Defective Grout May Cause Trouble for Bridges
August 16, 2012 — CDJ Staff
Grout, which was used to protect the steel support cables of the Woodrow Wilson Bridge, may lead to problems instead. The Baltimore Sun reports that the Federal Highway Administration is looking at three dozen bridges in twenty-one states that were built with defective grout. The grout contains high levels of chlorides, which can lead to corrosion. The collapse of pedestrian walkway in Concord, North Carolina was attributed to chloride contamination in the grout.
The grout, SikaGrout 300PT, was advertised as "non-corrosive, does not contain chlorides," but later testing showed that it contained levels that exceeded limits by 400 percent. Throughout the country, about 16 million pounds of this were used. Sika Corp. suspended production of the grout in 2010. If repairs need to be made, it is unclear who will pay.
Read the full story…
Death of Construction Defect Lawyer Ruled a Suicide
June 19, 2012 — CDJ Staff
The Clark County Coroner’s Office has concluded that Nancy Quon, the construction defect attorney implicated in the wide-ranging HOA scandal, died by her own hand. The cause of death was a combination of anti-anxiety and insomnia medication mixed with alcohol. Quon survived an earlier incident in which she took GHB and her apartment was set on fire. Quon denied that it was a suicide attempt.
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Destruction of Construction Defect Evidence Leads to Sanctions against Plaintiff
July 10, 2012 — CDJ Staff
Stating that the plaintiff’s actions have left the defendants in a situation where they “cannot properly defend the action,” a judge in the US District Court of New York has sanctioned the plaintiffs in Aktas v. JMC Dev. Co.
The plaintiffs hired JMC Development and Stephen Jung, an architect, to renovate their vacation home in Adirnodack, New York. As work progressed, “due to disagreements regarding the completion date and payments for the project, the relationship began to deteriorate.” The plaintiffs hired George Villar as an owner’s representative who “testified that he deemed the workmanship to be ‘poor.’”
Subsequently, the locks where changed on the home, preventing JMC from performing any additional work, after which drywall was removed, which Villar stated was so that “the engineer come and look at the framing.” Subsequently, Villar sent a letter to JMC stating that the work was “performed in an inadequate, negligent and un-professional manner.” Villar informed JMC that they were not to visit the property. Subsequently, the plaintiffs hired another firm. “Plaintiffs testified that the materials were ‘carted away’ and ‘thrown out.’”
The plaintiffs filed a suit against JMC and others. JMC filed a motion requesting that the plaintiffs be sanctioned for their spoliation of evidence. The court noted that “the plaintiffs recognized that litigation was imminent,” and that they “had a duty to preserve the evidence. As all of JMC’s work was destroyed, there is no evidence of whether or not the work was defective. The court concluded that it will “issue an adverse inference charge that permits the jury to infer that the missing evidence was favorable to the defendants.”
In conclusion, the court granted in part the spoliation sanctions. They granted JMC a summary judgment dismissing the plaintiffs’ claims of fraud.
Read the court’s decision…
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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Senate Committee Approves Military Construction Funds
June 29, 2011 — CDJ Staff
With a decrease in funding, as compared to the House bill, the Military Construction and Veteran’s Affairs subcommittee of the Senate moved on a $72 billion construction bill. The House version had approved an additional half billion dollars in funding. Senator Tim Johnson, Democrat of South Carolina, said that he expected easy reconciliation with the House version. The Senate bill will move to the full Senate Appropriations Committee on June 30.
The bill, S 1255, includes funding for construction and remodeling of military housing, as well as construction and remodeling of base facilities.
Read the full story… Read S1255
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.”
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Court Clarifies Sequence in California’s SB800
December 20, 2012 — CDJ Staff
As California’s Right-To-Repair law, SB800, nears its ninth birthday, it has remained “largely untested in the legal system” as noted by Megan MacNee of Wood, Smith, Henning & Berman LLP on the site RealEstateRama. She writes that some homeowners have requested documents prior to filing a claim, which she describes as an attempt to “game the system,” and “analogous to requiring a party to litigation to comply with discovery before a complaint is filed.”
