Five Years of Great Legal Blogging at Insurance Law Hawaii
December 9, 2011 — CDJ Staff
Our congratulations to Tred Eyerly who has been blogging at Insurance Law Hawaii for five years now. Over the years, he has posted more than five hundred posts and has provided us all with fascinating insights into the laws on insurance coverage. He describes his blog as “a commentary on insurance coverage issues in Hawaii and beyond.” We are grateful that the “beyond” has just in the last few weeks included Colorado, Illinois, Washington, Minnesota, and Rhode Island (about as far from the island of Hawaii as you can get).
You can read his blog at Insurance Law Hawaii.
Colorado statutory “property damage” caused by an “occurrence”
August 4, 2011 — CDCoverage.com
Colorado General Assembly House Bill 10-1394 was signed into law by the Governor on May 21, 2010, codified at Colo. Rev. Stat. § 13-20-808 (2010)
13-20-808. Insurance policies issued to construction professionals
(1) (a) The general assembly finds and determines that:
(I) The interpretation of insurance policies issued to construction professionals is of vital importance to the economic and social welfare of the citizens of Colorado and in furthering the purposes of this part 8.
(II) Insurance policies issued to construction professionals have become increasingly complex, often containing multiple, lengthy endorsements and exclusions conflicting with the reasonable expectations of the insured.
(III) The correct interpretation of coverage for damages arising out of construction defects is in the best interest of insurers, construction professionals, and property owners.
Read the full story…
Reprinted courtesy of CDCoverage.com
After $15 Million Settlement, Association Gets $7.7 Million From Additional Subcontractor
November 7, 2012 — CDJ Staff
The stucco subcontractor for a condominium complex did not join in with the other defendants in a settlement of more than $15 million, preferring to take the case to a jury trial. That jury has found the stucco installer liable for $7.7 million to make repairs. Mark Wiechnik of Herrick Feinstein LLP wrote about the case on the Lexology web site. Mr. Wiechnik notes that the jury was shown “samples of rotted wood taken from the property as well as numerous pictures of damage resulting from the various defects.”
Read the full story…
Home Sales Still Low, But Enough to Spur Homebuilders
August 16, 2012 — CDJ Staff
Although new home sales are still fifty percent below the average over the last forty years, the housing rebound has sent stock of homebuilders up 53 percent this year, during the same period, the S&P 500 rose only 12 percent. The San Francisco Chronicle reports that from 2005 through 2011, homebuilder stocks trailed the S&P 500.
The growth isn’t limited to homebuilders alone. Building suppliers are also seeing a growth in sales, with profits for companies that make gypsum wallboard, cabinetry, plumbing products, and other items used in home building.
Homebuilders have also been able to raise prices. Standard Pacific Corp of Irvine, California has raised prices and cut incentives. Nevertheless, the buyers still come. PulteGroup and D.R. Horton are also raising prices.
Read the full story…
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
“Details Matter” is the Foundation in a Texas Construction Defect Suit
March 1, 2012 — CDJ Staff
The Court of Appeals of Texas has ruled in the case of Barzoukas v. Foundation Design. Mr. Barzoukas contracted with Heights Development to build a house. He subsequently sued Heights Developments and “numerous other defendants who participated in the construction of his house.” Barzoukas eventually settled with all but two defendants, one who went bankrupt and Foundation Design, the defendant in this case. In the earlier phase, Barzoukas made claims of “negligence, negligent misrepresentation, fraud, fraudulent inducement, conspiracy, and exemplary damages in connection with the foundation.”
Foundation Design had been hired to install 15-foot piers to support the foundation. The engineer of record, Larry Smith, sent a letter to Heights Development noting that they had encountered hard clay stone when drilling. Smith changed the specifications to 12-foot piers. Initially, the City of Houston called a halt to work on the home when an inspector concluded that the piers were too shallow. Heights Development later convinced the city to allow work to continue. Subsequently, experts concluded that the piers were too shallow.
Foundation Design filed a motion for summary judgment. The trial court granted this, “without specifying the basis for its ruling.” Barzoukas contends the court was in error. Foundation Design contends that “Barzoukas failed to proffer competent evidence establishing that their conduct proximately caused damages.” Further, they did not feel that Smith’s letter gave “rise to viable claims for fraud and fraudulent inducement.”
