A Performance-Based Energy Code in Seattle: Will It Save Existing Buildings?
August 11, 2011 — Douglas Reiser, Builders Counsel
The City of Seattle has one of the most stringent energy codes in the nation. Based upon the Washington State Energy Code (which has been embroiled in litigation over its high standards), the code demands a lot from commercial developers. But, does it prevent developers from saving Seattle?s classic and old buildings? Perhaps.
The general compliance procedure requires buildings to be examined during the permitting process. This means that buildings are examined before they begin operating. The procedure is not malleable and is applicable to all buildings, old and new, big and small.
The downside of this procedure is that it eliminates awarding compliance to those buildings exhibiting a number of passive features, such as siting, thermal mass, and renewable energy production. This problem has prevented a number of interesting and architecturally pleasing existing building retrofits from getting off the ground. The cost of complying with the current system can be 20% more, and it might prevent builders from preserving a building?s historical integrity.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Geometrically Defined Drainage Cavities in EIFS as a Guard Against Defects
July 10, 2012 — CDJ Staff
The blog Stucco & Insulation Contractor writes up some details on a “relatively new modification to modern Exterior Insulation Finish Systems,” known as “geometrically defined insulation boards.” They note that the insulation has grooves cut in the back to provide a route for water to drain, instead of getting trapped. They note that when EIFS is installed by a skilled applicator, this is unnecessary. However, with less experienced (and cheaper) installers, problems are more likely.
By cutting these channels, the application of EIFS is rendered “idiot proof,” as they note. Their preference would be that EIFS installers take the time to do the job right, but call this “a step in the right direction.”
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Florida Appeals Court Rules in Favor of Homeowners Unaware of Construction Defects and Lack of Permits
December 9, 2011 — CDJ Staff
The Florida Court of Appeals has ruled that a homeowner is not liable for defects in unpermitted alterations, reversing a lower court’s decision in Jensen v. Bailey. The Jensens sold their house to the Baileys. During the sale, the Jensens filled out a property disclosure statement, checking “no” to a question about “any improvement or additions to the property, whether by your or by others that have been constructed in violation of building codes or without necessary permits.”
After moving in, the Baileys discovered several problems with the home. One involved a defective sewer connection leading to repeated backups. The Baileys also found problems with remodeling the Jensens had done in the kitchen, master bath, and bedroom. The remodeling work was not done with required permits nor was it up to code.
The court noted that an earlier case, Johnson v. Davis, established four criteria: “the seller of a home must have knowledge of a defect in the property; the defect must materially affect the value of the property; the defect must not be readily observable and must be unknown to the buyer; and the buyer must establish that the seller failed to disclose the defect to the buyer.” The court found that the first of these criteria was crucial to determining the case.
In the Johnson ruling, the then Chief Justice dissented, fearing that the courts “would ultimately construe Johnson’s requirement of actual knowledge to permit a finding of liability based on constructive knowledge,” quoting Justice Boyd, “a rule of constructive knowledge will develop based on the reasoning that if the seller did not know of the defect, he should have known about it before attempting to sell the property.” The Appeals Court concluded that the lower court hit this point in ruling on Jensen v. Bailey.
Citing other Florida cases, the court noted that the Johnson rule does require “proof of the seller’s actual knowledge of the defect.” The court cited a case in which it was concluded that the seller “should have known” that there was circumstantial evidence was that the seller did know about the defects, as the seller had been involved in the construction of the home.
In the case of the Jensens, the lower court concluded that they did not know that the work was defective, nor did they know that they were obligated to obtain permits for it. The Appeals Court found this one fact sufficient to reverse the decision and remand the case to the lower court for a final judgment in favor of the Jensens.
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Colorado Court of Appeals Finds Damages to Non-Defective Property Arising From Defective Construction Covered Under Commercial General Liability Policy
December 20, 2012 — Heidi Gassman, Higgins, Hopkins, McLain & Roswell
The recently decided case of Colorado Pool Systems, Inc. v. Scottsdale Insurance Company (Colo. Ct. App. 10CA2638, October 25, 2012), confirms that absent specific exclusions in the policy, a commercial general liability (“CGL”) policy covers damages to non-defective property arising from a builder’s own defective workmanship.
