Court Consolidates Cases and Fees in Soil Construction Defect Case
August 16, 2012 — CDJ Staff
The California Court of Appeals has ruled in Burrow v. JTL Development. JTL Development had appealed a judgement in a construction defect case in which JTL Development and Highland Development were found liable for damage due to homes built on unstable and improperly compacted soil. The two companies were sued by the two sets of homeowners, the Burrows and the Balls, and their cases were consolidated at trial. Each family was awarded $700,000 in damages. This judgement had also been appealed and affirmed by the appeals court. In the current case, an additional $235,800 in cost-of-proof sanctions had been awarded to the two families.
Before the trial, Dale Burrows, Charles Ball, and Laurie Ball “asked JTL and Highland to admit that they ‘approved grading plans’ for the Burrows’ and Balls’ properties; ‘had knowledge that the [properties] contained improperly compacted fill’; ‘had knowledge that the [properties were’ not properly prepared for structures’; and ‘did not provide Plaintiffs with a complete soils report’ prepared by Gorian & Associates.” These were requests 14, 19, 20, and 22. JTL and Highland denied all of these.
At trial, the Burrows and Balls proved that all these were true. JTL and Highland’s geotechnical subcontractor, Gorian & Associates, had “recommended that Highland remove and re-compact the entire tract to a depth of 25 feet.” JTL and Highland did not follow this recommendation, “in order to avoid expense.”
After judgment, the Burrows and Balls moved for $582,587.45 for “attorneys’ fees and costs incurred proving the truth of requests for admission.” JTL and Highland claimed that only Dale Burrows could recover fees, but that also the fees were not recoverable. Joe Lynch of Highland “declared that he always believed the soils under the Burrows and Balls homes were properly compacted.” The Burrows and Balls responded with six identical sets of requests for admissions and the court awarded each of them twenty-five percent of $235,800, with JTL and Highland each responsible for fifty percent.
The appeals court noted that JTL and Highland filed a timely appeal and goes on to notes the four circumstances under which a responding party does not have to pay costs and fees. The court concluded that none of these were met. Instead of waiving the request, JTL and Highland denied the request, stating “without in any manner waiving the foregoing objection, responding party denies the request for admission.”
Nor was the admission “of no substantial importance,” instead the court said that the matters were of “substantial importance,” and the “trial would have been shortened by their admission. Highland and JTL “relied on Gorian when it denied the request,” but the trial court “discredited Lynch’s assertions,” finding that “Highland knew the soil was improperly compacted.”
As all plaintiffs had identical discovery requests, the court rejected the claim that only Dale Burrows was entitled to an award.
Read the court’s decision…
Texas res judicata and co-insurer defense costs contribution
March 23, 2011 — Original story by CDCoverage.com, March 23, 2011
In Truck Ins. Exchange v. Mid-Continent Casualty Co., No. 03-08-00526-CV (Tex. App. 3d Aug. 27, 2010), insured contractor DCI was sued by the project owner seeking damages for defective construction. DCI tendered its defense to its CGL insurers Truck and Mid-Continent. Truck agreed to defend while Mid-Continent denied a defense. While the underlying suit was pending, Mid-Continent sued DCI, but not Truck, and obtained a judicial declaration of no duty to defend or indemnify DCI in the underlying suit. After settling the underlying suit, Truck sued Mid-Continent seeking contribution towards defense costs and indemnity payments. The state trial court entered summary judgment for Mid-Continent. The intermediate appellate court affirmed.
Read the full story...
Reprinted courtesy of CDCoverage.com
Subcontractor Not Liable for Defending Contractor in Construction Defect Case
February 10, 2012 — CDJ Staff
The California Court of Appeals has ruled on January 9, 2012 in Hensel Phelps Construction Company v. Urata & Sons Cement, upholding the judgment of the lower court.
