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
California Assembly Bill Proposes an End to Ten Year Statute of Repose
May 9, 2011 — May 9, 2011 Beverley BevenFlorez - Construction Defect Journal
California Assemblyman Furutani has introduced a bill that if passed would eliminate the ten year statute of repose in certain construction defect cases. The statute of repose would not apply when “an action in tort to recover damages for damage to real or personal property, or for personal injury or wrongful death from exposure to hazardous or toxic materials, pollution, hazardous waste, or associates environmental remediation activities,” according to the latest amended version of AB 1207.
When Furutani first introduced the bill, it was aimed at small businesses only. However, the description of the bill, which read, “An act to amend Section 14010 of the Corporations Code, relating to small businesses” has been stricken from the bill, and it has been amended to read, “An act to amend Section 337.15 of the Code of Civil Procedure, relating to civil actions.”
The change in the bill’s intent has caused some outcry among attorneys in the blogosphere. For instance, Sean Sherlock of Snell & Wilmer stated that “the proposed amendment is unnecessary, and would upset nearly 50 years of deliberative legislation and judicial precedent on construction defects liability and the 10–year statute — all apparently motivated by a decision in a single, isolated Superior Court lawsuit that has not yet been reviewed by the court of appeal.” Sherlock is referring to Acosta v. Shell Oil Company, in which the Superior Court agreed to dismiss the plaintiffs’ claims against the developer based in part on the ten year statute of repose. AB 1207 was amended five days after the ruling in Acosta v. Shell Oil Company.
California AB 1207 has been re-referred to the Judiciary Committee.
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Judge Okays Harmon Tower Demolition, Also Calls for More Testing
August 2, 2012 — CDJ Staff
Vegas.Inc reports that Clark County District Court Judge Elizabeth Gonzalez has permitted the demolition the tower, which MGM Resorts has claimed is a safety hazard. Perini Building Co. claims that the building does not need to be demolished. CityCenter claims that repairing the building would take nearly a year longer than a demolition and cost about $200 million. Further, CityCenter assumes that the building’s reputation would cost it another $30 million.
Subsequently, Judge Gonzalez ruled that the pattern of destructive testing would not support a claim that there were an estimated 1,400 defective items in the building. An attorney for CityCenter, Steve Morris, has suggested that they may seek more testing, impossible to do once the building is demolished. CityCenter issued a statement that “nearly every time CityCenter has chipped away concrete to review structural work at the Harmon, we have found defects.” They describe the building as “unusable.”
Tutor Perini contends that it “remains confident that it will prevail when the issues of safety, reparability and responsibility for the issues facing the Harmon tower are considered.
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Safety Officials Investigating Death From Fall
September 9, 2011 — CDJ Staff
California safety officials are looking into the circumstances surrounding the death of a construction worker who fell from a roof in Tiburon, California. Another worker found Gabriel Vasquez unconscious at the site. Vasquez was later pronounced dead. The State Division of Occupational Safety and Health are trying to determine how Vasquez fell.
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Australian Group Seeks Stronger Codes to Combat Dangerous Defects
October 23, 2012 — CDJ Staff
The Owners Corporation Network, a group that represents condominium owners in Australia, has raised concerns about building defects in high-rise building that can lead to safety problems. The group prepared a statement which would strengthen the rights of owners, but the government official, Fair Trading Minister Anthony Roberts, declined to sign it. A spokesperson for the group cited a fatal fire at a Sydney high rise, noting that “there had been issues of certification which has been a concern of the Owners Corporation Network.” The Australian Broadcasting Network reports that the government will be reviewing the laws concerning high-rise apartment buildings.
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Another Las Vegas Tower at the Center of Construction Defect Claims
November 7, 2012 — CDJ Staff
Accusations are coming from both sides over construction defects at a Las Vegas tower, only this time, it’s not the Harmon Towers, it’s Hilton Grand Vacations, which is part of the Planet Hollywood Resort. The project was originally dubbed PH Towers Westgate, and it was developed by Westgate Resorts, which is suing the contractor, Tutor-Saliba for $10 million over late completion and construction defects.
Among the defects Westgate is claiming are cracked floor tiles in the valet lobby and cracks and delamination of the pool deck. Tutor-Saliba argues that the failure of the valet lobby floor is due to Westgate specifying only 1/16th inch-wide grouting, instead of the specified ¬º inch, and Westgate’s refusal to allow expansion joints on the pool deck has lead to problems there. Westgate’s attorney, Robert Schumacher, attributes the problems to “shoddy construction practices.”
According to the article in the Las Vegas Review Journal, plans were only 60 percent complete when construction began, leading to “thousands of change orders.” Despite not meeting an August completion deadline, Tutor-Saliba is claiming it is owed a $1.5 million bonus nevertheless.