The court determined that homeowners may not request documents from the builder until they have actually filed a claim. The court noted that SB800 lacks any clear indication that homeowners may request documents before filing a claim (and also does not indicate that a builder would have to provide documents in these circumstances). The court concluded that the section that sets up the prelitigation procedures occurs before they section on documents discovery.¬? “Because the document request is part of the prelitigation procedure, and the prelitigation procedure does not begin until the homeowner has served notice of a claim, it follows that there can be no prelitigation obligation to produce documents under section 912, subdivision (a) unless the homeowner has commenced the prelitigation procedure by serving notice of a claim.”
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Excess Carrier Successfully Appeals Primary Insurer’s Summary Judgment Award
December 9, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the excess carrier was given inadequate notice of the underlying arbitration, the trial court determined it shared responsibility with the primary carrier for the arbitration award. Finding disputed issues of fact, the Washington Court of Appeals reversed in Am. States Ins. Co. v. Century Surety Co., 2011 Wash. App. LEXIS 2488 (Wash. Ct. App. Oct. 31, 2011).
The primary insurer, American States, issued two liability policies to Professional Home Builders (PHB), a siding contractor. The policies were for successive years, 1998-1999 and 1999-2000. Each policy had annual limits of $1 million per occurrence. PHB also had a commercial excess liability policy for 1999-2000 with Century Surety Company.
PHB was sued by Residential Investment Partners (RIP) for construction defects after moisture entered the building envelope, causing decay and damage. Century’s expert determined the decay started before the 1999-2000 policy period.
RIP and PHB went to arbitration.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Federal Court Denies Summary Judgment in Leaky Condo Conversion
August 4, 2011 — CDJ Staff
In the US District Court for Illinois, Judge William Hibber has rejected the request for summary judgment sought by the developers of a condominium building in the case of Nautilus Ins. Co. v. 1735 W. Diversey, LLC (the insureds). The insureds renovated a building at 1735 W. Diversey, Chicago, converting it into condominiums. After the project was completed and all units sold, and a condominium association form, one of the owners found that unit suffered leaks during rainstorms. The condo board hired a firm, CRI, to investigate the cause of the leakage. CRI found “water infiltration through the exterior brick masonry walls, build-up of efflorescence on the interior surfaces of the masonry, and periodic spalling of portions of the brick masonry.”
The redevelopment firm had purchased coverage from Nautilus. “Shortly after the Board filed its first complaint, the Insureds tendered the mater to Nautilus and requested that it indemnify and defend them from the Board's underlying claims. Nautilus, however, rejected the Insureds’ tender and denied coverage under both insurance policies.” Nautilus stated that the water leakage did not constitute an occurrence under the policies. The court cited these policies in which an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Illinois courts have determined that construction defects are not accidents.
The court concluded that the insured did not bring forth claims within the coverage of the policies and denied the motion for summary judgment.
Read the court’s decision…
FHA Lists Bridges and Overpasses that May Have Defective Grout
September 13, 2012 — CDJ Staff
The Federal Highway Administration has released a list of bridges and overpasses that may be prone to corrosion problems due to grout that was in chlorides when it was supposed to be completely free of them. Currently, the FHA is working with state departments of transportation to determine if the defective grout was indeed used on additional bridges and overpasses. The initial FHA list of structures determined to have been built with the defective grout lists thirty-four sites, of which four are in Ohio, the largest number for any state.
California contains only one such site, the intersection of the 55 and 405 freeways, one of the few items on the list not designated as a bridge.
Read the full story…
Lawsuit over Construction Defects Not a Federal Case
August 16, 2012 — CDJ Staff
The United State District Court in California has dismissed the claims of a contractor against the United States government, on the grounds that it was not within the subject matter jurisdiction of the court. The origins of the case are in a related construction defect claim. The current plaintiff, Performance Contracting, Inc., did the lath and plaster work for a building for the Department of Veterans Affairs. After the building was completed, the Veterans Affairs complained to the general contractor, Wynema, Inc., of water intrusion problems.
