Disruption: When Did It Start and Where Will It End?
June 25, 2019 —
Brian Gallagher - Construction ExecutiveIf change is the only constant—as was famously observed by a Greek philosopher circa 500 B.C.—then why single out some changes as “disruption”?
Disruption is about more than just technology; it’s about more, even, than the rapid rollout and development of technology in the past couple of decades. The word disruption refers to processes or products that are fundamentally different from what is currently in use and that render unforeseen, large-scale changes. Early discussions of disruption (the term was coined by Harvard Business School professor Clayton M. Christensen in a 1995 Harvard Business Review article) compared incremental change in existing systems, which are usually supported by established corporations, to innovations that start out as something completely fresh, limited in their appeal and flawed in initial iterations.
The construction industry was—and still is—late to adopt most technologies and late in experiencing overall disruption. It also lags behind other industries when it comes to efficiency and productivity. McKinsey reported that construction is one of the “least digitized industries in the world,” despite employing approximately 7% of the world’s working-age population and representing one of the world economy’s largest sectors. Disruption is likely to be fast approaching now, even for the construction industry. But its delay may confer the benefit of allowing construction companies to learn from other industries’ mistakes.
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Brian Gallagher, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Approaches to Managing Job Site Inventory
January 04, 2018 —
Jessica Stark - Construction InformerOriginally Published by CDJ on August 30, 2017
There is no question that organization on the job site can mean the difference between efficient performance and costly errors. A simple mistake can cost a company thousands, which is why details are carefully articulated and supervisors become better scrutinizers than magazine editors. But for some reason, many companies don’t consider managing job site inventory under this same attentive category, or perhaps they don’t know about the technology available to help them do it.
For contractors, keeping track of every piece of material and equipment lowers losses and keeps crews busy. This is especially true for contractors in the trades who often have specialized equipment in inventory such as power supplies, HVAC “smart energy” components or inspection equipment. Once everything is accounted for, the possibility of loss is decreased and there’s a chance to evaluate the use of all materials and equipment. This can show the efficiency of allotted resources. Is there enough equipment on the site to get tasks completed? Is there a need for more? Less? Having excess equipment can sometimes prepare a crew for problem scenarios. But it can also mean the construction company is overpaying for unneeded resources. However, the only way to know is by effectively managing job site inventory. That includes all equipment and materials
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Jessica Stark, Construction Informer
Contract’s Definition of “Substantial Completion” Does Not Apply to Third Party for Purposes of SOL, Holds Court of Appeal
June 15, 2020 —
Garret Murai - California Construction Law BlogThose of you in the construction industry know that the two primary statutes of limitation are the 4-year year statute of limitations for patent defects and 10-year statute of limitations for latent defects. Both statutes begin to run on “substantial completion.”
In Hensel Phelps Construction Co. v. Superior Court of San Diego, Case No. D076264 (January 22, 2020), the 4th District Court of Appeal examined whether the term “substantial completion,” as used in Civil Code section 941, which applies to residential construction, can be defined by the parties’ contract and applied to third-parties.
The Hensel Phelps Case
Hensel Phelps Construction Co. entered into a prime construction contract with the owner and developer of a mixed-use project in San Diego. Hensel Phelps was the general contractor on the project. The project included a residential condominium tower which would eventually be managed and maintained by Smart Corner Owners Association. Smart Corners was not a party to the contract.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Nashville Stadium Bond Deal Tests Future of Spectator Sports
December 14, 2020 —
Amanda Albright & Danielle Moran - BloombergAmerica’s country-music capital is making a bet on the world’s most popular sport.
A Nashville, Tennessee agency is selling $225 million of bonds to finance the construction of a 30,000-seat Major League Soccer stadium in Music City, anticipating it could be a boon once spectator sports emerge from the pandemic. Local officials have faith that it will: the Metropolitan Government of Nashville and Davidson County agreed to step in if revenue from the stadium isn’t enough to cover the debt payments, insulating bondholders from risk.
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Amanda Albright, Bloomberg and
Danielle Moran, Bloomberg
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Water Leak Covered for First Thirteen Days
April 11, 2018 —
Tred R. Eyerly - Insurance Law HawaiiThe Florida Court of Appeals recently held the policy's exclusion for repeated water seepage over a period of fourteen days or more does not exclude loss caused by the seepage for the first thirteen days.
Hicks v. Am. Integrity Ins. Co. of Florida, 2018 Fla. App. LEXIS 2616 (Fla. Ct. App. Feb. 23, 2018). Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com
Construction Manager’s Win in Michigan after Michigan Supreme Court Finds a Subcontractor’s Unintended Faulty Work is an ‘Occurrence’ Under CGL
August 03, 2020 — Gabrielle Szlachta-McGinn - Newmeyer Dillion
On June 29, 2020, the Michigan Supreme Court overturned a longstanding precedent that commercial general liability (“CGL”) insurers have historically relied upon to deny insurance coverage for claims involving pre-1986 CGL policies. See Hawkeye-Security Ins. Co. v. Vector Const. Co., 185 Mich. App. 369, 372, 460 N.W.2d 329, 331 (1990). In its recent ruling, the state Supreme Court unanimously agreed that an Insurance Services Office, Inc. (“ISO”) 1986 standard CGL policy, which is sold to construction contractors across the United States, provides coverage for property damage to a policyholder’s work product that resulted from a subcontractor’s unintended faulty workmanship. Skanska USA Bldg. Inc. v. M.A.P. Mech. Contractors, Inc., No. 159510, 2020 WL 3527909 (Mich. June 29, 2020).
