Contractor Removed from Site for Lack of Insurance
October 28, 2011 — CDJ Staff
The MetroWest Daily News reports that a demolition firm was told to leave the construction site at Natick High School since their failure to have workers compensation insurance makes them unable to work on the project. The contractor, Atlantic Dismantling and Site Construction, Inc. may have been working illegally since September.
The equipment that Atlantic had rented for the job was repossessed in August. Brait Builders Corp, the general contractor for the site had rented equipment so Atlantic could continue their work.
Their lack of insurance was discovered when a worker had a minor job-related injury. The state had issued a stop-work order for the firm and they could not legally bid on public projects. The school system did not receive any notice of this, and the school’s facilities director said of the general contractor, “chances are Brait never heard of anything either.”
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Building Boom Leads to Construction Defect Cases
August 2, 2012 — CDJ Staff
Professor Evan McKenzie of the University of Illinois at Chicago says that rise of construction defect litigation in the Las Vegas area followed the same pattern it did in other places, according to an article in the Las Vegas Review Journal. “Step one,” according to Professor McKenzie, “there was this enormous growth in construction. Then these attorneys began to swarm in from all over, especially Southern California.” McKenzie noted that during a building boom, construction “outpaces the ability of building inspectors to do their job.”
But, despite his contention that “rapid growth in housing stock” leads to “shoddy construction,” another problem of growth was that “eventually there were too many lawyers chasing too many condominium complexes and subdivisions.” What came next was that “attorneys start coming up with cases that really aren’t good cases.” It’s in the interest of these attorneys that HOA boards sue.
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Harsh New Time Limits on Construction Defect Claims
April 26, 2011 — April 26, 2011 by Scott F. Sullan, Esq., Mari K. Perczak, Esq., and Leslie A. Tuft, Esq. of
Sullan2, Sandgrund, Smith & Perczak, P.C. in the
HindemanSanchez blogA recent Colorado Supreme Court decision, Smith v. Executive Custom Homes, Inc., 230 P.3d 1186 (Colo. 2010), considerably shortens the time limit for bringing many construction defect lawsuits. Homeowners and homeowner associations risk losing the right to seek reimbursement from builders, developers and other construction professionals unless they carefully and quickly act upon discovery of evidence of any potential construction defect.
The Statute of Limitations for Construction Defect Claims
Colorado’s construction defect statute of limitations limits the time for homeowners and homeowners associations to bring lawsuits for construction defects against “construction professionals,” including developers, general contractors, builders, engineers, architects, other design professionals, inspectors and subcontractors. The statute requires homeowners and associations to file suit within two years “after the claim for relief arises.” A claim for relief “arises” when a homeowner or association discovers or reasonably should have discovered the physical manifestation of a construction defect.
The two-year time limitation applies to each construction defect separately, and will begin to run upon the appearance of a “manifestation” of a construction defect (which may include, for example, a condition as simple as a roof leak or drywall cracks), even if the homeowner or association does not know the cause of the apparent problem.
The Smith Opinion and its Effect on the Statute of Limitations
In Smith v. Executive Custom Homes, Inc., the plaintiff homeowner, Mrs. Smith, slipped on ice that had accumulated on her sidewalk because of a leaking gutter and suffered injury. When she first noticed the leak, she reported it to her property manager, who reported it to the builder. The builder attempted to repair the gutter, unbeknownst to Mrs. Smith, and she did not notice further problems until approximately one year after she first observed the leak, when she fell and suffered serious injury. She sued the builder within two years of her injury, but nearly three years after she first learned of the leak.
The Colorado Supreme Court dismissed Mrs. Smith’s claims as untimely and held that under the construction defect statute of limitations, the two-year period for suing for injuries due to construction defects begins when the homeowner first observes the physical manifestation of the defect, even if the resulting injury has not yet occurred. The court acknowledged that this ruling could result in “unfair results,” especially if a serious and unforeseeable injury occurs more than two years after the first time the homeowner noticed the problem, and as a result the victim is unable to seek redress from those responsible for the defect.
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Reprinted courtesy of Scott F. Sullan, Esq., Mari K. Perczak, Esq., and Leslie A. Tuft, Esq. of Sullan2, Sandgrund, Smith & Perczak, P.C., and they can be contacted through their web site.
