California Posts Nation’s Largest Gain in Construction Jobs
March 28, 2012 — CDJ Staff
California added about 8,900 construction jobs in January, 2012, as compared to December, 2011, leading the nation in the number of added construction jobs. Thirty-four other states also saw added construction jobs. A year prior, only twenty-eight states added construction jobs. The Associated General Contractors of America analyzed the monthly report from the Labor Department. Ken Simonson, the chief economist for the Associated General Contractors of America noted that “the gains this January partly reflect very mild weather this winter and exceptionally cold and snowy conditions a year before.”
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Texas contractual liability exclusion
May 18, 2011 — May 18, 2011 - CDCoverage.com
In Ewing Construction Co., Inc. v. Amerisure Ins. Co., No. C-10-256 (S.D. Tex. April 28, 2011), insured Ewing was the general contractor for an athletic facility constructed for a school district. The school district sued Ewing alleging defective construction of the project. The underlying complaint included contract and negligence causes of action, and sought damages for the repair of the damages and loss of the use of the project. The complaint did not allege damage to any property other than the project itself. Ewing tendered its defense to its CGL insurer Amerisure. Amerisure denied a defense and Ewing filed suit against Amerisure. The federal district trial court entered summary judgment for Amerisure. Applying Texas law, the court held that all of the damages fell within the “contractual liability†exclusion precluding any duty to defend or indemnify.
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Reprinted courtesy of CDCoverage.com
Hovnanian Increases Construction Defect Reserves for 2012
January 6, 2012 — CDJ Staff
In their fourth quarter earnings call, executives of Hovnanian Enterprises made some projections for investors, covering the company’s plans for 2012. During the call, Ara K. Hovnanian, the firm’s CEO, discussed their reserves to meet construction defect claims. The firm does an annual actuarial study of their construction defect reserves.
Mr. Hovnanian noted that there have been no changes for the past several years, but this year they are increasing their reserves by about $6.3 million. Additionally, the firm has added $2.5 million to their legal reserves. Mr. Hovnanian stated “we do not anticipate that changes of this magnitude will be recurring as we look forward to 2012.”
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Negligent Construction an Occurrence Says Ninth Circuit
June 30, 2011 — CDJ Staff
One June 27, the US Court of Appeals has rejected an appeal from Mid-Continent Casualty Company. Mid-Continent had appealed a summary judgment granted to Titan Construction Company.
Titan Construction had built condominiums for the Williamsburg Condominium Association, which later filed a construction defect lawsuit against Titan and other defendants. Titan settled with the developer, Kennydale, assigning its rights against Mid-Continent to Kennydale. Mid-Continent filed suit, claiming that “it had no obligation to indemnify or defend Titan, Kennydale, or various other defendants.” The district court found in favor of Mid-Continent, granting a summary judgment, concluding that Titan’s insurance covered “occurrences,” and none had taken place.
On appeal, the court found that the negligent construction of the condominiums constituted an “occurrence” The case was remanded and the district court this time found in favor of Titan, “concluding that Mid-Continent failed to raise a triable issue as to the applicability of the remaining policy exclusions.
The Ninth Circuit Court of Appeals has now affirmed that decision and Titan’s summary judgment stands.
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2011 West Coast Casualty Construction Defect Seminar – Recap
June 1, 2011 — CDJ Staff
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| Event exhibitors and sponsors contribute to an informative and engaging environment |
This year’s meeting was the best yet for the industry-leading construction defect and claims event.
This year’s seminar concluded on May 13, 2011 with the Construction Defect Community Charitable Foundation Golf Tournament, held at Strawberry Farms Golf Course.
The Disneyland Hotel in Anaheim, California was the place where more than 1,500 attendees convened for two days of professional development activities and seminars that included CLE workshops and panel discussions of special interest to legal and insurance professionals concerned with construction defect and claims litigation. Key events included “Challenges for Experts in Construction Defect Claims and Litigation,” “Keeping Up with Construction Defect Coverage,” and “Tips for Avoiding the ‘Perfect Storm’ in Handling of Wrap Claims.”
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| Supporting the golf tournament at the 15th hole |
This year’s Ollie award was given to George D. Calkins II, Esq. The West Coast Casualty Jerrold S. Oliver Award of Excellence was named in honor of the late Judge Jerrold S. Oliver, and recognizes an individual who is outstanding or has contributed to the betterment of the construction community.
