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…
Fifth Circuit Asks Texas Supreme Court to Clarify Construction Defect Decision
November 7, 2012 — CDJ Staff
The Fifth Circuit Court has withdrawn its decision in Ewing Construction Company v. Amerisure Insurance Company, pending clarification from the Texas Supreme Court of its decision in Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London. The Fifth Circuit had applied the Gilbert case in determining that a contractual liability exclusion barred coverage for faulty workmanship. The Insurance Journal reports that this decision was both applauded and criticized, with a concern noted that “an insurer would now have its pick of either the ‘your work’ exclusion or the contractual liability exclusion without the exception for subcontracted work.”
The Fifth Circuit is now asking the Texas Supreme Court two questions to clarify Gilbert, which Brian S. Martin and Suzanne M. Patrick see as a sign that the Court has realized that it overly expanded the scope of the earlier ruling. A response is expected from the Texas Supreme Court by spring 2013.
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Contract Not So Clear in South Carolina Construction Defect Case
November 7, 2012 — CDJ Staff
The South Carolina Court of Appeals has reversed a partial summary judgment issued by one of the lower courts in the case of The Retreat at Edisto Co-Owners Association v. The Retreat at Edisto. The underlying issues of the case deal with a construction defect complaint.
The lower court had concluded “Developer’s ‘First Amendment’ to the Master Deed required the Developer to satisfy the provision in the paragraph labeled ‘Master Deed Amendment or Phase II’ as a condition precedent to its election to proceed with the development of Phase II.”
The appeals court found that “the language of the First Amendment to the Master Deed is susceptible to more than one interpretation.” The court additionally concluded that the “Developer presented the requisite scintilla of evidence on the question of its intent in order to establish a genuine issue of material fact. As the material facts were in dispute, the appeals court reversed the summary judgment and remanded the case to the circuit court for further proceedings.
Read the court’s decision…
Las Vegas Home Builder Still in Bankruptcy
October 23, 2012 — CDJ Staff
American West Development attempted to exit Chapter 11 bankruptcy on September 27, but their plan was turned down by U.S. Bankruptcy Court Judge Mike Nakagawa. According to the Las Vegas Review-Journal, Judge Nakagawa rejected the plan over a trust fund for construction defects. America West’s attorney said they were hoping to complete the process by the end of the year.
Under approved portions of the plan, America West’s owner, Lawrence Canarelli, will retain control of the corporation, although he must contribute $10 million into the firm and an additional $1.5 million into the fund for construction defects. America West faces charges for construction defects reported in the broad range of “less than $20 million” to “as much as $80 million.”
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Construction Defects Are Occurrences, Says Georgia Supreme Court
July 10, 2012 — CDJ Staff
Michael Bradford writes about the implications of a March decision of the Georgia Supreme Court in which the court found that “negligent construction resulting in damage to surrounding property constitutes an occurrence under a commercial general liability policy. The contractor in the case, American Empire Surplus Lines Insurance Co. Inc. vs. Hathaway Development Co. Inc, argued that a damage caused by a plumbing subcontractor’s work was covered. American Empire was the insurer for the plumbing subcontractor.
Bradford notes that this follows similar decisions in other courts. The George court ruled that “an occurrence can arise where faulty workmanship causes unforeseen or unexpected damage to other property.”
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Anti-Assignment Provision Unenforceable in Kentucky
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
On a certified question from the Federal District Court, the Supreme Court of Kentucky decided that an anti-assignment provision in a policy is unenforceable.Wehr Constructors v. Paducah Div. Assur. Co. of Am., 2012 Ky. LEXIS 183 (Ky. Oct. 25, 2012).
Before building an addition to its hospital, Murray Calloway County Hospital purchased a builder's risk policy from Assurance Company of America.The policy provided, "Your rights and duties under this policy may not be transferred without Assurance's written consent . . . ." The Hospital contracted with Wehr Constructors to install concrete subsurfaces and vinyl floors in order to expand the hospital. After installation, a portion of the floors and subsurface work was damaged. The Hospital submitted a claim to Assurance for $75,000, but the claim was denied.
Wehr sued the Hospital to recover money for its work on the construction project. In settling the case, the Hospital assigned to Wehr any claim or rights the Hospital had against Assurance.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Construction Defects as Occurrences, Better Decided in Law than in Courts
December 9, 2011 — CDJ Staff
Construction defect claims are now occurrences for insurance purposes in four states, Arkansas, Colorado, Hawaii, and South Carolina, yet there are still frustrations for commercial general liability policyholders. Business Insurance describes court decisions on whether construction defect claims are covered as “incongruous,” and this drives up coverage and litigation costs. Construction firms often find they are defending themselves on two fronts, both the construction defect claim and also whether their insurance covers it.
