Georgia Supreme Court Rules Construction Defects Can Constitute an Occurrence in CGL Policies
April 5, 2011 — April 5, 2011 Beverley BevenFlorez - Construction Defect Journal
Recently, the Supreme Court of Georgia reversed the decision in American Empire Surplus Lines Insurance Company v Hathaway Development Company, Inc. stating that because Whisnant’s faulty workmanship caused damage to the surrounding properties, the construction defects constituted “occurrences” under the Commercial General Liability (CGL) policy. Unlike the South Carolina Supreme court ruling in the case of Crossman Communities v Harleysville Mutual, the Georgia Supreme Court stated that an accident can happen intentionally if the effect is not the intended result.
Interestingly, the only dissenting judge, J. Melton, disagreed with his colleagues on the basis that “although the term ‘accident’ is not specifically defined in the policy, it is axiomatic that an ‘accident’ cannot result from ‘intentional’ behavior.” It is clear that what constitutes an occurrence in CGL policies is still being hotly debated.
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Instant Hotel Tower, But Is It Safe?
March 28, 2012 — CDJ Staff
Broad Sustainable Building has leapfrogged in China’s construction boom by building a thirty-story hotel in just fifteen days in the city of Changsha. According to an article in the Los Angeles Times, most of the building was prefabricated, but most prefabricated buildings require a longer time for assembly. Broad claimed that it cut no corners on safety. However, Zhang Li, a Beijing architect, told the Times that “incredible speed also means incredible risk.”
At the completion date, the interior was still partially finished. Some rooms were furnished, while others weren’t quite so ready. The hotel will be used to house clients who are visiting Broad and some of its employees.
Broad called their process “the most profound innovation in human history” and predicted that soon a third of new buildings worldwide would be constructed this way. The company anticipates using the same process to build taller buildings, with hopes of eventually constructing a 150-story building.
China is currently undergoing a building boom which Zhang attributed to a desire to catch up to the developed world. As a result of this boom, he noted that building inspections are often skipped in China to speed up building.
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Nevada Assembly Sends Construction Defect Bill to Senate
June 6, 2011 — CDJ Staff
In a 26 to 16 vote, the Nevada Assembly has passed Assembly Bill 401, which extends the time limit for legal action over home construction defects. According to the Las Vegas Sun, Assembly member Marcus Conklin, Democrat of Las Vegas, said the bill was about “keeping the consumer whole.” However, Ira Hansen, Republican of Sparks, told the sun that suits are happening before contractors can make repairs. The bill would allow attorney fees even if repairs are made.
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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
Florida Construction Defect Case Settled for $3 Million
June 19, 2012 — CDJ Staff
The Runaway Beach Club Condominium Association of Kissimmee, Florida has settled its construction defect claims against the parties involved in the construction and development of the buildings. The association claimed that defective roofs and improperly installed windows had lead to leaks and associated damages. A trial date had been set, but parties involved were able to reach this settlement instead.
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The Year 2010 In Review: Design And Construction Defects Litigation
February 25, 2011 — Candace Matson, Harold Hamersmith, and Helen Lauderdale -
Construction & Infrastructure Law Blog - February 25, 2011
This article is the first in a series summarizing construction law developments for 2010
1. Centex Homes v. Financial Pacific Life Insurance Co., 2010 U.S. Dist. LEXIS 1995 (E.D. Cal. 2010)
After settling numerous homeowners’ construction defect claims — and more than ten years after the homes were substantially completed — a home developer brought suit against one of the concrete fabrication subcontractors for the development seeking indemnity for amounts paid to the homeowners, as well as for damages for breach of the subcontractor’s duties to procure specific insurance and to defend the developer against the homeowners’ claims. The subcontractor brought a motion for summary adjudication on the ground the developer’s claims were barred by the ten year statute of repose contained in Code of Civil Procedure Section 337.15.
The District Court agreed the developer’s claim for indemnity was barred by Section 337.15. And it held that because the damages recoverable for breach of the subcontractor’s duty to purchase insurance are identical to the damages recoverable through the developer’s indemnity claim, the breach of duty to procure insurance claim also was time-barred. The District Court, however, allowed the claim for breach of the duty to defend to proceed. The categories of losses associated with such a claim (attorneys’ fees and other defense costs) are distinct from the damages recoverable through claims governed by Section 337.15 (latent deficiency in the design and construction of the homes and injury to property arising out of the latent deficiencies).
2. UDC — Universal Development v. CH2M Hill, 181 Cal. App. 4th 10 (6th Dist. Jan. 2010)
Indemnification clauses in construction agreements often state that one party to the agreement — the “indemnitor” — will defend and indemnify the other party from particular types of claims. Of course, having a contract right to a defense is not the same as actually receiving a defense. Any indemnitor attempting to avoid paying for defense costs can simply deny the tender of defense with the hope that when the underlying claim is resolved the defense obligations will be forgotten. In the past, when parties entitled to a defense — the “indemnitees” — had long memories and pressed to recover defense costs, indemnitors attempted to justify denying the tender by claiming their defense obligations coincided with their indemnity obligations and neither arose until a final determination was made that the underlying claim was one for which indemnity was owed.
