott of New Mexico Business Weekly suggests that contractors may have laid off employees in anticipation of the “fiscal cliff.” Ken Simpson, the chief economist of the National Association of Home Builders said in a press release that “it is discouraging that construction employment is still struggling after three years of expansion in the overall economy.”
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Retaining Wall Contractor Not Responsible for Building Damage
July 20, 2011 — CDJ Staff
The Court of Appeals of Indiana ruled on July 8 in the case of Rollander Enterprises, Inc. v. H.C. Nutting Co. Judge Baily wrote the opinion affirming the decision of the trial court.
The case involved an unfinished condominium complex, the Slopes of Greendale, in Greendale, Indiana. Rollander is a real estate development company incorporated in Ohio. One of the issues in the case was whether the case should be settled in the Indiana courts or be tried in Ohio. The project was owned by a special purpose entity limited liability corporation incorporated in Indiana.
Rollander hired Nutting to determine the geological composition of the site. Nutting’s report described the site as “a medium plastic clay containing pieces of shale and limestone.” The court summarized this as corresponding with “slope instability and landslides.” Rollander then hired Nutting to design the retaining walls, which were constructed by Scherziner Drilling.
After cracking was discovered on State Route 1, the walls were discovered to be inadequate. More dirt was brought in and a system of tie-backs was designed to anchor the walls. Not only were the tie-backs unsightly, local officials would not approve the complex for occupancy. Further, the failure of the wall below one building lead to damage of that building.
The court concluded that since almost all events occurred in Indiana, they rejected Rollander’s contention that the case should be tried in Ohio. Further, the court notes “the last event making Nutting potentially liable on both claims was an injury that occurred in Indiana and consequently, under the lex loci delicti analysis, Indiana law applies.”
Nor did the court find that Nutting was responsible for the damage to the rest of the project, citing an Indiana Supreme Court ruling, that “there is no liability in tort to the owner of a major construction project for pure economic loss caused unintentionally by contractors, subcontractors, engineers, design professionals, or others engaged in the project with whom the project owner, whether or not technically in privity of contract, is connected through a network or chain of contracts.”
The court concluded:
Because Rollander was in contractual privity with Nutting, and Indy was connected to Nutting through a chain of contracts and no exception applies, the economic loss rule precludes their recovery in tort. Damage to Building B was not damage to "other property," and the negligent misrepresentation exception to the economic loss rule is inapplicable on these facts. The trial court therefore did not abuse its discretion by entering judgment on the evidence in favor of Nutting on the Appellants' negligence and negligent misrepresentation claims.
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Manhattan Developer Breaks Ground on $520 Million Project
November 18, 2011 — CDJ Staff
Rebuilding an area of Midtown West that has been condemned for decades, the Gotham Organization has broken ground on a 1,200-unit project that will include housing for a variety of household incomes and a school. One unit of the project will be affordable housing for families of annual incomes up to $40,000. Another will be for middle-income households. Additionally, there will be a 31-story tower with 550 luxury units.
The site CityBiz quotes Mayor Michael Bloomberg, as saying that the project “will grow our economy by creating 2,900 construction-related jobs.” The president of the Gotham Organization, David L. Picket notes that it will “create hundreds of new jobs, generate millions of dollars in revenue for the construction industry, contribute towards the building of a new primary, and provide homes to thousands of New Yorkers.”
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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.”
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Courts Are Conflicted As To Whether "Good Faith" Settlement Determinations Can Be Reviewed Via Writ Petition Or Appeal
July 10, 2012 — Stephen A. Sunseri and Aarti Kewalramani, Gatzke Dillon & Ballance LLP
The Court of Appeal, Second District, Division Three, ruled in Oak Springs Villas Homeowners Association v. Advanced Truss Systems, Inc., et al., (June 14, 2012, B234568) __ Cal.App.4th __ [2012 WL 2149923], that a non-settling defendant cannot appeal a trial court's good faith settlement determination. Instead, a non-settling defendant may only file a petition for writ of mandate pursuant to Code of Civil Procedure section 877.6 to challenge a good faith determination. This decision comes on the heels of a 2011 ruling in Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, which found that a writ petition is not the sole means of challenging a trial court's good faith settlement determination.
In Oak Springs Villas, supra, the condominium homeowners' association sued a developer, general contractor, and various subcontractors for alleged construction deficiencies and resultant property damage. The association eventually settled with the developer, but not with a truss manufacturer. The trial court approved the developer's motion for good faith settlement determination, and the truss manufacturer immediately appealed, instead of filing a writ petition. On appeal, the developer argued the good faith determination was not an appealable order. The truss manufacturer argued Cahill applied, as well as an older case, Justus v. Atchison (1977) 19 Cal.3d 564, which allowed for appeals when no remaining issues exist as to the appealing party.