Colorado Pool Systems, Inc. (“Colorado Pool”) was hired as a subcontractor to install a swimming pool at Founders Village Pool and Community Center (“Founders Village”) in Castle Rock, Colorado. After the concrete shell of the pool was placed, some of the rebar frame was found to be too close to the surface. Founders Village demanded that Colorado Pool remove and replace the pool, and Colorado Pool contacted its insurance carrier, Scottsdale Insurance Company (“Scottsdale”), with which Colorado Pool held a CGL policy. After inspecting the pool, Scottsdale’s claims adjuster stated that the insurance policy would cover losses associated with removing and replacing the pool.
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Reprinted courtesy of Heidi Gassman, Higgins, Hopkins, McLain & Roswell, LLC. Ms. Gassman can be contacted at gassman@hhmrlaw.com
Another Guilty Plea In Nevada Construction Defect Fraud Case
April 25, 2012 — CDJ Staff
The eleventh defendant has entered a guilty plea in the ongoing federal investigation of construction defect fraud in the Las Vegas area. Mahin Quintero plead guilty to producing a false authentication feature, a misdemeanor. Ms. Quintero’s part in the scheme was to falsely authenticate signatures on loan documents for straw buyers. Ms. Quintero stated in court that she had been ordered to destroy her notary book three years ago. According to her plea bargain, the straw buyers did not appear in front of her when she notarized their signatures. As part of the scheme, the straw buyers would take control of homeowners associates, sending construction defect complaints and repairs to favored firms.
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Sometimes It’s Okay to Destroy Evidence
August 17, 2011 — CDJ Staff
The Minnesota Supreme Court has ruled in the case of Miller v. Lankow that Mr. Miller was within his rights to remediate his home, even though doing so destroyed the evidence of water intrusion.
Linda Lankow built a home in 1992. In 2001 or 2002, Lankow discovered a stucco problem at the garage which she attributed to moisture intrusion. She asked the original contractor to fix the wall. In 2003, Lankow attempted to sell her home, but the home inspection revealed fungal growth in the basement. Lankow made further repairs, including alterations to the landscaping.
In 2004, Lankow put her house on the market once again and entered into an agreement with David Miller. Miller declined to have an independent inspection, as the home had been repaired by professional contractors.
In 2005, Miller put the house on the market. A prospective buyer requested a moisture inspection. The inspection firm, Private Eye, Inc. found “significant moisture intrusion problems.”
Miller hired an attorney who sent letters to the contractors and to Lankow and her husband. Lankow’s husband, Jim Betz, an attorney, represented his wife and sent a letter to Miller’s attorney that Miller had declined an opportunity to inspect the home.
In 2007, Miller’s new attorney sent letters to all parties that Miller had decided to begin remediation work on the house. All stucco was removed. Miller then filed a lawsuit against the prior owners, the builders, and the realtors.
Two of the contractors and the prior owners moved for summary judgment on the grounds that Miller had spoliated evidence by removing the stucco. They requested that Miller’s expert reports be excluded. The district court found for the defendants and imposed sanctions on Miller.
The Minnesota Supreme court found that “a custodial party’s duty to preserve evidence is not boundless,” stating that “it may be particularly import to allow remediation in cases such as the one before us.” Their reasoning was that “remediation of the moisture intrusion problem in the home may be necessary, even essential, to address immediate health concerns.”
Given that Miller needed to remediate the problem in order to continue living there, and that he had given the other parties a “full and fair opportunity to inspect,” the court found that he was within his rights. The court reversed the judgment of the lower court and remanded it to them for review.
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Injured Construction Worker Settles for Five Hundred Thousand
October 28, 2011 — CDJ Staff
An upstate New York man who was injured when an unsecured truss fell off the railings of a scissor lift has settled for $500,000. As the accident happened at the building site for a casino for the Seneca Nation, attorneys for the construction firm had argued that New York labor laws were inapplicable as the injury happened on Seneca Nation land. The state appeals court ruled that as none of the parties involved were Native Americans, it was not internal to the affairs of the Seneca Nation.
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Damron Agreement Questioned in Colorado Casualty Insurance v Safety Control Company, et al.