Construction Workers Face Dangers on the Job
November 18, 2011 — CDJ Staff
OSHA calculates that for each 33,000 active construction workers, one will die on the job each year, making their risk over the course of their careers at one out of every 200 workers. This puts it many times over OSHA’s definition of “significant risk” of 1 death per 1,000 workers over the course of their careers. According to an article in People’s World, “the main risk of death is from falls.”
At a talk at the American Public Health Association’s meeting, one expert noted that “construction workers make up 6 percent to 8 percent of all workers, but account for 20 percent of all deaths on the job every year.”
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Court Will Not Compel Judge to Dismiss Construction Defect Case
August 2, 2012 — CDJ Staff
The Fourteenth Court of Appeals of Texas has denied a petition for a writ of mandamus. The parties involved, Bonner Ball, Thomas Zenner, and Rallin Welch, are lmited partners of Black Diamond Builders, LLP. Black Diamond is the recipient of a lawsuit from Grier and Camille Patton, for whom Black Diamond built a home. The Pattons are alleging construction defects.
The Black Diamond partners argue that Judge Jeff Shadwick, presiding judge of the 55th District Court of Harris County, Texas should have granted their motion to dismiss. They sought to have the Fourteenth Court of Appeals compel that action.
The Black Diamond Partners claims that “the homowners failed to satisfy statutory prerequisites before filing suit, and dismissal of the suit was automatic under the applicable statues in effect at the time the Pattons noticed alleged defects in their home.”
The court noted that “a trial court will be held to have abused its discretion only if the party requesting mandamus relief establishes that the trial court could have reached but one decision.” The court did not concur with this and denied the petition for a writ of mandamus.
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No Coverage for Negligent Misrepresentation without Allegations of “Bodily Injury” or “Property Damage”
February 10, 2012 — Tred Eyerly, Insurance Law Hawaii
Jeff City Industries was the general contractor for a sewer system improvement project in Branson, Missouri. Bituminous Cas. Corp. v. United HRB Gen. Contractors, Inc., 2011 U.S. Dist. LEXIS 145666 (W.D. Mo. Dec. 19, 2011). Branson sued Jeff City, alleging breach of the construction contract for the project. The claims included improperly bedded sewer piping, improper aligning portions of trenching for the sewer piping, improper service line connections to the sewer piping, etc.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Boston’s Tunnel Project Plagued by Water
August 11, 2011 — CDJ Staff
Boston’s Tip O’Neil Tunnel, part of the “Big Dig” project, is suffering from water leaks which has lead to millions of dollars of damage, according to an article in the Boston Globe. The report quotes Frank DePaola, the highway administrator, as likening the water leaks to “three garden hoses.” The project’s chief engineer notes that those “three garden hoses” add up to 17 million gallons a year.
Further, the chief engineer reports notes that the leaks could compromise both safety and structural integrity. Problems have included a 110-pound light fixture that fell in February, ventilation ducts clogged with ice during the winter, and mold in utility rooms and ventilation buildings.
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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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Contractor’s Home Not Covered for Construction Defects
September 13, 2012 — CDJ Staff
The US District Court in Seattle has rejected most of the claims made by a Des Moines man over insurance coverage for water damage to his home. Judge John C. Coughenour granted summary judgment to Liberty Northwest in Ayar v. Liberty Northwest Insurance Corporation.
Sayad Ayar was the general contractor for the construction of his house. As a homeowner held a $1.5 million insurance policy from Liberty Northwest (LNW) that excluded “faulty, inadequate, or defective construction.”
In 2008, less than three years after his house was constructed, Mr. Ayar filed a claim after water leaked through his living room ceiling. LNW hired an engineering firm to investigate the damage. The engineering firm, CASE Forensics, concluded that the water intrusion was due to “the failure to install an adequate and continuous waterproof membrane, flashing, and drainage system within the balcony at the time of construction.” Ayar’s expert attributed the leakage to “damage done to the weather deck waterproofing during a storm event with high winds,” which would be covered under the policy. CASE Forensics reviewed these conclusions and rejected them. LNW denied coverage.
