Construction Demand Unsteady, Gains in Some Regions
June 29, 2011 — CDJ Staff
The Associated General Contractors of America reported Tuesday, June 28 that construction employment increased in 120 of the 337 metropolitan areas surveyed between May 2010 and May 2011.
‘While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist. ‘The close to even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting.”
The largest number of jobs created was in the Dallas, Texas region, with 5,600 new jobs, a five percent increase. The northern Massachusetts/southern New Hampshire region near Haverhill saw the greatest percentage increase, although that twenty-two percent increase represents only 800 new jobs. The Chicago, Illiinois area added 4,600 jobs, a four percent increase.
Other regions were not so lucky. The Atlanta, Georgia area saw a loss of 7,400 jobs, an eight percent loss. Las Vegas also lost 7,400 jobs, which there represented a sixteen percent decline. The New York City area lost 6,700 jobs, a six percent reduction. The Riverside, California area lost 5,300 jobs, a nine percent loss.
Stephen E. Sandherr, the association’s chief executive officer, blamed a combination of regulation and budget squeezes. "Some in Washington never met a regulation they didn’t like and others never found a penny they didn’t want to pinch. Together that makes for a bad way to boost employment and a great way to stifle the private sector and neglect critical economic infrastructure.”
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California Posts Nation’s Largest Gain in Construction Jobs
March 28, 2012 — CDJ Staff
California added about 8,900 construction jobs in January, 2012, as compared to December, 2011, leading the nation in the number of added construction jobs. Thirty-four other states also saw added construction jobs. A year prior, only twenty-eight states added construction jobs. The Associated General Contractors of America analyzed the monthly report from the Labor Department. Ken Simonson, the chief economist for the Associated General Contractors of America noted that “the gains this January partly reflect very mild weather this winter and exceptionally cold and snowy conditions a year before.”
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Changes to Arkansas Construction and Home Repair Laws
September 30, 2011 — CDJ Staff
A new law, set to take effect in 2012, lowers the ceiling on when work must be done by a licensed contractor. Through the end of the year, projects costing $20,000 or more had to be done by an Arkansas licensed contractor. As of January 1, 2012, that new limit will be $2,000.
This will apply to all single-family residences and according to Lovely County Citizen, covers “construction, alteration, renovation, repair, modification, improvement, removal, demotion, or addition to a pre-existing structure.” Residential building contractors will be required to have workers compensation insurance, as will home improvement contactors if they take jobs worth more than $20,000.
Morris Dillow, a building inspector in Holiday Island, said, “It will get these scammers out of here who are ripping people off.” He cited the example of a contractor who after getting paid for roof repairs and painting, left the job unfinished.
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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…
Texas res judicata and co-insurer defense costs contribution
March 23, 2011 — Original story by CDCoverage.com, March 23, 2011
In Truck Ins. Exchange v. Mid-Continent Casualty Co., No. 03-08-00526-CV (Tex. App. 3d Aug. 27, 2010), insured contractor DCI was sued by the project owner seeking damages for defective construction. DCI tendered its defense to its CGL insurers Truck and Mid-Continent. Truck agreed to defend while Mid-Continent denied a defense. While the underlying suit was pending, Mid-Continent sued DCI, but not Truck, and obtained a judicial declaration of no duty to defend or indemnify DCI in the underlying suit. After settling the underlying suit, Truck sued Mid-Continent seeking contribution towards defense costs and indemnity payments. The state trial court entered summary judgment for Mid-Continent. The intermediate appellate court affirmed.
Read the full story...
Reprinted courtesy of CDCoverage.com
The U.S. Tenth Circuit Court of Appeals Rules on Greystone
November 18, 2011 — Derek J. Lindenschmidt, Higgins, Hopkins, McLain & Roswell, LLC
On November 1, 2011, the Tenth Circuit Court of Appeals ruled on the certified question of whether property damage caused by a subcontractor’s faulty workmanship is an “occurrence” for purposes of a commercial general liability (CGL) insurance policy. In Greystone Const., Inc. v. National Fire & Marine Ins. Co., No. 09-1412 (10th Cir. Nov. 1, 2011), the Tenth Circuit determined that because damage to property caused by poor workmanship is generally neither expected nor intended, it may qualify under Colorado law as an occurrence and liability coverage should apply. Id. at 2.