Hensel Phelps was the general contractor for a high-rise in Sacramento. They were sued by the owners of the building after problems were discovered in the concrete slabs of the building’s parking garage. Instead of welded steel wire mesh, the slabs had been constructed with fiber mesh. Hensel Phelps filed a cross-complaint against Urata Cement, the subcontractor that had performed the cement work. Urata refused to defend Hensel Phelps. The owners’ case was subsequently dismissed due to the statute of limitations.
Although the original case was over, Hensel Phelps continued in their claims against Urata. “Urata argued that a handwritten interlineation required Hensel Phelps to prove Urata was at fault for the injury alleged in the building owners’ complaint before Urata was obliged to defend Hensel Phelps in that action.”
The lower court concluded that Urata would have been obligated to defend Hensel Phelps if the owners’ lawsuit had alleged that the damage was due to the subcontractor’s work or if evidence at trial established this. The lower court found neither of these true. Instead, the use of the fiber mesh was a design issue and “that decision was outside the scope of the subcontractor’s work.”
During the trial, Hensel Phelps conceded that Urata was not at fault. The appeals court could find no reading of the contract that would cause Urata to be obligated to defend Hensel Phelps, calling Hensel Phelps’s reading of the contact as “grammatically infeasible.”
Judges Nicholson, Raye, and Butz upheld the decision of the lower court and awarded costs on appeal to Urata.
Read the court’s decision…
Insurer Unable to Declare its Coverage Excess In Construction Defect Case
January 6, 2012 — CDJ Staff
The Ninth Circuit Court of Appeals has upheld a summary judgment in the case of American Family Mutual Insurance Co. v. National Fire & Marine Insurance Co. Several other insurance companies were party to this case. In the earlier case, the US District Court of Appeals for Arizona had granted a summary judgment to Ohio Casualty Group and National Fire & Marine Insurance Company. At the heart of it, is a dispute over construction defect coverage.
The general contractor for Astragal Luxury Villas, GFTDC, contracted with American Family to provide it with a commercial liability policy. Coverage was issued to various subcontractors by Ohio Casualty and National Fire. These policies included blanket additional insured endorsements that provided coverage to GFTDC. The subcontractor policies had provisions making their coverage excess over other policies available to GFTDC.
The need for insurance was triggered when the Astragal Condominium Unit Owners Association filed a construction defect claim in the Arizona Superior Court. CFTDC filed a third-party claim against several subcontractors. The case was settled with American Family paying the settlement, after which it filed seeking reimbursement from the subcontractor’s insurers. The court instead granted summary judgment in favor of Ohio Casualty and National Fire.
American Family appealed to the Ninth Circuit for a review of the summary judgment, arguing that the “other insurance” clauses were “mutually repugnant and unenforceable.” The Ninth Circuit cited a case from the Arizona Court of Appeals that held that “where two policies cover the same occurrence and both contain ‘other insurance’ clauses, the excess insurance provisions are mutually repugnant and must be disregarded. Each insurer is then liable for a pro rate share of the settlement or judgment.”
The court noted that unlike other “other insurance” cases, the American Family policy “states that it provides primary CGL coverage for CFTDC and is rendered excess only if there is ‘any other primary insurance’ available to GFTDC as an additional insured.” They note that “the American Family policy purports to convert from primary to excess coverage only if CFTDC has access to other primary insurance as an additional insured.”
In comparison, the court noted that “the ‘other insurance’ language in Ohio Casualty’s additional insured endorsement cannot reasonably be read to contradict, or otherwise be inconsistent with, the ‘other primary insurance’ provision in the American Family policy.” They find other reasons why National Fire’s coverage did not supersede American Family’s. In this case, the policy is “written explicitly to apply in excess.”
Finally, the Astragal settlement did not exhaust American Family’s coverage, so they were obligated to pay out the full amount. The court upheld the summary dismissal of American Family’s claims.
