Construction Defects Not Occurrences under Ohio Law
November 7, 2012 — CDJ Staff
Concluding the “claims of defective construction or workmanship brought by a property owners are not claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy,” the Supreme Court of Ohio has ruled in Westfield Insurance Co. v. Custom Agri Systems, Inc. In the underlying case, Custom Agri Systems, Inc. built a grain bin as a subcontractor to Younglove Construction, LLC. Younglove had been contracted by PSD Development, which withheld payment, claiming it had suffered damages due to defects in Custom Agri System’s work. Younglove filed a complaint against Custom Agri, which filed complaints against its subcontractors. Custom Agri also requested that its insurer, Westfield Insurance Company, defend and indemnify it. Westfield claimed that it had no such duty. The Ohio Supreme Court concurred.
The decision notes that “Custom was being sued under two general theories: defective construction and consequential damages resulting from the defective construction.” Westfield argued that none of the claims were “for ‘property damage’ caused by an ‘occurrence” and therefore none of the claims were covered under the CGL policy.” Further, Westfield argued that “even if the claims were for property damage caused by an occurrence, they were removed from coverage by an exclusion in the policy.”
The case was filed in the US District Court which issued a summary judgment for Westfield. The plaintiff appealed and Sixth Circuit Court of Appeals certified the questions to the Supreme Court of Ohio.
The court noted that “all of the claims against which Westfield is being asked to defect and indemnify Custom relate to Custom’s work itself.” And so, the court concluded that they “must decide whether Custom’s alleged defective construction of and workmanship on the steel grain bin constitute property damage caused by an ‘occurrence.’” However, the court noted that under the terms of the insurance contract, an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” and the court noted that the “natural and commonly accepted meaning” of “accident” is something “unexpected, as well as unintended.”
The Ohio Supreme Court also looked at court decisions in other places, and found that in many similar cases, courts have concluded that construction defects are not occurrences.
In a dissenting opinion, Justice Pfeifer argues that “if the defective construction is accidental, it constitutes an ‘occurrence’ under a CGL policy.” Justice Pfeifer characterized the majority’s definition of “accidental” as “broad, covering unexpected, unintentional happenings.”
Read the court’s decision…
Texas contractual liability exclusion
May 18, 2011 — May 18, 2011 - CDCoverage.com
In Ewing Construction Co., Inc. v. Amerisure Ins. Co., No. C-10-256 (S.D. Tex. April 28, 2011), insured Ewing was the general contractor for an athletic facility constructed for a school district. The school district sued Ewing alleging defective construction of the project. The underlying complaint included contract and negligence causes of action, and sought damages for the repair of the damages and loss of the use of the project. The complaint did not allege damage to any property other than the project itself. Ewing tendered its defense to its CGL insurer Amerisure. Amerisure denied a defense and Ewing filed suit against Amerisure. The federal district trial court entered summary judgment for Amerisure. Applying Texas law, the court held that all of the damages fell within the “contractual liability†exclusion precluding any duty to defend or indemnify.
Read the full story…
Reprinted courtesy of CDCoverage.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…
Housing Market on Way to Recovery
October 23, 2012 — CDJ Staff
Bloomberg News reports that new home purchases neared a two-year high, with July sales being the strongest since April 2010. Economists polled by Bloomberg expected an annual pace of 380,000 sales, the current levels are at 373,000. Strongest sales gains were in the Northeast, with a 20 percent jump. The Midwest and Western regions had small gains, and the South saw a drop of 4.9 percent. As the Northeast’s home prices are highest and the South’s the lowest, the pattern of sales lead to a sharp increase in median sales price.
Meanwhile, existing stocks of homes continued to deplete, reaching a record low of 38,000 completed homes on the market. In response, builders are constructing new homes at a pace not seen since April 2010, accord to the Commerce Department.
Read the full story…
Window Manufacturer Weathers Recession by Diversifying
October 28, 2011 — CDJ Staff
American Openings, a Tuscon-based window manufacturer, has responded to the loss of its sales of windows for new home construction by moving into new markets. The Arizona Daily Star reports that American Openings used to see providing windows for new homes as half their business. Now, Tom Regina, the founder and president says “single family is just dead.”
Their products are insulated windows, designed to comply with Energy Star standards. Without new homes being built, now the company is focusing on homeowners and building owners looking for more energy efficient windows. As the windows have two or three panes and special coatings, homeowners using them are eligible for tax credits.
One of their newer products combines their energy-saving coatings with “break resistant” glass. The article notes that the windows repel “all but the most determined burglars.” However, the company is still awaiting special equipment to cut the glass.