The Court of Appeal ruled in the developer's favor and declined to follow Cahill, stating the truss manufacturer should have filed a writ petition, as expressly required under Section 877.6, subdivision (e). The Court also believed Justus was inapplicable because a non-settling party should not be allowed to have two review opportunities ?Äì one after an adverse good faith ruling, and then another after the ultimate conclusion of the case.
However, the greater effect is that Cahill and Oak Springs Villas simultaneously stand in conflict and appear to be valid law. One case allows for an appeal of a good faith settlement determination, while the other requires strict adherence to the statute. The Supreme Court is likely to review the issue. In the meantime, parties challenging good faith rulings are advised to consult the statutory requirements under Section 877.6, subdivision (e).
Printed courtesy of Stephen A. Sunseri and Aarti Kewalramani, Gatzke Dillon & Ballance LLP. Mr. Sunseri can be contacted at ssunseri@gdandb.com and Ms. Kewalramani can be contacted at akewalramani@gdandb.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.
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Mississippi exclusions j(5) and j(6) “that particular part”
June 7, 2011 — CDCoverage.com
In Lafayete Ins. Co. v. Peerboom, No. 3:10cv336 (S.D. Miss. June 2, 2011), claimant homeowner Peerboom hired insured contractor Absolute to raise Peerboom’s house two feet to avoid future flooding. While Absolute was raising the house, it fell, resulting in physical injury to the home. Peerboom sued Absolute for negligence, breach of contract, and fraud, seeking damages for the destruction of the home. Absolute’s CGL insurer Lafayette defended under a reservation of rights and filed a declaratory judgment action.
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Reprinted courtesy of CDCoverage.com
Defective Grout May Cause Trouble for Bridges
August 16, 2012 — CDJ Staff
Grout, which was used to protect the steel support cables of the Woodrow Wilson Bridge, may lead to problems instead. The Baltimore Sun reports that the Federal Highway Administration is looking at three dozen bridges in twenty-one states that were built with defective grout. The grout contains high levels of chlorides, which can lead to corrosion. The collapse of pedestrian walkway in Concord, North Carolina was attributed to chloride contamination in the grout.
The grout, SikaGrout 300PT, was advertised as "non-corrosive, does not contain chlorides," but later testing showed that it contained levels that exceeded limits by 400 percent. Throughout the country, about 16 million pounds of this were used. Sika Corp. suspended production of the grout in 2010. If repairs need to be made, it is unclear who will pay.
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Construction Demand Unsteady, Gains in Some Regions
June 29, 2011 — CDJ Staff
The Associated General Contractors of America reported Tuesday, June 28 that construction employment increased in 120 of the 337 metropolitan areas surveyed between May 2010 and May 2011.
‘While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist. ‘The close to even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting.”
The largest number of jobs created was in the Dallas, Texas region, with 5,600 new jobs, a five percent increase. The northern Massachusetts/southern New Hampshire region near Haverhill saw the greatest percentage increase, although that twenty-two percent increase represents only 800 new jobs. The Chicago, Illiinois area added 4,600 jobs, a four percent increase.
Other regions were not so lucky. The Atlanta, Georgia area saw a loss of 7,400 jobs, an eight percent loss. Las Vegas also lost 7,400 jobs, which there represented a sixteen percent decline. The New York City area lost 6,700 jobs, a six percent reduction. The Riverside, California area lost 5,300 jobs, a nine percent loss.
Stephen E. Sandherr, the association’s chief executive officer, blamed a combination of regulation and budget squeezes. "Some in Washington never met a regulation they didn’t like and others never found a penny they didn’t want to pinch. Together that makes for a bad way to boost employment and a great way to stifle the private sector and neglect critical economic infrastructure.”
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Coverage Rejected Under Owned Property and Alienated Property Exclusions
June 6, 2011 —
Tred R. Eyerly,
Insurance Law HawaiiThe insured’s request for a defense when sued in a construction defect action was denied under the owned property exclusion and the alienated property exclusion in1777 Lafayette Partners v. Golden Gate Ins. Co., 2011 U.S. Dist. LEXIS 48562 (N.D. Cal. April 29, 2011).