Wyema and Performance conducted testing and the water intrusion was found to be due to “a variety of design defects and omissions, including: 1) omission of proper window flashing; 2) inadequate waterproof membrane around the windows; 3) inadequate T-molding around the windows; 4) lack of a window sill pan for the windows; 5) lack of any backing in the window framing; 6) lack of any backing for the stucco expansion joints and seams; and 7) failure to require that a performance mock-up of the window assembly and adjacent areas be built and water tested.” Wyema filed a construction defect action against Performance and other subcontractors.
In the current case, Performance claims that Veteran Affairs was negligent, that it “breached its duty to Plaintiff when it provided deficient plants and specifications” and “failed to properly oversee construction and inspect Project work.” The court determined that it could not hear this case, noting that “Federal Courts are presumptively without jurisdiction over civil actions.”
Performance raised its claims under the Federal Tort Claims Act. The judge was not persuaded by this claim, noting that the FTCA does not apply to purported breach of the General Contract. The FTCA waives the government’s sovereign immunity in cases of “injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of an employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.”
Performance was unable to pursue its claims in the Court of Federal Claims as there was no contract between Performance and the government. However, the court noted that Performance’s inability to file suit in the Court of Federal Claims does not open up a path to the District Court. “Litigants are not guaranteed a forum in which to sue the United States.” The court further noted that “if this Court were to accept Plaintiff’s logic, non-parties to contracts, but not parties, would be free to pursue contract claims in the fora of their choosing.”
Read the court’s decision…
SB800 Cases Approach the Courts
July 10, 2012 — CDJ Staff
California’s Right to Repair Law turns ten this year and cases under the statute are finally coming to trial, as John V. O’Meara of Bremer Whyte Brown & O’Meara writes for the Martindale-Hubble Legal Library. Mr. O’Meara notes that SB800 eliminated “the traditional definitions of construction defect,” replacing them with “functionality standards.” He argues that these standards are not uniform: “some standards require damage and others do not.” He also wonders what terms like “significant cracks,” “intended water” and “materially comply” mean in a court.
Mr. O’Meara states that “defendants in construction defect cases have a right to know the standards that apply to a case, the definitions that will be presented to the jury, and the burden of proof that attaches.”
Read the full story…
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.”
Read the full story…
State Farm Too Quick To Deny Coverage, Court Rules
July 22, 2011 — CDJ Staff
On July 13, 2011, Judge Sarah S. Vance of the US District Court issued a rule in the case of Travelers Cas. & Surety Co. of Am. v. Univ. Facilities, Inc. (E.D. La., 2011). In this case, Stanley Smith Drywall was contracted by Capstone Building Corporation to “perform undisclosed work at the facility believed to involve the installation of drywall.” The project involved the design and construction of student residences for the Southeastern Louisiana University in Hammond, Louisiana. In May, 2009, University Facilities, Inc. (UFI) sued Capstone Development Corporation and Capstone On-Campus Management.
State Farm insured Stanley Smith Drywall and they sought a declaration that they have no duty: “(1) to insure Stanley Smith or CBC, or (2) to defend or indemnify any party against UFI's claims in the pending arbitration.” State Farm contends “(1) there is no "occurrence" to trigger coverage under the policy; (2) only breach of contract claims are asserted; (3) there is no property damage alleged; and (4) various coverage limitations and exclusions apply to prevent coverage.’
The court concluded that “whether State Farm has a duty to defend in the arbitration must be determined by considering the claims asserted in the arbitration.” However, the arbitration claims were not made part of the record. There, “, the Court cannot determine as a matter of law State Farm's duty to defend on the present record.” The same was true of State Farm’s duty to indemnify. “Stanley Smith and CBC assert that State Farm's motion for summary judgment was filed before any discovery was conducted in the arbitration proceeding or in this case. The Court finds that State Farm has failed to develop the record sufficiently to establish that there is no genuine issue of material fact as to its duty to indemnify Stanley Smith or CBC in the arbitration.’