Read the full story...
Court Consolidates Cases and Fees in Soil Construction Defect Case
August 16, 2012 — CDJ Staff
The California Court of Appeals has ruled in Burrow v. JTL Development. JTL Development had appealed a judgement in a construction defect case in which JTL Development and Highland Development were found liable for damage due to homes built on unstable and improperly compacted soil. The two companies were sued by the two sets of homeowners, the Burrows and the Balls, and their cases were consolidated at trial. Each family was awarded $700,000 in damages. This judgement had also been appealed and affirmed by the appeals court. In the current case, an additional $235,800 in cost-of-proof sanctions had been awarded to the two families.
Before the trial, Dale Burrows, Charles Ball, and Laurie Ball “asked JTL and Highland to admit that they ‘approved grading plans’ for the Burrows’ and Balls’ properties; ‘had knowledge that the [properties] contained improperly compacted fill’; ‘had knowledge that the [properties were’ not properly prepared for structures’; and ‘did not provide Plaintiffs with a complete soils report’ prepared by Gorian & Associates.” These were requests 14, 19, 20, and 22. JTL and Highland denied all of these.
At trial, the Burrows and Balls proved that all these were true. JTL and Highland’s geotechnical subcontractor, Gorian & Associates, had “recommended that Highland remove and re-compact the entire tract to a depth of 25 feet.” JTL and Highland did not follow this recommendation, “in order to avoid expense.”
After judgment, the Burrows and Balls moved for $582,587.45 for “attorneys’ fees and costs incurred proving the truth of requests for admission.” JTL and Highland claimed that only Dale Burrows could recover fees, but that also the fees were not recoverable. Joe Lynch of Highland “declared that he always believed the soils under the Burrows and Balls homes were properly compacted.” The Burrows and Balls responded with six identical sets of requests for admissions and the court awarded each of them twenty-five percent of $235,800, with JTL and Highland each responsible for fifty percent.
The appeals court noted that JTL and Highland filed a timely appeal and goes on to notes the four circumstances under which a responding party does not have to pay costs and fees. The court concluded that none of these were met. Instead of waiving the request, JTL and Highland denied the request, stating “without in any manner waiving the foregoing objection, responding party denies the request for admission.”
Nor was the admission “of no substantial importance,” instead the court said that the matters were of “substantial importance,” and the “trial would have been shortened by their admission. Highland and JTL “relied on Gorian when it denied the request,” but the trial court “discredited Lynch’s assertions,” finding that “Highland knew the soil was improperly compacted.”
As all plaintiffs had identical discovery requests, the court rejected the claim that only Dale Burrows was entitled to an award.
Read the court’s decision…
Ensuing Loss Provision Found Ambiguous
April 25, 2012 — Tred Eyerly, Construction Law Hawaii
After the insurer denied coverage in a homeowner’s policy for construction defects under various exclusions, the court found the ensuing loss provision was ambiguous.Kesling v. Am. Family Mut. Ins. Co., 2012 U.S. Dist. LEXIS 38857 (D. Colo. March 22, 2012).
After purchasing a home from the sellers, the insureds noticed problems with the deck of the home. Massive cracking appeared, causing lifting and leaking on the deck and water running through the exterior foundation wall into the home. There was also damage to the roof and crawlspace.
The insureds had a homeowner’s policy with American Family, which covered accidental direct physical loss to property described in the policy unless the loss was excluded. They requested coverage for "conditions, defects and damages." American Family denied coverage because wear and tear, as well as damage to foundations, floors and roofs were excluded. The policy did provide coverage, however, for "any resulting loss to property described . . . above, not excluded or excepted in this policy.
When coverage was denied, the insureds sued American Family.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Pennsylvania Court Extends Construction Defect Protections to Subsequent Buyers
December 20, 2012 — CDJ Staff
The Pennsylvania courts have long held that there is an implied warranty of habitability for the initial purchaser of a home. Now, as some defects may not immediately show up, the court has extended that implied warranty to second and subsequent purchasers. As Marc D. Brookman, David I. Haas, and Christopher Bender of Duane Morris note, “this judicially created doctrine shifts the risk of a latent defect in the construction of a new home from the purchaser to the builder-vendor.”
The Pennsylvania Supreme Court concluded that a contractual relationship is not needed for an implied warranty of habitability. The court’s concern was inequalities would result when a home was sold while other homes were protected by being within the statute of repose.