Frank Armstrong, the Senior Vice President and National Director of Construction Claims for Willis North America says that the problem starts with the word “occurrence,” as various state courts have different interpretations of the word. “Certain pieces of it don’t fit well, at lest according to some courts in the country, with coverage for construction defect risks.”
Another insurance executive, Julian Ehlich, the Senior Vice President of Claims for Aon Risk Solutions’ construction services group notes that “jurisdictions differ, so policyholders don’t know what they’re going to get.”
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Florida trigger
May 18, 2011 — May 18, 2011 - CDCoverage.com
In Johnson-Graham-Malone, Inc. v. Austwood Enterprises, Inc., No. 16-2009-CA-005750-XXXX-MA (Fla. 4th Cir. Ct. Duval County, April 29, 2011), insured JGM was the general contractor for an apartment project completed in 1998. In 2007, the project owner sued JGM seeking damages for defective construction resulting in moisture penetration property damage. JGM tendered its defense to Amerisure. Amerisure denied a defense. JGM defended and settled the underlying suit and then filed suit against Amerisure seeking recovery of defense and settlement costs. The trial court granted JGM’s motion for partial summary judgment. The court first addressed Amerisure’s duty to defend. Applying Florida law, the court held that, although the underlying complaint alleged that the property damage was not discovered until after expiration of the Amerisure policies
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Reprinted courtesy of CDCoverage.com
Official Tried to Influence Judge against Shortchanged Subcontractor
February 10, 2012 — CDJ Staff
A contractor testified in the trial of former Cuyahoga County Commissioner Jimmy Dimora. According to Fox 8 in Cleveland, Ohio, Sean Newman, the president of Letter Perfect testified that his company was a subcontractor on the reconstruction of the locker rooms at the Cleveland Browns Stadium. Newman said his company was paid only $400,000 of their $650,000 bid. When Letter Perfect sued the contractor, D.A.S. Construction, Dimora called the judge to influence her to rule in favor of D.A.S.
The judge in the earlier case, Bridgett McCafferty, has been found guilty of lying to the FBI during their investigation and is serving a 14-month prison sentence.
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There is No Non-Delegable Duty on the Part of Residential Builders in Colorado
August 2, 2012 — Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC
Recently, in the Arapahoe District Court, the Honorable Michael Spear, issued an order holding that builders do not owe a non-delegable duty to homeowners. In Marx and Corken v. Alpert Custom Homes, Inc., et al., Judge Spear’s order came in response to plaintiffs’ motion for determination of question of law seeking a finding that the defendants owed a non-delegable duty to the plaintiffs and thus, to strike defendants’ designation of nonparties at fault. After being fully briefed, Judge Spear, found that such a non-delegable duty does not exist.
The case arises from the construction of a single-family residence in Aurora, Colorado. Through the construction and interaction with Alpert Custom Homes, Inc. and Scott and Sally Alpert, the defendants, Paul Marx and Kay Corken, the plaintiffs claimed they suffered various damages and losses, and brought claims for breach of contract-warranty, breach of contract, violation of the Colorado Consumer Protection Act, breaches of the implied covenant of good faith, promissory estoppel, willful breach of contract, and quantum meruit. During litigation, the defendants filed a designation of nonparties at fault, which named several parties which were at fault for the alleged construction defects at issue in the case. The pertinent nonparties named were subcontractors of defendant Alpert Custom Homes, Inc. during the construction of the residence.
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Reprinted courtesy of Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com
Defective Grout May Cause Trouble for Bridges
August 16, 2012 — CDJ Staff
Grout, which was used to protect the steel support cables of the Woodrow Wilson Bridge, may lead to problems instead. The Baltimore Sun reports that the Federal Highway Administration is looking at three dozen bridges in twenty-one states that were built with defective grout. The grout contains high levels of chlorides, which can lead to corrosion. The collapse of pedestrian walkway in Concord, North Carolina was attributed to chloride contamination in the grout.
The grout, SikaGrout 300PT, was advertised as "non-corrosive, does not contain chlorides," but later testing showed that it contained levels that exceeded limits by 400 percent. Throughout the country, about 16 million pounds of this were used. Sika Corp. suspended production of the grout in 2010. If repairs need to be made, it is unclear who will pay.
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Construction Law Alert: A Specialty License May Not Be Required If Work Covered By Another License
March 7, 2011 — By
Steve Cvitanovic of
Haight Brown & Bonesteel, LLP.Contractors should always be sure that they understand the licensing in any Subcontract or Prime Contract before entering into any agreement. However, on March 3, 2011, in the case of Pacific Casson & Shoring, Inc. v. Bernards Bros., Inc. 2011 Cal.App.Lexis 236, the Court of Appeal determined that if a specialty license is subsumed within another license, the specialty license may not be required.
