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.”
Read the full story…
Brown Paint Doesn’t Cover Up Construction Defects
April 25, 2012 — CDJ Staff
In a decision that describes the case as illustrating “the perils that real estate brokers and their agents assume when acting as a dual listing agent to both the buyers and sellers of the same house,” the California Court of Appeals has issued a decision in William L. Lyon & Associates v. The Superior Court of Placer County. Lyon & Associates sought summary judgment to dismiss the claims of the Henleys who bought a home in a transaction where a Lyon agent represented both sides.
The prior owners of the home, the Costas, had used a Lyon agent in purchasing their home. When they later sought to sell it, that agent “became aware of some of the house’s defects and problems.” In response, the Costas sought the help of another agent, Connie Gidal, also of Lyons & Associates. Photos taken in the presence of Ms. Gidal show defects of the paint and stucco. The Costas also took the step of painting the house dark brown. During the sale process, “rain caused many of the painted-over defects to reappear.” The Costas “purchased more dark brown paint and covered up the newly visible damage prior to inspection by the Henleys.”
With the damage concealed, the Henleys bought the home in May 2006. The agreement with Lyons & Associates noted that “a dual agent is obligated to disclose known facts materially affecting the value or desirability of the property to both parties.” Escrow closed on May 9, 2006. The contract with the broker included a two-year limit on the time to bring legal action.
The Henleys moved in during June 2006, and “began to discover construction defects that had been concealed by the Costas.” In addition to the painted-over stucco problems, the Henleys found that the Costas had “installed quartzite stone overlays on the backyard steps in a manner that caused water intrusion on the house’s stucco walls.”
In May 2009, the Henleys sued the Costas, Ron McKim Construction, Lyons & Associates, and Ms. Gidal. Their complaint alleged that Lyons & Associates had committed breach of contact, negligence, fraud, breach of fiduciary duty, and negligent nondisclosure in connection with the construction defects. The Costas named Lyons in a cross complaint. Lyons moved for summary judgments on the grounds that the two-year statute of limitations had expired before the complaint and cross-complaint were filed. Both the Henleys and the Costas opposed this claim. The court denied the motion and Lyons appealed.
The appeals court upheld the denial, noting that the both California Supreme Court decision and later action by the legislature compels real estate brokers and salespersons “to conduct a reasonably competent and diligent visual inspection of the property offered for sale.” The court noted that under California law, brokers have responsibilities to both sellers and buyers. The section of law cited by Lyons applies to seller’s agents. The court rejected the contention by Lyons that they were “cooperating brokers.” The Henleys were “not constrained by the two-year statute of limitations.”
Lyons contended that even if California’s statute did not apply, there was a contractual limit of two years. The court also rejected this, agreeing with the Henleys that “the two-year limitation period must be extended by the discovery rule.”
The court noted that “Lyon & Associates may not reap the benefit of a shortened contractual limitation period when its own alleged malfeasance contributed to the delay in the discovery of the buyer’s injury.” The court found that the Henleys could proceed with their breach of contract claim, because, “when a breach of contract is committed in secret, such as the intentional nondisclosure of a real estate broker regarding a previously visible construction defect, the contractual limitations period is properly held subject to the discovery rule.” The court felt that the interpretation favored by the California Association of Realtors would “halve the applicable statute of limitations period.”
In addition to rejecting Lyon request for summary judgment on the claims made by the Henleys, the court also rejected the request of summary judgment on the claims made by the Costas, concluding that neither claim is time-barred. Costs were awarded to both the Henleys and Costas.
Read the court’s decision…
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.”
Read Full Story...
Consulting Firm Indicted and Charged with Falsifying Concrete Reports
August 17, 2011 — CDJ Staff
The New York Times reports that a company paid to inspect concrete at major public works projects in New York has been charged with falsifying results. They had been hired by the city three years ago after their predecessor was found to have falsified results.
According to the Times, investigators found nothing legitimate in nearly three thousand reports. The owner and five employees of American Standard Testing and Consulting Laboratories have been indicted on twenty-nine counts, including charges under New York’s racketeering law. Prison terms could be up to twenty-five years.
Prior to the city’s contract with American Standard, the city employed a firm called Testwell. Testwell was found in 2008 to have falsified its test results.