February 10, 2012 — CDJ Staff
Safety Control and EMC appealed the judgment in Colorado Casualty Insurance Company versus Safety Control Company, Inc., et al. (Ariz. App., 2012). The Superior Court in Maricopa County addressed “the validity and effect of a Damron agreement a contractor and its excess insurer entered into that assigned their rights to sue the primary insurer.” Judge Johnsen stated, “We hold the agreement is enforceable but remand for a determination of whether the stipulated judgment falls within the primary insurer’s policy.”
The Opinion provides some facts and procedural history regarding the claim. “The Arizona Department of Transportation (“ADOT”) hired DBA Construction Company (“DBA”) to perform a road-improvement project on the Loop 101 freeway. Safety Control Company, Inc. was one of DBA’s subcontractors. As required by the subcontract, Safety Control purchased from Employer’s Mutual Casualty Company (“EMC”) a certificate of insurance identifying DBA as an additional insured on a policy providing primary coverage for liability arising out of Safety Control’s work.”
A collision occurred on site, injuring Hugo Roman. Roman then sued ADT and DBA for damages. “Colorado Casualty tendered DBA’s defense to the subcontractors, including Safety Control. Safety Control and EMC rejected the tender. Roman eventually settled his claims against DBA and ADOT. DBA and ADOT stipulated with Roman for entry of judgment of $750,000; Roman received $75,000 from DBA (paid by Colorado Casualty) and $20,000 from ADOT, and agreed not to execute on the stipulated judgment. Finally, DBA, ADOT and Colorado Casualty assigned to Roman their rights against the subcontractors and other insurers.”
Colorado Casualty attempted to recover what “it had paid to defend DBA and ADOT and settle with Roman. However, Roman intervened, and argued that “Colorado Casualty had assigned its subrogation rights to him as part of the settlement agreement.” The suit was not dismissed, but the Superior Court allowed Roman to intervene. “Roman then filed a counterclaim against Colorado Casualty and a cross-claim against the subcontractors.”
All claims were settled against all of the defendants except Safety Control and EMC. “The superior court ruled on summary judgment that EMC breached a duty to defend DBA and that as a result, ‘DBA was entitled to settle with Roman without EMC’s consent as long as the settlement was not collusive or fraudulent.’ After more briefing, the court held the stipulated judgment was neither collusive nor procured by fraud and that EMC therefore was liable to Roman on the stipulated judgment and for his attorney’s fees. The court also held Safety Control breached its subcontract with DBA by failing to procure completed-operations insurance coverage and would be liable for damages to the extent that EMC did not satisfy what remained (after the other settlements) of the stipulated judgment and awards of attorney’s fees.” Safety Control and EMC appealed the judgment.
Four reasons were given for the decision of the ruling. First, “the disagreement between Roman and Colorado Casualty does not preclude them from pursuing their claims against EMC and Safety Control.” Second, “the settlement agreement is not otherwise invalid.” Third, “issues of fact remain about whether the judgment falls within the EMC policy.” Finally, “Safety Control breached the subcontract by failing to procure ‘Completed Operations’ coverage for DBA.”
In conclusion, the Superior Court affirmed in part, reversed in part, and remanded . “Although, as stated above, we have affirmed several rulings of the superior court, we reverse the judgment against EMC and remand for further proceedings consistent with this Opinion to determine whether the stipulated judgment was a liability that arose out of Safety Control’s operations. In addition, we affirm the superior court’s declaratory judgment against Safety Control but remand so that the court may clarify the circumstances under which Safety Control may be liable for damages and may conduct whatever further proceedings it deems appropriate to ascertain the amount of those damages. We decline all parties’ requests for attorney’s fees pursuant to A.R.S. § 12-341.01 without prejudice to a request for fees incurred in this appeal to be filed by the prevailing party on remand before the superior court.”
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When Does a Claim Against an Insurance Carrier for Failing to Defend Accrue?
November 7, 2012 — David McLain, Colorado Construction Litigation
The following is an update on our December 20, 2010 article regarding United States Fire Insurance Company v. Pinkard Construction Company, Civil Action No. 09-CV-01854-MSK-MJW, and its underlying dispute, Legacy Apartments v. Pinkard Construction Company, Case No. 2003 CV 703, Boulder County Dist. Ct. That article can be found here.