Read the court’s decision…
Georgia Supreme Court Rules Construction Defects Can Constitute an Occurrence in CGL Policies
April 5, 2011 — April 5, 2011 Beverley BevenFlorez - Construction Defect Journal
Recently, the Supreme Court of Georgia reversed the decision in American Empire Surplus Lines Insurance Company v Hathaway Development Company, Inc. stating that because Whisnant’s faulty workmanship caused damage to the surrounding properties, the construction defects constituted “occurrences” under the Commercial General Liability (CGL) policy. Unlike the South Carolina Supreme court ruling in the case of Crossman Communities v Harleysville Mutual, the Georgia Supreme Court stated that an accident can happen intentionally if the effect is not the intended result.
Interestingly, the only dissenting judge, J. Melton, disagreed with his colleagues on the basis that “although the term ‘accident’ is not specifically defined in the policy, it is axiomatic that an ‘accident’ cannot result from ‘intentional’ behavior.” It is clear that what constitutes an occurrence in CGL policies is still being hotly debated.
Read the full story...
Supreme Court of Oregon Affirms Decision in Abraham v. T. Henry Construction, et al.
April 20, 2011 — April 20, 2011 Beverley BevenFlorez - Construction Defect Journal
After reviewing the decision in Abraham v. T. Henry Construction, et al., the Oregon Supreme Court affirmed that a tort claim for property damage arising from construction defects may exist even when the homeowner and the builder are in a contractual relationship.
When the case was initially filed, the plaintiffs alleged breach of contract and negligence. The defendants moved for summary judgment arguing that one, the claim was barred by the six-year statute of limitations and two, no special relationship (such as one between a doctor and patient) existed. The court agreed with the defendants. However, the Court of Appeals while affirming the trial court’s decision on breach of contract reversed the decision on negligence. The Court of Appeals stated that an administrative or statute rule could establish a standard of care independent from the contract.
The Oregon Supreme Court gave an example of cases where a tort claim could exist when a contract is present: “If an individual and a contractor enter into a contract to build a house, which provides that the contractor will install only copper pipe, but the contractor installs PVC pipe instead (assuming both kinds of pipe comply with the building code and the use of either would be consistent with the standard of care expected of contractors), that failure would be a breach of contract only. […] If the failure to install the copper pipe caused a reduction in the value of the house, the plaintiff would be able to recover that amount in an action for breach of contract. […] On the other hand, if the contractor installed the PVC pipe in a defective manner and those pipes therefore leaked, causing property damage to the house, the homeowner would have claims in both contract and tort. […] In those circumstances, the obligation to install copper instead of PVC pipe is purely contractual; the manner of installing the pipe, however, implicates both contract and tort because of the foreseeable risk of property damage that can result from improperly installed pipes.”
Read the court’s decision…
Recent Case Brings Clarity and Questions to Statute of Repose Application
August 16, 2012 — Douglas Reiser, Builders Counsel
I have often chatted about the Washington Statute of Repose on this blog. The Statute of Repose prevents construction claims, for the most part, from being raised 6 years from the date of substantial completion or termination. Well, a recent Court of Appeals case dove deep into the specific determinative factors that tell us when to start the clock. It certainly raises questions about how long we really have to file suit.
The Statute of Repose has been a frequent topic here, so I will simply direct you to my prior post for further information on how this law works. A recent post was published about a lawsuit that might raise some questions about when and how the clock begins to roll, and claim periods begin to diminish.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Judge Rejects Extrapolation, Harmon Tower to Remain Standing
November 7, 2012 — CDJ Staff
CityCenter has filed an emergency motion asking the Nevada Supreme Court to intervene in Judge Elizabeth Gonzalez’ order that the building’s defects cannot be extrapolated from those tested. CityCenter’s structural engineering expert “evaluated 397 of the Harmon’s critical structural elements and found all but one defective,” according to the article on Vegas.Inc. Judge Gonzalez would not permit this to be extrapolated to the untested 1,072, as the locations tested were not random.