One problem the court had was a lack of evidence. The court noted that “the purported subcontract is entirely missing” in the pleadings. The court has no contract between Bazourkas and Heights Development, nor one between Heights Development and either Foundation Design or Smith. The court underscored the importance of this, writing, “details matter.” They found that “the details are largely missing here.” Without the contract, the court found it impossible to determine if “Smith or an entity related to him agreed to indemnify Heights Development for damages arising from Smith’s negligent performance.”
As the material facts are in dispute, the appeals court found that there were no grounds for a summary judgment in the case. “Pointing to the existence of a contract between Heights Development and Barzoukas, or to the existence of a subcontract, is the beginning of the analysis ? not the end.”
Foundation Design and Smith also claimed that Barzoukas’s expert did not proffer competent evidence and that the expert’s opinions were conclusory. The trial court did not rule on these claims and the appeals court has rejected them.
Finally, Barzoukas made a claim that the trial court should not have rejected his argument of fraud and fraudulent inducement. Here, however, the appeals court upheld the decision of the lower court. “Barzoukas did not present evidence supporting an inference that Smith or Foundation Design made a purposeful misrepresentation.
The court remanded the case to the trial court for reconsideration. One member of the panel, Judge Charles Seymore, upheld the entire decision of the trial court. He dissented with the majority, finding that the economic loss rule foreclosed the claim of negligence.
Read the court’s decision…
Legislatures Shouldn’t Try to Do the Courts’ Job
March 1, 2012 — CDJ Staff
David Thamann, writing in Property Casualty 360, argues that current actions by legislatures on insurance coverage amount to “legislative interference or overreach.” He notes that under current Colorado law, “a court shall presume that the work of a construction professional that results in property damage — including damage to the work itself or other work — is an accident unless the property damage is intended and expected by the insured.” He argues that here legislators are stepping into the role of the courts. “Insureds and insurers are not always going to be pleased with a court ruling, but that is the system we have.”
Read the full story…
Safe Harbors- not just for Sailors anymore (or, why advance planning can prevent claims of defective plans & specs) (law note)
August 17, 2011 — Melissa Brumback
Have you ever considered a “Safe Harbor Provision” for your Owner-Architect or Owner-Engineer contract? Maybe it is time that you do.
As you are (probably too well) aware, on every construction project there are changes. Some of these are due to the owner’s change of heart, value engineering concerns, contractor failures, and material substitutions. Some may be because of a design error, omission, or drawing conflict. It happens.
A “Safe Harbor Provision” is a provision that establishes an acceptable percentage of increased construction costs (that is, a percentage of the project’s contingency). The idea is that if the construction changes attributable to the designer is within this percentage, no claim will be made by the Owner for design defects.
Read the full story…
Reprinted courtesy of Melissa Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
The Complete and Accepted Work Doctrine and Construction Defects
August 16, 2012 — CDJ Staff
Matthew C. Bouchard of Lewis & Roberts PLLC, writes how North Carolina is “bucking the trend” on the “complete and accepted work doctrine.” As he notes, in most states “a contractor can be found liable for personal injuries suffered by third parties from accidents occurring after the contractor’s work is completed and accepted.” But one exception is North Carolina.
He gives the example of a case, Lamb v. D.S. Duggins Welding, Inc., in which a site superintendent was “injured by the alleged negligence of the project’s steel deck installer, a sub-subcontractor in the contractual chain” “after the sub-sub’s work had been completed and accepted.” The trial court held that the “completed and accepted work doctrine” ended the subcontractor’s liability. The case noted that “employees of the general contractor had modified the installation of the perimeter safety cable in question after the sub-sub had demobilized from the site.”
Mr. Bouchard notes that “once a project is accepted and turned over, the contractor typically loses control over maintenance of the new facility.” However, he notes that “where the contractor’s work constitutes negligence ?Ķ the doctrine may not apply.” Nor does it end breach of contract claims. It only covers third parties.