Read the full story…
Nevada Bill Aims to Reduce Legal Fees For Construction Defect Practitioners
March 21, 2011 — March 21, 2011 Construction Defect Journal Staff
Assemblyman Ira Hansen and twelve additional members of Nevada’s Assembly are sponsoring Assembly Bill 285. AB 285 Revises provisions governing an award of attorney’s fees in causes of action for constructional defects. Existing law generally provides that a claimant may recover reasonable attorney’s fees as part of the claimant’s damages in a cause of action for constructional defects. (NRS 40.655)
This bill removes this provision and instead authorizes a court to award reasonable attorney’s fees to a prevailing party involved in such a cause of action if an independent basis for the award exists pursuant to existing law which authorizes a court to award attorney’s fees in certain circumstances, or Rule 68 of the Nevada Rules of Civil Procedure, which provides for the payment of reasonable attorney’s fees by an offeree who rejects an offer and subsequently fails to obtain a more favorable judgment.
In an AP report published in Business Week it is suggested that the target objective of legislators centers on what it refers to as Nevada’s "Rampant construction defect lawsuits".
According to Business Week "The suits bring in hundreds of millions of dollars for lawyers and have put construction companies out of business. Hansen says fewer construction firms mean higher prices for Nevada consumers."
Click Here To Read Full Text and Revisions of Assembly Bill 285
Statutes of Limitations May be the Colorado Contractors’ Friend
April 18, 2011 — April 18, 2011 Beverley BevenFlorez - Construction Defect Journal
Albert Wolf, a principal in Wolf Slatkin & Madison P. C., has written an interesting article on statutes of limitations in construction defect claims in Colorado. While Wolf states that in most cases, “construction defect claims against construction industry participants (contractors, subcontractors, architects, engineers, etc.) requires that suits be started within two years after construction defects have been or should have been—in the exercise of reasonable diligence (care)—discovered,” if a project used the AIA General Conditions (AIA Document A2010) before the 2007 edition, the “statutes of limitations begin to run (accrue) at either substantial completion or breach by the contractor (installation of defective work), depending on the circumstances.”
“That’s a huge difference,” Wolf writes in his article. “For example, if the structural defect caused by faulty foundation work is not discovered or discoverable until walls begin to exhibit cracking more than two years after the building is completed, the owner’s claim against the contractor may be barred if the AIA provision is applied.”
Read the full story...
Cogently Written Opinion Finds Coverage for Loss Caused By Defective Concrete
November 7, 2012 — Tred Eyerly, Insurance Law Hawaii
If ever in need of a concise, well-reasoned opinion on “occurrence,” “property damage” and applicability of the business risk exclusions, turn to Pamperin Rentals II, LLC v. R.G. Hendricks & Sons Construction, Inc., 2012 Wis Ct. App. LEXIS 698 (Wis. Ct. App. Sept. 5, 2012).
A contractor was hired to install concrete during construction of seven gas stations. Red-D-Mix provided the concrete. The contractor and Red-D-Mix were eventually sued by the gas stations, based upon allegations that the concrete was defectively manufactured and installed. The gas stations alleged that Red-D-Mix supplied concrete that was defective and resulted in damages, including the need to repair nearby asphalt.
Red-D-Mix tendered to its insurers, who denied coverage. Suit was filed and the insurers moved for summary judgment. The trial court determined there were no allegations of either “property damage” or an “occurrence.” Therefore, there was no duty to defend or indemnify Red-D-Mix.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Arizona Court of Appeals Rules Issues Were Not Covered in Construction Defect Suit
December 9, 2011 — CDJ Staff
The Arizona Court of Appeals has ruled in the case of Peters v. Marque Homes. In this case, Walter Peters provided the land and funding for Marque Homes to build a luxury residence in Glendale, Arizona. By the terms of the “Joint Venture Agreement,” Peters provided the land and funding, while Marque would not charge Peters for overhead, profits, or supervision fees. The agreement specified that profits would be divided equally.
Two years later, Marque sued Peters claiming he had breached his obligations by refusing several offers for the home. Peters replied that Marque had “failed to complete the home so it is habitable to prospective purchasers.” Peters stated he had “retained an expert inspector who had identified numerous defects.” The court appointed a Special Commissioner to list the home for sale. Peters purchased the home with two stipulations ordered by the court. At this point, the earlier case was dismissed with prejudice.
Peters then sued Marque “asserting express and implied warranty claims arising out of alleged construction defects in the home.” Marque claimed that Peters’s claims were “precluded by the prior joint venture dispute.” The court granted Marque’s motion.
The appeals court reversed the lower court’s decision, determining that Peters’s claims were not precluded by the agreement. Although there had been a prior case between the two parties, warranty issues did not form a part of that case. “Peters never raised these allegations nor presented this evidence in support of any warranty claim.”