Further problems lead to further investigations, and in each case, LNW attributed the problems to construction defects. During this process, LNW “authorized Ayar to cut into the ceiling’s drywall in order to assist in determining the source of the water intrusion.” Mr. Ayar moved his family to a rental home. He requested that LNW cover the rental and other other costs.
LNW’s adjuster concluded that no coverage was available, but recommended paying Mr. Ayar $19,648.68 to reinstall drywall and repair the hole in the ceiling. The insurance company paid $2,000 to cover the cost of cutting into the ceiling. The also claimed the amount of drywall he removed was “excessive” and would not cover his relocation as “his home had been livable and because the loss was not covered.”
Ayar made four claims to the court in support of the argument that LNW misrepresented “pertinent facts or insurance policy provisions.” The court rejected three of these, noting that as all water damage was excluded, LNW’s citation of other sources of water intrusion was not a misrepresentation. “LNW did not rely on this provision as the reason for denying coverage.” Nor was LNW’s reference to “fungi, wet or dry rot” a misrepresentation. As for their reference to construction defects, it “was clearly appropriate given that the construction defect exclusion was the principal basis or denying the claim.” However, the court found that regarding the removal of drywall, “a triable issue of the facts exists.”
Ayar also claimed that LNW did not conduct a reasonable investigation, but the court found no evidence to support this conclusion. “This is not a case where the insurer failed to investigate or did so only half-heartedly.” Although the thoroughness of the investigation could not questioned, the court concluded that its timing could. Ayar claimed that LNW engaged in unreasonable delays. LNW counters that the delays were due to “Ayar’s own obstructive behavior and failure to cooperate with LNW’s investigation.”
The court dismissed all of Ayar’s claims, with the exception of whether LNW should have informed him that they would not pay for drywall repair unless there was damage, and whether LNW’s investigation failed to conclude its investigation within a thirty-day time line.
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Nevada Budget Remains at Impasse over Construction Defect Law
June 1, 2011 — CDJ Staff
Negotiations for the Nevada state budget have stalled over proposals to amend the state’s construction defect laws. Assembly Republicans had offered changes to the law to make it friendlier to contractors; however, after a state Supreme Court ruling that the state could not move a local government entity’s funds into state coffers, pressure has increased on the governor to lift the expiration dates of taxes approved in 2009.
The Reno Gazette-Journal quotes John Madole, a construction industry lobbyist, “We agree with them that you have to address the issue of the attorney fees, and for all practical purposes, they are automatically awarded when anybody brings any kind of suit.”
Speaker of the Assembly, John Oceguera, a Democrat, has proposed a bill that “makes it absolutely crystal clear that the only time you get attorney's fees is if you're the prevailing party.”
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When Does a Claim Against an Insurance Carrier for Failing to Defend Accrue?
November 7, 2012 — David McLain, Colorado Construction Litigation
The following is an update on our December 20, 2010 article regarding United States Fire Insurance Company v. Pinkard Construction Company, Civil Action No. 09-CV-01854-MSK-MJW, and its underlying dispute, Legacy Apartments v. Pinkard Construction Company, Case No. 2003 CV 703, Boulder County Dist. Ct. That article can be found here.
The present action, St. Paul Fire and Marine Insurance Co., et al. v. The North River Insurance Co., et al., Civil Action No. 10-CV-02936-MSK-CBS, encompasses the coverage battle that ensued between Pinkard’s insurers, Travelers Indemnity Company of America (“Travelers”) and United States Fire Insurance Company (“USFI”), following the settlement of Legacy’s construction defect claims against Pinkard. A short history of the underlying facts is as follows:
In 1995, Pinkard constructed the Legacy Apartments housing complex in Longmont, Colorado. Following construction, Legacy notified Pinkard of water leaks associated with various elements of construction. Legacy ultimately filed suit against Pinkard in 2003, and would go on to clarify and amend its defect claims in 2004, 2006, and again in 2008. Following Pinkard’s notification of Legacy’s claims, USFI provided a defense to Pinkard, but Travelers refused to do so, on the purported basis that Legacy’s allegations did not implicate property damage under the terms of Travelers’ policy.
