Colorado Senate Bill 12-181: 2012’s Version of a Prompt Pay Bill
May 10, 2012 — W. Berkeley Mann, Jr., Higgins, Hopkins, McLain & Roswell, LLC
A potentially important legislative bill has been introduced in waning days of the 2012 legislative session, which would change many of the commercial practices that prevail in the construction industry. Senate Bill 12-181 applies to all building and construction contracts and would prohibit any contract provision that requires a contractor, subcontractor, or supplier to waive their lien in advance of payment. It also would ban any “choice of law” provisions that make a Colorado-based construction contract subject to enforcement only in another state, or under the laws of another state.
The bill also seeks to change many existing commercial practices between contractors, subcontractors, and suppliers. It is presently unclear whether the bill allows parties to contract around these payment procedure provisions, or whether these requirements are simply “gap filling” provisions that pertain if there are no written contract terms specified on these issues. The proposed statute would mandate payment to subcontractors and material suppliers due within seven days in the absence of a dispute about the work or materials being billed. After this seven day period, the bill would require the payment of interest at the rate of 1.5% monthly (18% annually). In any later suit for payment, the creditor would also be able to collect reasonable attorneys’ fees. Additionally, non-payment to a subcontractor or supplier who is later found to be entitled to prompt payment would excuse the subcontractor or supplier, and its surety bond provider, from any further performance under the contract.
It is presently unclear whether the bill allows parties to contract around these payment procedure provisions. However, it is clear that the bill provides some leeway for change orders, as long as there is (1) negotiation in good faith between the parties concerning the changed scope of work, and (2) a 50% payment of a subcontractor’s costs by the changing party within 30 days of the change order work being done. Additionally, the bill provides for retainage, but in an amount of no more than 5%.
The bill is presently set for hearing before the Colorado Senate Committee on Business, Labor, and Technology Committee on May 2, 2012 at 1:30 p.m.
Read the full story…
Reprinted courtesy of W. Berkeley Mann, Jr. of Higgins, Hopkins, McLain & Roswell, LLC. Mr. Mann can be contacted at mann@hhmrlaw.com.
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
Eleventh Circuit Asks Georgia Supreme Court if Construction Defects Are Caused by an "Occurrence"
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
The Eleventh Circuit certified a question to the Georgia Supreme Court, asking whether property damage can constitute an "occurrence" under a CGL policy where its effects are not felt on "other property." HDI-Gerling Am. Ins. Co. v. Morrison Homes, Inc., 2012 U.S. App. Ct. LEXIS 23813 (11th Cir. Nov. 19, 2012).
The general contractor, Taylor Morrison Services, Inc., was covered by a CGL policy issued by Gerling. The policy excluded "expected or intended injury," contractual liability," and business risk exclusions. Morrison was sued by homeowners in a class action suit. Morrison had allegedly omitted four inches of gravel required beneath the base of the concrete foundations by the Uniform Building Code. Thereafter, the houses sustained water intrusion, cracks in the floors and driveways, and warped and buckling flooring.
Gerling defended, but sued Morrison for a declaratory judgment.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
District Court Awards Summary Judgment to Insurance Firm in Framing Case
August 4, 2011 — CDJ Staff
In the case of Continental Western Insurance Company v. Shay Construction Inc., Judge Walker Miller has granted a summary judgment against Shay Construction and their co-defendant, Milender White Construction Company.
Shay was the framing subcontractor for Milender White on what the court described as “a major construction project in Grand County, Colorado.” Two of Shay’s subcontractors, Wood Source Inc. and Chase Lumber Company furnished materials, labor, and equipment to Shay. They subsequently sued for nonpayment and sought to enforce mechanic’s liens, naming both Shay and Milender as defendants. Milender White alleged that Shay had “breached its obligation under its subcontracts with Milender White.”
