New Buildings in California Soon Must Be Greener
June 19, 2012 — CDJ Staff
The California Energy Commission has approved new energy efficiency standards for new homes and commercial buildings. The 2013 Building Energy Efficiency Standards are set to go into effect on January 1, 2014, and will require 30% more energy efficiency for non-residential construction and 25% more for homes. The standards do not affect hospitals, nursing homes, or prisons.
Buildings covered under the standard will have to have roofs that ready for the installation of solar panels. Additionally, non-residential buildings will require high-performance windows, advanced lighting controls, and cool-roof technologies. Residential requirements include insulated hot-water pipes, whole house fans, and more efficient windows.
The new standards are expected to add 3,500 new building industry jobs. One thing these construction workers won’t be building are power plants, since over the next thirty years, the standards are expected to save as much as six power plants.
Read the full story…
Damron Agreement Questioned in Colorado Casualty Insurance v Safety Control Company, et al.
February 10, 2012 — CDJ Staff
Safety Control and EMC appealed the judgment in Colorado Casualty Insurance Company versus Safety Control Company, Inc., et al. (Ariz. App., 2012). The Superior Court in Maricopa County addressed “the validity and effect of a Damron agreement a contractor and its excess insurer entered into that assigned their rights to sue the primary insurer.” Judge Johnsen stated, “We hold the agreement is enforceable but remand for a determination of whether the stipulated judgment falls within the primary insurer’s policy.”
The Opinion provides some facts and procedural history regarding the claim. “The Arizona Department of Transportation (“ADOT”) hired DBA Construction Company (“DBA”) to perform a road-improvement project on the Loop 101 freeway. Safety Control Company, Inc. was one of DBA’s subcontractors. As required by the subcontract, Safety Control purchased from Employer’s Mutual Casualty Company (“EMC”) a certificate of insurance identifying DBA as an additional insured on a policy providing primary coverage for liability arising out of Safety Control’s work.”
A collision occurred on site, injuring Hugo Roman. Roman then sued ADT and DBA for damages. “Colorado Casualty tendered DBA’s defense to the subcontractors, including Safety Control. Safety Control and EMC rejected the tender. Roman eventually settled his claims against DBA and ADOT. DBA and ADOT stipulated with Roman for entry of judgment of $750,000; Roman received $75,000 from DBA (paid by Colorado Casualty) and $20,000 from ADOT, and agreed not to execute on the stipulated judgment. Finally, DBA, ADOT and Colorado Casualty assigned to Roman their rights against the subcontractors and other insurers.”
Colorado Casualty attempted to recover what “it had paid to defend DBA and ADOT and settle with Roman. However, Roman intervened, and argued that “Colorado Casualty had assigned its subrogation rights to him as part of the settlement agreement.” The suit was not dismissed, but the Superior Court allowed Roman to intervene. “Roman then filed a counterclaim against Colorado Casualty and a cross-claim against the subcontractors.”
All claims were settled against all of the defendants except Safety Control and EMC. “The superior court ruled on summary judgment that EMC breached a duty to defend DBA and that as a result, ‘DBA was entitled to settle with Roman without EMC’s consent as long as the settlement was not collusive or fraudulent.’ After more briefing, the court held the stipulated judgment was neither collusive nor procured by fraud and that EMC therefore was liable to Roman on the stipulated judgment and for his attorney’s fees. The court also held Safety Control breached its subcontract with DBA by failing to procure completed-operations insurance coverage and would be liable for damages to the extent that EMC did not satisfy what remained (after the other settlements) of the stipulated judgment and awards of attorney’s fees.” Safety Control and EMC appealed the judgment.
Four reasons were given for the decision of the ruling. First, “the disagreement between Roman and Colorado Casualty does not preclude them from pursuing their claims against EMC and Safety Control.” Second, “the settlement agreement is not otherwise invalid.” Third, “issues of fact remain about whether the judgment falls within the EMC policy.” Finally, “Safety Control breached the subcontract by failing to procure ‘Completed Operations’ coverage for DBA.”
