Architect Not Responsible for Injuries to Guests
September 1, 2011 — CDJ Staff
The Texas Court of Appeals has ruled, with one dissent, that the architectural firm that designed a home was not responsible to the injuries caused to guests when a balcony collapsed. Judge David Puryear wrote the majority opinion in Black + Vernooy Architects v. Smith.
Black + Vernooy designed a vacation home for Robert and Kathy Maxfield in 2000. The Maxfields hired a general contractor to build the home. The general contractor hired a subcontractor to build a balcony; however, the subcontractor did not follow the architect’s design in building the balcony.
A year after the house was completed; the Maxfields were visited by Lou Ann Smith and Karen Gravely. The balcony collapsed under the two women. Ms. Gravely suffered a broken finger, a crushed toe, and bruises. Ms. Smith was rendered a paraplegic as a result of the fall. They sued the Maxfields, the general contractor, and the architects for negligence. The Maxfields and the general contractor settled. A jury found that the architects held 10% of the responsibility. The architects appealed the judgment of the district court.
The Appeals Court reversed this judgment, noting that “there has been no allegation that the Architects negligently designed the balcony or that the Architects actually created the defects at issue.” Further, “the Smiths allege that the defect was caused by the construction practices of the contractor and subcontractor when the balcony was not built in accordance with the design plans of the Architects.”
The court found that even though the architects had a duty “to endeavor to guard against defects and deficiencies in the construction of the home and to generally ascertain whether the home was being built in compliance with the construction plans,” this duty did not extend to third parties.
Read the court’s decision…
New Jersey Court Rules on Statue of Repose Case
May 26, 2011 — CDJ Staff
A three-judge panel issued a per curium ruling on May 23 in Fairview Heights Condo. v. Investors (N.J. Super., 2011), a case which the members of a condominium board argued: “that the judge erred by: 1) dismissing plaintiff’s claims against RLI based upon the statute of repose; 2) dismissing the breach of fiduciary duty claims against the Luppinos based upon a lack of expert opinion; 3) barring the testimony of Gonzalez; and 4) barring the May 23, 1989 job site report.” The court rejected all claims from the condominium board.
The court found that the building must be unsafe for the statute of repose to apply. They noted, “the judge made no findings on whether the water seepage, or the property damage caused by such seepage, in any way rendered the building, or any of the units, unsafe.” Further, “without a specific finding on the question of whether the defects had rendered the building ‘unsafe,’ defendants were not entitled to the benefit of the ten-year statute of repose.“
On the second point, the court also upheld the lower court’s findings regarding the management company:
“The report submitted by Berman establishes that the EIFS product was defective in its design and would therefore have failed from the outset. The defects in that product were, according to Berman, not prone to repair or other mitigation. Therefore, even if defendants did not appropriately inspect or repair the EIFS, their failure to do so would have had no impact on the long-term performance of the EIFS exterior cladding. As plaintiff failed to raise a genuine issue of material fact on these questions, the judge properly granted summary judgment to the Luppinos on plaintiff’s breach of fiduciary duty claim.”
On the final two points, the judges noted “plaintiff maintains that the judge committed reversible error when he excluded the Gonzalez certification and the 1989 job site report prepared by Raymond Brzuchalski.” They saw “no abuse of discretion related to the exclusion of the Gonzalez certification, and reject plaintiff’s arguments to the contrary.” Of the job site report, they found, “no abuse of discretion in the judge's finding that the Brzuchalski 1989 job site report did not satisfy the requirements of N.J.R.E.803(c)(6).”
Read the court’s decision
Background Owner of Property Cannot Be Compelled to Arbitrate Construction Defects
November 7, 2012 — CDJ Staff
In Truppi v. Pasco Engineering, John Quattro sued Property Management Contractors, Inc. over construction defects in William Truppi’s home. All parties are named in the suit. The California Court of Appeals ruled that Property Management Contractors, Inc. (PMCI) could not compel Mr. Quattro to arbitration.
The background of the case involves two houses built in Encinitas, California by PCMI: one for Mr. Truppi at 560 Neptune, and one for Mr. Quattro at 566 Neptune. Both contracts contained an arbitration provision. Mr. Quattro signed the contract for his residence and Mr. Truppi signed the other. Mr. Quattro then sued PCMI and its principal, William Gregory. Mr. Quattro claimed to be the true contracting party for the 560 Neptune residence and a third party beneficiary of the contract Mr. Truppi signed, and stated that PCMI was aware of this.
PCMI in a demurrer stated that Quattro “had only a ‘prospective beneficial interest in the property upon its eventual sale or lease.’” Mr. Quattro amended his complaint to account for the issues raised by PCMI. The court rejected PCMI’s demurrer to the amended complaint.
Finally, PCMI and Gregory asserted that Quattro was “not the real party in interest” and could not sue. PCMI continues to assert that Quattro lacks standing, but their attorney sent Quattro an e-mail stating, “While my client disputes that you are a party, and that you lack standing to assert the claim, to the extent you do so I believe you are obligated to proceed by way of arbitration.”
