No Coverage for Counterclaim Alleging Construction Defects Pled as Breach of Contract
September 13, 2012 — Tred Eyerley, Insurance Law Hawaii
The Colorado Court of Appeals considered whether counterclaims against the insured for alleged faulty construction work were based in contract or constituted allegations of an "accident" under the policy. TCD, Inc. v. Am. Family Mutual Ins. Co., 2012 WL 1231964 (Colo. Ct. App. April 12, 2012).
The developer, Frisco Gateway Center, LLC, contracted with TCD, the general contractor, to construct a building. TCD, in turn, subcontracted with Petra Roofing to install the roof. The subcontract required Petra to "indemnify, hold harmless, and defend" TCD against claims arising out of resulting from the performance of Petra's work on the project. Petra was also required to name TCD as an additional insured on its CGL policy.
After a dispute arose between TCD and Gateway regarding payment and performance on the project, TCD sued Gateway and other parties seeking payment. Gateway counterclaimed against TCD for breach of contract and negligence. TCD demanded coverage from Petra's insurer, but coverage was denied.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Texas Law Bars Coverage under Homeowner’s Policy for Mold Damage
July 13, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the insurer paid for some of the mold damage at the insured’s home, the Fifth Circuit eventually determined the homeowner’s policy did not cover such damage. Rooters v. State Farm Lloyds, 2011 U.S. App. LEXIS 12306 (5th Cir. June 15, 2011).
The policy excluded loss caused by hail to personal property unless the direct force of wind or hail made an opening in the roof allowing rain to enter. Further, the policy excluded loss caused by mold or other fungi.
In 1999, hail and rain caused water damage to the roof and interior of the residence. State Farm paid $19,000 to repair the roof. Another $1,800 was paid for repairs to the interior of the building. In 2002, the insured noticed black mold. State Farm issued an additional check for $4,402 for mold abatement.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Hilton Grand Vacations Defect Trial Delayed
October 23, 2012 — CDJ Staff
A settlement agreement between Conti Electric and Westgate Resorts has lead to a delay in starting the trial over construction defect claims and billing disputes over Hilton Grand Vacations a time share tower in Las Vegas. According to the Las Vegas Review-Journal, the dispute includes claims of $23.3 million owed to the general contractor against which the developer has placed $30 million in construction defect claims.
Read the full story…
New Safety Standards Issued by ASSE and ANSI
March 28, 2012 — Melissa Dewey Brumback, Construction Law North Carolina
The American National Standards Institute (ANSI) and the American Society of Safety Engineers (ASSE) have recently announced their approval of two new safety standards to enhance construction site safety.
The two new standards, which are set to take effect during June 2012, are the ANSI/ASSE A10.1-2011 Pre-Project and Pre-Task Safety and Health Planning for Construction and Demolition Operations, and the ANSI/ASSE A10.26-2011 Emergency Procedures for Construction and Demolition Sites.
The new A10.1-2011 standard was designed to assist construction owners, contractors, and designers by ensuring that safety and health planning were standard parts of their pre-construction planning. It is also intended to help owners of construction sites to establish a process for evaluating constructor candidates with regard to their safety and health performance planning.
The A10.26 standard applies to emergency situations, including fires, collapses, and hazardous spills. The standard deals with emergency rescue, evacuation, and transportation of injured workers, and also plans for coordinating with emergency medical facilities ahead of potential disasters.
Read the full story…
Reprinted courtesy of Melissa Dewey Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
Texas Windstorm Insurance Agency Under Scrutiny
April 5, 2011 — April 5, 2011 Beverley BevenFlorez - Construction Defect Journal
Representative Larry Taylor has introduced a bill in the Texas Legislature (HB 2818) that would further regulate the Texas Windstorm Insurance Agency (TWIA). According to Taylor, “In order to be adequately prepared for future hurricane seasons, it is imperative that TWIA be operating at maximum efficiency, that the Reserve Trust Fund be solvent and that the agency have adequate management measures in place to protect consumers and ensure that claims are paid in a timely manner. House Bill 2818 is an important step in the right direction toward restoring public confidence in TWIA.”
HB 2818 includes measures that would create an expert panel that would advise the commissioner on how to evaluate loss from the storm, and a greater transparency of TWIA Board meetings and actions.
In addition, the Texas Department of Insurance (TDI) has placed TWIA on Administrative Oversight. According to TDI, “While under Administrative Oversight, the Department may require its prior review and approval of executive decisions, certain expenditures, and other transactions. The insurer is required to fully cooperate with the Department and provide complete and timely disclosure of all information responsive to Department requests.”