In conclusion, the Superior Court affirmed in part, reversed in part, and remanded . “Although, as stated above, we have affirmed several rulings of the superior court, we reverse the judgment against EMC and remand for further proceedings consistent with this Opinion to determine whether the stipulated judgment was a liability that arose out of Safety Control’s operations. In addition, we affirm the superior court’s declaratory judgment against Safety Control but remand so that the court may clarify the circumstances under which Safety Control may be liable for damages and may conduct whatever further proceedings it deems appropriate to ascertain the amount of those damages. We decline all parties’ requests for attorney’s fees pursuant to A.R.S. § 12-341.01 without prejudice to a request for fees incurred in this appeal to be filed by the prevailing party on remand before the superior court.”
Read the court’s decision…
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…
Good and Bad News on Construction Employment
February 10, 2012 — CDJ Staff
The construction industry hit a two-year high in January, with 21,000 jobs added that month. The mild winter is assumed to have helped. According to the General Contractors of America, the construction industry currently employs about 5.57 million people. This is a 21 percent gain over January 2010. Ken Simonson, the chief economist of GCA, noted that “the unemployment rate in construction is still double that of the overall economy.” He said it was not currently clear if “the recent job growth reflects a sustained pickup or merely acceleration of homebuilding and highway projects that normally halt when the ground freezes in December and January.”
Stephen Sandherr, the chief executive officer of the GCA, said that the federal government had to make infrastructure funding a top priority. “Without adequate long-term funding for infrastructure, competitive tax rates and fewer costly regulatory hurdles, the construction industry may lose some of the jobs it gained in the last year.”
Read the full story…
When is a Construction Project truly “Complete”? That depends. (law note)
August 2, 2012 — Melissa Dewey Brumback, Construction Law North Carolina
Long-time readers of the blog may remember my earlier post on substantial completion. However, in looking over my blog stats to see what search terms lead people here, it looks like this is hot topic. The blog searches came in two general categories:
1. Those searching strictly for a definition of substantial completion. Some examples:
- What does “substantial completion” mean?
- when does a building achieve substantial completion
- contracts “substantial completion”
- substantial completion undefined
- when is a project substantially complete
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Reprinted courtesy of Melissa Dewey Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
No Choice between Homeowner Protection and Bankrupt Developers?
February 10, 2012 — CDJ Staff
Donna DiMaggio Berger, writing in the Sun Sentinel argues those may be the only current choices in Florida. A recent court case, Lakeview Reserve HOA v. Maronda Homes has caused a swift response from the legislators. Ms. Berger notes that the construction defect bill, HB 1013, “would take away a homeowner’s rights to pursue a developer for defects to the driveways, roads, sidewalks, utilities, drainage areas and other so-called ‘off-site’ improvements.” The alternative? She notes that applying the Maronda decision would “bankrupt developers who don’t build defect-free roads and sidewalks.”
Read the full story…
Amerisure Case to be Heard by Texas Supreme Court
August 16, 2012 — CDJ Staff
The Fifth Circuit Court of Appeals has withdrawn its decision in Ewing Construction Company Inc. v. Amerisure Insurance Company, according to Insurance Developments. The Fifth Circuit had concluded that “a contractor’s obligation to perform its contact in a workmanlike manner constituted an ‘assumption of liability.’” Two questions have now been certified to the Texas Supreme Court. The dissent in the case argued the majority had misread Texas Supreme Court precedent. The court will now have the opportunity to clarify this matter.
Read the full story…
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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Firm Sued For Construction Defects in Parking Garage
October 23, 2012 — CDJ Staff
Northhampton County, Pennsylvania is suing a contractor who resurfaced a parking garage in 2009. According to the Express-Times, three years later, the surface is cracked and the county is seeking $700,000 for repairs. Additionally, they have withheld $44,000 of the $2.2 million contract because of the problems. John Stoffa, Northampton County Executive, says that the garage is stable, but not up to safety standards.