The court did not cover the issue of Quattro’s standing in the case, only if he could be compelled to arbitration. The court affirmed the lower court’s finding that Quattro could not be compelled to arbitrate the construction defect claim as neither he nor Gregory signed the contract in an individual capacity. Further, the court noted that PCMI and Gregory “denied the existence of an agreement between themselves and Quattro on the 560 contract,” and cannot compel arbitration on a non-existent agreement. And while non-signatories can, in some situations be compelled to arbitrate, the court found that “these cases are inapplicable because here they seek to have the alleged third party beneficiary (Quattro) compelled by a nonsignatory (Gregory).” The arbitration clause in question “expressly limited its application to persons or entities that signed the 560 contract.”
As Mr. Quattro was not a signatory to that agreement, the court found that he could not be held to its arbitration provision.
Read the court’s decision…
There Is No Non-Delegable Duty on the Part of Residential Builders in Colorado
August 16, 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.
Read the full story…
Reprinted courtesy of Brady Iandiorio, Higgins, Hopkins, McLain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com
Australian Developer Denies Building Problems Due to Construction Defects
June 15, 2011 — CDJ Staff
The Sunland Group, the developer, is objecting to claims that it is responsible for corrosion damage in a residential building in Gold Coast, Australia, as reported in the Courier & Mail. Residents of Q1, the world’s tallest residential tower, are suing the developer, claiming that defects and corrosion “compromise the long-term durability and appearance of” the six-year-old building.
The developer has not only denied that there are defects in the building, but has also stated that the construction contract “did not warrant that the construction would be defects-free.” Sunland claimed that corrosion was due to the homeowners association having “failed to carry out the maintenance requirements.”
Repair of the building is expected to cost millions of dollars. Sunland denies that it should pay any of that.
Read the full story…
Drug Company Provides Cure for Development Woes
November 18, 2011 — CDJ Staff
Vertex Pharmaceuticals is poised to become the holder of Boston’s biggest commercial lease, paying $72.5 million for 1.1 million square feet on Boston’s waterfront. Vertex’s new buildings are still under construction, but the plans have spurred other development in the Fan Pier area, according to the New York Times. The Times quotes Mary A. Burke, a senior economist at the Federal Reserve Bank of Boston that the Vertex project gives “a big push” to the “momentum for economic growth.”
The Fallon Company is building Vertex’s new laboratory and office space. They are separately planning to build a high-rise with 150 luxury condominium units. According to Joseph Fallon, the chief executive and president of the Fallon Company, there is already a waiting list of 50 buyers for the condominiums.
Across the street from the Vertex site, a group including Morgan Stanley and Boston Global Investors is planning a 23-block mixed use project that would include 1.2 million square feet of retail space. Additionally, the New England Development and the Hanover Group is building a 356-unit apartment building at the adjacent Pier 4.
Read the full story…
More Charges in Las Vegas HOA Scandal
September 13, 2012 — CDJ Staff
The indictments continue in the Las Vegas HOA scandal. A lawyer for the Justice Department told the judge in the case that “we expect several indictments before the end of the year.” According to the Las Vegas Review Journal, “a dozen or more” additional people will be charged in the conspiracy.
The judge in the case, Senior U.S. District Judge Lloyd George, told prosecutors that he wanted to address the issue of compensation for homeowners. Currently, defendants have agreed to pay $1.5 million to compensate homeowners associations and banks. Vistana homeowners have claimed that the conspirators got the bulk of a $19 million construction defect settlement.
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…
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.
Read the full story…
Construction Defect Not a RICO Case, Says Court
August 4, 2011 — CDJ Staff
The US District Court of North Carolina has rejected an attempt by a homeowner to restart her construction defect claim by turning it into a RICO lawsuit. Linda Sharp, the plaintiff in the case of Sharp v. Town of Kitty Hawk, attempted to amend a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO) and argued that her case belonged in the federal courts.
Ms. Sharp sued in November, 2010 claiming construction defects. She sued in federal court, although the court noted that as she and most of the defendants are citizens of North Carolina, the state court would have been the appropriate jurisdiction. Further, the court noted that one federal claim Sharp made was dismissed with prejudice, leaving only the state law claims. These the court dismissed without prejudice, declining to exercise jurisdiction over North Carolina law.
After the dismissal, Ms. Sharp attempted to amend her complaint after the deadline. To do so, according to the court, she would be required to obtain consent from defendants or leave of the court. She did neither.
In his opinion, Judge W. Earl Britt rejected her motion for leave to amend. He also granted the defendants’ motion to dismiss. The clerk was directed to close the case.
