New Web Site Tracks Settled Construction Defect Claims
June 19, 2012 — CDJ Staff
Peter Lissner, a former Nevada homebuilder, has created a new site to help track homes that have been involved in construction defect litigation. His site, housefaxreview.com, collections documentation about homes where claims of construction defects have been made. He told The Builders Magazine concerns about “the number of homes that have been served notices, received compensation, yet the homes weren’t repaired.” On the site, the creator is identified as “a family owned builder.” According to the site, “the builder had no claims until the neighborhood reached the statutory claims limit 10 years.”
Lissner also claims that in many cases, after settling construction defect lawsuits, the homeowners sell to subsequent buyers without disclosing the lawsuit or their failure to repair. “Who is going to let the new homeowner know about the issue?” he asks.
Documents on the site are priced according to their relevance. Lissner notes that those who provide documents to the site will receive free access.
Read the full story…
Hilton Grand Vacations Defect Trial Delayed
October 23, 2012 — CDJ Staff
A settlement agreement between Conti Electric and Westgate Resorts has lead to a delay in starting the trial over construction defect claims and billing disputes over Hilton Grand Vacations a time share tower in Las Vegas. According to the Las Vegas Review-Journal, the dispute includes claims of $23.3 million owed to the general contractor against which the developer has placed $30 million in construction defect claims.
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Condominium Exclusion Bars Coverage for Construction Defect
August 17, 2011 — Tred Eyerley, Insurance Law Hawaii
Coverage was denied under the policy’s condominium exclusion in California Traditions, Inc. v. Claremont Liability Ins. Co.,2011 Cal. App.LEXIS912 (Cal. Ct. App., ordered published July 11, 2011).
California Traditions was the developer and general contractor for a housing development. California Traditions subcontracted with Ja-Con to perform the rough framing work for 30 residential units. The project had 146 separate residences that were freestanding with no shared walls, roof, halls, or plumbing or electrical lines. To allow a higher density development, the project was developed, marketed and sold as condominiums.
The purchaser of one of the units filed a complaint against California Traditions alleging property damage from the defective construction. California Traditions cross-complained against Ja-Con.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Construction Defect Not Occurrences, Says Hawaii Court
July 10, 2012 — CDJ Staff
Some insurers in Hawaii have made it clear that they will be covering construction defects, despite a court ruling concluding that defects are not occurrences, under Hawaii law. The case, heard by Hawaii’s Intermediate Court of Appeals found that “breach-of-contract claims based on allegations of shoddy performance are not covered under CGL policies and that tort-based claims derivative of such breach of contract claims also are not covered.”
Writing in Business Insider, Michael Bradford notes that the case, Group Builders Inc. and Tradewind Insurance Co. Ltd. vs. Admiral Insurance Co., involved improperly installed insulation at the Hilton Hawaiian Village’s Kalia Tower. Hilton was forced to close 21 floors due to extensive mold in guest rooms. Although the court did recognize this property damage, they did not feel it triggered insurance coverage, noting that if disputes over the quality of work were covered, CGL policies would become professional liability policies or performance bonds.
One critic of the decision, Warren C. Perkins, the risk manager at Boh Bros. Construction of New Orleans, noted that under the decision, “it doesn’t matter what the policy says and there is no need to investigate the policy wording.”
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School District Marks End of Construction Project by Hiring Lawyers
June 19, 2012 — CDJ Staff
A school district in northeastern Pennsylvania has retained legal services as they approach the end of a construction project. The Mid Valley School Board cited concerns about the project’s budget, but Randy Parry, Superintendent of Mid Valley schools referenced “possible litigation at the end of the project.” Mr. Parry told the Scranton Times Tribune that construction delays could be a reason for litigation.
In addition to approving an additional $20,000 for legal representation, the board also approved $21,579 for additional project costs.