Judge Gonzalez also ruled that if CityCenter does additional testing, they may not appeal her order that ruled the extrapolation inadmissible. CityCenter argued to the Nevada Supreme Court that “the notion that CityCenter should be forced to incur additional millions of dollars in testing costs and sanctions ?Äì on the condition that it waive its right to appeal this ruling ?Äì just to be permitted to present its own damages evidence, shocks the conscience.”
Gonzalez gave the okay to CityCenter to demolish the building, but its demolition would make any further testing impossible. Under Gonzalez’ ruling, the untested structural elements cannot b assumed to be defective.
Read the full story…
Insurer’s Discovery Requests Ruled to be Overbroad in Construction Defect Suit
October 28, 2011 — CDJ Staff
The US District Court has ruled in the case of D.R. Horton Los Angeles Holding Co. Inc. v. American Safety Indemnity, Co. D.R. Horton was involved in a real estate development project. Its subcontractor, Ebensteiner Co., was insured by ASIC and named D.R. Horton as an additional insured and third-party beneficiary. D.R. Horton, in response to legal complaints and cross-complaints, filed for coverage from ASIC under the Ebensteiner policy. This was refused by ASIC. ASIC claimed that “there is no potential coverage for Ebensteiner as a Named Insurer and/or D.R. Horton as an Additional Insured.” They stated that “the requirements for coverage are not satisfied.”
The case same to trial with the deadline for discovery set at March 1, 2011. ASIC stated they were seeking the developer’s “job file” for the Canyon Gate project. D.R. Horton claimed that ASIC’s discovery request was overbroad and that it would be “unduly burdensome for it to produce all documents responsive to the overbroad requests.”
D.R. Horton did agree to produce several categories of documents, which included:
“(1) final building inspection sign-offs for the homes that are the subject of the underlying litigation;(2) an updated homeowner matrix for the underlying actions; (3) the concrete subcontractor files; (4) the daily field logs for D.R. Horton’s on-site employee during Ebensteiner’s work; (5) documents relating to concrete work, including documents for concrete suppliers; (6) documents relating to compacting testing; (7) documents relating to grading; and (8) D.R. Horton’s request for proposal for grading”
The court found that the requests from ASIC were overbroad, noting that the language of the ASIC Request for Production of Documents (RFP) 3-5 would include “subcontractor files for plumbing, electric, flooring, etc. - none of these being at issue in the case.” The court denied the ASIC’s motion to compel further documents.
The court also found fault with ASIC’s RFPs 6 and 7. Here, D.R. Horton claimed the language was written so broadly it would require the production of sales information and, again, subcontractors not relevant to the case.
Further, the court found that RFPs 8, 10, 11, and 13 were also overbroad. RFP 8 covered all subcontractors. D.R. Horton replied that they had earlier complied with the documents covered in RFPs 10 and 11. The court concurred. RFP 13 was denied as it went beyond the scope of admissible evidence, even including attorney-client communication.
The court denied all of ASIC’s attempts to compel further discovery.
Read the court’s decision…
California Supreme Court Finds Associations Bound by Member Arbitration Clauses
September 13, 2012 — CDJ Staff
In a decision with great implications for construction defect suits in California, the California Supreme Court has ruled in Pinnacle Museum Tower Association v. Pinnacle Market Development that arbitration clauses binding on the members of the association are also binding on the association itself. They concluded this, even though “the association did not exist as an entity independent of the developer when the declaration was drafted and recorded.” The opinion, written by Justice Baxter, was joined by four additional justices, with two separate concurrences and a dissenting opinion by Justice Kennard.
The Pinnacle homeowners sought to bring suit over construction defect claims. In response, the developer filed a motion to compel arbitration. The association argued that the arbitration clause signed by its individual members was not binding on it. The Appeals Court invalidated the arbitration agreement “finding it marked by slight substantive unconscionability and high degree of procedural unconscionability. The Appeals Court determined that “for all intents and purposes, Pinnacle was the only party to the ‘agreement,’ and there was no independent homeowners association when Pinnacle recorded the CC&R’s.” However, the California Supreme Court said that this was “not persuasive in light of the statutory and contract principles in play.”