Read the full story…
Excess Carrier Successfully Appeals Primary Insurer’s Summary Judgment Award
December 9, 2011 — Tred R. Eyerly, Insurance Law Hawaii
Although the excess carrier was given inadequate notice of the underlying arbitration, the trial court determined it shared responsibility with the primary carrier for the arbitration award. Finding disputed issues of fact, the Washington Court of Appeals reversed in Am. States Ins. Co. v. Century Surety Co., 2011 Wash. App. LEXIS 2488 (Wash. Ct. App. Oct. 31, 2011).
The primary insurer, American States, issued two liability policies to Professional Home Builders (PHB), a siding contractor. The policies were for successive years, 1998-1999 and 1999-2000. Each policy had annual limits of $1 million per occurrence. PHB also had a commercial excess liability policy for 1999-2000 with Century Surety Company.
PHB was sued by Residential Investment Partners (RIP) for construction defects after moisture entered the building envelope, causing decay and damage. Century’s expert determined the decay started before the 1999-2000 policy period.
RIP and PHB went to arbitration.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Nevada Senate Rejects Construction Defect Bill
June 7, 2011 — CDJ Staff
The Las Vegas Sun reports that Assembly Bill 401, the construction defect bill, lost in a vote of 9 to 12. The measure extended the time for construction defect suits to be filed, awarded legal costs only to successful plaintiffs, and set a definition of construction defects. Two Democrats joined the Republicans in the Senate in defeating the bill.
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.
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Homebuilding Still on the Rise
December 20, 2012 — CDJ Staff
The National Association of Home Builders reports that spending on private homes was up three percent in October 2012, bringing it to a four-year high. This was part of a trend in which fourteen of the last fifteen months have seen increases in spending on residential construction. Likewise, multifamily residences have seen thirteen months of increased spending, putting it 82% higher than its low, two years ago. ¬?In addition to new homes, remodeling is also up, reaching its highest point in five years.
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Court Grants Summary Judgment to Insurer in HVAC Defect Case
August 4, 2011 — CDJ Staff
The US District Court in Colorado has determined in the case of RK Mechanical, Inc. v. Travelers Property Casualty Company of America that Travelers did not breach its insurance contract when it refused to cover RK Mechanical.
RK Mechanical performed an HVAC installation for a residential project for which J.E. Dunn Rocky Mountain was the general contractor. As part of the work, RK “installed approximately one hundred seventy-one CPVC flanges, which were manufactured by Charlotte Pipe and Foundry Company.” Two of these flanges failed in June, 2009 leading to water damage. RK replaced the cracked flanges and engaged in water remediation. “Travelers paid Dunn and RK for the costs associated with the water damage associated with the Flange Failure.” The court notes that Travelers did not pay for the cracked flanges, however.
Subsequently, RK examined the remaining flanges, finding many cracked ones. These were replaced with new ones. Later, all the Charlotte flanges were replaced with ones from another manufacturer. RK applied for coverage.
All sides brought in their experts: “Microbac Laboratories, Inc. prepared a report on behalf of RK concluding that the Flange Failure was due, in part, to an assembly or workmanship defect in addition to manufacturing defects in the flanges. Higgins & Associates prepared a report on behalf of Travelers concluding that the flanges failed due to improper installation. Plastic Failure Labs prepared a report on behalf of the flange manufacturer concluding that the flanges failed due to improper installation by RK.”
At this point, Travelers denied coverage. RK sued alleging that the coverage for flange failure and water damage implicitly includes mitigation costs. The court rejected this claim, noting it would do so even if Travelers had paid for the replacement of the first two flanges. Nor did the court find that replacement of the faulty flanges is not "a covered cause of loss." RK also argued that as it was required to mitigate, Travelers was obligated to cover costs. However, the court found that “the mitigation costs expended by RK were not incurred in an effort to avoid damages from a potential breach of contract by Travelers.” The court additionally noted that despite RK’s claims, the Colorado courts have not found a common law duty to mitigate. Finally, the court found that the exclusions in the policy were not in violation of public policy.
