Plaintiffs In Construction Defect Cases to Recover For Emotional Damages?
March 16, 2011 — March 16, 2011 - Construction Defect Journal Staff
A recent post to the Markusson, Green, Jarvis Blog reports on an important appeals decision which promises to impact construction defect litigation in Colorado.
The post provides analysis on the recovery of inconvenience damages. The focus of the piece is centered on Hildebrand v. New Vista Homes II, LLC, 08CA2645, 2010 WL 4492356 (Colo. Ct. App. Nov. 10, 2010), wherein it was held that " the plain language of Construction Defect Action Reform Act permits recovery of damages for inconvenience, and that the trial court did not err by allowing inconvenience damages to go to the jury".
According to the MGJ Blog "The Hildebrand decision is important because it provides Construction Defect Plaintiffs with a foothold for collecting emotional damages. While several questions of law remain as to who or under exactly what circumstances a Plaintiff may recover these types of damages, the Hildebrand case has clearly set forth that emotional damages may be considered as part of actual damages pursuant to CDARA."
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Court Sends Construction Defect Case from Kansas to Missouri
August 2, 2012 — CDJ Staff
The United State Court of Appeals for the Tenth Circuit has ruled in Mid-Continent Casualty Company v. The Village at Deer Creek Homeowners Association. The prior case was heard by the United States District Court for the District of Kansas. In this appeal, Mid-Continent sought a declaratory judgement. The Village at Deer Creek Homeowners Association moved to dismiss, and the district court had granted this, giving jurisdiction to the Missouri state courts.
The homeowners association had sued Greater Midwest Builders, Ltd., who had constructed the subdivision, in the Kansas state courts. The suit ended with a verdict against Greater Midwest for more than $7 million. The association and other plaintiffs in that case filed for equitable garnishment against State Auto, Mid-Continent, and Greater Midwest. State Auto removed the garnishment action to federal court in Missouri. Mid-Continent moved to sever the actions against it and transfer the case to the District of Kansas.
Subsequently, the plaintiffs filed a notice of voluntary dismissal in the Western District of Missouri. A second garnishment action followed in which Mid-Continent was named as an additional plaintiff. State Auto again removed to the Western District of Missouri, while Mid-Continent moved to sever and transfer to the District of Kansas. The Kansas court granted the association’s motion to dismiss.
In the appeal, Mid-Continent sought a declaratory judgment. This was denied by the appeals court. The district court “concluded that the Missouri courts were better situated to provide complete relief to all parties involved in the coverage dispute.” The appeals court affirmed the association’s movement to dismiss. Mid-Continent’s motion was denied as moot.
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Ensuing Loss Found Ambiguous, Allowing Coverage
August 16, 2012 — Tred Eyerly, Insurance Law Hawaii
The court determined the ensuing loss provision was ambiguous and found coverage for the home owners in Platek v. Town of Hamburg, 2012 N.Y. App. Div. LEXIS 5371 (N.Y. App. Div. July 6, 2012).
The burst of a water main caused water damage to the insureds' basement. Allstate disclaimed coverage under exclusion 4 for losses caused by "[w]ater . . . on or below the surface of the ground, regardless of its source . . . [,] includ[ing] water . . . which exerts pressure on or flows, seeps or leaks through any part of the residence premises."
Another policy provision covered "sudden and accidental direct physical loss caused by fire, explosion or theft resulting from item []. . . 4 . . . ." Plaintiffs argued that this exception applied because their claimed loss was caused by an "explosion" of the water main.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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.
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Homeowners Must Comply with Arbitration over Construction Defects
January 6, 2012 — CDJ Staff
The California Court of Appeals has upheld a decision by the Superior Court of Kern County that homeowners must comply with arbitration procedures in their construction defect claim. The California Court of Appeals ruled on December 14 in the case of Baeza v. Superior Court of Kern County, denying the plaintiff’s petition that the trial court vacate its order.
The plaintiffs in the case are homeowners in various developments built by Castle & Cook. The homes were sold with a contract that provided for “nonadversarial prelitigation procedures, including mediation, and judicial reference.” The homeowners made defect claims and argued that Castle & Cooke failed to comply with statutory disclosure requirements and that some of the contracts violate related statutes.
The appeals court found that there was no ground for appeal of the lower court’s order to continue with prelitigation procedures. The court noted that the plaintiffs could not seek a review of the mediation until a judgment was issued, but that then the issue would be moot. The court felt that there were issues presented that needed clarification, and so they reviewed this case. This was cleared for publication.
The court considered the intent of the legislature in passing the Right to Repair Act, noting that “under the statutory scheme, the builder has the option of contracting for an alternative nonadversarial prelitigation procedure,” as established in Chapter 4. The court noted that Chapter 4 “contains no specifics regarding what provisions the alternative nonadversarial contractual provisions may or must include.”
The plaintiffs contended that the builder was in violation of the standards set out in Section 912, however the court responded that these sections set out one set of procedures, but they concluded that “if the Legislature had intended the section 912 disclosure provisions…it could have made the requirements applicable to all builders by locating them in a section outside Chapter 4.”