In 1999, Lafayette Partners purchased an abandoned walnut processing factory to convert into living and working units. The property was developed into a rental property from 2000-2001, and thereafter rented. In May 2003, Lafayette Partners entered into a sales agreement with Wolff Enterprises LLC. The sale closed in February 2005. Wolff then converted the rental units into condominiums.
In December 2007, the Walnut Factory Owners Association sued Wolff for construction defects. In Lafayette Partners was added to the suit in 2009. The suit alleged a variety of defective conditions, including the roofs, exteriors, windows, electrical , plumbing, and mechanical components and systems.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Ohio Adopts Energy-Efficient Building Code
June 19, 2012 — CDJ Staff
In a compromise between environmental groups, who were looking for stricter standards, and homebuilders, who were trying to contain building costs, the state of Ohio has adopted buildings codes that will increase the energy efficiency of new homes. The estimated costs are about $1,100 with estimated annual savings of $230. According to Corey Roblee of the International Code Council, “It’s something needed in the state of Ohio.”
The Ohio Home Builders Association opposed a proposal to adopt the guidelines of the International Code Council. Builders will be able to either follow the ICC guidelines or they can use the Ohio guidelines to meet the same energy efficiency. Vincent Squillace, the executive vice president of the OHBA, said, “We came up with an equivalent code that’s more strict but is about $2,000 cheaper per home to implement than the original code.”
The new code will require that at least 75% of lighting must be high efficiency, increases the degree of insulation, and specifies more efficient windows, among other changes.
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Judge Kobayashi Determines No Coverage for Construction Defect Claim
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
Judge Kobayashi of the U.S. District Court, District of Hawaii, largely followed earlier precedent established by Judge Mollway in finding no coverage for construction defect claims. See Evanston v. Nagano, 2012 WL 3800320 (D. Hawaii Aug. 31, 2012).
Evanston issued several liability policies to the insured contractor from 2002 and 2011. The insured entered a contract to build a residence in Honolulu. The homeowners were not happy with their home after the work was completed. They filed suit, alleging that the project was delayed and the construction was "riddled with defects." The complaint included claims for breach of contract and breach of warranties. Negligence was not alleged. Evanston defended, but under a reservation of rights.
Evanston filed suit for a declaratory judgment and moved 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
Southern California Lost $8 Billion in Construction Wages
August 17, 2011 — CDJ Staff
Los Angeles and Orange Counties are first on a list no area wants to be on. According to the Sacramento Bee, reporting on data from the U.S. Bureau of Economic Analysis, LA and Orange Counties saw an $8 billion drop in construction wages in 2010, as compared to 2006. In 2006, the region saw payrolls of $26.8 billion, but in 2010, that was reduced to $18.5 billion.
This was not the largest percentage change. Of the metropolitan areas with the largest declines in construction earnings, Las Vegas saw a $3.6 billion drop, however that represented half of their 2006 totals of $7.2 billion. Conversely, a $3.3 billion drop in the New York area represented only 10% of what had been $33.8 billion in payroll in 2006.
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Environment Decision May Expand Construction Defect Claims
August 16, 2012 — CDJ Staff
Could a California Supreme Court decision on environmental claims have an effect on construction defect cases? Jonathan B. Sokol, a lawyer at Greenberg Glusker argues just that in a post on his firm’s blog. He notes that the California Supreme Court has held that “the ‘all sums” method of allocation applies in California” and that “an insurer cannot limit its liability to just the amount of loss that occurred in its particular policy period.” While his focus is on environmental cases, he says that “the decision could also potentially expand the scope of coverage for construction defect claims and other claims involving continuous and progressive property damage and bodily injury.
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Contractors with Ties to Trustees Reaped Benefits from LA Community College Modernization Program
March 3, 2011 — Original reporting by Gale Holland, Michael Finnegan and Doug Smith, Los Angeles Times
In the latest installment of the “Billions To Spend” series of investigative reports focused on construction defects, management, and cost issues relevant to LACC’s Community College Modernization Projects, the LA Times examines the costs associated with the various layers of construction management and benefits that accrued to contractors with ties to LACC trustees.
The reporting by the Times is seemingly critical of the project’s utilization of “body shops” an industry term for companies that function as employers of record. The article segment published today cites a number of circumstances wherein their utilization appears to have escalated costs substantially.
“To gauge the cost of the staffing system, The Times reviewed thousands of pages of financial records from April 2007, when URS began managing the program, to July 2010. Reporters identified two dozen contractors serving as conduits for pay and benefits for employees they did not supervise.
At least 230 people were employed in this manner, at a total cost of about $40 million, the records show.