The present action, St. Paul Fire and Marine Insurance Co., et al. v. The North River Insurance Co., et al., Civil Action No. 10-CV-02936-MSK-CBS, encompasses the coverage battle that ensued between Pinkard’s insurers, Travelers Indemnity Company of America (“Travelers”) and United States Fire Insurance Company (“USFI”), following the settlement of Legacy’s construction defect claims against Pinkard. A short history of the underlying facts is as follows:
In 1995, Pinkard constructed the Legacy Apartments housing complex in Longmont, Colorado. Following construction, Legacy notified Pinkard of water leaks associated with various elements of construction. Legacy ultimately filed suit against Pinkard in 2003, and would go on to clarify and amend its defect claims in 2004, 2006, and again in 2008. Following Pinkard’s notification of Legacy’s claims, USFI provided a defense to Pinkard, but Travelers refused to do so, on the purported basis that Legacy’s allegations did not implicate property damage under the terms of Travelers’ policy.
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Reprinted courtesy of David M. McLain, Higgins, Hopkins, McLain & Roswell, LLC. Mr. McLain can be contacted at mclain@hhmrlaw.com
Oregon agreement to procure insurance, anti-indemnity statute, and self-insured retention
March 5, 2011 — By
CDCoverage.com, March 5, 2011
In Continental Casualty Ins. Co. v. Zurich American Ins. Co., No. 09-35484 (9th Cir. Oct. 28, 2010), general contractor TCR was sued by an employee of subcontractor Safeway for bodily injuries suffered while working on the project. In the subcontract, Safeway agreed to procure primary insurance providing coverage for TCR for liability arising out of Safeway’s negligence. Safeway’s CGL policy included a self-insured retention that had to be satisfied before the insurer had a duty to defend. TCR filed suit against Safeway alleging that
Read the full story... Reprinted courtesy of CDCoverage.com
Housing Prices Up through Most of Country
December 20, 2012 — CDJ Staff
Home prices in October were up more than six percent compared with prices in October 2011. The LA Times noted that some of the strongest gains were in California and Arizona. The Phoenix metropolitan area saw a 24.5% rise in home prices. In California, Riverside and Los Angeles were just above the national average, at 7.3% and 6.4%, contributing to the state’s overall nine percent increase.
The news wasn’t good throughout the entire country, as five states did not see any price increases. Mark Fleming, the chief economist at CoreLogic, a research firm in Irvine, California said that “the housing recovery that started earlier in 2012 continues to gain momentum.
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Couple Sues Attorney over Construction Defect Case, Loses
June 10, 2011 — CDJ Staff
The California Court of Appeals has ruled against a couple who sued their lawyer, after they were unhappy with the results of a construction defect case. Craig and Jeanne Petrik sued Mahaffey and Associates for legal malpractice and breach of contract. Their lawyer, Douglas L. Mahaffey, had settled their case for $400,000. The Petricks claimed Mahaffey did not have the authority make an offer to compromise.
In the original case, Mahaffey held back the $400,000 awarded in the settlement until he and the Petricks came to terms on how much of that was owed to Mahaffey. The lower court concluded that the Petricks were due $146,323,18. The jury did not agree with the Petrik’s claim that conditions had been met in which Mahaffey would not be charging them costs.
Judges O’Leary and Ikola wrote the opinion, with the third judge on the panel, Judge Bedworth offering a dissent only on their view of the cost waiver clause.
Read the court’s opinion
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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New Web Site Tracks Settled Construction Defect Claims
June 19, 2012 — CDJ Staff
Peter Lissner, a former Nevada homebuilder, has created a new site to help track homes that have been involved in construction defect litigation. His site, housefaxreview.com, collections documentation about homes where claims of construction defects have been made. He told The Builders Magazine concerns about “the number of homes that have been served notices, received compensation, yet the homes weren’t repaired.” On the site, the creator is identified as “a family owned builder.” According to the site, “the builder had no claims until the neighborhood reached the statutory claims limit 10 years.”
Lissner also claims that in many cases, after settling construction defect lawsuits, the homeowners sell to subsequent buyers without disclosing the lawsuit or their failure to repair. “Who is going to let the new homeowner know about the issue?” he asks.
Documents on the site are priced according to their relevance. Lissner notes that those who provide documents to the site will receive free access.
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Construction Demand Unsteady, Gains in Some Regions
June 29, 2011 — CDJ Staff
The Associated General Contractors of America reported Tuesday, June 28 that construction employment increased in 120 of the 337 metropolitan areas surveyed between May 2010 and May 2011.