In addition to being the most comprehensive professional development seminar in the area of construction defects, this year’s seminar was equally valuable as a networking opportunity for members of the industry. People participated in professional development events during the day and then continued networking in the evening at numerous social events. The Lawn Party as well as the legendary Wood, Smith, Henning & Berman events were very well attended. Additional valuable networking events were hosted by a number of industry professionals at the House of Blues, and Tortilla Joe’s.
As of this writing the 2011, West Coast Casualty's Construction Defect Seminar has applied for or has already received the following continuing education accreditation in the following areas;
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For more information about next year’s event, visit West Coast Casualty.
Anti-Assignment Provision Unenforceable in Kentucky
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
On a certified question from the Federal District Court, the Supreme Court of Kentucky decided that an anti-assignment provision in a policy is unenforceable.Wehr Constructors v. Paducah Div. Assur. Co. of Am., 2012 Ky. LEXIS 183 (Ky. Oct. 25, 2012).
Before building an addition to its hospital, Murray Calloway County Hospital purchased a builder's risk policy from Assurance Company of America.The policy provided, "Your rights and duties under this policy may not be transferred without Assurance's written consent . . . ." The Hospital contracted with Wehr Constructors to install concrete subsurfaces and vinyl floors in order to expand the hospital. After installation, a portion of the floors and subsurface work was damaged. The Hospital submitted a claim to Assurance for $75,000, but the claim was denied.
Wehr sued the Hospital to recover money for its work on the construction project. In settling the case, the Hospital assigned to Wehr any claim or rights the Hospital had against Assurance.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Houses Can Still Make Cents: Illinois’ Implied Warranty of Habitability
March 1, 2011 — Original Story by
Marisa L. Saber Cozen O’Connor Subrogation & Recovery Law BlogIn a report published earlier this week Marisa L. Saber writes about the implied warranty of habitability in the context of construction defect litigation. The piece speaks of the difficulties in alleging tort theories against builders and vendors in light of Illinois’ expansion of the economic loss doctrine, and how the implied warranty of habitability may provide another avenue for recovery.
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Seven Tips to Manage Construction Defect Risk
July 10, 2012 — CDJ Staff
Jody T. Wright looks at “seven strategies being used around the country to identify, manage and mitigate your exposures” in a piece in Business Insurance. Wright, Senior VP, Construction Department Manager for Lockton Companies in Denver, gives seven simple steps from the perspective of a insurer.
His first step is to match your project to your insurance. He suggests keeping the riskier projects separate, noting that from an insurer’s point-of-view, “any project that creates a homeowners association carries a higher potential threat of future litigation.” This leads to his second point: you need to “determine what makes your liability insurer nervous.” In other words, talk with your insurer.
His third point suggests that builders look back and see if there is a pattern of problems that have lead to payouts from your insurer. Keep your insurer happier by making sure these areas don’t continue to be problems. Nor should you look for new problems. He suggests against leading in new technologies.
Three more points deal with being careful about with whom you associate. He tells builders to negotiate their contracts, avoiding clauses that would obligate a builder to “indemnify the owner for the negligent work of others that they did not control.” Avoid subcontractors “with loss patterns that might affect your project and reputation.” Builders should identify “owners with a pattern of suing contractors” adding that risk to the cost of the job. They should also identify “the most effective attorneys and expert witnesses” and get them involved before the litigation starts.
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Yellow Brass Fittings Play a Crucial Role in Baker v Castle & Cooke Homes
May 10, 2012 — CDJ Staff
Baker v Castle & Cooke Homes Hawaii, et al. is a “class action filed by homeowners who allege that their homes have a construction defect. They allege that their plumbing systems include brass fittings susceptible to corrosion and likely to cause leaks. They bring this action against the developer of their homes and the manufacturers of the brass fittings.”
Zurn, the manufacturer of the allegedly defective brass fittings, sought a dismissal, or if that could not be achieved, then “a more definite statement, of five of the six claims.” Zurn moved for summary judgment on the sixth claim, or alternately sought “summary judgment on one of the five claims it” sought to dismiss.” The court granted in part the motion, and denied the motion for summary judgment.