Read the full story…
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.
Read the full story…
Denver Court Rules that Condo Owners Must Follow Arbitration Agreement
November 7, 2012 — CDJ Staff
Prior to initiating a construction defect lawsuit, the Glass House Residential Association voted to invalidate the arbitration agreement that had been written into its declaration and bylaws by the developer and general contractor. After the association started their construction defect claims, the developer and general contractor argued that the case must go to arbitration, as the arbitration clause contained a provision that it could not be altered without the agreement of the developer and general contractor.
The Denver District Court has ruled against that association, determining that the res triction was not in violation of Colorado condominium law. And, as a post from Polsinelli Shughart PC on JDSupra notes, the Colorado Common Interest Ownership Act encourages the use of arbitration procedures to settle disputes. The CCIOA does prohibit “certain restrictions on the homeowners association’s ability to amend the condominium declarations,” however, preserving an arbitration agreement is not one of them.
Read the full story…
Nevada Court Adopts Efficient Proximate Cause Doctrine
February 10, 2012 — Tred Eyerly, Insurance Law Hawaii
Although the Nevada Supreme Court adopted the efficient proximate cause doctrine, it determined it did not apply to salvage coverage under an all-risk policy for a rain-damaged building. Fourth Street Place, LLC v. The Travelers Indemn. Co., 2011 Nev LEXIS 114 (Nev. Dec. 29, 2011).
Fourth Street owned an office building which was insured by an all-risk policy issued by Travelers. Fourth Street hired Above It All Roofing to repair the roof of the office building. Above It All removed the waterproof membrane on the roof and prepared to replace the membrane the following week. Over the weekend, however, substantial rain hit. On Sunday, Above It All returned to cover the exposed portions of the roof with tarps, but wind later blew the tarps away. The building suffered significant interior damage as it continued to be exposed to the rain.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
New Construction Laws, New Forms in California
July 10, 2012 — CDJ Staff
New construction laws came into effect in California on July 1. Writing for the Martindale-Hubble Legal Library, Glenn Mau, J. Michael McGuire, and John Tonsing, all of Archer Norris, discuss these changes. They note that the most important part of the changes to California construction law is that “all mechanics liens, stop notices and bond claims recorded after July 1, 2012 must use the new standardized forms and follow the new definitions, notice prerequisites and statutory release form language.”
Read the full story…
New Washington Law Nixes Unfair Indemnification in Construction Contracts
April 25, 2012 — Douglas Reiser, Builders Cousel
Contractual fairness ? it is part of my mantra. If you read the blog, you probably know that I preach brevity, balance and clarity in contracting. The State of Washington did well to finally eliminate something that has angered me for quite some time ? unfair indemnification.
One of my favorite construction contract revisions is mutual indemnification. Many “up the chain” contractors and owners are going to stick you with a unilateral indemnification clause that protects them for just about everything, including their own fumbling of a project. Adding mutual indemnification provides some balance, and keeps parties reliant upon each other for success on the job site.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Windows and Lawsuits Fly at W Hotel
July 5, 2011 — CDJ Staff
An Austin, Texas lawyer has filed a lawsuit against Starwood Hotels and Resorts, the operator of the W Hotel Austin, after two people were struck by glass which fell from the hotel’s balconies. YNN in Austin reports that the hotel has been closed indefinitely as construction workers removed panels. An additional three panels fell before work started. Randy Howry, the lawyer representing the injured parties, notes that in May glass falling from the W Hotel in Atlanta killed one woman and injured another. “Seventeen days pass and we put them on notice, our clients have put them on notice, yet nothing has been done an only after the glass fell yesterday did they do something about it,” YNN quotes Howry.
The hotel released a statement that they will be replacing all of the balcony glass to ensure safety for their guests and the general public. They relocated all hotel guests and coordinated with Austin officials to close adjacent sidewalks and roads. The statement identifies the firms involved with the design and construction of the balconies.