Read the court’s decision…
Windows and Lawsuits Fly at W Hotel
July 5, 2011 — CDJ Staff
An Austin, Texas lawyer has filed a lawsuit against Starwood Hotels and Resorts, the operator of the W Hotel Austin, after two people were struck by glass which fell from the hotel’s balconies. YNN in Austin reports that the hotel has been closed indefinitely as construction workers removed panels. An additional three panels fell before work started. Randy Howry, the lawyer representing the injured parties, notes that in May glass falling from the W Hotel in Atlanta killed one woman and injured another. “Seventeen days pass and we put them on notice, our clients have put them on notice, yet nothing has been done an only after the glass fell yesterday did they do something about it,” YNN quotes Howry.
The hotel released a statement that they will be replacing all of the balcony glass to ensure safety for their guests and the general public. They relocated all hotel guests and coordinated with Austin officials to close adjacent sidewalks and roads. The statement identifies the firms involved with the design and construction of the balconies.
Read the full story …
Residential Construction Down in San Diego
September 13, 2012 — CDJ Staff
While new home construction is on the rise in some parts of the country, San Diego has seen a fall, comparing the first seven months of 2012 with the first seven months of 2011, dropping nine percent, according to an article in the San Diego Business Journal. The news isn’t all bad, since although July residential construction dropped sharply, nonresidential construction increased thirty-six percent.
Read the full story…
Going Green for Lower Permit Fees
October 23, 2012 — CDJ Staff
Clay County, Kansas is offering rebates on building permits for green homes. According to the Kansas City Star, building permits in the county are typically $2,500. The county will rebate anything from half to all of the permit fee, depending on how well the builder meets green standards. The county will monitor and inspect the process to make certain that builders adhere to their promises for green construction. The county hopes this will encourage green building by offsetting the cost.
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…
Kentucky Court Upholds Arbitration Award, Denies Appeal
June 15, 2011 — CDJ Staff
The Kentucky Court of Appeals has ruled in Lake Cumberland Community Action Agency v. CMW, Inc. affirming the arbitration award. CMW, Inc. was responsible for the construction of a facility to be used for pre-school students and the housing of Alzheimer patients and senior citizens. An agreement was made that any disputes would be heard by an arbitrator selected by the construction industry.
The plaintiff alleged that there were design and construction defects in the building trusses, violation of the Kentucky Building Code, and problems with the HVAC system. The arbitrator awarded $106,000 to the plaintiff which then sought to vacate the award. The circuit court upheld the arbitrator’s decision.
The Court of Appeals found that there was no basis for rejecting the arbitrator’s decision, noting “there is nothing to show that there was any fraud or bias on the part of the arbitrator.” The appeals court, with all three judges concurring, upheld the arbitration award.
Read the court’s decision
Largest Per Unit Settlement Ever in California Construction Defect Case?
October 28, 2011 — CDJ Staff
BusinessWire reports that the Chelsea Court Homeowners Association has settled their construction defect case for $5.4 million. That works out to $169,000 per unit, which BusinessWire describes as “California’s largest per-unit recovery known to be on record to date.”
Most of the money in the settlement is coming from insurance companies for the builder and thirteen subcontractors. Issues included roof and window leaks, deck failures, and unsafe walkways.
Read the full story...
Water Damage Covered Under Efficient Proximate Cause Doctrine
August 2, 2012 — Tred Eyerly, Insurance Law Hawaii
A U.S. District Court in Washington found coverage in what it described as a text book study of the efficient proximate cause rule. Hiller v. Allstate Pro. & Cas. Ins. Co., 2012 U.S. Dist. LEXIS 84862 (E.D. Wash. June 19, 2012).
The Hillers purchased a newly constructed home in December 2006. They also purchased an all-risk homeowner's policy from Allstate.
In July 2010, the Hillers discovered that the carpet in the basement of the residence was saturated with water. Allstate was immediately notified. Hiller began an investigation to attempt to determine the source of the water. He poured water into a downspout drain at the northwest corner of the residence. This caused water to leak into the northwest corner of the home's basement.
An area was excavated around the northwest downspout drain. The end of the drain pipe was partially blocked by rocks and had been wrapped with fabric landscaping material. Further, a “T” pipe installed at the foot of the drain was directing water toward the house's concrete foundation. Hiller notified Allstate that the problems with the drain was due to construction defects and the system was designed to fail.
Allstate denied the claim. Based upon Hiller's information, coverage was excluded under the policy's surface water, subsurface water, inherent vice, and latent defect exclusions.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Recent Case Brings Clarity and Questions to Statute of Repose Application
August 16, 2012 — Douglas Reiser, Builders Counsel
I have often chatted about the Washington Statute of Repose on this blog. The Statute of Repose prevents construction claims, for the most part, from being raised 6 years from the date of substantial completion or termination. Well, a recent Court of Appeals case dove deep into the specific determinative factors that tell us when to start the clock. It certainly raises questions about how long we really have to file suit.
The Statute of Repose has been a frequent topic here, so I will simply direct you to my prior post for further information on how this law works. A recent post was published about a lawsuit that might raise some questions about when and how the clock begins to roll, and claim periods begin to diminish.
Read the full story…
Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