Read the court’s decision…
Hawaii Building Codes to Stay in State Control
March 1, 2012 — CDJ Staff
The Hawaii State Senate voted down Senate Bill 2692. Had it been passed, the State Building Code Council would have been abolished and building codes would have become the responsibility of county governments. The bill was opposed by the Insurance Institute for Business and Home Safety. Their director of code development, Wanda Edwards said that the bill “would have undermined key components that are essential to an effective state building code regime.”
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Kansas Man Caught for Construction Scam in Virginia
December 20, 2012 — CDJ Staff
A Virginia court sent charges of construction fraud against a Kansas man to a grand jury. Larry Foster visited homes in Bedford County, Virginia, tested the water, and told homeowners that they needed new water filtration systems. The homeowners paid, but Mr. Foster never delivered. One homeowner who testified paid him $1,690. Another paid even more, giving $3,090 to Mr. Foster. In order to dupe his victims, Foster used the address of a chiropractor as a business address, unbeknownst to the actual business there.. He is wanted for charges in other states as well.
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Webinar on Insurance Disputes in Construction Defects
July 10, 2012 — CDJ Staff
Seth Lamden, of the firm Neal Gerber Eisenberg will be presenting a webinar on “Insurance Coverage Disputes in Construction Defects” on July 17, 2012 at 1 p.m. EDT. Mr. Lamden’s presentation will focus on “handling both the construction and insurance components of construction defect claims.” He will be discussing recent case law and new insurance products. The presentation will present information on evaluating various types of insurance policies, explaining common issues, contract requirement, and the economic loss doctrine. Mr. Lamden will advise attendees on how to avoid getting into a construction defect case. He will conclude his presentation with a brief question-and-answer session.
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Policyholder Fails to Build Adequate Record to Support Bad Faith Claim
May 19, 2011 — May 19, 2011 -
Tred R. Eyerly,
Insurance Law HawaiiThe importance of careful preparation and documentation was the take away lesson in a Texas bad faith case, C.K. Lee v. Catlin Specialty Ins. Co., 2011 U.S. Dist. LEXIS 19145 (S.D. Tex. Feb. 28, 2011).
C.K. Lee owned a commercial shopping center in Houston. Catlin issued a commercial property policy to Lee. On September 12, 2008, Hurricane Ike hit and caused substantial property damage throughout the Texas Gulf Coast area. On September 24, 2008, Lee submitted a claim for damage to the roof of his shopping center to Catlin.
Catlin hired Engle Martin to represent its interests in adjusting the claim. Engle Martin eventually adjusted over 200 Ike-related claims for Catlin.
In November 2008, Engle Martin and Emergency Services Inc., retained by Lee, inspected Lee’s property. Engle Martin observed evidence of roof repairs that had apparently been made both before and after Hurricane Ike. Engle Martin decided it was necessary to use an infrared scan of the roof to help identify which damages, if any, were attributable to wind and which, if any, were attributable to sub par, prior repairs or natural deterioration.
Engle Martin retained Project, Time & Cost (PT&C) to conduct the infrared inspection. PT&C’s inspection determined there was no wind-related damage to the roof and no breaches or openings created by wind. Instead, the roof had exceeded its life expectancy and was in need of replacement due to normal wear and weathering. Consequently, Catlin decided that the damage to Lee’s roof was not caused by winds from Hurricane Ike.
Meanwhile, Lee’s contractor, Emergency Services, prepared a report estimating that the total cost of repairing the roof would be $871,187. Engle Martin’s estimate for repair of the roof was $22,864.
Lee filed suit for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code. Catlin moved for summary judgment on all claims but breach of contract, arguing that because there was a bona fide dispute concerning the cause of the damages and whether they were covered under the policy, there was no evidence of bad faith or violations of the Texas Insurance Code.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
