OSHA Extends Temporary Fall Protection Rules
March 1, 2012 — CDJ Staff
OSHA announced that its current rules on fall protection for residential construction will remain in place until September 15, 2012. The current measures became effective in June 2011. Under the new rules, falls must be prevented by fall protection measures unless the measures can be shown to be unfeasible or even hazardous.
Under the extension of the temporary enforcement measures, contractors who ask for compliance assistance with OSHA are given top priority and penalties can be reduced. OSHA has conducted more than 1,000 outreach sessions on the new rules.
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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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California Supreme Court Finds Associations Bound by Member Arbitration Clauses
September 13, 2012 — CDJ Staff
In a decision with great implications for construction defect suits in California, the California Supreme Court has ruled in Pinnacle Museum Tower Association v. Pinnacle Market Development that arbitration clauses binding on the members of the association are also binding on the association itself. They concluded this, even though “the association did not exist as an entity independent of the developer when the declaration was drafted and recorded.” The opinion, written by Justice Baxter, was joined by four additional justices, with two separate concurrences and a dissenting opinion by Justice Kennard.
The Pinnacle homeowners sought to bring suit over construction defect claims. In response, the developer filed a motion to compel arbitration. The association argued that the arbitration clause signed by its individual members was not binding on it. The Appeals Court invalidated the arbitration agreement “finding it marked by slight substantive unconscionability and high degree of procedural unconscionability. The Appeals Court determined that “for all intents and purposes, Pinnacle was the only party to the ‘agreement,’ and there was no independent homeowners association when Pinnacle recorded the CC&R’s.” However, the California Supreme Court said that this was “not persuasive in light of the statutory and contract principles in play.”
The opinion notes that “the Project CC&R’s provides that Pinnacle and, by accepting a deed to any portion of the Project property, the Association and each individual condominium owner agree to submit any construction dispute to binding arbitration in accordance with the FAA.” The Court noted that “settled principles of condominium law establish that an owners association, like its constituent members, must act in conformity with the terms of a recorded declaration,” which, as the Court notes, includes the CC&Rs.
After finding that the terms were binding on the Association, the Court then questioned whether the terms were “unenforceable as unconscionable,” noting that “the party resisting arbitration bears the burden of proving unconscionability.” But the Court found that “the arbitration provisions of article XVIII are not substantively unconscionable.” Additionally, they found “no support for the Association’s claims of unfairness and absence of mutuality.”
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AFL-CIO Joins in $10 Billion Infrastructure Plan
June 30, 2011 — CDJ Staff
The AFL-CIO has announced plans to generate up to $10 billion in funding for infrastructure development, training construction workers, and making buildings more energy efficient, pledging $20 million to retrofit buildings. Bloomberg News reports that union officials made the announcement in Chicago at the Clinton Global Initiative, releasing a statement from Richard Trumka, president of the union, “we, at the AFL-CIO, believe that together, with our partners in business and government, we can profitably invest significant resources to make America more competitive and energy efficient.” A foot injury prevented Mr. Trumka from attending the event.
The statement also quoted Mark Ayers, president of the Building and Construction Trades Department of the AFL-CIO, “the time is now to become intensely focused on the creation of jobs.”
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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.
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Orange County Home Builder Dead at 93
April 25, 2012 — CDJ Staff
Randall E. Presley was a homebuilder in Southern California for more than thirty years, acting as head of Presley Development Company from 1956 until selling the firm to Lyon Homes in 1987. The two companies merged in 1991 as the Presley Cos. Mr. Presley saw the need in the 1950s to provide people in Southern California with low- to medium-priced quality homes.
His firm built more than 160 communities and was among the ten largest homebuilding firms in the country, expanding beyond California. Mr. Presley was 93 when he succumbed to pneumonia. He is survived by a wife, three children, seven grandchildren, and 11 great-grandchildren.
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New Jersey Court Rules on Statue of Repose Case
May 26, 2011 — CDJ Staff
A three-judge panel issued a per curium ruling on May 23 in Fairview Heights Condo. v. Investors (N.J. Super., 2011), a case which the members of a condominium board argued: “that the judge erred by: 1) dismissing plaintiff’s claims against RLI based upon the statute of repose; 2) dismissing the breach of fiduciary duty claims against the Luppinos based upon a lack of expert opinion; 3) barring the testimony of Gonzalez; and 4) barring the May 23, 1989 job site report.” The court rejected all claims from the condominium board.