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Architectural Firm Disputes Claim of Fault
May 27, 2011 — CDJ Staff
Lake-Flato Architects has disputed the arbitration panel’s conclusion that problems with the home of Tom Hanks and Rita Wilson were due to design flaws. The firm settled with the couple for $900,000, however the Idaho Mountain Express reports that David Lake said, “the settlement in the case in no way represents that Lake Flato was responsible for faulty design.” The Express reported that “the arbitrators found that problems at the home were attributable to design errors that did not take into account the cold winter climate of the Sun Valley area.”
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Nevada Bill Aims to Reduce Legal Fees For Construction Defect Practitioners
March 21, 2011 — March 21, 2011 Construction Defect Journal Staff
Assemblyman Ira Hansen and twelve additional members of Nevada’s Assembly are sponsoring Assembly Bill 285. AB 285 Revises provisions governing an award of attorney’s fees in causes of action for constructional defects. Existing law generally provides that a claimant may recover reasonable attorney’s fees as part of the claimant’s damages in a cause of action for constructional defects. (NRS 40.655)
This bill removes this provision and instead authorizes a court to award reasonable attorney’s fees to a prevailing party involved in such a cause of action if an independent basis for the award exists pursuant to existing law which authorizes a court to award attorney’s fees in certain circumstances, or Rule 68 of the Nevada Rules of Civil Procedure, which provides for the payment of reasonable attorney’s fees by an offeree who rejects an offer and subsequently fails to obtain a more favorable judgment.
In an AP report published in Business Week it is suggested that the target objective of legislators centers on what it refers to as Nevada’s "Rampant construction defect lawsuits".
According to Business Week "The suits bring in hundreds of millions of dollars for lawyers and have put construction companies out of business. Hansen says fewer construction firms mean higher prices for Nevada consumers."
Click Here To Read Full Text and Revisions of Assembly Bill 285
West Hollywood Building: Historic Building May Be Defective
August 16, 2012 — CDJ Staff
The Sunset Lanai apartment building in West Hollywood, California has its fans, it also has its detractors. Designed by Edward H. Flickett and built in 1952 by George Alexander, the building isn’t wearing its years lightly. Its owner has opposed a move by the West Hollywood Preservation Commission that the building is a “local cultural resource.” Instead, Edwin Silver, the building’s owner says the group has overstated the building’s significance. His lawyer points to “design and construction flaws,” and says the building is prone to flooding and leaks. Repairs to the building have an estimated cost of $2.3 million, according to the L.A. Times.
The West Hollywood City Council decided to table the question of a historical designation as that might impede repairs. However, they did decide that if Silver seeks to demolish the building, they will grant the protection.
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FHA Lists Bridges and Overpasses that May Have Defective Grout
September 13, 2012 — CDJ Staff
The Federal Highway Administration has released a list of bridges and overpasses that may be prone to corrosion problems due to grout that was in chlorides when it was supposed to be completely free of them. Currently, the FHA is working with state departments of transportation to determine if the defective grout was indeed used on additional bridges and overpasses. The initial FHA list of structures determined to have been built with the defective grout lists thirty-four sites, of which four are in Ohio, the largest number for any state.
California contains only one such site, the intersection of the 55 and 405 freeways, one of the few items on the list not designated as a bridge.
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Ensuing Loss Provision Does Not Salvage Coverage
August 2, 2012 — Tred Eyerly, Insurance Law Hawaii
The Minnesota Court of Appeals affirmed the trial court's decision finding no coverage due to exclusions from the all-risk policy for losses related to mold, rot and condensation. Koskovich v. Am Family Mut. Ins. Co., 2012 Minn. App. Unpub. LEXIS 581 (Minn. Ct. App. June 25, 2012).
In 1978, the insureds purchased a home that was built in 1904. From 1991 to 1995, they remodeled, which included rotating the house 45 degrees, removing a wing and adding a new section. Polypropylene vapor barriers were installed, with pinholes for ventilation.
In 2008, water was observed on an interior floor. An investigation revealed that the sheathing under the siding and the house's framing were wet and rotten, requiring removal and replacement of the siding and studs. Repairs were made and a claim was submitted to American Family Mutual Insurance Company.