Shay’s insurance provider, Continental Western, stated that its coverage did not include “the dispute between Shay, its subcontractors, particularly the cross claims asserted by Milender White.” Shay then sued Continental Western, alleging breach of contract and statutory bad faith.
The court, however, has found with Continental Western and has granted them a summary judgment. They found “no genuine issue as to any material fact.” The judge did not side with Continental Western on their interpretation of the phrase “those sums that the insured becomes legally obligated to pay as damages.” The court found that the Colorado courts have not limited this to tort actions only. However, as Milender’s cross claim included claims of faulty workmanship on the part of Shay, Judge Miller found for Continental.
Read the court’s decision…
Southern California Lost $8 Billion in Construction Wages
August 17, 2011 — CDJ Staff
Los Angeles and Orange Counties are first on a list no area wants to be on. According to the Sacramento Bee, reporting on data from the U.S. Bureau of Economic Analysis, LA and Orange Counties saw an $8 billion drop in construction wages in 2010, as compared to 2006. In 2006, the region saw payrolls of $26.8 billion, but in 2010, that was reduced to $18.5 billion.
This was not the largest percentage change. Of the metropolitan areas with the largest declines in construction earnings, Las Vegas saw a $3.6 billion drop, however that represented half of their 2006 totals of $7.2 billion. Conversely, a $3.3 billion drop in the New York area represented only 10% of what had been $33.8 billion in payroll in 2006.
Read the full story…
Insurance Company Prevails in “Chinese Drywall” Case
June 17, 2011 — CDJ Staff
The Louisiana Court of Appeals rejected an appeal to reverse a summary judgment granted to Louisiana Citizens Property Insurance Company. Terrence and Rhonda Ross contracted for a remodel of their home in which Chinese-made drywall was used. When the drywall emitted harmful gasses, the Rosses filed a claim under their insurance policy. This claim was rejected under four exclusions: for faulty materials, latent defect, loss by corrosion, and loss by pollution. After the claim was denied, the Rosses sued Louisiana Citizens.
In April 2010, the lower court granted a summary judgment, followed by a May, 2010 order dismissing the Rosses’ claims against Louisiana Citizens. The Rosses appealed this decision. In the court’s review, they agreed with Louisiana Citizens and the lower court on all counts. Although the Rosses maintained that the drywall was not defective (as it still functioned as drywall), the court ruled that its emission of sulfuric gases was a defect. Further, as it was in place for two years before this became evident, it was also a latent defect. Damage to the Rosses’ home consisted of corrosion damage caused by the pollutants in the drywall.
The Rosses made an additional claim that since their policy covered smoke damage, this should be covered, as the harm was done by sulfuric gases. The court noted that the contract specifies “fumes or vapors from a boiler, furnace, or related equipment,” none of which apply in this case.
Read the court’s decision
Ohio “property damage” caused by an “occurrence.”
May 18, 2011 — May 18, 2011 - CDCoverage.com
In JTO, Inc. v. State Automobile Mut. Ins. Co., No. 2010-L-062 (Ohio Ct. App. March 25, 2011), general contractor JTO was sued by hotel project owner Marriott for breach of contract and warranties seeking damages for the repair of construction defects resulting in moisture penetration property damage to interior components. JTO filed a third party complaint against subcontractor Farizel and also tendered its defense as an additional insured under Farizel’s State Auto CGL policy.
Read the full story…
Reprinted courtesy of CDCoverage.com
Census Bureau, HUD Show Declines in Residential Construction
May 17, 2011 – CDJ Staff
The U.S. Census Bureau and the Department of Housing and Urban Development released their summary of residential construction for April 2011 on May 17.
Building permits for privately owned housing units were down 4% from last month and 12% from last year. Similarly, privately-owned housing starts were down 10% from March and 23% below the previous year.
For further details, read the Census Bureau/HUD report
No Coverage for Construction Defects Under Alabama Law
June 19, 2012 — Tred Eyerely, Insurance Law Hawaii
The federal district court determined that under Alabama law, there was no coverage for breach of contract claims arising from alleged construction defects. Owners Ins. Co. v. Shep Jones Constr., Inc., 2012 U.S. Dist. LEXIS 62085 (N.D. Ala. May 3, 2012).