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OSHA Cites Construction Firm for Safety Violations
August 16, 2012 — CDJ Staff
S.J. Louis Construction of Texas Ltd. has been cited by OHSH for one serious and one repeat safety violation, according to a report in Insurance Journal. OSHA officials saw S.J. Louis employees working in an unshored trench along a highway service road. The company had cited for this violation previously. Without shoring of trenches deeper than five feet there is a risk of serious injury or death.
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Gilroy Homeowners Sue over Leaky Homes
February 10, 2012 — CDJ Staff
Two years into a lawsuit against Shapell Homes, the builder of a subdivision called Eagle Ridge in Gilroy, California, homeowners have joined or left the lawsuit. About fifty homeowners are still in the suit, which contends that construction defects have lead to water intrusion in their homes. The lawyer for the homeowners contends that more than a hundred homes have construction defects.
One homeowner said that soon after he joined the suit, Sharpell sent workers to his home who repaired problems to his satisfaction. “They came in within two weeks and fixed everything,” said Frank Lowry. Another homeowner, Wilson Haddow, said that he was “quite happy” after Shapell repaired problems.
Others weren’t quite so happy. Greg Yancey said that problems had “been a nightmare” and that “it just doesn’t feel like home.” He said that his “house is possessed,” with problems that include walls that bow out and a balcony that drips rainwater to the front door. His home is currently worth far less than the $700,000 he paid in 2007.
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Construction Firm Charged for Creating “Hail” Damage
June 19, 2012 — CDJ Staff
A Burlington County, Pennsylvania judge has sentenced a firm and its employee for insurance fraud. In the scam, representatives of Precision Builders visited homes after hailstorms and advised homeowners that they could get new roofs and sidings covered by insurance. Many of the homeowners noted that they had not noticed any hail damage.
After homeowners filed claims, employees of Precision Builders would visit the homes and damage the roofs and sidings consistent with the adjusters’ reports.
One employee of Precision Builders, Dominik Sadowski, has pleaded guilty to third-degree insurance fraud. He has been sentenced to four years probation and 100 hours of community service. Another defendant, Marcin Gradziel, is alleged to have visited and damaged properties. He has plead not guilty.
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Another Colorado District Court Refuses to Apply HB 10-1394 Retroactively
October 28, 2011 — David M. McLain, Colorado Construction Litigation
In Martinez v. Mike Wells Construction Company, 09CV227, Teller County District Court Judge Edward S. Colt refused to apply C.R.S. § 13-20-808 retroactively to provide coverage for the underlying construction defect allegations. According to the recitation of facts in Judge Colt’s March 2011 order, Martinez contracted with Mike Wells Construction to serve as the general contractor for the construction of a home. At that time, Mike Wells Construction was insured through ProBuilders Specialty Insurance Company, RRG. Disputes arose between Martinez and Mike Wells Construction, resulting in Martinez ordering it off of the project in mid-November 2007 and terminating its right to work there by letter dated November 28, 2007.
Mike Wells, the owner of the corporation, subsequently died. Martinez sued Mike Wells Construction in July 2009 for breach of contract and various claims relating to alleged defecting workmanship. Martinez provided notice of the suit to the special administrator of the probate estate. No answer having been filed, the court entered a default judgment against Mike Wells Construction and Martinez sought to garnish Mike Wells Construction’s ProBuilders insurance policy.
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Reprinted courtesy of Higgins, Hopkins, McLain & Roswell, LLC. Mr. McClain can be contacted at mclain@hhmrlaw.com
Going Green for Lower Permit Fees
October 23, 2012 — CDJ Staff
Clay County, Kansas is offering rebates on building permits for green homes. According to the Kansas City Star, building permits in the county are typically $2,500. The county will rebate anything from half to all of the permit fee, depending on how well the builder meets green standards. The county will monitor and inspect the process to make certain that builders adhere to their promises for green construction. The county hopes this will encourage green building by offsetting the cost.
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Builder to Appeal Razing of Harmon Tower
August 2, 2012 — CDJ Staff
An attorney for Tutor Perini, George Ogilvie, has said that he will appeal to the state Supreme Court to stop Clark County District Court Judge Elizabeth Gonzalez’s ruling from taking effect. She has given the go-ahead to MGM Resorts and CityCenter to implode the building. Ogilvie described the demolition as “a do-over at Perini’s expense” in protesting Gonzalez’s order. Gonzalez has said that she will instruct jurors that the demolition was an admission that the building was badly built. Ogilvie says this is “allowing MGM to bury its mistakes.”
MGM claims that it is only following the directive of county safety officials. “When Clark County demanded that CityCenter abate the potential hazard created by faulty construction at the Harmon, we determined that demolition is the surest, safest and fasted way to do so.”