Read the full story …
Badly Constructed Masonry Walls Not an Occurrence in Arkansas Law
May 10, 2012 — CDJ Staff
The US District Court for Maryland has granted a summary judgment in the case Konover Construction Corp. v. ATC Associates to Massachusetts Bay Insurance Company and denied a request for dismissal from ACT. Konover (KBE) was contracted by Wal-Mart to build a Wal-Mart store and a Sam’s Club in Port Covington, Maryland. Superus, Inc. was hired by KBE to build the masonry walls. Superus purchased a policy from Massachusetts Bay Insurance which named KBE as an additional insured. Wal-Mart hired ATC Associates to independently test and inspect the concrete structural steel, and masonry.
After the building was in use, a large crack appeared which was attributed a latent construction defect. Other cracks were discovered. Upon investigation, it was discovered that there were “voids or foam in the concrete block surrounding the reinforcing steel that should have been filled with grout,” and in some cases, “reinforcing steel was missing or not installed in accordance with the specifications.” KBE paid for the repair and remediation and Wal-Mart assigned all rights and interests against ATC to KBE.
KBE filed suit against ATC. ATC called for dismissal on the grounds that Wal-Mart had no claims as the problems had been remediated. Wal-Mart then provided KBE with additional agreements to give them enforceable rights against ATC and Superus. KBE filed a fourteen claims against ATC, Superus, and Massachusetts Bay. In the current case, Massachusetts Bay sought summary judgment and ATC sought dismissal of all claims against it.
Massachusetts Bay claims that they need not indemnify Superus, as “there is no evidence adequate to establish that Superus’ defective work caused any collateral and/or resulting damage that was not subject to an Impaired Property exclusion, and that, in any event, no damage occurred during the policy period.”
As Wal-Mart is headquarted in Arkansas, certain contracts were under Arkansas law. Under the Arkansas courts, “defective workmanship, standing alone and resulting in damages only to the work product itself, is not an ‘occurrence.’” The court determined that collateral or resultant damage would be covered. The court found that “it is clear under Arkansas law, and the parties appear to agree, that Massachusetts Bay is not obligated to indemnify KBE for any repairs to the masonry walls themselves, including any cracks or gaps in the walls.” The court also found that “there is no evidence adequate to prove that any allegedly resultant property damage was caused by Superus’ faulty construction of the walls.” The court also noted that “if the building code violation and structural integrity problem were ‘property damage,’ insurance coverage would be barred by the Impaired Property Exclusion.” Based on these findings, the court concluded that Massachusetts Bay is entitled to summary judgment.
While the court dismissed the case against Massachusetts Bay, the court declined ATC’s motion to dismiss. The court noted that ACT’s alleged negligence in conducting inspections “created only a risk of economic loss for KBE.” Although hired by Wal-Mart, ATC “transmitted its daily testing and inspection reports of the Wal-Mart and Sam’s Club projects directly to KBE.” The court found that “KBE has made a plausible claim.”
ATC also claimed that KBE contributed to the negligence due to the negligence of its subcontractor. The court concluded that it was plausible that “ATC will not be able to carry its burden of proving KBE was contributorily negligent.” The court was less sanguine about KBE’s fraud claim, but though it “may not now appear likely to have merit, it is above the ‘plausibility’ line.”
In conclusion, KBE may not continue its case against Massachusetts Bay. However, the judge allowed the other proceedings to continue.
Read the court’s decision…
BHA Expands Construction Experts Group
October 28, 2011 — Bert L. Howe & Associates, Inc. - Corporate Offices
Bert L. Howe & Associates, Inc., one of the nation’s leading construction forensics firms is pleased to announce the expansion of the company’s civil and structural engineering capabilities.
JERRY M. MILES, PE - Mr. Miles has been a licensed civil engineer in California since 1987 and has served as the lead civil engineer on many projects in several states. His experience includes contract administration services as the owner’s representative on a variety of projects including mastered planned communities, residential subdivisions, shopping centers and multi-family residential projects. He has also been involved in providing water quality management plans and storm water pollution prevention plans. Mr. Miles has also served on the Town of Apple Valley’s Building Department Dispute Resolution Board.
His more than 26 years of engineering experience includes geotechnical evaluations, structural design of wood-framed, masonry, and concrete tilt-up buildings, small and large subdivision engineering construction/improvements plans, hydrology/hydraulic reports and design, forensic investigation and expert witness testimony. Mr. Miles has qualified as an expert in numerous jurisdictions and Federal court. He has been called upon to provide deposition testimony on more than twenty-five occasions and has successfully testified at arbitration and trial. Click here to view Mr. Miles’ Current CV.