The insured entered a contract with the homeowner to remodel her home. After construction was completed, the homeowner sued the insured, alleging damages arising form breach of contract, negligence and negligent supervision.
The insured had a policy with Owners Insurance Company. Owners Insurance defended under a reservation rights.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
OSHA Cites Construction Firm for Safety Violations
August 16, 2012 — CDJ Staff
S.J. Louis Construction of Texas Ltd. has been cited by OHSH for one serious and one repeat safety violation, according to a report in Insurance Journal. OSHA officials saw S.J. Louis employees working in an unshored trench along a highway service road. The company had cited for this violation previously. Without shoring of trenches deeper than five feet there is a risk of serious injury or death.
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
Construction on the Rise in Denver
September 13, 2012 — CDJ Staff
In another sign of a recovery in the housing industry, the Denver Business Journal reports that the pace of new home construction has accelerated in the Denver area. According to the article, in the first seven months of 2012, forty-eight percent more permits were issued than in the first seven months of 2011. In July, 2012, there were sixty-six percent more permits than a year previously. For the Denver metropolitan area, July was the sixteenth consecutive month in which permits were up from a year previously.
Read the full story…
Discovery Ordered in Nevada Construction Defect Lawsuit
August 16, 2012 — CDJ Staff
Gemstone LVS was sued by the Manhattan Homeowners Association in Las Vegas, after which Chartis Specialty Insurance informed Gemstone that they “had no duty to defend or indemnify Gemstone under the Commercial Umbrella Liability Policy.” Gemstone “asserts that at the time the Policy was purchased, it was understood that Chartis would provide insurance coverage for a construction defect lawsuit” and now seeks discovery “to prove Chartis’ bad faith purpose in drafting an illusory Policy.”
The opinion notes that “the Court conducted a preliminary peek at the pending motion for partial summary judgment and finds that Chartis has not made the strong showing necessary to support the requested stay.” Further, the court notes that “when ambiguity in the language of a policy exists, the court may consider not only the language of the policy but also the ‘intent of the parties, the subject matter of the policy, and the circumstances surrounding its issuance.’” The court concludes that “this type of discovery is relevant to understanding the intent of the parties, more specifically, whether it was understood that Chartis would provide insurance coverage given the construction defect lawsuit.”
Accordingly, the court denied Chartis’ motion for stay of discovery and established a schedule for discovery, expert designations, rebuttal expert designations, and other matters related to the trial.
Read the court’s decision…
Cabinetmaker Exceeds Expectations as Conditions Improve
October 23, 2012 — CDJ Staff
American Woodmark, the manufacturer of several national brands of cabinets and vanities, saw greater than anticipated earnings in its most recent quarter. Their revenue was $148.3 million, an increase of 13% over the same quarter a year prior. They saw a 40% increase in sales. As a result, their per-share earnings were 7 cents, instead of the projected loss of 3 cents per share. Forbes reports that the share price for American Woodmark has been rising in August 2012.
Read the full story…
Insurance Firm Under No Duty to Defend in Hawaii Construction Defect Case
September 13, 2012 — CDJ Staff
The US District Court for Hawaii has granted a motion for summary judgment in Evanston Insurance v. Nagano. The case is related to a construction defect claim, Hu v. Nagano, and the issue at hand is whether Evanston Insurance is obligated to defend the Naganos in the underlying case.
The Hus hired Eric Nagano and his firm PMX to construct a house. Mr. Nagano’s firm was insured by Evanston, however, he lost his contractor’s license in “approximately March 2006.” Mr. Nagano sought the Hus’ authorization to allow HC Builders to take over the contract. HC Builders is headed by Mr. Nagano’s wife, Hiroko, who has held a contractor’s license since “approximately September 2006.” Ms. Nagano and HC Builders were also insured by Evanston Insurance. The house, started by PMX was finished by HC Builders.