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Reprinted courtesy of David M. McLain, Higgins, Hopkins, McLain & Roswell, LLC. Mr. McLain can be contacted at mclain@hhmrlaw.com
Contractor Manslaughter? Safety Shortcuts Are Not Worth It
August 11, 2011 — Douglas Reiser, Builders Counsel
It’s been a while since I discussed the importance of safety. But, a recent article on ENR.com compelled this brief article. Don’t shortcut safety — you could be facing serious criminal repercussions.
A New York crane company owner and one of his employees are each facing a second-degree manslaughter charge for the death of two construction workers.  The charges stem from the collapse of a crane in New York City. The district attorney determined that the crane owner cut a few corners to reduce its operation costs, significantly sacrificing safety.
Another example was the 2010 trial of another New York crane operator who was charged with manslaughter. In that case, the criminal charges failed to stick, but an administrative judge found that the contractor used a damaged sling to support the steel collar binding the tower-crane mast to the 18th floor of a high-rise building being constructed. The company also used four slings instead of the eight, as specified by the crane manufacturer; improperly attached the slings and failed to pad or soften them.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Lien Claimant’s Right to Execute against Bond Upheld in Court of Appeals
February 10, 2012 — Douglas Rieser, Builders Counsel
Stonewood v. Infinity Homes is a simple construction dispute over a matter of about $9,000.00. But sometimes these tiny little disputes turn into expensive legal battles over mere procedural quivering. In Stonewood, a small subcontractor won a big victory yesterday when the Divison 1 Court of Appeals upheld its judgment against a lien release bond posted by an owner.
Infinity Homes contracted with Stonewood Design to lay tile in one of its customer’s homes. Stonewood did the work, but Infinity withheld roughly $9,000.00 of the contract sums for what it alleged were trade damages left on the tile. The two parties were unable to come to an agreement over payment and Stonewood proceeded with a lien under RCW 60.04. It then filed an action to enforce the lien against the homeowner, Infinity and its bonding company.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Construction Defects Are Occurrences, Says South Carolina High Court
December 20, 2012 — CDJ Staff
The South Carolina Supreme Court has left the legislature’s new, expanded definition of “occurrence” in place, declining to declare it unconstitutional. South Carolina included faulty workmanship as an occurrence in response to a Supreme Court decision, which the court later reversed. One of the parties in that earlier decision, Harleysville Insurance, challenged the new law, claiming that the legislature didn’t have the power to pass a law to overturn a court ruling. The court did not concur.
However, the court did determine that the law was not retroactive and covered only claims filed after the law became effective in May 2011. The Chief Justice of South Carolina noted that “insurance coverage for construction liability lacks clarity, particularly with respect to whether construction defects constitute ‘occurrences’ under construction general insurance policies.”
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United States District Court Confirms That Insurers Can Be Held Liable Under The CCPA.
June 19, 2012 — Chad Johnson
In D.R. Horton, Inc.-Denver v. The Travelers Indem. Co. of Am., 10-CV-02826-WJM-KMT, 2012 WL 527204 (D. Colo. Feb. 16, 2012), the court was asked to rule on Travelers’[1] motion to dismiss D.R. Horton, Inc. ?Äì Denver’s (“DRH”) claim that Travelers violated the Colorado Consumer Protection Act (“CCPA”).
In the underlying construction defect case (“CD case”), DRH, as the developer and general contractor of a construction project, tendered the defense of the CD case to certain subcontractors and to Travelers as an insurer to those subcontractors. Travelers accepted the duty to defend DRH. DRH hired counsel to defend it, and the attorney fees and costs of suit were billed to Travelers. However, for a period of over five years, Travelers failed to actually pay any portion of the defense of DRH. Finally, on October 31, 2008, Travelers offered checks for payment of only 4% of the costs and fees incurred. DRH then returned the checks to Travelers and provided Travelers with authority to support its position that the amounts in Travelers’ checks were inadequate. Thereafter, Travelers dug its heels in, and resubmitted the same checks.