MATTHEW J. STIEFEL, PE - With a background that spans a multitude of design and new construction projects to catastrophic claims analysis, Mr. Stiefel brings a unique set of credentials and experience to the construction experts group at Bert L. Howe & Associates. Mr. Stiefel has more than 13 years’ experience in civil, structural, and geotechnical engineering; providing design and construction consulting services on a variety of projects that include multi-family and single family dwellings, commercial buildings, transportation facilities, industrial facilities, storm drain channels, water and wastewater pipelines. His engineering experience encompasses multiple disciplines of civil engineering including geotechnical design and evaluation, foundation design, structural design of wood-framed buildings, preparation of grading plans and site drainage analysis. He has provided cause and origin analysis for insurance adjusters on many residential and commercial sites related to issues involving moisture intrusion and mold, foundation movement, site drainage, soil movement, wind damage, and other various losses. Click here to view Mr. Stiefel’s Current CV.
Supreme Court of Oregon Affirms Decision in Abraham v. T. Henry Construction, et al.
April 20, 2011 — April 20, 2011 Beverley BevenFlorez - Construction Defect Journal
After reviewing the decision in Abraham v. T. Henry Construction, et al., the Oregon Supreme Court affirmed that a tort claim for property damage arising from construction defects may exist even when the homeowner and the builder are in a contractual relationship.
When the case was initially filed, the plaintiffs alleged breach of contract and negligence. The defendants moved for summary judgment arguing that one, the claim was barred by the six-year statute of limitations and two, no special relationship (such as one between a doctor and patient) existed. The court agreed with the defendants. However, the Court of Appeals while affirming the trial court’s decision on breach of contract reversed the decision on negligence. The Court of Appeals stated that an administrative or statute rule could establish a standard of care independent from the contract.
The Oregon Supreme Court gave an example of cases where a tort claim could exist when a contract is present: “If an individual and a contractor enter into a contract to build a house, which provides that the contractor will install only copper pipe, but the contractor installs PVC pipe instead (assuming both kinds of pipe comply with the building code and the use of either would be consistent with the standard of care expected of contractors), that failure would be a breach of contract only. […] If the failure to install the copper pipe caused a reduction in the value of the house, the plaintiff would be able to recover that amount in an action for breach of contract. […] On the other hand, if the contractor installed the PVC pipe in a defective manner and those pipes therefore leaked, causing property damage to the house, the homeowner would have claims in both contract and tort. […] In those circumstances, the obligation to install copper instead of PVC pipe is purely contractual; the manner of installing the pipe, however, implicates both contract and tort because of the foreseeable risk of property damage that can result from improperly installed pipes.”
Read the court’s decision…
Illinois Court Determines Insurer Must Defend Negligent Misrepresentation Claim
December 9, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the insureds disclosed flooding problems in the basement, the buyers purchased their home. USAA Cas. Ins. Co. v. McInerney, 2011 Ill. App. LEXIS 1130 (Ill Ct. App. Oct. 31, 2011). In a supplemental disclosure, the insureds reported that during heavy rains light seepage occurred in the basement.
After moving in, the buyers experienced significant water infiltration and flooding in the basement. The buyers and their children also began to experience mold-related illnesses.
The buyers sued for rescission of the contract or, in the alternative, damages. They alleged breach of contract, fraudulent misrepresentation and negligent misrepresentation. In the claim for negligent misrepresentation, the buyers alleged that the insureds carelessly omitted the fact that there were material defects in the basement and foundation when they should have known of such defects.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
San Diego Construction Defect Claim Settled for $2.3 Million
July 10, 2012 — CDJ Staff
The Nauman Law firm has settled the lawsuit by the Latitude Owners Association against CS-Crossroads and others, as reported in the Sacramento Bee from a press release by the firm. The owners at Latitude, a condominium community in San Diego, found that hillside crawl spaces were not property waterproofed, leading to rotting plywood, water intrusion, and pipe leaks. There were additional problems with retrofitted windows and repairs of outside decks. The case was filed in San Diego Superior Court, but settled after multiple mediations.