The short history of the Greystone case is as follows. In Greystone Const., Inc. v. National Fire & Marine Ins. Co., 649 F. Supp. 2d 1213 (D. Colo. 2009), two contractors and one of their insurers brought an action against a second insurer after the second insurer refused to fund the contractors’ defense in construction defect actions brought by separate homeowners. Id. at 1215. The U.S. District Court for the District of Colorado, relying on General Sec. Indem. Co. of Arizona v. Mountain States Mut. Cas. Co., 205 P.3d 529 (Colo. App. 2009), granted summary judgment in favor of the second insurer on the basis that the homeowners’ complaints did not allege accidents that would trigger covered occurrences under the second insurer’s policies. Id. at 1220. Notably, the Greystone, General Security, and other similar decisions prompted the Colorado General Assembly to enact C.R.S. § 13-20-808, which was designed to provide guidance for courts interpreting perceived coverage conflicts between insurance policy provisions and exclusions. The statute requires courts to construe insurance policies to favor coverage if reasonably and objectively possible. C.R.S. § 13-20-808(5).
The Tenth Circuit began its analysis by determining whether C.R.S. § 13-20-808, which defines the term “accident” for purposes of Colorado insurance law, would have a retroactive effect, and thereby settle the question before the court. The Tenth Circuit gave consideration to several Colorado district court orders issued since the enactment of C.R.S. § 13-20-808 which have suggested that the statute does not apply retroactively, including Martinez v. Mike Wells Constr., No. 09cv227 (Colo. Dist. Ct., Mar. 1, 2011), and Colo. Pool. Sys., Inv. V. Scottsdale Ins. Co., No. 09cv836 (Colo. Dist. Ct., Oct. 4, 2010). The Tenth Circuit also attempted to ascertain the General Assembly’s intent behind the term “all insurance policies currently in existence...” Greystone, No. 09-1412, at 12. The Tenth Circuit determined that the General Assembly would have more clearly stated its intentions for the term if it was supposed to apply retroactively to expired policies, rather than those still running. Id. at 12-13. Ultimately, the Tenth Circuit decided that C.R.S. § 13-20-808 did not apply retroactively, but noted that “the retrospective application of the statute is not necessarily unconstitutional.” Id. at 9, 11-14. As such, the Tenth Circuit advised that it was required to decide the question presented in the appeal under the principles of Colorado insurance law. Id. at 15.
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Reprinted courtesy of Higgins, Hopkins, McLain & Roswell, LLC. Mr. Lindenschmidt can be contacted at lindenschmidt@hhmrlaw.com
One World Trade Center Due to Be America’s Tallest and World’s Priciest
February 10, 2012 — CDJ Staff
As One World Trade Center rises, so does the price tag. After construction delays and cost overruns, the cost of the building at the site of the September 11 attacks has risen to $3.8 billion. Part of the expense of the skyscraper is the heavily reinforced base of the building. The elevator shafts are also heavily reinforced, all part of guarding against future terrorist attacks.
In comparison, the world’s tallest tower, the Burj Khalifa in Dubai, cost only $1.5 billion, less than half the cost of One World Trade Center. As a result, the Port Authority does not see the building as being profitable in near future. In order to fund it, the agency is raising tolls on bridge and tunnel traffic.
Currently, about the half the unfinished building is leased. Construction is expected to conclude in 2013.
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Nevada Assembly Sends Construction Defect Bill to Senate
June 6, 2011 — CDJ Staff
In a 26 to 16 vote, the Nevada Assembly has passed Assembly Bill 401, which extends the time limit for legal action over home construction defects. According to the Las Vegas Sun, Assembly member Marcus Conklin, Democrat of Las Vegas, said the bill was about “keeping the consumer whole.” However, Ira Hansen, Republican of Sparks, told the sun that suits are happening before contractors can make repairs. The bill would allow attorney fees even if repairs are made.
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Arizona Contractor Designs Water-Repellant Cabinets
September 9, 2011 — CDJ Staff
Dubbing his product “Baltic Duck,” a Mesa, Arizona building contractor is offering household cabinets made with specially treated water-repellent plywood instead of the usual particle board. Pete Celano calls his product Baltic Duck because the plywood is made in the Baltic region of Eastern Europe. To further protect the cabinets from moisture, a silicone-based sealant is applied to the corners and edges.
Celano’s cabinets use standard decorative fronts. The design of the cabinets allows spilled liquids to drain away without encountering the decorative wood.