Read the full story (Rep. Taylor’s Press Release)...
Read the full story (Texas Department of Insurance’s Press Release)...
Home Builder Doesn’t See Long Impact from Hurricane
November 7, 2012 — CDJ Staff
No one needs to tell Toll Brothers about the impact of Hurricane Sandy. The Wall Street Journal reports that the home building company lost power as a result of the storm. Martin Connor, the company’s CFO, told the Journal that he did not expect the hurricane to have a big effect on sales. Luckily for the company, many of its large projects are either sufficiently completed to provide shelter or too early in the process to be affected by the storm. “This type of weather event has limited impact on the market. It may move settlements later, and may defer people a weekend or two until they go out shopping. But it doesn’t have a long impact.”
Read the full story…
Construction Defects Not Occurrences under Ohio Law
November 7, 2012 — CDJ Staff
Concluding the “claims of defective construction or workmanship brought by a property owners are not claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy,” the Supreme Court of Ohio has ruled in Westfield Insurance Co. v. Custom Agri Systems, Inc. In the underlying case, Custom Agri Systems, Inc. built a grain bin as a subcontractor to Younglove Construction, LLC. Younglove had been contracted by PSD Development, which withheld payment, claiming it had suffered damages due to defects in Custom Agri System’s work. Younglove filed a complaint against Custom Agri, which filed complaints against its subcontractors. Custom Agri also requested that its insurer, Westfield Insurance Company, defend and indemnify it. Westfield claimed that it had no such duty. The Ohio Supreme Court concurred.
The decision notes that “Custom was being sued under two general theories: defective construction and consequential damages resulting from the defective construction.” Westfield argued that none of the claims were “for ‘property damage’ caused by an ‘occurrence” and therefore none of the claims were covered under the CGL policy.” Further, Westfield argued that “even if the claims were for property damage caused by an occurrence, they were removed from coverage by an exclusion in the policy.”
The case was filed in the US District Court which issued a summary judgment for Westfield. The plaintiff appealed and Sixth Circuit Court of Appeals certified the questions to the Supreme Court of Ohio.
The court noted that “all of the claims against which Westfield is being asked to defect and indemnify Custom relate to Custom’s work itself.” And so, the court concluded that they “must decide whether Custom’s alleged defective construction of and workmanship on the steel grain bin constitute property damage caused by an ‘occurrence.’” However, the court noted that under the terms of the insurance contract, an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” and the court noted that the “natural and commonly accepted meaning” of “accident” is something “unexpected, as well as unintended.”
The Ohio Supreme Court also looked at court decisions in other places, and found that in many similar cases, courts have concluded that construction defects are not occurrences.
In a dissenting opinion, Justice Pfeifer argues that “if the defective construction is accidental, it constitutes an ‘occurrence’ under a CGL policy.” Justice Pfeifer characterized the majority’s definition of “accidental” as “broad, covering unexpected, unintentional happenings.”
Read the court’s decision…
Allowing The Use Of a General Verdict Form in a Construction Defect Case Could Subject Your Client to Prejudgment Interest
August 16, 2012 — Heather Anderson, Higgins, Hopkins, McLain & Roswell, LLC
A recent opinion from the Colorado Court of Appeals is a cautionary tale concerning the calculation of pre-judgment interest. See Hendricks v. Allied Waste Transportation, Inc., 2012 WL 1881004 (Colo. App. 2012). The Hendricks sued Allied after one of its drivers backed into the corner of their home with an Allied garbage truck. At trial, a jury awarded the Hendricks $160,100 in damages. Although the jury was instructed on the cost of repairs, diminution in value, and non-economic damages, the parties agreed to a general verdict form that did not ask the jury to specify the types of damages awarded. Id. at *1. The Hendricks sought to amend the judgment to include prejudgment interest and costs, which the trial court granted.
Allied appealed, arguing that the trial court erred by awarding the Hendricks prejudgment interest from the date their property was damaged. Id. at *7. The Colorado Court of Appeals found no error, and affirmed.
Read the full story…5
Reprinted courtesy of Heather Anderson, Higgins, Hopkins, McLain & Roswell, LLC. Ms. Anderson can be contacted at anderson@hhmrlaw.com
One Colorado Court Allows Negligence Claim by General Contractor Against Subcontractor
December 20, 2012 — Heather Anderson , Higgins, Hopkins, McLain & Roswell
Judge Paul King of the Douglas County District Court recently confirmed that subcontractors in residential construction owe an independent duty, separate and apart from any contractual duties, to act without negligence in the construction of a home in Colorado. See Order, dated September 7, 2010, Sunoo v. Hickory Homes, Inc. et al., Case No. 2007CV1866; see alsoCosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo. 1983); A.C. Excavating v. Yacht Club II Homeowners Ass’n, Inc., 114 P.3d 862 (Colo. 2005). He also verified that the holding in the B.R.W. Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004)[1] case does not prohibit general contractors, such as Hickory Homes, from enforcing a subcontractor’s independent duty to act without negligence in the construction of a home.