‘While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist. ‘The close to even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting.”
The largest number of jobs created was in the Dallas, Texas region, with 5,600 new jobs, a five percent increase. The northern Massachusetts/southern New Hampshire region near Haverhill saw the greatest percentage increase, although that twenty-two percent increase represents only 800 new jobs. The Chicago, Illiinois area added 4,600 jobs, a four percent increase.
Other regions were not so lucky. The Atlanta, Georgia area saw a loss of 7,400 jobs, an eight percent loss. Las Vegas also lost 7,400 jobs, which there represented a sixteen percent decline. The New York City area lost 6,700 jobs, a six percent reduction. The Riverside, California area lost 5,300 jobs, a nine percent loss.
Stephen E. Sandherr, the association’s chief executive officer, blamed a combination of regulation and budget squeezes. "Some in Washington never met a regulation they didn’t like and others never found a penny they didn’t want to pinch. Together that makes for a bad way to boost employment and a great way to stifle the private sector and neglect critical economic infrastructure.”
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David McLain to Speak at the CDLA 2012 Annual Conference
June 19, 2012 — CDJ Staff
The Colorado Dense Lawyers Association will be holding their 2012 Annual Conference from July 26 through the 28, in Crested Butte, Colorado. The CDLA provides benefits to its member defense trial lawyers, including educational and information resources.
David McLain of Higgins, Hopkins, McLain & Roswell, LLC will be joining in a discussion with William J. McConnell, PE of Vertex Engineering on Saturday, July 28. Their topic will be common building code violations alleged in construction defect cases and how to respond to these allegations.
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General Contractor/Developer May Not Rely on the Homeowner Protection Act to Avoid a Waiver of Consequential Damages in an AIA Contract
August 4, 2011 — Higgins, Hopkins, McLain & Roswell, LLC
Recently, in Caribou Ridge Homes, LLC v. Zero Energy, LLC, et al., Case No. 10CV1094, Boulder County District Court Judge Ingrid S. Bakke entered a ruling and order on the Plaintiff’s Motion for Determination of Question of Law Pursuant to C.R.C.P. 56(h) on Issue of Damages. The Order found that the Plaintiff was not a homeowner intended to be protected by the Homeowner Protection Act (the “HPA”) and thus could not pursue its claims for consequential damages against Defendant.
By way of background, on June 18, 2008, Plaintiff Caribou Ridge Homes, LLC (“Caribou”) entered into a Standard Form Agreement Between Owner and Contractor AIA Document A114-2001 (the “Contract”) with Defendant Zero Energy, LLC (“Zero Energy”). Plaintiff hired Zero Energy to serve as a general contractor for the construction of a single-family home in the Caribou Ridge subdivision in Nederland, Colorado. A provision in the contract contained a mutual waiver of consequential damages (“Waiver”).
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Reprinted courtesy Higgins, Hopkins, McLain & Roswell, LLC
Contractors with Ties to Trustees Reaped Benefits from LA Community College Modernization Program
March 3, 2011 — Original reporting by Gale Holland, Michael Finnegan and Doug Smith, Los Angeles Times
In the latest installment of the “Billions To Spend” series of investigative reports focused on construction defects, management, and cost issues relevant to LACC’s Community College Modernization Projects, the LA Times examines the costs associated with the various layers of construction management and benefits that accrued to contractors with ties to LACC trustees.
The reporting by the Times is seemingly critical of the project’s utilization of “body shops” an industry term for companies that function as employers of record. The article segment published today cites a number of circumstances wherein their utilization appears to have escalated costs substantially.
“To gauge the cost of the staffing system, The Times reviewed thousands of pages of financial records from April 2007, when URS began managing the program, to July 2010. Reporters identified two dozen contractors serving as conduits for pay and benefits for employees they did not supervise.
At least 230 people were employed in this manner, at a total cost of about $40 million, the records show.
Approximately $18 million of the total was paid to the employees, according to the Times analysis. The remaining $22 million went to profit and overhead for contractors, the records indicate.
For employees on its own payroll, the district says that medical and other benefits increase compensation costs 40% above base salaries. So if the district had employed its construction staff directly, the total cost for the period studied would have been $25 million instead of $40 million, a savings of $15 million, The Times calculated.”
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