In 2008, Skanska USA Building, Inc., the construction manager on a renovation project for Mid-Michigan Medical Center, signed a subcontract with defendant M.A.P. Mechanical Contractors (“MAP”) to install a new heating and cooling (“HVAC”) system. Id. During the renovation, MAP installed some of the expansion joints in the new HVAC system backwards. Id. The defective installation caused approximately $1.4 million in property damage to concrete, steel and the heating system, which Skanska discovered nearly two years after MAP completed the project. Id. After performing the repairs and replacing the damaged property, Skanska sought repayment for the repair costs from MAP and also submitted a claim to Amerisure seeking coverage as an insured under the CGL policy. Id. When Amerisure rejected Skanska’s claim, Skanska sued both parties. Id. Amerisure relied on the holding in Hawkeye and argued that MAP’s defective workmanship was not a covered “occurrence” under the CGL policy, which the policy defined as an accident. Id. at *4.
The Michigan Court of Appeals ignored the express language contained in the CGL policy and applied a prior appellate court precedent from Hawkeye, finding that MAP’s faulty work was not an “occurrence” and thus, did not trigger CGL coverage. Id. at *4. The Court of Appeals further reasoned that Skanska was an Amerisure policyholder and that the only property damage was to Skanska’s own work, which was not covered under the CGL policy. Id. at *5.
In a landmark decision, the Michigan Supreme Court reversed, holding unanimously that the Court of Appeals incorrectly applied the holding of Hawkeye because it failed to consider the impact of the 1986 revisions to standard CGL insurance policies. Id. at *10. Chief Justice Bridget M. McCormack explained that the Hawkeye decision rested on the 1973 version of the ISO form insurance policy, which specifically excluded certain business risks from coverage such as property damage to a policyholder’s own work. Id. The Supreme Court agreed that while Hawkeye was correctly decided, it did not apply here because the 1986 revised ISO policy includes an exception for property damage caused by a subcontractor’s unintentional faulty work. Id.
The Supreme Court said that under the plain reading of the current CGL policy language, an “accident” could include a subcontractor’s unintentional defective work that damaged a policyholder’s work product and thus, may qualify as an “occurrence” covered under the policy. Id. at *9. The Supreme Court defined an “accident” (which was not defined in the Amerisure policy) as “an undefined contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.” Id. at *5; see Allstate Ins. Co. v. McCarn, 466 Mich. 277, 281, 645 N.W.2d 20, 23 (2002). The Supreme Court noted that there was no evidence suggesting that MAP purposefully installed the expansion joints backwards, nor was there evidence indicating that the parties affected by MAP’s negligence anticipated, foresaw, or expected MAP’s defective installation or property damage. Skanska, 2020 WL 3527909, at *4. Therefore, the Supreme Court concluded that an “occurrence” may have happened, which would trigger coverage under the CGL policy. Id. at *10.
Although this landmark decision changes Michigan law, the decision is limited to cases involving the 1986 ISO policy language revisions to CGL insurance policies. Id. The Supreme Court's decision does not overturn Hawkeye, but rather limits Hawkeye’s authority to cases involving the 1973 ISO form. Id.
Gabrielle Szlachta-McGinn was a summer associate at Newmeyer Dillion as part of the firm's 2020 summer class. You may learn more about Newmeyer Dillion's construction litigation services and find the group's key contacts at https://www.newmeyerdillion.com/construction-litigation/.
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Construction Litigation Roundup: “Wrap Music to an Insurer’s Ears?”
February 05, 2024 — Daniel Lund III - Lexology
The general contractor on a New Orleans condominium construction project obtained a Contractor Controlled Insurance Program/CCIP policy or "Wrap-Up" policy for the job.
An accident occurred on the job when a construction elevator/hoist fell, injuring several workers. The elevator/hoist was provided by a subcontractor, pursuant to a rental agreement and related subcontract with the general contractor. Contained within the subcontract was a provision which states that the general contractor "has arranged for the Project to be insured under a controlled insurance program (the "CCIP" or "WrapUp"),” and that the CCIP shall provide "commercial general liability insurance and excess liability insurance, in connection with the performance of the Work at the Project site."
A third-party administrator for the wrap-up policy had been in communication with the subcontractor prior to the commencement of the work, “specifically advising that insurance coverage was not automatic” and providing the subcontractor with an enrollment form for the CCIP. Ultimately, the subcontractor “declined to comply with the request,” stating that the subcontractor would "not participate in paying any wrap insurance premiums" – because the subcontractor had its own insurance. Read the court decision
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Reprinted courtesy of Daniel Lund III, Phelps
Mr. Lund may be contacted at daniel.lund@phelps.com
Surge in Home Completions Tamps Down Inflation as Fed Meets
June 17, 2015 — Carlos Torres – Bloomberg
American builders are tamping down what little inflation there is.
Construction companies completed 392,000 buildings with five or more units at an annualized rate in May, the most since 1988, Commerce Department figures showed Tuesday in Washington.
“The pickup in demand is pushing up rents and also creating more incentive for builders to put up more units,” said Michael Hanson, a senior economist at Bank of America Corp. in New York. The jump in completions “helps offset some of the upward pressure we’ve seen” on rents, said.
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Reprinted courtesy of Carlos Torres, Bloomberg