Read the full story…
Reprinted courtesy of Heather Anderson, Higgins, Hopkins, McLain & Roswell, LLC. Ms. Anderson can be contacted at anderson@hhmrlaw.com
West Coast Casualty Promises Exciting Line Up at the Nineteenth Annual Conference
March 28, 2012 — CDJ Staff
West Coast Casualty has announced the lineup for the annual WCC Construction Defect Seminar. This year’s seminar will be the nineteenth anniversary, and it will be held on May 17th and 18th, 2012 in Anaheim, California. They are the largest construction defect event in the world and this year’s seminar will again bring the top people in the field to address many of the current issues and where the construction defect community will be going in the future.
The event, anticipated to be even larger than prior years, will have numerous panels and presentations on the current state of construction defect litigation. Among the topics that will be presented are “Arbitrate? Let’s See You Make Me!” “Defending Construction Defect Failure Mechanisms?An Expert’s Perspective,” and “Current Trends in Effectively Handling SB800 Cases.”
Speakers at the event will include judges, lawyers, and representatives of the insurance industry. One event, “Meet Your Judges, A Candid Discussion on Construction Defect Claims and Litigation from the Bench?” will include judges from five states, including the Honorable Nancy M. Saitta, Chief Justice of the Nevada Supreme Court, the Honorable Clifton Newman of the South Carolina Circuit Court, and the Honorable Rex Heeseman of the Los Angeles County Superior Court.
Daniel A. Berman, Esq. and Stephen Henning, Esq. will be talking on the topic of “Social Networking Sites: Strategies, Ethical Pitfalls, and Practice Pointers for Litigating and Winning Your Construction Defect Case.” Mr. Berman is a Founding and Managing Partner of Wood, Smith, Henning & Berman LLP. He has been named a Southern California Super Lawyer for eight consecutive years. Mr. Henning is a Founding Partner of Wood, Smith, Henning & Berman, LLP and Fellow of the Litigation Counsel of America. Mr. Henning will also be one of the presenters on the panel “Important Court Decisions Impacting Construction Defect Claims.”
The panel “Why Do We Need to Know Certain Things and How Decisions Are Made” will be presented by important figures in the construction claims industry, including Phyllis Modlin, Todd Schweitzer, Teresa D. Wolcott, and Lee Wright. Ms. Modlin is a Construction Defect Claims Supervisor responsible for nationwide claims for Markel Corporation. Mr. Schweitzer is an Assistant Vice President of Major Case for Construction Defect and Professional Liability Claims Services at Zurich North America. Ms. Wolcott is the National Product Manager for Construction Defect Claims within the Construction Claims Organization at Travelers Insurance. Mr. Wright is an Assistant Vice President and Senior Claims Consultant for XL Specialty Insurance.
The event will also include a Science and Technology Fair in which exhibitors will be presenting technological problem solving and decision making as they relate to resolving ongoing construction and post construction-defect related issues while reducing costs for all those involved in claims and litigation. The fair is dedicated to these novel applications of science and technology that benefit the construction defect community but are not yet commonly available. This will be the third time the Construction Defect Seminar will include a Science and Technology Fair.
Sessions at the event are approved for MCLE credit in Arizona, California, Colorado, Illinois, Maine, Minnesota, New York, Ohio, and Pennsylvania. MCLE credits vary by state; attendees can obtain up to 10.25 hours of credit in Arizona, California, Maine, and New York. Applications for several other states are still pending. Additionally, the event is also worth continuing education credits with the Florida Department of Insurance and for Registered Professional Adjusters. West Coast Casualty has applications pending for adjuster continuing education in an additional thirty-six states.
West Coast Casualty recommends this event for anyone involved in construction or construction defect claims, whether they are a claims adjuster, a member of a homeowner board, a judge, a property manager, a construction claims attorney, a general contractor, or anyone else with an interest in this area. The event typically has more than 1,600 attendees. Those interested can register online.