The developer, Castle & Cooke, sought dismissal of the First Amended Complaint stating “that Plaintiffs have not complied with Hawaii’s Contractor Repair Act, chapter 672E of Hawaii Revised Statutes, which requires, among other things, a plaintiff to give a contractor the results of any testing done before filing an action against that contractor.” The court couldn’t determine “certain facts essential to ruling” on Castle & Cooke’s motion, and therefore denied the motion, but ordered Plaintiffs to submit requested material by the stated deadline.
The Baker v Castle & Cooke case began with the Plaintiffs claim that the use of yellow brass fittings can lead to construction defects. They allege that “yellow brass is particularly susceptible to dezincification, a corrosion process in which zinc leaches into potable water that comes into contact with the brass. According to Plaintiffs, as the brass corrodes, it becomes porous and mechanically weak. Plaintiffs further allege that the PEX systems in the putative class members’ homes have begun to, or are about to, leak water into the walls, ceilings, and floors of their homes. Plaintiffs allege that the leakage will cause water damage and mold growth, exposing the occupants to toxins.”
In response to the plaintiffs’ claims, Zurn argued “because their yellow brass fittings have not failed to date, Plaintiffs fail to allege, and have no evidence showing, that they have suffered any actual injury.” Plaintiffs replied, “even if the fittings have not failed as of today, failure in the future is inevitable.”
However, the court stated, “whether Plaintiffs have suffered any injury, or whether Plaintiffs are attempting to proceed based solely on future injury, implicates Plaintiffs’ standing to bring this action, as well as whether this case is ripe for adjudication.” The court has requested the parties to submit “supplemental briefing on whether this case should be dismissed pursuant to Rule 12(b)(1). In supplemental briefs, Zurn argues that dismissal is appropriate because Plaintiffs lack standing, and Castle & Cooke argues that dismissal is appropriate because Plaintiffs’ claims are not ripe.”
The court continues to discuss the problem of standing: “To establish standing, a plaintiff must demonstrate three things. First, the plaintiff must suffer an "injury-in-fact," which means that there must be a concrete and particularized "invasion of a legally protected interest" and the invasion is actual or imminent. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Second, the injury must be fairly traceable to the challenged action. Third, a favorable decision must be likely to redress the injury. Id. It is the first element (injury-in-fact) that is in issue here.”
The court found that the plaintiffs do have standing: “Even if the court could not rely on the allegations that the pipes will soon leak, the court would conclude that, for standing purposes, Plaintiffs have a sufficient injury-in-fact in the form of their alleged economic loss.” In a hearing, Plaintiffs argued that their homes had decreased in value.
The court also denied Castle & Cooke’s motion to dismiss based on a lack of ripeness, stating “the same reasons Plaintiffs satisfy the injury-in-fact requirement for standing purposes, they satisfy the constitutional ripeness requirement.”
Plaintiffs asserted six counts against Zurn. Zurn, in response, made a motion to dismiss counts VIII, IX, X, XII, and XIII. The court granted Zurn’s motion for Counts VIII, IX, and X only: “Counts VIII (product liability), IX (negligence), and X (strict liability) sound in tort. Zurn argues that, because Plaintiffs allege no injury other than to the PEX systems and the yellow brass fittings themselves, the economic loss rule bars their tort claims. The court agrees.”
The court disagreed with Zurn’s motion regarding Count XII: “Count XII asserts that Zurn has breached the implied warranty of merchantability. Zurn argues that Count XII is barred by the applicable statute of limitations and that Plaintiffs do not sufficiently allege an injury. The court disagrees.”
Zurn’s motion regarding Count XIII was also denied: “Count XIII asserts that Zurn violated section 480-2 of Hawaii Revised Statutes.” Furthermore, “Plaintiffs allege that Zurn ‘engaged in unfair and deceptive acts or practices when [it] designed, manufactured and sold Yellow Brass Fittings.’ Zurn argues that Plaintiffs fail to state a claim under section 480-2(a) because their claims are barred by the statute of limitations and they do not adequately allege reliance or a cognizable injury. The court disagrees.”
The court denied the motion for summary judgment with respect to Counts XI and XII.