The court found that the building must be unsafe for the statute of repose to apply. They noted, “the judge made no findings on whether the water seepage, or the property damage caused by such seepage, in any way rendered the building, or any of the units, unsafe.” Further, “without a specific finding on the question of whether the defects had rendered the building ‘unsafe,’ defendants were not entitled to the benefit of the ten-year statute of repose.“
On the second point, the court also upheld the lower court’s findings regarding the management company:
“The report submitted by Berman establishes that the EIFS product was defective in its design and would therefore have failed from the outset. The defects in that product were, according to Berman, not prone to repair or other mitigation. Therefore, even if defendants did not appropriately inspect or repair the EIFS, their failure to do so would have had no impact on the long-term performance of the EIFS exterior cladding. As plaintiff failed to raise a genuine issue of material fact on these questions, the judge properly granted summary judgment to the Luppinos on plaintiff’s breach of fiduciary duty claim.”
On the final two points, the judges noted “plaintiff maintains that the judge committed reversible error when he excluded the Gonzalez certification and the 1989 job site report prepared by Raymond Brzuchalski.” They saw “no abuse of discretion related to the exclusion of the Gonzalez certification, and reject plaintiff’s arguments to the contrary.” Of the job site report, they found, “no abuse of discretion in the judge's finding that the Brzuchalski 1989 job site report did not satisfy the requirements of N.J.R.E.803(c)(6).”
Read the court’s decision
Federal Judge Dismisses Insurance Coverage Lawsuit In Construction Defect Case
December 9, 2011 — CDJ Staff
A federal judge dismissed a coverage lawsuit brought by Mid Continent Casualty Company against its insured, Greater Midwest Builders Ltd.
Plaintiff brought this declaratory judgment action in response to a suit filed in Johnson County District Court, seeking a judicial determination that it had no coverage obligation for claims asserted against its insured. This case was stayed until the state court action entered judgment against the insured. The prevailing parties then commenced a garnishment action against the plaintiff, and another insurance company, in state court in Missouri. The court was asked whether it should lift the stay and proceed with the case, or decline jurisdiction in favor of resolution in the Missouri state court.
The court granted the motion to dismiss holding that proceeding with the case would lead to protracted, piecemeal litigation, while deferring to the Missouri state court would decide all the claims involved in the dispute.
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Construction Defect Destroys Home, Forty Years Later
June 19, 2012 — CDJ Staff
Fire investigators in Monroe, North Carolina have blamed a nail as the source of a fire that lead to a home being declared a total loss. The nail, part of the original construction, nicked a wire within a wall, causing a short, which started a fire. The home was built in the late 1960s.
WBTV reported that the homeowner was awakened by a power outage. He went outside and saw flames coming from a vent in the roof. He was unable to contain the fire with a garden hose. Neighbors called firemen who were able to stop the blaze.
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Contractor’s Home Not Covered for Construction Defects
September 13, 2012 — CDJ Staff
The US District Court in Seattle has rejected most of the claims made by a Des Moines man over insurance coverage for water damage to his home. Judge John C. Coughenour granted summary judgment to Liberty Northwest in Ayar v. Liberty Northwest Insurance Corporation.
Sayad Ayar was the general contractor for the construction of his house. As a homeowner held a $1.5 million insurance policy from Liberty Northwest (LNW) that excluded “faulty, inadequate, or defective construction.”
In 2008, less than three years after his house was constructed, Mr. Ayar filed a claim after water leaked through his living room ceiling. LNW hired an engineering firm to investigate the damage. The engineering firm, CASE Forensics, concluded that the water intrusion was due to “the failure to install an adequate and continuous waterproof membrane, flashing, and drainage system within the balcony at the time of construction.” Ayar’s expert attributed the leakage to “damage done to the weather deck waterproofing during a storm event with high winds,” which would be covered under the policy. CASE Forensics reviewed these conclusions and rejected them. LNW denied coverage.
Further problems lead to further investigations, and in each case, LNW attributed the problems to construction defects. During this process, LNW “authorized Ayar to cut into the ceiling’s drywall in order to assist in determining the source of the water intrusion.” Mr. Ayar moved his family to a rental home. He requested that LNW cover the rental and other other costs.
LNW’s adjuster concluded that no coverage was available, but recommended paying Mr. Ayar $19,648.68 to reinstall drywall and repair the hole in the ceiling. The insurance company paid $2,000 to cover the cost of cutting into the ceiling. The also claimed the amount of drywall he removed was “excessive” and would not cover his relocation as “his home had been livable and because the loss was not covered.”
Ayar made four claims to the court in support of the argument that LNW misrepresented “pertinent facts or insurance policy provisions.” The court rejected three of these, noting that as all water damage was excluded, LNW’s citation of other sources of water intrusion was not a misrepresentation. “LNW did not rely on this provision as the reason for denying coverage.” Nor was LNW’s reference to “fungi, wet or dry rot” a misrepresentation. As for their reference to construction defects, it “was clearly appropriate given that the construction defect exclusion was the principal basis or denying the claim.” However, the court found that regarding the removal of drywall, “a triable issue of the facts exists.”