The court also noted that the “parties never agreed to preclude future warranty claims.” Marque and Peters “agreed in the stipulated sale order that ‘the sale of the property to a third party shall be “as is” with a 10-year structural warranty.’” The court noted that the agreement said nothing about one of the parties buying the house.
The appeals court left open a claim by Marque that there are no implied or express warranties available to Peters. They asked the Superior Court to address this.
Read the court’s decision…
Exclusions Bar Coverage for Damage Caused by Chinese Drywall
July 5, 2011 —
Tred R. Eyerly,
Insurance Law HawaiiThe insured homeowners were unsuccessful in arguing around the policy's exclusions when seeking coverage for damage caused by Chinese drywall. Ross v. C. Adams. Constr. & Design, L.L.C., 2011 La. App. LEXIS 769 (La. Ct. App. June 14, 2011).
Before the insureds purchased and moved into their home, it was renovated. After moving in, the insures discovered foreign gypsum drywall, or Chinese drywall. The insureds submitted a claim to Louisiana Citizens Property Insurance Company. In an investigation, the insurer confirmed the presence of Chinese drywall and damage to the metal surfaces caused by corrosion. Louisiana Citizens refused coverage and the insureds sued. The trial court denied the insured's motion for summary judgment and granted summary judgment to Louisiana Citizens.
The court of appeal affirmed. Initially, the court determined the insureds sustained a direct physical loss. The inherent qualities of the Chinese drywall created a physical loss to the home and required that the drywall be removed and replaced.
Four exclusions, however, barred coverage. First, damages due to faulty or defective materials were excluded from coverage. The Chinese drywall emitted high levels of sulfuric gas which caused the damage to the insured's plumbing, electrical wiring and metal components.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Texas “Loser Pays” Law May Benefit Construction Insurers
June 7, 2011 — CDJ Staff
Under a new law, Texas HB 274, the Texas Supreme Court will be making rules for motions to dismiss and to expedite suits of less than $100,000. The law also contains two “loser pays” provisions. If a lawsuit is found dismissed for having “no basis in fact or law,” the losing side must pay attorney costs. The other provision caps award of attorney fees if plaintiffs reject settlement offers. Texas Lawyer quotes Houston attorney Mike Gallagher as saying this will affect “the practice of everyone who handles significant lawsuits.”
Gregory Marcum, whose practice includes construction defect litigation, plans to contact insurance companies, as the new law may save them money. “It will definitely be a factor in the defense strategy for handling a case.” He notes that “any insurance carrier would want that done.”
Marcum notes that the offer-of-settlement rules only apply when cases go to trial. “Almost all cases settle.”
Read HB 274
Read the full story…
Insurer Beware: Failure to Defend Ends with Hefty Verdict
June 1, 2011 — Douglas Reiser in the Builders Counsel Blog
Served with a lawsuit that you turned over to your insurer? Insurer refusing to defend you? Well, find some hope in this news. Washington’s IFCA has the claws to ensure that insurers perform their duties.
Contractors heavily rely on the defense provisions of their Commercial General Liability (CGL) policies. In construction, a legal dispute can easily rear its head when you least expect it. Luckily, Washington registered contractors are required to maintain CGL insurance. That insurance often provides contractors with adequate legal defense in the event that they are sued.
But, what if your insurer turns down the defense request? They might be staring at massive damages. A current Reiser Legal client, Australia Unlimited, Inc., recently won a large verdict against Hartford Insurance, after the insurer unreasonably denied their claim. The firm who represented Australia Unlimited Inc. in that case, Hackett Beecher and Hart, were successful in procuring a $5.43 Million verdict
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
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.
Read the full story…
Ohio Adopts Energy-Efficient Building Code
June 19, 2012 — CDJ Staff
In a compromise between environmental groups, who were looking for stricter standards, and homebuilders, who were trying to contain building costs, the state of Ohio has adopted buildings codes that will increase the energy efficiency of new homes. The estimated costs are about $1,100 with estimated annual savings of $230. According to Corey Roblee of the International Code Council, “It’s something needed in the state of Ohio.”
The Ohio Home Builders Association opposed a proposal to adopt the guidelines of the International Code Council. Builders will be able to either follow the ICC guidelines or they can use the Ohio guidelines to meet the same energy efficiency. Vincent Squillace, the executive vice president of the OHBA, said, “We came up with an equivalent code that’s more strict but is about $2,000 cheaper per home to implement than the original code.”
The new code will require that at least 75% of lighting must be high efficiency, increases the degree of insulation, and specifies more efficient windows, among other changes.
Read the full story…
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.
Read the full story…