Read the full story…
Contractor Convicted of Additional Fraud
November 18, 2011 — CDJ Staff
A Pennsylvania contractor in prison for fraud has been convicted with insurance fraud. The York Daily Record reports that Steven D. Gebhart was already in jail for fraud for about $350,000 for work he either failed to finish or even start or by using substandard materials and practices when he was convicted of insurance fraud. Gebbert’s offices were destroyed in a fire that was later determined to be arson. He was not charged with this, but instead for overestimating his losses to the insurance company. Sentencing for the fraud charge will be on December 21.
Read the full story…
Pier Fire Started by Welders
August 2, 2012 — CDJ Staff
Welders working on Pier 29 in San Francisco were preparing the building for the America’s Cup sailing race. Instead, they accidentally caused $2.4 million in damages. Mindy Talmadge, a fire department spokesperson, attributed the fire to crews welding a latter to a wall. According to Talmadge, a spark entered a crack in the concrete wall and “the wood on the building underneath was really dry.” It took firefighters more than two hours to extinguish the blaze.
Read the full story…
Ensuing Loss Provision Does Not Salvage Coverage
August 2, 2012 — Tred Eyerly, Insurance Law Hawaii
The Minnesota Court of Appeals affirmed the trial court's decision finding no coverage due to exclusions from the all-risk policy for losses related to mold, rot and condensation. Koskovich v. Am Family Mut. Ins. Co., 2012 Minn. App. Unpub. LEXIS 581 (Minn. Ct. App. June 25, 2012).
In 1978, the insureds purchased a home that was built in 1904. From 1991 to 1995, they remodeled, which included rotating the house 45 degrees, removing a wing and adding a new section. Polypropylene vapor barriers were installed, with pinholes for ventilation.
In 2008, water was observed on an interior floor. An investigation revealed that the sheathing under the siding and the house's framing were wet and rotten, requiring removal and replacement of the siding and studs. Repairs were made and a claim was submitted to American Family Mutual Insurance Company.
American's structural engineer inspected and determined that moisture was likely caused by condensation of water vapor where the vapor barrier was held tight to the sheathing and by inward water migration from wet siding during rainy periods through the vapor-barrier perforations. The structural engineer opined that, although the home's framing was deteriorated and structurally compromised, it did not appear as though the home was in imminent danger of collapse.
American denied coverage.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.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…
No “Special Relationship” in Oregon Construction Defect Claim
July 10, 2012 — CDJ Staff
Writing on his firm’s blog, Justin Stark discusses recent changes in construction defect claims in Oregon where, as he points out, “courts in Oregon have been lowering legal hurdles that construction defect plaintiffs must overcome in bringing their cases.” He cites a case in which water damage was discovered more than six years after construction was complete. The owners claimed breach of contract and negligence. The trial court found for the contractor, who argued “that there was no ‘special relationship’ with the owners that could support the negligence claim.”
This was overturned on appeal, with the court concluding that if there was a violation of the building code, then the negligence claim could stand. This was appealed to the Oregon Supreme court which concluded that “neither a special relationship nor a statutory standard of care, such as the building code, is necessary to bring a negligence claim here.”
Stark notes that “many forms of construction contract incorporate the phrase ‘workmanlike,’ which implicates the ‘common law standard of care’ in negligence law.
Read the full story…
In Re Golba: The Knaubs v. Golba and Rollison, Debtors
June 19, 2012 — Brady Iandiorio
Now comes another cautionary tale for builders and developers, especially those using single purpose business entities to handle individual construction projects. The United States Bankruptcy Court in Denver, Colorado, through the Honorable Michael Romero, provided an order regarding plaintiffs’ problems with a home they purchased from an entity controlled or represented by defendants. Plaintiffs, Kelvin and Holly Knaub (the “Knaubs”) filed adversary proceedings against debtor Robert Golba in his bankruptcy proceeding and against debtor Greg Rollison in his separate bankruptcy proceeding. The adversary proceedings were partially consolidated to proceed in parallel but not substantively.