The opinion notes that “the Project CC&R’s provides that Pinnacle and, by accepting a deed to any portion of the Project property, the Association and each individual condominium owner agree to submit any construction dispute to binding arbitration in accordance with the FAA.” The Court noted that “settled principles of condominium law establish that an owners association, like its constituent members, must act in conformity with the terms of a recorded declaration,” which, as the Court notes, includes the CC&Rs.
After finding that the terms were binding on the Association, the Court then questioned whether the terms were “unenforceable as unconscionable,” noting that “the party resisting arbitration bears the burden of proving unconscionability.” But the Court found that “the arbitration provisions of article XVIII are not substantively unconscionable.” Additionally, they found “no support for the Association’s claims of unfairness and absence of mutuality.”
Read the court’s decision…
Construction Law Client Alert: Hirer Beware - When Exercising Control Over a Job Site’s Safety Conditions, You May be Held Directly Liable for an Independent Contractor’s Injury
April 6, 2011 — April 6, 2011 - By Mark VonderHaar and Yvette Davis in the Haight Brown & Bonesteel Blog
On February 24, 2011, the California Court of Appeal held in Jeffrey Tverberg, et al v. Fillner Construction, Inc. that the imposition of direct liability on a hirer turns on whether the hirer exercised retained control of worksite safety in such a manner that affirmatively contributed to the independent contractor’s injury. Twice, Tverberg, an independent contractor hired by a general contractor's subcontractor, asked the general contractor to make the job site safe by covering up open holes created by another unrelated subcontractor while Tverberg was working at the site. After Tverberg was injured at the site by falling in a hole, he sued both the general contractor and the subcontractor which had hired him.
The Court of Appeal reasoned that when the general contractor instructed another subcontractor to create a condition that was potentially dangerous (i.e., creating open and uncovered bollard holes), and simultaneously required Tverberg to perform unrelated work near the open holes, the general contractor s conduct may have constituted a negligent exercise of its retained control which affirmatively contributed to Tverberg’s injury. The Court also reasoned that the general contractor affirmatively assumed responsibility for the safety of the workers near the holes by only requiring stakes and safety ribbon, and negligently discharged that responsibility which resulted in injury.
Read the full story...
Reprinted courtesy of Mark VonderHaar and Yvette Davis of Haight Brown & Bonesteel. Mr. VonderHaar can be contacted at mvonderhaar@hbblaw.com and Ms. Davis at ydavis@hbblaw.com.
Town Files Construction Lawsuit over Dust
August 16, 2012 — CDJ Staff
Washington Township in Ohio has filed a lawsuit against Underground Utilities for their handling of construction fill on a road project. The City of Mansfield had hired the firm to improve road safety. The lawsuit is over the company’s actions in processing soil for fill, which they are doing on three vacant lots that are zoned for residential use. Washington Township Trustee Jack Butler told the Mansfield Journal that “what brought the lawsuit to a head was the fact that the contractor did not control the dust.” Subsequent receiving notices of zoning violations, the company began to move its operation to another site.
Read the full story…
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.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Florida Property Bill Passes Economic Affairs Committee with Amendments
April 14, 2011 — April 14, 2011 Beverley BevenFlorez - Construction Defect Journal
The Florida Property Bill (HBB 803) was passed by the Economic Affairs Committee by a vote of 11-7, according to Property Casualty 360, after adopting nine new amendments. The additions to the bill included limiting notice of claims to a set number of years, extending the statute of limitation on property claims from five years to six years, among others.
HB 803 and SB 408, the Senate companion bill, focus primarily on residential property insurance. They make changes to the Florida Hurricane Catastrophe Fund, while also promoting increased notification of policy changes to policyholders. Sections of the bills provide minor fixes such as renaming Citizens Property Insurance Corporation to Taxpayer-Funded Property Insurance Corporation. However, other sections of the bills contain more significant policy changes such as sinkhole coverage and hurricane claims.