The Hus authorized construction to begin in July 2003, but “construction did not commence until approximately October 2004 and, even after commencement, there were numerous delays resulting in months of inactivity on the Project.” The Hus had expressed to Mr. Nagano and PMX “that the construction period could not exceed twelve months after July 1, 2003.” As a result of the delays, “the Hus’ community association fined them because of the prolonged construction and the Hus’ construction lender assessed extension fees and fines for exceeding the term of the loan.”
The Hus noted that the project did not have a licensed contractor from March through September 2006. In the end, the Hus “allege that Defendants did not fulfill the obligations under the Construction Contract,” and that “the Project was ‘grossly delayed’ and the construction was ‘riddled with defects.’” Despite an Owner’s Notice of Completion filed in December 2007, the residence “had no electricity, no hot water, ... no installed appliances” and “parts of the flooring were either missing or incomplete.” And then it leaked.
The Naganos tendered the defense to Evanston. The Naganos “allege the defense is limited because Evanston: allowed default to be entered against the Naganos (the default was later set aside); delayed retaining experts; and limited the ability of the Naganos’ retained counsel to perform necessary actions to advance the case.” Evanston argues that it “does not have a duty to defend or indemnify Defendants against the Hus’ claims,” as the Hus’ claims are not covered under the policy. Further, the PMX policies have an exclusion for breach of contract.
The court concluded that all of the claims made by the Hus were based in contract and therefore were outside of the terms of the Naganos insurance coverage, as the courts have "construed Hawaii law as not providing for insurance coverage for contract related claims." Therefore, Evanston does not have a duty to defend the Naganos.
Read the court’s decision…
Homebuilders Go Green in Response to Homebuyer Demand
May 10, 2012 — CDJ Staff
McGrawHill Construction reports that 17 percent of new homes and remodels in 2011 were done with green building practices. Their report estimates that by 2016, this will rise to 29 to 38 percent of the market for home construction and remodeling.
Consumers see the green buildings as more desirable, particularly where they are more energy efficient. Two thirds of builders noted their customers were interested in features that would lower the energy use of their homes. Consumers also feel that green building materials are more durable and see green homes as higher quality.
Read the full story…
Another Guilty Plea in Las Vegas HOA Scandal
December 20, 2012 — CDJ Staff
A twenty-eighth person has plead guilty in the ongoing Las Vegas HOA scandal. Dax Louderman, who had been a construction company manager had acknowledged that he stole more than $495,000 from his former employers, Alpha 1 Construction and the Stone Canyon Homeowners Association, and further that he did not report this improper income on his tax returns. He has agreed to work with prosecutors and to pay $134,860 to the IRS. His actual sentencing will happen on June 24.
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…
Don MacGregor To Speak at 2011 West Coast Casualty Construction Defect Seminar
January 1, 2011 — February 08, 2011 CDJ Staff
“Challenges for Experts in Construction Defect Claims and Litigation” will be held Thursday May 13, 2011 between 1:30 and 3:00 PM at this year’s West Coast Casualty Construction Defect Seminar. Among the various topics covered will be of Right to Repair/Opportunity to Repair statutes, improper testing methodologies, new challenges where a case involves a Wrap Policy, OCIPS, CCIPS, and other owner controlled insurance programs, as well as the need for realistic testing protocols for the party the expert is retained to represent.
During the presentation Mr. MacGregor will be working in connection with a group of construction and design experts each of which have extensive experience with construction defect and claims related litigation. This particular session is expected to attract a standing-room only crowd, drawing in excess of 1700 attendees.
The West Coast Casualty Construction Defect Seminar is the largest seminar of its type. This year’s event is scheduled for will take place on May 12 and 13, 2011, at The Disneyland Hotel and Resort. For more information regarding the years event please visit http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