Ayar also claimed that LNW did not conduct a reasonable investigation, but the court found no evidence to support this conclusion. “This is not a case where the insurer failed to investigate or did so only half-heartedly.” Although the thoroughness of the investigation could not questioned, the court concluded that its timing could. Ayar claimed that LNW engaged in unreasonable delays. LNW counters that the delays were due to “Ayar’s own obstructive behavior and failure to cooperate with LNW’s investigation.”
The court dismissed all of Ayar’s claims, with the exception of whether LNW should have informed him that they would not pay for drywall repair unless there was damage, and whether LNW’s investigation failed to conclude its investigation within a thirty-day time line.
Read the court’s decision…
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
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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Construction Defects: 2010 in Review
July 10, 2012 — CDJ Staff
Candace Matson, Harold Hammersmith, and Helen Lauderdale, all of Sheppard Mullin, recently looked at design and construction defect litigation in 2010. They look at three California construction law cases. In one prominent case, the developer’s claims were barred under California law. However, the court did allow a claim for breach of the duty to defend.
In a second case, the California Supreme Court ruled that a duty to defend is separate from a duty to indemnify. A developer sought to include its engineering subcontractor in a suit. The subcontractor unsuccessfully argued that it had no duty to defend as the homeowners had not sued it.
The third case involved a lawyer who had represented a homeowner accused a libel against a construction firm and then later represented one of the subcontractors the firm had employed. The California Court of appeals concluded that there was no conflict of interest and so the contractor could not disqualify the subcontractor’s lawyer.
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California Lawyer Gives How-To on Pursuing a Construction Defect Claim
September 13, 2012 — CDJ Staff
On his recently started blog, Harry Kaladjian writes about construction defect litigation in California. He notes that after taking possession, homeowners sometimes notices problems such as “slab cracks in the garage, water leaking through the ceiling, warped floors, improper framing, cracking stucco, etc.” He goes on to note that once that happens, there are series of things homeowners must do.
The first is to be concerned about the statute of limitations. Then, “once it has been established that defects exist, the homeowner must refer to the ‘Right to Repair Act’ and ‘Calderon Procedures.’” These, he notes set out the “pre-litigation procedures prior to filing a lawsuit.”
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After Breaching its Duty to Defend, Insurer Must Indemnify
August 11, 2011 — Tred Eyerly, Insurance Law Hawaii
In a brief decision analyzing Oregon law, the Ninth Circuit determined that once an insurer breaches its duty to defend, it must indemnify. See Desrosiers v. Hudson Speciality Ins. Co., 2011 U.S. App. LEXIS 12591 (9th CIr. June 21, 2011).
The victim secured a judgment against the insured after he was beaten by another patron outside the insured's bar. Hudson Speciality Insurance refused to defend the insured, claiming the injury arose from an assault and battery, which excluded coverage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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
Statute of Repose Dependant on When Subcontractors Finished
July 10, 2012 — CDJ Staff
Scott C. Sandberg of Snell and Wilmer writes a post on the JDSupra site about the Colorado Court of Appeals decision in Shaw Construction v. United Builder Services. Sanberg notes that when the general contractor was sued by an HOA, the contractor turned around and sued its subcontractors. The contractor made three claims. They claimed that “improvement” referred to the whole project, that “substantial completion” was reached when the architect certified completion, and that the statute of repose was tolled by the HOA’s service of a Construction Defect Action Reform Act notice.
The subcontractors claimed that “improvement” only referred to their specific work, which reached “substantial completion” when they finished, despite work to be done by other later, and the HOA’s notice to the contractor did not affect the subcontractors. The Colorado court agreed with the subcontractors.
Sandberg notes that some of the contractor’s were not addressed by the court, noting that “the court did not decide whether an improvement triggering the statute of repose can be determined on a trade-by-trade basis,” and that “the court did not decide whether substantial completion occurs when a certificate of occupancy is issued or when the architect certifies completion.”
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Condo Owners Worried Despite Settlement
September 13, 2012 — CDJ Staff
KB Homes may have settled a construction defect claim with Willowbrook Condominium Association, but some of the owners are still concerned about the repair process. The Sarasota, Florida Herald Tribune reports that one homeowner’s living room “ends with a white tarp.” He told the paper, “We feel like we’re not even owners of our own home.” A neighbor wondered “what happens when people get displaced while their homes are gutted?”
As part of the agreement, the condominium association will be selecting a contractor to repair the problems, while the cost will be paid by KB Homes. Nevertheless, at least one owner fears for their ability to resell his home, noting that even after repairs have been made, “do you think someone’s going to come in here and buy?”
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