Read the full story…
Save A Legal Fee? Sometimes You Better Talk With Your Construction Attorney
May 10, 2012 — Douglas Reiser, Builders Counsel
I love writing this column, because I think it’s refreshing for contractors to hear that they don’t always need an attorney. Today’s post is the “Un-Save a Legal Fee” because I want to point out a specific illustration of when you definitely need your attorney. Using a construction contract template can be fine, but you always need to consider its application to each project ? or it could bite you in the rear.
Seattle attorney Paul Cressman published a prime depiction of bad contract management, last week. A Florida appellate court struck down a general contractor’s “pay if paid” clause when it became ambiguous because of some incorporated language from its prime contract. Specifically, a clause in the prime contract required the general contractor to pay all subcontractors before receiving payment from the owner, while the general contractor’s “pay if paid” clause required its subcontractors to wait for payment until it arrived from the owner.
Read the full story…
Construction Defect Bill Introduced in California
June 10, 2011 — CDJ Staff
Linda Halderman (R-Fresno) has introduced a bill which would require lawyers soliciting clients for construction defect cases to provide their prospective clients with a statement including that sellers may be required to disclose that they were engaged in a construction lawsuit. Further, the bill would require lawyers to disclose that they cannot guarantee financial recovery.
Halderman was quoted by The Business Journal as saying, “Lawsuit abuse has been very damaging, especially to homeowners in the Valley.” Halderman hopes that her bill will discourage class action lawsuits against builders and that this will protect jobs in the construction industry.
Read the full story…
Virginia Chinese Drywall “property damage” caused by an “occurrence” and number of “occurrences”
August 4, 2011 — CDCoverage.com
In Dragas Management Corp. v. Hanover Insurance Co., No. 2:10cv547 (E.D. Va. July 21, 2011), claimant residential home general contractor and developer DMC filed for arbitration against insured drywall supply and install subcontractor Porter-Blaine seeking damages for (1) the replacement of defective Chinese drywall, and (2) the repair of resulting property to other components of the DMC homes and homeowners’ personal property in seventy-four homes. Porter-Blaine’s CGL insurer Citizens and excess insurer Hanover defended Porter-Blaine in the DMC arbitration.
Read the full story…
Reprinted courtesy of CDCoverage.com
Home Repair Firms Sued for Fraud
September 30, 2011 — CDJ Staff
The Illinois Attorney General has filed a lawsuit in Cook County Circuit Court alleging that two connected firms took money from homeowners and then failed to perform the contracted work. One of the three defendants, Chris Bidigare, was an owner of agent of both Fairway Construction and Maintenance Services, LLC, and Rock Construction Management, LLC.
In once case, according to the article on the OakPark Patch, one homeowner provided a $111,000 down payment, only to have the company cancel the job and refuse to return the money. One homeowner was told by Fairway that she should contact their insurance provider. The insurance provider told her that Fairway’s insurance had been cancelled due to non-payment.
The suit seeks to bar the three defendants from working in home repair in Illinois.
Read the full story…
Federal Judge Dismisses Insurance Coverage Lawsuit In Construction Defect Case
December 9, 2011 — CDJ Staff
A federal judge dismissed a coverage lawsuit brought by Mid Continent Casualty Company against its insured, Greater Midwest Builders Ltd.
Plaintiff brought this declaratory judgment action in response to a suit filed in Johnson County District Court, seeking a judicial determination that it had no coverage obligation for claims asserted against its insured. This case was stayed until the state court action entered judgment against the insured. The prevailing parties then commenced a garnishment action against the plaintiff, and another insurance company, in state court in Missouri. The court was asked whether it should lift the stay and proceed with the case, or decline jurisdiction in favor of resolution in the Missouri state court.
The court granted the motion to dismiss holding that proceeding with the case would lead to protracted, piecemeal litigation, while deferring to the Missouri state court would decide all the claims involved in the dispute.
Read the court’s decision…
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.
Read the full story…
Louisiana Politicians Struggle on Construction Bills, Hospital Redevelopment
June 16, 2011 — CDJ Staff
Louisiana politicians are still working on a compromise in the state’s construction budget, as reported in the Times-Picayune. Rob Marrianneax, the chair of the Senate Revenue and Fiscal Affairs Committee, removed a $45 million request from Governor Bobby Jindal and added $4 million for projects that Jindal vetoed last year.
Two senators have formed competing plans to fund redevelopment construction for New Orleans’s Methodist Hospital. Mitch Landrieu, the mayor of New Orleans, hoped for $30 million dollars in state bonds. Senator Cynthia Willard-Lewis proposed an amendment that would supply $1.6 million, while Senator J.P. Morrell has an amendment that would supply $4 million.
Read the full story…
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.”
Read the full story…