The bills’ intent, according to the SunSentinel.com, is to reduce fraudulent claims and to bring new insurers into the insurance market. However, SunSentinel.com also reports that the bills may drastically increase property insurance premiums.
Read the full Property Casualty 360 article...
Read the full Sun Sentinel article...
Bill Seeks to Protect Legitimate Contractors
December 20, 2012 — CDJ Staff
The California construction industry sees Senate Bill 863 as a needed help to legitimate construction businesses. The bill introduces regulations that will help shut down fraudulent contractors and help reduce workers’ compensation fraud. John Upshaw of the Independent Roofing Contractors of California described the revenue lost to California and other states as “phenomenal,” saying that “we need to continue the coordinated efforts if we are to see true workers’ compensation reform.”
Read the full story…
More Charges in Las Vegas HOA Construction Defect Scam
May 10, 2012 — CDJ Staff
VegasInc.com reports that U.S. District Judge James Mahan has unsealed fourteen more criminal cases in the ongoing Las Vegas HOA corruption probe. One of the fourteen is Lisa Kim, whose Platinum Community Services managed communities in which Nancy Quon and Leon Benzer were involved.
Two attorneys were also named. Brian Jones had previously been named in civil litigation as working to rig HOA elections in favor of the straw buyers. Jeanne Winkler had done legal work for one of the communities and for the developer before her disbarment.
Eight of the names released were of alleged straw buyers. These individuals are said to have bought fractional shares of homes so they could stand for election on the HOA boards. One of the individuals named, Arnold Meyers, had sued the Jasmine Homeowners Association, claiming that their HOA elections were tainted. Myers claimed that homeowners received postcards stating that he did not own his condo. His suit was dropped after two homeowners claimed that their names had been forged on Meyer’s affidavits.
Read the full story…
Partial Settlement in DeKalb Construction Management Case
July 10, 2012 — CDJ Staff
The DeKalb County School District has made a partial settlement in a lawsuit over their claims of mismanagement of construction projects. The Atlanta Journal-Constitution reports that the school board settled with E. R. Mitchell & Co., the smaller of two firms that they have sued. As part of the settlement, Mitchell will be testifying against their former partner. Claims from the other side of the lawsuit are that the school board improperly fired the Heery/Mitchell partnership. The superintendant who fired the company, Crawford Lewis, and his chief operations office, Pat Reid, have since been charged with criminal conspiracy to defraud the construction program. A lawyer for Heery said that “we believe that when presented to a jury, Heery will be vindicated.”
Read the full story…
Coverage Exists Under Ensuing Loss Provision
July 10, 2012 — Tred Eyerly, Insurance Law Hawaii
Finding coverage under the ensuing loss provision, the Washington Supreme Court overruled a Court of Appeals decision we previously reported here. Vision One, LLC v. Philadelphia Indem. Ins. Co., 276 P.3d 300 (Wash. 2012).
Vision developed a condominium project. Before concrete was poured, a subcontractor supplied the shoring to temporarily support the poured concrete slabs. After the shoring installation was completed, concrete was poured on the first floor. When the pouring was finished, the shoring gave way. The framing, rebar and newly poured concrete came crashing down onto the the lower level parking area, where the wet concrete eventually hardened. It took several weeks to clean up the debris and repair the damage.
Vision had a builders’ risk policy with Philadelphia. The policy excluded losses caused by or resulting from deficient design or faulty workmanship. Collapse, however, was not listed as an excluded event. Further, the exclusion for faulty workmanship contained a resulting loss clause providing that "if loss or damage by a Covered Cause of Loss results, [Philadelphia] will pay for the loss or damage caused by that Covered Cause of Loss."
Philadelphia denied coverage under the faulty workmanship exclusion.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