Approximately $18 million of the total was paid to the employees, according to the Times analysis. The remaining $22 million went to profit and overhead for contractors, the records indicate.
For employees on its own payroll, the district says that medical and other benefits increase compensation costs 40% above base salaries. So if the district had employed its construction staff directly, the total cost for the period studied would have been $25 million instead of $40 million, a savings of $15 million, The Times calculated.”
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Nevada Supreme Court Reverses Decision against Grader in Drainage Case
June 30, 2011 — CDJ Staff
The Nevada Supreme Court has issued an opinion in the case of Rayburn Lawn & Landscape Designers v. Plaster Development Corporation, reversing the decision of the lower court and remanding the case for a new trial.
The case originated in a construction defect suit in which Plaster Development Corporation was sued by homeowners. Plaster filed a third-party complaint against its subcontractor, Reyburn. The testimony of Reyburn’s owner was considered to be admission of liability and so the court limited the scope of Reyburn’s closing argument and did not allow the jury to determine the extent of Reyburn’s liability. Reyburn appealed.
Plaster, in their case, cited California’s Crawford v. Weather Sheild MFG, Inc. The court held the application of these standards, but noted that the “an indemnitor’s duty to defend an indemnitee is limited to those claims directly attributed to the indemnitor’s scope of work and does not include defending against claims arising from the negligence of other subcontractors and the indemnittee’s own negligence.”
On the matter of law against Reyburn, the court concluded, “Given the conflicting evidence at trial as to whether Reyburn’s work was implicated in the defective retaining walls and sidewalls, and viewing the evidence and inferences in Reyburn’s favor, we conclude that a reasonable jury could have granted relief in favor of Reyburn.” The Nevada Supreme Court conduced that the district court should not have granted Plaster’s motion for judgement.
Further, the Nevada Supreme Court found that the district court should have apportioned the fees and costs to those claims directly attributed to Reyburn’s scope of work, “if any,” and should not have assigned all attorney costs and court fees to Reyburn.
Read the court’s decision…
Harmon Towers Duty to Defend Question Must Wait, Says Court
March 1, 2012 — CDJ Staff
The Harmon Towers project in Las Vegas was eventually halted short of the planned forty-seven stories after “it was determined that there was substantial defective construction, including defective installation of reinforcing steel throughout the Harmon.” The American Home Insurance Company and Lexington Insurance Company put forth a claim that they had no duty to defend Perini Construction, the builder of the defective Harmon Towers. Further, American Home seeks to recover the monies American reimbursed Perini. The United States District Court of Nevada ruled in the case of American Home Assurance Co. v. Perini Building on February 3, 2012.
The two insurance companies covered Perini and its subcontractors, Century Steel, Pacific Coast Steel, and Ceco Concrete Construction. Century Steel was the initial subcontractor for the reinforcing steel; they were later acquired by Pacific Coast Steel. In this current case, Perini Construction is the sole defendant.
Perini sought a dismissal of these claims, arguing that without the subcontractors joined to the case, “the Court cannot afford complete relief among existing parties.” The court rejected this claim, noting that the court can determine the duties of the insurance companies to Perini, which the court described as “separate and distinct from those of the subcontractors.” The subcontractors “have not claimed an interest in the subject matter of the action.” The court concluded that it could determine whether Perini was entitled or not to coverage without affecting the subcontractors. The court rejected Perini’s claim.
Perini also asked the court to abstain from the case, arguing that it was better heard in a state court. The court noted that several considerations cover whether a case is heard in state or federal courts. The court noted that if the case weighed heavily on state law, the state courts would be the obvious location. Further, if there were a parallel action in the state courts, “there is a presumption that the whole suit should be heard in state courts.” This is, however, no parallel state suit, although the court noted that Perini has “threatened” to do so.
However, the issue of who is to blame for the problems at Harmon Towers has not been resolved. The court concluded that until the “underlying action” was concluded, it was premature to consider the issues raised in this case while the earlier lawsuit was still in progress. The court denied Perini’s motion to dismiss the case. Given that the outcome of the earlier construction defect case may lead to further litigation in state court, the District Court granted Perini’s motion to abstain, but staying their judgment until the construction defect case is resolved.
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After Construction Defect Case, Repairs to Austin Building
August 2, 2012 — CDJ Staff
The Austin Business Journal reports that remediation is about to begin on Met Center 10, a building that was “at the center of a complex structural defect case.” Claims were made that Grubb & Ellis failed to disclose known structural defects to a group of investors who purchased the building. The brokerage was ordered to pay $6.75 million. Repairs will take an estimated six months at a cost of $3.7 million.
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