The court denied State Farm’s motion for a summary judgment on its duty to defend and indemnify.
Read the court’s decision…
Eleventh Circuit Asks Georgia Supreme Court if Construction Defects Are Caused by an "Occurrence"
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
The Eleventh Circuit certified a question to the Georgia Supreme Court, asking whether property damage can constitute an "occurrence" under a CGL policy where its effects are not felt on "other property." HDI-Gerling Am. Ins. Co. v. Morrison Homes, Inc., 2012 U.S. App. Ct. LEXIS 23813 (11th Cir. Nov. 19, 2012).
The general contractor, Taylor Morrison Services, Inc., was covered by a CGL policy issued by Gerling. The policy excluded "expected or intended injury," contractual liability," and business risk exclusions. Morrison was sued by homeowners in a class action suit. Morrison had allegedly omitted four inches of gravel required beneath the base of the concrete foundations by the Uniform Building Code. Thereafter, the houses sustained water intrusion, cracks in the floors and driveways, and warped and buckling flooring.
Gerling defended, but sued Morrison for a declaratory judgment.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Insurer Must Cover Construction Defects Claims under Actual Injury Rule
March 1, 2012 — Tred Eyerly, Insurance Law Hawaii
The Texas Court of Appeals held that the insured need not prove the exact dates physical damage occurred in order to trigger defense and indemnity coverage. Vines-Herrin Custom Homes, LLC v. Great Am. Lloyds Ins. Co., 2011 Tex. App. LEXIS 10027 (Tex. Ct. App. Dec. 21, 2011).
In 1999, the insured built a home. He was insured under a CGL policy issued by Great American from November 9, 1998 to November 9, 2000. Thereafter, the insured held a CGL policy issued by Mid-Continent from November 9, 2000 to September 18, 2002.
After construction was completed, the insured sold the house to the buyer in May 2000. After moving in, the buyer found numerous construction defects in the home, including water entering cracks in the home, and sinking and sagging of parts of the house. The buyer sued the insured, who sought coverage under the two policies. When the insurers refused to defend the underlying suit, the insured sued for a declaratory judgment.
The underlying case went to arbitration and an award of $2.4 million was granted to the buyer. The insured assigned to the buyer his claims against the insurers.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Construction Spending Dropped in July
September 13, 2012 — CDJ Staff
Bloomberg News reports that after four months of gains in construction spending, July saw a drop of 0.9 percent, wiping out June’s gain of 0.4 percent. Despite the overall decline in spending, there was an increase of 1.5 percent in expenditure on building new single-family homes and 2.8 percent on multifamily residential construction.
Read the full story…
No Coverage Under Ensuing Loss Provision
September 9, 2011 — Tred Eyerley, Construction Law Hawaii
The cost of removing and replacing cracked flanges to prevent future leakage was not covered as an ensuing loss under a builder’s risk policy in RK Mechanical, Inc. v. Travelers Prop. Casualty Co. of Am., 2011 U.S. Dist. LEXIS 83958 (D. Colo. Aug. 1, 2011).
The insured, RK Mechanical Inc., was a subcontractor hired to install plumbing for a residential construction project. RK was an additional insured on the general contractor’s policy with Travelers. RK installed approximately 170 CPVC flanges on the project. Subsequently, two of the flanges cracked, allowing water to overflow and causing water damage to the project. Travelers was notified of the flange failure and resulting water damage.
RK subsequently removed and replaced the two cracked flanges and began water remediation. Travelers paid for the cost of the water damage due to the cracked flanges.
RK then examined all of the flanges installed in the project and discovered many were cracked and/or showed signs of potential failure. RK removed and replaced the cracked flanges. RK tendered a claim and demand for indemnity to Travelers for these repair costs. Travelers denied the claim. RK then sued for breach of contract and declaratory relief. The parties filed cross motions for summary judgment.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