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Reprinted courtesy of Candace Matson, Harold Hamersmith, and Helen Lauderdale, Sheppard Mullin Richter & Hampton LLP. Ms. Matson can be contacted at cmatson@sheppardmullin.com, Mr. Hamersmith can be contacted at hhamersmith@sheppardmullin.com, and Ms. Lauderdale can be contacted at hlauderdale@sheppardmullin.com.
Construction Defects Lead to Demolition
May 26, 2011 — CDJ Staff
Ten years after it was built, demolition of Seattle’s McGuire Building has begun, as Jeanne Lang Jones reports in the Puget Sound Business Journal. Construction defects had rendered the 25-story apartment building uninhabitable. The major problem was corroded steel cabling. According to the report, “the building’s owners reached an undisclosed settlement last year with St. Louis-based contractor McCarthy Building Companies.”
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Texas exclusions j(5) and j(6).
April 27, 2011 — April 27, 2011, by CDCoverage.com
In Evanston Ins. Co. v. D&L Masonry of Lubbock, Inc., No. 07-10-00358-CV (Tex. Ct. App. April 18, 2011), insured masonry subcontractor D&L sued its CGL insurer Evanston to recover costs incurred by D&L for the replacement of window frames damaged by D&L while performing masonry work adjacent to the window frames. The trial court granted summary judgment for D&L.
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Reprinted courtesy of CDCoverage.com
Washington Court of Appeals Upholds Standard of Repose in Fruit Warehouse Case
August 4, 2011 — CDJ Staff
On July 28, the Washington Court of Appeals ruled in Clasen Fruit & Cold Storage v. Frederick & Michael Construction Co., Inc. that more than six years had passed since a contractor had concluded work and so granted a summary dismissal of the suit.
Frederick & Michael Construction Co., Inc. (F&M) was contracted to construct several buildings for Clasen Fruit and Cold Storage. These were completed in March, 1999. The buildings suffered wind damage to the roofs in 2001, 2003, 2005, and 2006. In the first two incidents, F&M repaired the roofs with Clasen paying for repairs.
In 2005, Clasen hired Continuous Gutter to make repairs. The final incident was the collapse of the roof of one building. This was attributed to “excessive moisture in the roof’s vapor barriers.” At this point, Clasen demanded that F&M pay for repair and replacement costs. In 2008, Clasen sued F&M for damages for breach of contract and negligent design and construction of the roof.
The decision then covered the meanings, in Washington law, of “termination of services” and “substantial completion.” The panel concluded that construction was “substantially completed in 1997” and “relevant services” by 2001. “But Clasen did not sue until 2008, some seven years after termination of any roof related services.”
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Architect Not Liable for Balcony’s Collapse
September 13, 2012 — CDJ Staff
The Texas Supreme Court declined to hear an appeal from a woman who was partially paralyzed due to the collapse of a balcony. She had sued the architect of her friends’ home, but the Texas Third Circuit Court of Appeals had reversed a jury ruling against the architect, Sinclair Black. Black’s firm, Black + Vernooy, had designed the home and had supervised “administration of the construction contract.” Despite a contractual obligation to “endeavor to guard the owner against defects and deficiencies,” the balcony builder had not followed the architect’s specifications, including in the construction of the balcony.
While the jury found Black liable for ten percent of the blame, Black argued that he could not be held liable for the contractor’s negligence, nor did he have any duty to third parties.
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Town Files Construction Lawsuit over Dust
August 16, 2012 — CDJ Staff
Washington Township in Ohio has filed a lawsuit against Underground Utilities for their handling of construction fill on a road project. The City of Mansfield had hired the firm to improve road safety. The lawsuit is over the company’s actions in processing soil for fill, which they are doing on three vacant lots that are zoned for residential use. Washington Township Trustee Jack Butler told the Mansfield Journal that “what brought the lawsuit to a head was the fact that the contractor did not control the dust.” Subsequent receiving notices of zoning violations, the company began to move its operation to another site.
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Insurance Firm Defends against $22 Million Claim
June 15, 2011 — CDJ Staff
The Houston law firm of Eggleston & Briscoe successfully defended their client, Colony Insurance Company, which was being sued for $22 million over roof hail damage. The Summer Hill Village Community Association did not convince a jury that the insurance company had violated state law or breached its contract when it denied coverage for the roofs. The homeowners association contended that the roof damage was due to a hail storm in 2007. The jury agreed with experts who contended the damage was already present at that time.