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Are Construction Defects Covered by Your General Liability Policy?
July 10, 2012 — CDJ Staff
Construction firms are finding that their insurers are denying construction defect claims and the courts are siding with the insurers, according to Kelly M. Gindele, writing in the Martindale-Hubble Legal Library. Ms. Gindele notes that when construction defect claims are not covered, firms can end up with “multi-million dollar claims” that it has to pay “out of its own pocket.” She notes that in Kentucky and Ohio, if “the insured’s work causes an unforeseen and unintended event to occur?Ķthere is not occurrence under the policy.” Further, if there is an occurrence, the court will “look for an exception to coverage.”
She also notes that contractors may not hold sufficient coverage, either by limiting the amounts or the time. She notes that while “insurers generally try to limit coverage for defect claims to one year,” that “construction defects may not be found in a year’s time.”
Ms. Ginele recommends that contractors “hire an insurance company with extensive experience in this field” and “independent legal counsel with insurance knowledge,” to avoid finding themselves “with limited or even no coverage when it needs it most.”
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After Breaching its Duty to Defend, Insurer Must Indemnify
August 11, 2011 — Tred Eyerly, Insurance Law Hawaii
In a brief decision analyzing Oregon law, the Ninth Circuit determined that once an insurer breaches its duty to defend, it must indemnify. See Desrosiers v. Hudson Speciality Ins. Co., 2011 U.S. App. LEXIS 12591 (9th CIr. June 21, 2011).
The victim secured a judgment against the insured after he was beaten by another patron outside the insured's bar. Hudson Speciality Insurance refused to defend the insured, claiming the injury arose from an assault and battery, which excluded coverage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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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Ceiling Collapse Attributed to Construction Defect
May 19, 2011 — May 16, 2011 - CDJ Staff
WSMV, Nashville reports that the ceiling collapse in a Franklin, Tennessee Kohl’s was attributed to a construction defect by fire officials. The officials noted that the ceiling was renovated at the time. No injuries were reported.
The report notes that “inspectors were supposed to look at the renovations next week, but fire officials said that will have to be delayed until another time.”
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Construction Jobs Expected to Rise in Post-Hurricane Rebuilding
November 7, 2012 — CDJ Staff
Businessweek reports that construction jobs and materials will see increased demand as property owners in New York and New Jersey rebuild after hurricane Sandy. Tom Jeffery, of Irvine, California-based CoreLogic, a real estate information service, noted that “a high percent of damaged properties are going to be repaired.” Experts estimate property damage to total anywhere from $7 billion to $40 billion.
It is also estimated that about 739,000 properties in the area are underwater in the way that has nothing to do with flooding, with negative equity of 25 percent or more. Many of these homeowners are likely to walk away from their mortgages.
Ken Simonson, chief economist of the Associated General Contractors of America, expects “localized spikes in construction employment throughout November and the winter.” Martin Connor, the chief financial officer of Toll Brothers, expects to see more a rise in labor costs than in materials.
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Claims Under Colorado Defect Action Reform Act Count as Suits
July 10, 2012 — CDJ Staff
The Colorado Court of Appeals has affirmed the judgment of the lower court in Melssen v. Auto-Owners Insurance. The Melssens built a custom home for the Holleys, during which time the Melssens retained a comprehensive general liability policy from Auto-Owners, which “obligated Auto-Owerns to defend the Melssens with respect to any ‘suit’ seeking damages for ‘property damage’ during the policy period.” Soon after the house was constructed, cracks developed in the drywall, then outside stucco and basement slab. The Holleys contended that “approximately $300,000 of damages to the Holleys’ property was caused by the Melssens’ engineering and construction defects” and filed a claim under the Colorado Defect Action Reform Act (CDARA). The Melssens “demanded Auto-Owners defend and indemnify the Melssens and forwared Auto-Owners the notice of claim.”
Although the Melssens notified Auto-Owners in June 2008, it was not until October 2008 that Auto-Owners denied coverage stating that the claims were sustained outside the policy period. The Melssens filed an action against Auto-Owners. At trial, the jury ruled in favor of the Melssens awarding them damages, to which the trial court added costs and attorney fees.
On appeal, Auto-Owners contended that the trial court erred in allowing the Melssens to argue that the CDARA notice of claim “was the functional equivalent of a complaint commencing a suit.” The appeals court found that “the CDARA notice of claim process constituted an alternative dispute resolution proceeding under the policy.” The court agreed that jury should not have been asked to determine if a CDARA action is a “suit,” but as the jury found for the Melssens, the concluding it “constituted harmless error.” Further, the court found that an action under the CDARA satisfied the definition of a “suit.”
The court found for the Melssens, affirming the lower court’s decision and remanding the case to the lower court for the awarding of appeals costs to the Melssens.
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