Bernards entered into a subcontract with Pacific to excavate, backfill, grade and provide geotechnical design parameters for a hospital. The Prime Contract required the bidder to maintain a Class C-12 specialty earthwork license. However, Pacific only held a Class A general engineering license which it turns out was suspended during the performance of the work. Pacific sued Bernards for nonpayment of $544,567, but the lawsuit was dismissed because the trial court found that Pacific (1) lacked a C-12 license, and (2) Pacific’s Class A license was suspended for failure to pay an unrelated judgment. Pacific was also ordered to disgorge $206,437 in prior payments.
The Court of Appeal reversed and remanded. The Court of Appeal agreed with Pacific and held that a C-12 specialty license was not required despite the Prime Contract. The Court of Appeal found that the C-12 specialty license would have been “superfluous” since it was fully encompassed within the Class A requirements. However, the Court of Appeal also remanded the case for further
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Reprinted courtesy of Steve Cvitanovic of Haight Brown & Bonesteel, LLP.
Insurance Policy Provides No Coverage For Slab Collapse in Vision One
August 17, 2011 — Douglas Reiser, Builders Counsel
This post will examine whether Division Two of the Washington Court of Appeals properly reversed and remanded several lower court decisions in the case of Vision One LLC v. Philadelphia Indemnity Insurance. In short, and from the perspective of an appellate attorney, the court of appeals got the decision right. Given the rules of contract interpretation and causation in tort claims, there was really no other way the court could have ruled. I understand that from a contractor’s perspective and insurance perspective, the decision seems odd. But from a purely legal standpoint, the decision is well-reasoned and well-supported. Let me explain.
Background
First, here are the facts in a nutshell. Vision One is a construction company that undertook to construct a condo complex in Tacoma. Vision then contracted with D&D Concrete to pour a concrete slab for a section of the foundation. To shore the concrete slab, D&D further contracted Berg Equipment to provide necessary equipment to stabilize the structure. Well, something down the line went wrong. The shoring failed and the slab collapsed, causing a great deal of damage.
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Read the court’s decision…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Faulty Workmanship may be an Occurrence in Indiana CGL Policies
April 7, 2011 — April 7, 2011 Beverley BevenFlorez - Construction Defect Journal
The question of whether construction defects can be an occurrence in Commercial General Liabilities (CGL) policies continues to find mixed answers. The United States District Court in Indiana denied the Plaintiff’s Motion for Summary Judgment in the case of General Casualty Insurance v. Compton Construction Co., Inc. and Mary Ann Zubak stating that faulty workmanship can be an occurrence in CGL policies.
Judge Theresa L. Springmann cited Sheehan Construction Co., et al. v. Continental Casualty Co., et al. for her decision, ”The Indiana Supreme Court reversed summary judgment, which had been granted in favor of the insurer in Sheehan, holding that faulty workmanship can constitute an ‘accident’ under a CGL policy, which means any damage would have been caused by an ‘occurrence’ triggering the insurance policy’s coverage provisions. The Indiana Supreme Court also held that, under identically-worded policy exclusion terms that are at issue in this case, defective subcontractor work could provide the basis for a claim under a CGL policy.”
As we reported on April 1st, South Carolina’s legislature is currently working on bill S-431 that would change the wording of CGL policies in their state to include construction defects. Ray Farmer, Southwest region vice president of the American Insurance Association spoke out against the bill. “CGL policies were never meant to cover faulty workmanship by the contractor,” he said. “The bill’s supplementary and erroneous liability provisions will only serve to unnecessarily impact construction costs in South Carolina.”
Read the Opinion and order...
Read the court’s ruling...
Read the American Insurance Association statement...
Fire Reveals Defects, Appeals Court Affirms Judgment against Builder
July 10, 2012 — CDJ Staff
The Arizona Court of Appeals has ruled in the case of Simms v. Nance Construction. After a fire damaged his home, Jerry Simms discovered some construction defects in the work of the builder, Nance Construction. Nance Construction completed the home in 2000 and it was damaged by fire in 2001. In the course of Simms’ suit against his neighbor, “defense experts opined both that Dusty Creek had negligently repaired the damage to Simms’ residence and that many defects found in the houses were the result of defects in the original construction.” Nance offered to make roof repairs. Simms responded with a list of “numerous construction defects,” stating this was “not a comprehensive and final list of items.” Nance offered to repair some while disputing others. Simms entered a lawsuit against Nance and other parties.
Nance first sought a summary judgment, “asserting that Simms had failed to adequately disclose the repairs for which he sought to hold Nance responsible.” The court denied this. It also would not allow Nance to introduce evidence that Simms had been denied a license by the Arizona Department of Gaming over “questionable business practices, illegal activities, and financial transactions with a person purportedly involved in organized crime.”