Mr. Eggleston noted that “when your client is sued for a claim of $22 million, it is very satisfying to hear a jury agree that they in fact acted honorably and owed nothing.”
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North Carolina Exclusion j(6) “That Particular Part”
February 10, 2012 — CDCoverage.com
In Alliance Mutual Insurance Co. v. Dove, 714 S.E.2d 782 (N.C. Ct. App. 2011), claimant Murphy-Brown hired insured Dove to repair a broken elevator belt in a grain elevator in Murphy-Brown’s feed mill. The elevator was inside a metal duct and, to access the broken belt, Dove had to cut out a section of the duct. After replacing the belt, Dove welded the metal section back to the duct. Immediately after Dove completed the welding, dust inside the duct ignited, causing an explosion in the elevator, resulting in property damage to the elevator and other property. Murphy-Brown sued Dove for negligence seeking damages for the repair and replacement of the elevator, repair and replacement of the other property, increased grain handling costs during the repairs, and loss of use.
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Reprinted courtesy of CDCoverage.com
One World Trade Center Due to Be America’s Tallest and World’s Priciest
February 10, 2012 — CDJ Staff
As One World Trade Center rises, so does the price tag. After construction delays and cost overruns, the cost of the building at the site of the September 11 attacks has risen to $3.8 billion. Part of the expense of the skyscraper is the heavily reinforced base of the building. The elevator shafts are also heavily reinforced, all part of guarding against future terrorist attacks.
In comparison, the world’s tallest tower, the Burj Khalifa in Dubai, cost only $1.5 billion, less than half the cost of One World Trade Center. As a result, the Port Authority does not see the building as being profitable in near future. In order to fund it, the agency is raising tolls on bridge and tunnel traffic.
Currently, about the half the unfinished building is leased. Construction is expected to conclude in 2013.
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Broker Not Liable for Failure to Reveal Insurer's Insolvency After Policy Issued
March 28, 2012 — Tred Eyerly, Insurance Law Hawaii
Faced with an issue of first impression in California, the Court of Appeals held that a broker was not liable for failing to reveal the insurer's insolvency occurring after issuance of the policy. Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Ins. Serv. West, Inc., 2012 Cal. App. LEXIS 232 (Cal. Ct. App. Feb. 28, 2012).
The developer for a construction project in downtown San Diego retained Aon as its broker to secure coverage. Aon procured a general liability policy for the project with Legion Indemnity Company. Legion was solvent when it issued the policy.
The developer hired Pacific Rim (“PacRim”) as one of several subcontractors on the project. The parties entered into a contract in which the developer agreed to provide PacRim with liability insurance through an Owner Controlled Insurance Program (“OCIP”). Aon was not a party to the contract and PacRim was never its client. PacRim, however, enrolled in the OCIP by contacting Aon and providing all necessary paperwork.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Building Boom Leads to Construction Defect Cases
August 2, 2012 — CDJ Staff
Professor Evan McKenzie of the University of Illinois at Chicago says that rise of construction defect litigation in the Las Vegas area followed the same pattern it did in other places, according to an article in the Las Vegas Review Journal. “Step one,” according to Professor McKenzie, “there was this enormous growth in construction. Then these attorneys began to swarm in from all over, especially Southern California.” McKenzie noted that during a building boom, construction “outpaces the ability of building inspectors to do their job.”
But, despite his contention that “rapid growth in housing stock” leads to “shoddy construction,” another problem of growth was that “eventually there were too many lawyers chasing too many condominium complexes and subdivisions.” What came next was that “attorneys start coming up with cases that really aren’t good cases.” It’s in the interest of these attorneys that HOA boards sue.
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Workers Hurt in Casino Floor Collapse
February 10, 2012 — CDJ Staff
More than a dozen construction workers fell about thirty feet when a floor collapsed in a Cincinnati casino. The workers were pouring cement on the second-floor level when the accident happened. The area in question will be the gaming area in the completed casino. Scott Allen, OSHA’s regional spokesperson, said their investigation of the accident would probably take about a month to complete.
The cause of the collapse is still undetermined. Although the weather has been wet in the area, experts thought it unlikely to be the cause. A construction forensics professor at Ohio State University said that “concrete pouring is very common” and that “you cannot go wrong unless something happens with the connection.” Engineering experts said it was more likely an issue with the metal decking.
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Construction Suit Ends with Just an Apology
February 10, 2012 — CDJ Staff
After suing a contractor for failing to complete the remodeling of their home, an Orange County couple has settled for an apology. Douglas J. Pettibone represented the contractor, who had lost his business after a broken neck, multiple surgeries, and an addiction to pain medicine. Mr. Pettibone represented his client pro bone. The case was settled in arbitration by JAMS.
Mr. Pettibone noted that his client gave “a heartfelt and very moving apology.” The remodeling was completed by another contractor, two years after Thorp Construction stopped work on the project. After the apology, the case was dismissed.
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