DRH was then forced to file a coverage action against Travelers for declaratory judgment, breach of contract, bad faith breach of insurance contract, and deceptive trade practices under the CCPA. In its motion to dismiss DRH’s CCPA claim, Travelers’ argued that DRH failed to plead specific facts that Travelers engaged in a deceptive trade practice under C.R.S. § 6-1-105, and DRH failed to plead sufficient facts showing that Travelers’ actions significantly affect the public ?Äì a necessary element of a CCPA claim.
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Reprinted courtesy of Chad Johnson, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Johnson can be contacted at johnson@hhmrlaw.com
The Montrose Language Interpreted: How Many Policies Are Implicated By A Construction Defect That Later Causes a Flood?
March 17, 2011 — By Shaun McParland Baldwin, March 17, 2011
The Court of Appeals of Indiana recently addressed the “Montrose” language added to the CGL ISO form in 2001 in the context of a construction defect claim where a fractured storm drain caused significant flooding a year after the drain was damaged. The insuring agreement requires that “bodily injury or “property damage” be caused by an occurrence and that the “bodily injury or “property damage” occur during the policy period. The Montrose language adds that the insurance applies only if, prior to the policy period, no insured knew that the “bodily injury or “property damage” had occurred in whole or in part. Significantly, it also states that any “bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period known to have occurred, includes a continuation, change or resumption of that “bodily injury” or “property damage” after the end of the policy period.
In Grange Mutual Cas. Co. v. West Bend Mut. Ins. Co., No. 29D04-0706-PL-1112 (Ct. App. IN March 15, 2011), http://www.ai.org/judiciary/opinions/pdf/03151109ehf.pdf, Sullivan was the General Contractor for a school construction project. Its subcontractor, McCurdy, installed the storm drain pipes. One of the storm pipes was fractured in 2005 while McCurdy was doing its installation work. More than a year later, the school experienced significant water damage due to flooding. It was later discovered that the flooding was due to the fractured storm drain. Sullivanrsquo;s insurer paid $146,403 for the water damage. That insurer brought a subrogation claim against McCurdy and its two insurers: West Bend and Grange. West Bend had issued CGL coverage to McCurdy while the construction was ongoing, including the date in which the storm pipe was fractured. Grange issued CGL coverage to McCurdy at the time of the flooding. Those two carriers jointly settled the subrogation claim and then litigated which insurer actually owed coverage for the loss. Significantly, the loss that was paid included only damages from the flooding, not any damages for the cost of repairing the pipe.
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Reprinted courtesy of Shaun McParland Baldwin of Tressler LLP. Ms Baldwin can be contacted at sbaldwin@tresslerllp.com
Alaska Supreme Court Dismisses Claims of Uncooperative Pro Se Litigant in Defect Case
August 11, 2011 — CDJ Staff
The Alaska Supreme Court found that in the case of Khalsa v. Chose, Ms. Khalsa? failure to cooperate with the courts has obligated them to dismiss her claims against Mr. Chose. Ms. Khalsa bought a home kit from Mandala Custom Homes of Nelson, British Columbia, Canada. Mr. Chose, one of the owners of Mandala was paid by Ms. Khalsa to supervise assembly in Fairbanks. After construction, the roof developed leaks. Ms. Khalsa stated that when climbing a ladder to inspect a skylight leak, she fell and injured herself.
During the subsequent suit, Khalsa proved uncooperative. She skipped a pretrial conference. She attended a hearing that set discovery deadlines but then did not comply with discovery, including her failure to provide medical records documenting her injuries. She eventually said that she would only be able to travel from Arizona to Alaska if the defendants paid for her and her caretaker?s expenses.
When finally deposed, Khalsa terminated the deposition after five minutes, alleging the deposition was “intentionally designed to cause [her] to endure further emotional distress, due to the psychological trauma . . . that was caused or contributed to by the defendants.”
Eventually, the lower court sanctioned her twice. In July, 2008, the court concluded that her failure to provide medical records required dismissal of her injury lawsuit. In October of that year, the court dismissed all remaining claims due to her “pattern of excuses and long delays in providing information for discovery culminating in her refusal to participate in her deposition by the defendants.” Further, Khalsa has argued that the trial court displayed “prejudice and bias toward the pro se plaintiff.”
The Alaska Supreme Court rejected all of Ms. Khalsa?s claims, dismissing her case. They did, however, note that she has thirty days to file an appeal.
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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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