During the suit, Simms contracted with Advanced Repair Technologies “for repairs that included a complete remodel of the roof and the exterior stucco system.” Nance later claimed that the cost of ART’s repair was unreasonable, claiming that it should have cost about $600,000 instead of the $1.5 million for which Simms contracted. The jury found against Nance, with a judgment of $870,200 of which half was due to the roofing subcontractor.
After the verdict, Nash moved for a new trial, stating that the jury should have heard expert testimony on whether the contract price was reasonable. Nance also “argued that the trial court had erred in refusing to allow Nance to impeach Simms’ credibility with his purported prior acts of dishonesty.” These motions were denied and Nance appealed.
The appeals court upheld the trial court on all counts. The court found that, despite the contention made by Nance, the jury had sufficient information to determine if the cost of the repairs were reasonable. The court also found that Simms had given Nance an opportunity to propose repairs. The law, however, “does not require the Plaintiff to accept an offer for repairs,” adding that “the record makes clear that the parties were far apart in their belief of the nature of repairs necessary.” Nor did the court find that Nance should have been allowed to introduce evidence to impeach Simms’ credibility.
Although judgment of the lower court was affirmed, the court took the discretion to decline to award attorneys’ fees to Simms, although he was awarded costs.
Read the court’s decision…
Boston’s Tunnel Project Plagued by Water
August 11, 2011 — CDJ Staff
Boston’s Tip O’Neil Tunnel, part of the “Big Dig” project, is suffering from water leaks which has lead to millions of dollars of damage, according to an article in the Boston Globe. The report quotes Frank DePaola, the highway administrator, as likening the water leaks to “three garden hoses.” The project’s chief engineer notes that those “three garden hoses” add up to 17 million gallons a year.
Further, the chief engineer reports notes that the leaks could compromise both safety and structural integrity. Problems have included a 110-pound light fixture that fell in February, ventilation ducts clogged with ice during the winter, and mold in utility rooms and ventilation buildings.
Read the full story…
Tennessee Court: Window Openings Too Small, Judgment Too Large
November 18, 2011 — CDJ Staff
The Tennessee Court of Appeals has issued a ruling in the case of Dayton v. Ackerman, upholding the decision of the lower court, even as they found that the award was incorrectly computed. The Daytons purchased a house that had been designed and built by the Ackermans, who operated a construction business. The court noted that the warranty with the house promised that “for a period of 60 days, the following items will be free of defects in materials or workmanship: doors (including hardware); windows; electric switches; receptacles; and fixtures; caulking around exterior openings; pluming fixtures; and cabinet work.”
Soon, the Daytons began to experience problems with the house. Many were addressed by the Ackermans, but the Daytons continued to have problems with the windows. Neither side could specify a firm date when the Ackermans were contacted by the Daytons about the window problems. The Ackermans maintained that more than two years passed before the Daytons complained about the windows. The lower court found the Daytons more credible in this.
Initially, the Daytons included the window manufacturer in their suit, but after preliminary investigations, the Daytons dropped Martin Doors from their suit. Martin Doors concluded that the windows were improperly installed, many of them “jammed into openings that were too small for them.”
After the Daytons dismissed Martin Doors, the Ackermans sought to file a third party complaint against them. This was denied by the court, as too much time had elapsed. The Ackermans also noted that not all of the window installations were defective, however, the courts found that the Daytons ought not to have mismatched windows.
Unfortunately for the Daytons, the window repair was done incorrectly and the windows were now too small for the openings. The firm that did the repair discounted the windows and Daytons concealed the problem with plantation shutters, totalling $400 less than the original lowest estimate. However, the appeals court noted that it was here that the trial court made their computation error. Correcting this, the appeals court assessed the Ackermans $12,016.20 instead of $13,016.20.
Finally, the Ackerman’s expert was excluded as he had changed his testimony between deposition and trial. The trial reviewed the expert’s testimony and had it been admissible, it would not have changed the ruling.
Read the court’s decision…
Partial Settlement in DeKalb Construction Management Case
July 10, 2012 — CDJ Staff
The DeKalb County School District has made a partial settlement in a lawsuit over their claims of mismanagement of construction projects. The Atlanta Journal-Constitution reports that the school board settled with E. R. Mitchell & Co., the smaller of two firms that they have sued. As part of the settlement, Mitchell will be testifying against their former partner. Claims from the other side of the lawsuit are that the school board improperly fired the Heery/Mitchell partnership. The superintendant who fired the company, Crawford Lewis, and his chief operations office, Pat Reid, have since been charged with criminal conspiracy to defraud the construction program. A lawyer for Heery said that “we believe that when presented to a jury, Heery will be vindicated.”
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