American's structural engineer inspected and determined that moisture was likely caused by condensation of water vapor where the vapor barrier was held tight to the sheathing and by inward water migration from wet siding during rainy periods through the vapor-barrier perforations. The structural engineer opined that, although the home's framing was deteriorated and structurally compromised, it did not appear as though the home was in imminent danger of collapse.
American denied coverage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Can We Compel Insurers To Cover Construction Defect in General Liability Policies?
December 9, 2011 — Douglas Reiser, Builders Counsel
Recently, I read an article on Engineering News-Record that outlines a remarkable movement by as many as four states, to mandate coverage of construction defects in contractor general liability insurance policies. Say what? Is this a reality? What will become of affordable insurance?
Commercial General Liability insurance, or CGL, is your basic liability insurance. Every contractor doing business in the State of Washington, and most likely those abroad, has this insurance. Contractors buy this insurance to protect them from unforeseen liabilities arising from their negligence - and right now it’s reasonably affordable.
Why is it so affordable in such a risk-heavy industry? Because CGL policies significantly limit the scope of their coverage. Coverage is generally afforded for damages resulting from negligence (The roofer put a hammer through the drywall contractor’s wall) or which resulted from your defective construction (the roof leaked and flooded the rest of the house). But, that coverage does not include replacement of your faulty construction (the contents of the home might be protected by your leaky roof - the leaky roof itself is not).
The debate over coverage typically stems from the definition of “occurrence,” a term used to describe the event from which coverage arises, “resulting loss,” a term used to describe the type of loss covered.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Colorado Court of Appeals Rejects Retroactive Application of C.R.S. § 13-20-808.
April 25, 2012 — Chad W. Johnson, Higgins, Hopkins, McClain & Roswell, LLC
In TCD, Inc. v. American Family Mutual Insurance Company, TCD appealed the district court’s summary judgment ruling in favor of American Family. TCD, Inc. v. American Family Mutual Insurance Company Colo. App. No. 11CA1046 (April 12, 2012). TCD was the general contractor on a project to construct a building for Frisco General Gateway Center, LLC (“Gateway”). TCD subcontracted with a roofer named Petra Roofing and Remodeling Company (“Petra”) to performing the roofing work for the building. The subcontract required Petra to defend and indemnify TCD and to name TCD as an additional insured under its CGL policy. American Family issued a CGL policy to Petra that named TCD as an additional insured from 2006-2007.
TCD filed suit against Gateway seeking payment for its work at the project. Gateway counterclaimed against TCD for breach of contract, negligence, and violation of the CCPA. TCD demanded that American Family defend it from the counterclaims pursuant to Petra’s policies. American Family denied coverage and a separate coverage suit ensued. At the trial court level, the court entered summary judgment for American Family because the counterclaims of Gateway did not trigger the duty to defend or indemnify TCD as an additional insured.
On appeal, TCD argued that: 1) the counterclaims raise a genuine issue of material fact regarding American Family’s duty to defend; 2) the court should hear evidence beyond the four corners of the complaint; and, 3) the court should apply C.R.S. § 13-20-808 retroactively.
Read the full story… Reprinted courtesy of Chad W. Johnson of Higgins, Hopkins, McClain & Roswell, LLC. Mr. Johnson can be contacted at johnson@hhmrlaw.com.
Harmon Hotel Construction Defect Update
July 18, 2011 — CDJ Staff
Coverage of the ongoing litigation concerning the Harmon Hotel continues to proliferate. Architectural Record and a number of other news outlets continue to provide additional details and coverage of the matter. Chief among the conditions alleged are improperly installed reinforcing steel inside link beams on 15 floors. MGM Claims that the conditions amount to hundreds of millions of dollars in damages, while Perini (the builder) indicated in a July 12th statement that the buildings problems are related to the design, and the they are “fixable.”
There is significant speculation that MGM Resorts International isn’t interested in repairing the hotel due to a glut of hotel rooms attendant to the troubled economy. In a statement Tuesday Perini reportedly stated that “Repairing and opening the Harmon would only create a greater glut of unused hotel rooms for MGM,” “If market conditions were better and MGM found that demand existed for the Harmon hotel rooms, MGM would not be claiming that the Harmon is unstable.”