Castle & Cooke sought to dismiss “Plaintiffs’ claims against it under section 672E-2 of Hawaii Revised Statutes, which provides for dismissal when claimants fail to comply with chapter 672E.” There was some discussion regarding the test results. Apparently, the plaintiffs had failed to provide a written notice of claim at least 90 days before filing the action. However, it is unclear if the Plaintiffs have since complied with the requirements of the chapter. “The court has received no supplemental information from either party about whether any test results from another case have been turned over or whether those materials are subject to a confidentiality agreement. The record at this point does not establish noncompliance with the requirement in chapter 672E to provide such information. The court therefore denies the motion to dismiss.”
In summary, “Zurn’s motion to dismiss is granted as to Count VIII, Count IX, and Count X. Zurn’s motion to dismiss is denied with respect to Plaintiffs’ other claims. Zurn’s request for a more definite statement and its summary judgment motion are denied. Plaintiffs are given leave to file an amended Complaint no later than May 21, 2012.” Furthermore, “the court denies Castle & Cooke’s motion, but directs Plaintiffs to file, within two weeks, either a certificate of compliance with section 672E-3(c), or an explanation as to why they have not complied. Castle & Cooke may submit a response within two weeks of Plaintiffs’ submission. Each party’s submission is limited to 1000 words.”
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Courts Are Conflicted As To Whether "Good Faith" Settlement Determinations Can Be Reviewed Via Writ Petition Or Appeal
July 10, 2012 — Stephen A. Sunseri and Aarti Kewalramani, Gatzke Dillon & Ballance LLP
The Court of Appeal, Second District, Division Three, ruled in Oak Springs Villas Homeowners Association v. Advanced Truss Systems, Inc., et al., (June 14, 2012, B234568) __ Cal.App.4th __ [2012 WL 2149923], that a non-settling defendant cannot appeal a trial court's good faith settlement determination. Instead, a non-settling defendant may only file a petition for writ of mandate pursuant to Code of Civil Procedure section 877.6 to challenge a good faith determination. This decision comes on the heels of a 2011 ruling in Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, which found that a writ petition is not the sole means of challenging a trial court's good faith settlement determination.
In Oak Springs Villas, supra, the condominium homeowners' association sued a developer, general contractor, and various subcontractors for alleged construction deficiencies and resultant property damage. The association eventually settled with the developer, but not with a truss manufacturer. The trial court approved the developer's motion for good faith settlement determination, and the truss manufacturer immediately appealed, instead of filing a writ petition. On appeal, the developer argued the good faith determination was not an appealable order. The truss manufacturer argued Cahill applied, as well as an older case, Justus v. Atchison (1977) 19 Cal.3d 564, which allowed for appeals when no remaining issues exist as to the appealing party.
The Court of Appeal ruled in the developer's favor and declined to follow Cahill, stating the truss manufacturer should have filed a writ petition, as expressly required under Section 877.6, subdivision (e). The Court also believed Justus was inapplicable because a non-settling party should not be allowed to have two review opportunities ?Äì one after an adverse good faith ruling, and then another after the ultimate conclusion of the case.
However, the greater effect is that Cahill and Oak Springs Villas simultaneously stand in conflict and appear to be valid law. One case allows for an appeal of a good faith settlement determination, while the other requires strict adherence to the statute. The Supreme Court is likely to review the issue. In the meantime, parties challenging good faith rulings are advised to consult the statutory requirements under Section 877.6, subdivision (e).
Printed courtesy of Stephen A. Sunseri and Aarti Kewalramani, Gatzke Dillon & Ballance LLP. Mr. Sunseri can be contacted at ssunseri@gdandb.com and Ms. Kewalramani can be contacted at akewalramani@gdandb.com.
Firm Sued For Construction Defects in Parking Garage
October 23, 2012 — CDJ Staff
Northhampton County, Pennsylvania is suing a contractor who resurfaced a parking garage in 2009. According to the Express-Times, three years later, the surface is cracked and the county is seeking $700,000 for repairs. Additionally, they have withheld $44,000 of the $2.2 million contract because of the problems. John Stoffa, Northampton County Executive, says that the garage is stable, but not up to safety standards.