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Follow Up on Continental Western v. Shay Construction
March 28, 2012 — Brady Iandiorio, Colorado Construction Litigation
Writing in Construction Law Colorado, Brady Iandiorio revisits the case Continental Western v. Shay Construction. He promises to continue to follow cases dealing with Colorado HB 10-1394.
Recently the Court ruled on two Motions to Reconsider filed by Defendants Milender White and Shay Construction.
Procedurally, the Motions to Reconsider were ruled on by the Honorable William J. Martinez, because the day after the motions were filed the action was reassigned to Judge Martinez. In the short analysis of the Motion to Reconsider, the court leaned on Judge Walker D. Miller’s ruling on the summary judgment and his analysis of the (j)(5) and (j)(6) exclusions.
As a quick refresher regarding the grant of summary judgment, Judge Miller agreed with Continental Western’s argument that the asserted claims were excluded under the “damage to property” exclusion. The policy’s exclusions state: “(j) Damage to Property . . . (5) that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations; or (6) that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” Judge Miller found that both exclusions (j)(5) and (6) applied to both Shay’s allegedly defective work.
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Reprinted courtesy of Brady Iandiorio of Higgins, Hopkins, McClain & Roswell, LLC. Mr. Iandiorio can be contacted at iandiorio@hhmrlaw.com.
Can We Compel Insurers To Cover Construction Defect in General Liability Policies?
December 9, 2011 — Douglas Reiser, Builders Counsel
Recently, I read an article on Engineering News-Record that outlines a remarkable movement by as many as four states, to mandate coverage of construction defects in contractor general liability insurance policies. Say what? Is this a reality? What will become of affordable insurance?
Commercial General Liability insurance, or CGL, is your basic liability insurance. Every contractor doing business in the State of Washington, and most likely those abroad, has this insurance. Contractors buy this insurance to protect them from unforeseen liabilities arising from their negligence - and right now it’s reasonably affordable.
Why is it so affordable in such a risk-heavy industry? Because CGL policies significantly limit the scope of their coverage. Coverage is generally afforded for damages resulting from negligence (The roofer put a hammer through the drywall contractor’s wall) or which resulted from your defective construction (the roof leaked and flooded the rest of the house). But, that coverage does not include replacement of your faulty construction (the contents of the home might be protected by your leaky roof - the leaky roof itself is not).
The debate over coverage typically stems from the definition of “occurrence,” a term used to describe the event from which coverage arises, “resulting loss,” a term used to describe the type of loss covered.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Seven Tips to Manage Construction Defect Risk
July 10, 2012 — CDJ Staff
Jody T. Wright looks at “seven strategies being used around the country to identify, manage and mitigate your exposures” in a piece in Business Insurance. Wright, Senior VP, Construction Department Manager for Lockton Companies in Denver, gives seven simple steps from the perspective of a insurer.
His first step is to match your project to your insurance. He suggests keeping the riskier projects separate, noting that from an insurer’s point-of-view, “any project that creates a homeowners association carries a higher potential threat of future litigation.” This leads to his second point: you need to “determine what makes your liability insurer nervous.” In other words, talk with your insurer.
His third point suggests that builders look back and see if there is a pattern of problems that have lead to payouts from your insurer. Keep your insurer happier by making sure these areas don’t continue to be problems. Nor should you look for new problems. He suggests against leading in new technologies.
Three more points deal with being careful about with whom you associate. He tells builders to negotiate their contracts, avoiding clauses that would obligate a builder to “indemnify the owner for the negligent work of others that they did not control.” Avoid subcontractors “with loss patterns that might affect your project and reputation.” Builders should identify “owners with a pattern of suing contractors” adding that risk to the cost of the job. They should also identify “the most effective attorneys and expert witnesses” and get them involved before the litigation starts.
Read the full story…
Florida: No Implied Warranties for Neighborhood Improvements
July 10, 2012 — CDJ Staff
A new law in Florida ends suits from homeowners associations from suing over damages from off-site improvements on the basis of implied warranties. Rob Samouch, writing for the Naples Daily News quotes House Biill 1013: “There is no cause of action in law or equity available to a purchaser of a home or to a homeowners’ association based upon the doctrine or theory of implied warranty of fitness and merchantability or habitability for damages to off-site improvements." The off-site improvements are defined as: "The street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is not located on or under the lot on which a new home is constructed.”
Mr. Samouch notes that “there are no statutory warrant rights in homeowner associations of fitness and merchantability or habitability like there is for condominium associations.” He predicts that the Florida legislature will have to address this issue “once new homeowners start screaming and yelling to them about their shoddy infrastructure for which they have no legal remedy.”