MGM asserts that Perini failed to ”properly construct” the project. Clark County’s Department of Development Services has reportedly asked MGM to provide a plan to fix the project by August 15th.
The Harmon is part of the $8.5 billion CityCenter project that opened in the fourth quarter of 2009 and is jointly owned by MGM Resorts and Dubai World.
Prior reports indicated that the owner (MGM) had considered razing the entire project. The future of the project remains uncertain.
Louisiana Politicians Struggle on Construction Bills, Hospital Redevelopment
June 16, 2011 — CDJ Staff
Louisiana politicians are still working on a compromise in the state’s construction budget, as reported in the Times-Picayune. Rob Marrianneax, the chair of the Senate Revenue and Fiscal Affairs Committee, removed a $45 million request from Governor Bobby Jindal and added $4 million for projects that Jindal vetoed last year.
Two senators have formed competing plans to fund redevelopment construction for New Orleans’s Methodist Hospital. Mitch Landrieu, the mayor of New Orleans, hoped for $30 million dollars in state bonds. Senator Cynthia Willard-Lewis proposed an amendment that would supply $1.6 million, while Senator J.P. Morrell has an amendment that would supply $4 million.
Read the full story…
Hawaii State Senate Requires CGL Carriers to Submit Premium Information To State Legislature
March 20, 2011 — March 20, 2011 Construction Defect Journal Staff
In light of the decision in Hawaii’s Intermediate Court of Appeals in Group Builders, Inc.,v. Admiral Insurance Company, 231 P.3d 67(2010), Hawaii’s state senate is requesting that "every domestic and foreign insurance company that has ever issued commercial general liability policies in the State is requested to submit information to the Legislature on the total premiums received for their commercial general liability policies during the past ten years"
Read Full Text of Hawaii State Senate Resolution
Faulty Workmanship Causing Damage to Other Property Covered as Construction Defect
September 30, 2011 — Tred Eyerley, Insurance Law Hawaii
In yet another recent construction defect case, the Illinois Court of Appeal found for coverage. See Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 Ill. App. Ct. LEXIS 872 (Ill. Ct. App. Aug. 15, 2011).
Weather-Tite, Inc. hired Larson as a subcontractor to apply sealant to windows installed by Weather-Tite in a condominium building. The windows subsequently leaked and caused water damage. The homeowner’s association sued Weather-Tite for breach of express and implied warranties. Weather-Tite filed a third-party complaint against Larsen alleging that, if it was liable to the association for breach of warranty, Larsen was liable for contribution as a joint tortfeasor. Weather-Tite and Larsen both tendered defenses to Milwaukee Insurance. The tenders were denied and Milwaukee Insurance filed suit to determine rights under the policy.
Cross-motions for summary judgment were filed by all parties. The trial court granted Milwaukee Insurance’s summary judgment motion as to Weather-Tite, but granted Larsen’s cross-motion against Milwaukee Insurance.
On appeal, the appellate court considered whether the underlying pleadings alleged facts demonstrating "property damage" resulting from an "occurrence" within the terms of the policy.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.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
Application of Efficient Proximate Cause Doctrine Supports Coverage
January 6, 2012 — Tred Eyerly, Insurance Law Hawaii
Relying on the efficient proximate cause doctrine, the court determined coverage potentially existed for damage caused by water. Union Sav. Bank v. Allstate Indem. Co., 2011 U.S. Dist. LEXIS 134398 (S.D. Ind. Nov. 21, 2011).
The Tods purchased property that was mortgaged by Union Savings. The Tods obtained a Landlords Policy for the property from Allstate. When the Tods were in default on their loan, Union Savings notified them that foreclosure proceedings would commence. Union Savings sent an appraiser to the property who discovered water in the basement. Water and electricity to the building were off. Union Savings notified Allstate and later filed a formal claim under the mortgagee clause in the Landlords Policy. This clause stated, "A covered loss will be payable to the mortgagees named on the policy declaration. . . ."
Allstate denied coverage, citing exclusions for water damage.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