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Construction Law Alert: A Specialty License May Not Be Required If Work Covered By Another License
March 7, 2011 — By
Steve Cvitanovic of
Haight Brown & Bonesteel, LLP.Contractors should always be sure that they understand the licensing in any Subcontract or Prime Contract before entering into any agreement. However, on March 3, 2011, in the case of Pacific Casson & Shoring, Inc. v. Bernards Bros., Inc. 2011 Cal.App.Lexis 236, the Court of Appeal determined that if a specialty license is subsumed within another license, the specialty license may not be required.
Bernards entered into a subcontract with Pacific to excavate, backfill, grade and provide geotechnical design parameters for a hospital. The Prime Contract required the bidder to maintain a Class C-12 specialty earthwork license. However, Pacific only held a Class A general engineering license which it turns out was suspended during the performance of the work. Pacific sued Bernards for nonpayment of $544,567, but the lawsuit was dismissed because the trial court found that Pacific (1) lacked a C-12 license, and (2) Pacific’s Class A license was suspended for failure to pay an unrelated judgment. Pacific was also ordered to disgorge $206,437 in prior payments.
The Court of Appeal reversed and remanded. The Court of Appeal agreed with Pacific and held that a C-12 specialty license was not required despite the Prime Contract. The Court of Appeal found that the C-12 specialty license would have been “superfluous” since it was fully encompassed within the Class A requirements. However, the Court of Appeal also remanded the case for further
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Reprinted courtesy of Steve Cvitanovic of Haight Brown & Bonesteel, LLP.
No Coverage For Damage Caused by Chinese Drywall
October 28, 2011 — Tred Eyerley, Insurance Law Hawaii
The pollution exclusion barred coverage for alleged property damage and bodily injury in Evanston Ins. Co. v. Harbor Walk Dev., LLC, No. 2:10cv312 (E.D. Va. Sept. 9, 2011).
Homeowners sued the insured, Harbor Walk, in three lawsuits, alleging the Chinese drywall installed in their homes emitted sulfides and other noxious gases. This caused corrosion and damage to the air-conditioning and ventilation units, refrigeration coils, copper tubing, faucets, metal surfaces, electrical appliances and other personal items. The homeowners also alleged the compounds emitted by the drywall caused bodily injury, such as allergic reactions, headaches, etc.
Harbor Walk’s insurer, Evanston, filed for a declaratory judgment that the pollution exclusion precluded coverage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
No Choice between Homeowner Protection and Bankrupt Developers?
February 10, 2012 — CDJ Staff
Donna DiMaggio Berger, writing in the Sun Sentinel argues those may be the only current choices in Florida. A recent court case, Lakeview Reserve HOA v. Maronda Homes has caused a swift response from the legislators. Ms. Berger notes that the construction defect bill, HB 1013, “would take away a homeowner’s rights to pursue a developer for defects to the driveways, roads, sidewalks, utilities, drainage areas and other so-called ‘off-site’ improvements.” The alternative? She notes that applying the Maronda decision would “bankrupt developers who don’t build defect-free roads and sidewalks.”
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Construction Delayed by Discovery of Bones
June 28, 2011 — CDJ Staff
Work stopped on a $7 million construction project in Oak Harbor, Washington, after three sets of Native American remains were found. The Washington State Department of Archaeology and Historic Preservation had suggested that the project employ an archaeologist. City, state, and tribal officials are determining what will happen next. The Seattle Times reports that Jim Slowik, Oak Harbor’s mayor, has asked for a review of why no archaeologist was part of the project.
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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
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
Insurer Has Duty to Disclose Insured's Interest In Obtaining Written Explanation of Arbitration Award
October 23, 2012 — Tred Eyerly, Insurance Law Hawaii
The issue faced by the Minnesota Supreme Court was whether the insurer had a duty to disclose the insured's interest in obtaining a written explanation of an arbitration award that identified the claims of recovery and the portions of the award attributable to each. Remodeling Dimensions, Inc. v. Integrity Mut. Ins. Co., 2012 LEXIS Minn. 404 (Minn. Sup. Ct., Aug. 22, 2012).
Remodeling Dimensions, Inc. ("RDI") built an addition for the homeowners and installed windows in the original part of the house. After construction began, the homeowners also asked RDI to fix the master bedroom window in the original part of the house.
After completion of the project, the house sustained storm damage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