The bill took effect on July 1, 2012 and applies to “all cases accruing before, pending on, or filed after July 1, 2012.”
Read the full story…
Court Sends Construction Defect Case from Kansas to Missouri
August 2, 2012 — CDJ Staff
The United State Court of Appeals for the Tenth Circuit has ruled in Mid-Continent Casualty Company v. The Village at Deer Creek Homeowners Association. The prior case was heard by the United States District Court for the District of Kansas. In this appeal, Mid-Continent sought a declaratory judgement. The Village at Deer Creek Homeowners Association moved to dismiss, and the district court had granted this, giving jurisdiction to the Missouri state courts.
The homeowners association had sued Greater Midwest Builders, Ltd., who had constructed the subdivision, in the Kansas state courts. The suit ended with a verdict against Greater Midwest for more than $7 million. The association and other plaintiffs in that case filed for equitable garnishment against State Auto, Mid-Continent, and Greater Midwest. State Auto removed the garnishment action to federal court in Missouri. Mid-Continent moved to sever the actions against it and transfer the case to the District of Kansas.
Subsequently, the plaintiffs filed a notice of voluntary dismissal in the Western District of Missouri. A second garnishment action followed in which Mid-Continent was named as an additional plaintiff. State Auto again removed to the Western District of Missouri, while Mid-Continent moved to sever and transfer to the District of Kansas. The Kansas court granted the association’s motion to dismiss.
In the appeal, Mid-Continent sought a declaratory judgment. This was denied by the appeals court. The district court “concluded that the Missouri courts were better situated to provide complete relief to all parties involved in the coverage dispute.” The appeals court affirmed the association’s movement to dismiss. Mid-Continent’s motion was denied as moot.
Read the court's decision…
Contractors Admit Involvement in Kickbacks
December 9, 2011 — CDJ Staff
Two New Jersey contractors have pleaded guilty to charges that they made false representations for a government contract in a case related to kickbacks for construction work done in two school districts. New Jersey is recommending that the two men, Martin Starr and Stephen Gallagher, will each pay $50,000 in penalties, serve up to a year in jail, and be unable to accept public contracts for five years.
Last month, another individual in the case, Kenneth Disko, who had been the engineer for the school district, pleaded guilty on a similar charge. In addition to a $50,000 penalty, he will be serving three to five years in prison. A fourth conspirator, Robert Berman, the former business administrator for one of the school districts, has to pay a $13,000 fine and cooperate with the investigation. He is also barred from public employment in New Jersey and has been terminated from his position.
Starr admitted to preparing fictitious quotes which appeared to be from other contractors in order that his firm would seem to be the lowest bidder. Gallagher helped in preparing the fictitious bids and also provided cash kickbacks to Disko.
Read the full story…
Construction Upturn in Silicon Valley
August 17, 2011 — CDJ Staff
Work resumed after nearly three years on an office tower in Santa Clara, according to the San Jose Mercury News. Work had stalled on the building due to the economy, but now the developer is planning a second five-story building on the site. Other dormant projects in the area are also getting restarted. Santa Clara County saw the addition of 1,800 construction jobs in June.
A spokesperson for the Operating Engineers Local 3 in Alameda told the paper, “two years ago we had five thousand folks on the out-of-work list. It’s now down to about 1,700.”
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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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Gut Feeling Does Not Disqualify Expert Opinion
July 6, 2011 — CDJ Staff
The New Jersey Supreme Court issued a ruling in June on the case of Nevins v. Toll in which they reversed an earlier decision and remanded the case to a lower court for retrial. At issue in the case was the testimony of the plaintiff’s expert, J. Anthony Dowling. In depositions, Mr. Dowling said that his estimates for repair were based on a “gut feeling.” Dowling said he had “very little” experience in cost estimates for single-family homes. The defendants sought to bar Dowling’s testimony which was granted by the judge. Without an expert, Ms. Nevin’s case was dismissed.
Describing Dowling’s report as “far from a model of how an expert’s opinion in a construction case should be presented,” the court noted that Dowling is not a professional expert witness. However, the court did note that Dowling is a professional cost estimator. Despite Mr. Dowling using his “gut feeling” to construct his estimate, the New Jersey Supreme Court felt that whether his estimate is convincing is “a question for the jury.”
Read the court’s opinion…