Read the full story…
Former New York Governor to Head Construction Monitoring Firm
September 13, 2012 — CDJ Staff
David Paterson, who succeeded Eliot Spitzer as Governor of New York, has started a new venture after leaving the Governor’s office in construction integrity monitoring. WNYC reports that Paterson will be the majority owner of Icon Compliance Services, LLC, which will both conduct investigations and work with law enforcement officials. Paterson says that in government projects “often concessions are made for political reasons in the public sector and then you never really get a product that you paid for.”
Paterson will be working with a former vice president of Bovis Construction, Brian Aryai, who is also a former U.S. Treasury Agent. Aryai said that “it is astounding that some of the fraud that has come to the surface in the recent past,” and describes it as “almost laughable they were not detected.” Aryai tipped federal prosecutors that Bovis had been over billing on projects for at least a decade.
Read the full story…
Joinder vs. Misjoinder in Colorado Construction Claims: Roche Constructors v. One Beacon
July 10, 2012 — David McLain, Higgins, Hopkins, McLain & Roswell, LLC
Often, those practicing in the construction defect field have faced questions concerning the joinder of a party. Recently, the U.S. District Court for the District of Colorado weighed in on the requirements for joinder under the Colorado Rules of Civil Procedure. See Roche Constructors, Inc. v. One Beacon America Ins. Co., 2012 WL 1060000 (D. Colo. 2012). Roche secured a construction contract to build a detention facility for the Lincoln County Sheriff’s Office in Lincoln County, Nebraska. In turn, Roche entered into a subcontract with Dobberstein Roofing Company, Inc. in October 2009 to install the roofing system and other related work at the detention facility. The subcontract agreement required Dobberstein to maintain adequate commercial general liability insurance and to add Roche as an additional insured under the policy. Roche maintained a builder’s risk policy issued by OneBeacon America Insurance Company and Dobberstein secured a certificate of liability insurance underwritten by Transportation Insurance Company (“TIC”). Id. at *1.
Roche alleged that Dobberstein constructed the roofing system in a negligent manner in violation of the subcontract. Roche claims it incurred additional costs to repair structural damage to the roofing system as a result of Dobberstein’s negligent work. In order to cover said damage, Roche tendered insurance claims to OneBeacon and TIC.
Read the full story…
Reprinted courtesy of David McLain, Higgins, Hopkins, McLain & Roswell, LLC. Mr. McLain can be contacted at mclain@hhmrlaw.com
United States District Court Confirms That Insurers Can Be Held Liable Under The CCPA.
June 19, 2012 — Chad Johnson
In D.R. Horton, Inc.-Denver v. The Travelers Indem. Co. of Am., 10-CV-02826-WJM-KMT, 2012 WL 527204 (D. Colo. Feb. 16, 2012), the court was asked to rule on Travelers’[1] motion to dismiss D.R. Horton, Inc. ?Äì Denver’s (“DRH”) claim that Travelers violated the Colorado Consumer Protection Act (“CCPA”).
In the underlying construction defect case (“CD case”), DRH, as the developer and general contractor of a construction project, tendered the defense of the CD case to certain subcontractors and to Travelers as an insurer to those subcontractors. Travelers accepted the duty to defend DRH. DRH hired counsel to defend it, and the attorney fees and costs of suit were billed to Travelers. However, for a period of over five years, Travelers failed to actually pay any portion of the defense of DRH. Finally, on October 31, 2008, Travelers offered checks for payment of only 4% of the costs and fees incurred. DRH then returned the checks to Travelers and provided Travelers with authority to support its position that the amounts in Travelers’ checks were inadequate. Thereafter, Travelers dug its heels in, and resubmitted the same checks.
DRH was then forced to file a coverage action against Travelers for declaratory judgment, breach of contract, bad faith breach of insurance contract, and deceptive trade practices under the CCPA. In its motion to dismiss DRH’s CCPA claim, Travelers’ argued that DRH failed to plead specific facts that Travelers engaged in a deceptive trade practice under C.R.S. § 6-1-105, and DRH failed to plead sufficient facts showing that Travelers’ actions significantly affect the public ?Äì a necessary element of a CCPA claim.
Read the full story…
Reprinted courtesy of Chad Johnson, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Johnson can be contacted at johnson@hhmrlaw.com