The Knaubs purchased a home from Gemm Homes (“Gemm”) in May 2003. Problems stemming from the foundation caused the Knaubs to seek an explanation and ultimately a solution from Gemm and then from Avalon Homes (“Avalon”), which the Knaubs claim is just a continuation of Gemm. Through their complaint, the Knaubs seek relief for 1) damages caused by fraudulent representations and false pretenses under 11 U.S.C. § 523(a)(2)(A), based on Golba’s misrepresentation that Gemm and Rollison were not involved in Avalon; 2) damages caused by actual fraud under § 523(a)(2)(A), based on Golba’s and Rollison’s alleged conspiracy fraudulently to convey the assets of Gemm to the Avalon entities; and 3) damages caused by breach of fiduciary duty under § 523(a)(4), alleging Gemm was an insolvent company which owed a fiduciary duty to its creditors, and alleging Golba participated in transferring Gemm’s assets to Avalon for no consideration. In the Golba action, the third claim for relief was dismissed.
The facts of the case are important and somewhat convoluted. In an effort to make the cases clear, the evidence, allegations, and facts will be laid out in detail below. The Knaubs’ house was purchased from Gemm and soon after both Gemm and Rollison had an engineering company perform an analysis which discovered the foundation was not laid on stable ground.
Read the full story…
Reprinted courtesy of Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com
Construction Bright Spot in Indianapolis
March 1, 2012 — CDJ Staff
The downtown Indianapolis area is the site of about 85 major building projects that are from groundbreaking to just complete. The Indianapolis Star reports that the cumulative worth of the projects is about $3 billion, a level of construction that Indianapolis has seen only once before.
About thirty of the projects are residential. The main commercial project is a $754 million hospital building. The boom in downtown Indianapolis is not matched elsewhere, with the Indianapolis Star reporting that in the rest of Central Indiana, construction has slowed.
Read the full story…
Arizona Homeowners Must Give Notice of Construction Defect Claims
August 2, 2012 — CDJ Staff
Chris Combs of the Combs Law Group notes that “the new home construction industry is recovering” and that some of the buyers of these homes “will have claims for construction defects.” But not so quick on filing that claim.
Under Arizona law, as Mr. Combs notes the law “requires that, at least 90 days before filing any lawsuit, the buyer furnish notice by certified mail to the homebuilder specifying in detail the construction defect.” Only if there is no agreement over proposed repair can the homeowner file a lawsuit.
Read the full story…
Is There a Conflict of Interest When a CD Defense Attorney Becomes Coverage Counsel Post-Litigation?
September 1, 2011 — Chad Johnson of Higgins, Hopkins, McLain & Roswell, LLC
In Weitz Co., LLC v. Ohio Cas. Ins. Co., the U.S. District Court for the District of Colorado was asked to rule on a motion to disqualify counsel in an insurance coverage action. 11-CV-00694-REB-BNB, 2011 WL 2535040 (D. Colo. June 27, 2011). Motions to disqualify counsel are viewed with suspicion, as courts “must guard against the possibility that disqualification is sought to ‘secure a tactical advantage in the proceedings.’” Id. at *2 (citing Religious Technology Center v. F.A.C.T. Net, Inc., 945 F. Supp. 1470, 1473 (D. Colo. 1996).
Weitz Company, LLC (“Weitz”) is a general contractor and defendant in an underlying construction defect suit which had concluded before the action bringing rise to this order. In the underlying action, Weitz made third-party claims against subcontractors, including NPW Contracting (“NPW”). Weitz was listed as an additional insured under NPW’s policies with both Ohio Casualty Insurance Company and Mountain States Mutual Casualty Company (collectively “the Carriers”). The Carriers accepted Weitz’s tender of defense under a reservation of rights. However, neither insurance carrier actually contributed to Weitz’s defense costs in the underlying action. At the conclusion of the construction defect action, the parties unsuccessfully attempted to apportion the attorney’s fees and costs. Eventually, Weitz brought suit against the recalcitrant carriers. The Lottner firm, which had previously represented Weitz in the underlying construction defect action, continued to represent Weitz in this coverage action.
Read the full story…
Reprinted courtesy of Higgins, Hopkins, McLain & Roswell, LLC. Mr. Johnson can be contacted at johnson@hhmrlaw.com