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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
An Upward Trend in Commercial Construction?
March 28, 2012 — Melissa Dewey Brumback, Construction Law North Carolina
Year-end economic indicators demonstrate that private commercial construction may be increasing in 2012, primarily as demand grows for new projects built in the United States.
According to an article in Businessweek, the Architecture Billings Index held at 52 in December, indicating a modest expansion in the market. The American Institute of Architects said that the commercial and industrial component of the number climbed to 54.1 in December, the highest in 10 months.
The monthly survey of U.S.-based architecture firms is one of the main indicators of nonresidential construction, and these numbers suggest that modest improvement may be on the horizon.
The information is confirmed by data from the Census Bureau that shows that spending on lodging, office, commercial and manufacturing buildings grew 8.2 percent in November to $9.2 billion from a year ago. These types of commercial and industrial projects are historically canaries in the mine and are usually the first part of the industry to improve as the economy expands.
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Reprinted courtesy of Melissa Dewey Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
Hospital Construction Firm Settles Defect Claim for $1.1 Million
September 13, 2012 — CDJ Staff
Law360 reports that Bovis Lend Lease has settled claims of $10 million in damages for $1.1 million. Bovis was building three annexes to a hospital in Oklahoma. The hospital alleged that a faulty moisture barrier system lead to damage throughout the hospital.
Bovis is a division of the Lend Lease Group, a multinational construction firm based Sydney, Australia.
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Court Grants Summary Judgment to Insurer in HVAC Defect Case
August 4, 2011 — CDJ Staff
The US District Court in Colorado has determined in the case of RK Mechanical, Inc. v. Travelers Property Casualty Company of America that Travelers did not breach its insurance contract when it refused to cover RK Mechanical.
RK Mechanical performed an HVAC installation for a residential project for which J.E. Dunn Rocky Mountain was the general contractor. As part of the work, RK “installed approximately one hundred seventy-one CPVC flanges, which were manufactured by Charlotte Pipe and Foundry Company.” Two of these flanges failed in June, 2009 leading to water damage. RK replaced the cracked flanges and engaged in water remediation. “Travelers paid Dunn and RK for the costs associated with the water damage associated with the Flange Failure.” The court notes that Travelers did not pay for the cracked flanges, however.
Subsequently, RK examined the remaining flanges, finding many cracked ones. These were replaced with new ones. Later, all the Charlotte flanges were replaced with ones from another manufacturer. RK applied for coverage.
All sides brought in their experts: “Microbac Laboratories, Inc. prepared a report on behalf of RK concluding that the Flange Failure was due, in part, to an assembly or workmanship defect in addition to manufacturing defects in the flanges. Higgins & Associates prepared a report on behalf of Travelers concluding that the flanges failed due to improper installation. Plastic Failure Labs prepared a report on behalf of the flange manufacturer concluding that the flanges failed due to improper installation by RK.”
At this point, Travelers denied coverage. RK sued alleging that the coverage for flange failure and water damage implicitly includes mitigation costs. The court rejected this claim, noting it would do so even if Travelers had paid for the replacement of the first two flanges. Nor did the court find that replacement of the faulty flanges is not "a covered cause of loss." RK also argued that as it was required to mitigate, Travelers was obligated to cover costs. However, the court found that “the mitigation costs expended by RK were not incurred in an effort to avoid damages from a potential breach of contract by Travelers.” The court additionally noted that despite RK’s claims, the Colorado courts have not found a common law duty to mitigate. Finally, the court found that the exclusions in the policy were not in violation of public policy.
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Construction on the Rise in Denver
September 13, 2012 — CDJ Staff
In another sign of a recovery in the housing industry, the Denver Business Journal reports that the pace of new home construction has accelerated in the Denver area. According to the article, in the first seven months of 2012, forty-eight percent more permits were issued than in the first seven months of 2011. In July, 2012, there were sixty-six percent more permits than a year previously. For the Denver metropolitan area, July was the sixteenth consecutive month in which permits were up from a year previously.
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Statute of Repose Dependant on When Subcontractors Finished
July 10, 2012 — CDJ Staff
Scott C. Sandberg of Snell and Wilmer writes a post on the JDSupra site about the Colorado Court of Appeals decision in Shaw Construction v. United Builder Services. Sanberg notes that when the general contractor was sued by an HOA, the contractor turned around and sued its subcontractors. The contractor made three claims. They claimed that “improvement” referred to the whole project, that “substantial completion” was reached when the architect certified completion, and that the statute of repose was tolled by the HOA’s service of a Construction Defect Action Reform Act notice.
The subcontractors claimed that “improvement” only referred to their specific work, which reached “substantial completion” when they finished, despite work to be done by other later, and the HOA’s notice to the contractor did not affect the subcontractors. The Colorado court agreed with the subcontractors.
Sandberg notes that some of the contractor’s were not addressed by the court, noting that “the court did not decide whether an improvement triggering the statute of repose can be determined on a trade-by-trade basis,” and that “the court did not decide whether substantial completion occurs when a certificate of occupancy is issued or when the architect certifies completion.”
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Florida “get to” costs do not constitute damages because of “property damage”
August 11, 2011 — CDCoverage.com
In Palm Beach Grading, Inc. v. Nautilus Ins. Co., No. 10-12821 (11th Cir. July 14, 2011), claimant general contractor Palm Beach Grading (?PBG?) subcontracted with insured A-1 for construction of a sewer line for the project.  A-1 abandoned its work and PBG hired another subcontractor to complete construction of the sewer line.  The new subcontractor discovered that A-1?s work was defective requiring repair and replacement of portions of the sewer line which also required the destruction and replacement of surrounding work.
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Reprinted courtesy of CDCoverage.com
Lien Law Unlikely To Change — Yet
May 26, 2011 — Melissa Brumback, Construction Law in North Carolina
For those of you following the proposed revisions to the NC lien law that is currently at the NC House Judiciary Subcommittee B, a quick update: the proposed bill (HB 489) is unlikely to be voted on this legislative session due to its unpopularity with several constituency groups, including both the AIA-North Carolinaand the NC Home Builders Association.
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Reprinted courtesy of Melissa Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
Nevada Construction Defect Lawyers Dead in Possible Suicides
March 28, 2012 — CDJ Staff
A number of news sources have reported on the recent death of Nevada construction defect attorney, Nancy Quon. Ms. Quon was implicated in a recent scandal in which a group conspired to control homeowner associations in order to divert construction defect lawsuits to the members of the conspiracy.
Ms. Quon was found dead in her bathtub. The details are still under investigations. She and her boyfriend were accused of a failed arson/suicide scheme in 2010. Ms. Quon survived an attempt to burn down her home. Subsequently, her boyfriend obtained some gamma-hydroxybutyric acid (GBH) for her, as part of another failed suicide attempt.
Subsequent to Ms. Quon’s death, David Amesbury was found in California dead by hanging. Mr. Amesbury took a plea deal in the case, and he had admitted his role in providing legal and construction contracts to firms in the conspiracy. He was accused of fixing HOA elections.
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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.”
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Reference to "Man Made" Movement of Earth Corrects Ambiguity
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
In Pioneer Tower Owners Assn. v. State Farm Fire & Cas. Co., 12 NY3d 302 (2009), the New York Court of Appeals found an "earth movement" exclusion was ambiguous when applied to an excavation. The court now considered whether a similar exclusion, expressly made applicable to "man made" movement of earth, eliminated the ambiguity when loss was created by excavation. Bentoria Holdings, Inc. v. Travelers Indem. Co., 2012 N.Y. LEXIS 3087 (N.Y. Oct. 25, 2012).
Plaintiff's building suffered cracks due to an excavation being conducted on the lot next door. A claim was submitted to Travelers, plaintiff's insurer. Travelers rejected the claim, relying on the earth movement exclusion.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
There Is No Non-Delegable Duty on the Part of Residential Builders in Colorado
August 16, 2012 — Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC
Recently, in the Arapahoe District Court, the Honorable Michael Spear, issued an order holding that builders do not owe a non-delegable duty to homeowners. In Marx and Corken v. Alpert Custom Homes, Inc., et al., Judge Spear’s order came in response to plaintiffs’ motion for determination of question of law seeking a finding that the defendants owed a non-delegable duty to the plaintiffs and thus, to strike defendants’ designation of nonparties at fault. After being fully briefed, Judge Spear, found that such a non-delegable duty does not exist.
The case arises from the construction of a single-family residence in Aurora, Colorado. Through the construction and interaction with Alpert Custom Homes, Inc. and Scott and Sally Alpert, the defendants, Paul Marx and Kay Corken, the plaintiffs claimed they suffered various damages and losses, and brought claims for breach of contract-warranty, breach of contract, violation of the Colorado Consumer Protection Act, breaches of the implied covenant of good faith, promissory estoppel, willful breach of contract, and quantum meruit. During litigation, the defendants filed a designation of nonparties at fault, which named several parties which were at fault for the alleged construction defects at issue in the case.
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Reprinted courtesy of Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com
Unit Owners Have No Standing to Sue under Condominium Association’s Policy
February 10, 2012 — Tred Eyerly, Insurance Law Hawaii
If a condominium owner suffers damage caused by a leak from another unit, may it sue the insurer for the Association of Apartment Owner (AOAO) for coverage? The federal district court for Hawaii said "no" in a decision by Judge Mollway. See Peters v. Lexington Ins. Co., 2011 U.S. Dist. LEXIS 148734 (D. Haw. December 27, 2011).
Two cases were consolidated. In each case, Plaintiffs owned condominium units at the Watercrest Resort on Molokai. Water leaking from another unit damaged Plaintiffs’ units.
Watercrest Resort was insured by Lexington pursuant to a policy maintained by the AOAO. Plaintiffs filed claims with Lexington. Lexington hired an adjustor.
Unhappy with the adjustment of their claims, Plaintiffs sued Lexington and the adjustor.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
