Pay Loss Provision Does Not Preclude Assignment of Post-Loss Claim
July 30, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe court determined that a policy's loss payment provision did not bar a post-loss assignment. One Call Prop. Servs. v. Sec. First Ins. Co., 2015 Fl. App. LEXIS 7643 (Fla. Ct. App. May 20, 2015).
After One Cell performed emergency water removal for the insured, the insured assigned his rights to policy proceeds as payment. One Cell alleged that Security First refused to reimburse the insured adequately for the services provided. One Cell filed suit, and Security First moved to dismiss. The trial court granted the motion based upon the policy's non-assignment provision.
One Cell appealed. One Cell argued post-loss assignments were valid under Florida law even when the policy contained an anti-assignment provision, and the right to payment accrued on the date of the loss.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Kiewit-Turner Stops Work on VA Project—Now What?
December 31, 2014 —
Craig Martin – Construction Contractor AdvisorThe Kiewit-Turner joint venture created to build the VA’s hospital near Denver stopped work on December 10 after the Civilian Board of Contract Appeals ruled that the VA breached the contract. Kiewit-Turner claims that the VA owes it over $100 million on the project. And, given the appeals board’s recent ruling entirely against the VA, the claim may get some traction.
This project has been plagued with problems from the beginning. One strange aspect of the project is the VA’s apparent unwillingness to incorporate value engineering or require the architects to redesign the project to fit within the budget. The latest budget was $582M, while the latest projections show that the project will cost more than $1 billion to complete.
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Craig Martin, Lamson, Dugan and Murray, LLPMr. Martin may be contacted at
cmartin@ldmlaw.com
Reports of the Death of SB800 are Greatly Exaggerated – The Court of Appeal Revives Mandatory SB800 Procedures
September 03, 2015 —
Steven M. Cvitanovic & David A. Harris – Haight Brown & Bonesteel LLPIn a 20 page opinion, the Court of Appeal for the Fifth District repudiated the holding of Liberty Mutual Insurance Co. v. Brookfield Crystal Cove, LLC (2013) 219 Cal.App.4th 98 (“Liberty Mutual”), and held that plaintiffs in construction defect actions must comply with the statutory pre-litigation inspection and repair procedures mandated by SB800 (the “Act”) regardless of whether they plead a cause of action for violation of the Act. The Case, McMillin Albany LLC v. Superior Court (Carl Van Tassell), (Ct. of Appeal F069370) breathes new life into the Act’s right to repair requirements, and reinforces the Act’s stated purpose of seeking to limit the number of court cases by allowing a builder to resolve construction defect claims by agreeing to repair the homeowners’ residence.
In McMillin, 37 homeowners filed a lawsuit against McMillin, the builder of their homes, alleging eight causes of action, including strict products liability, negligence, and breach of express and implied warranty. Plaintiffs’ third cause of action alleged violations of the Act. The plaintiffs did not follow the Act’s notification procedures and filed their lawsuit without providing McMillin with an opportunity to repair the alleged defects. Plaintiffs and McMillin attempted to negotiate a stay of the lawsuit to complete the Act’s prelitigation procedures. When talks broke down, plaintiffs dismissed the third cause of action and contended they were no longer required to follow the Act’s prelitigation procedures. McMillin filed a motion to stay with the trial court. The trial court denied McMillin’s motion concluding that under Liberty Mutual, “[plaintiffs] were entitled to plead common law causes of action in lieu of a cause of action for violation of the building standards set out in [the Act], and they were not required to submit to the prelitigation process of the Act when their complaint did not allege any cause of action for violation of the Act.”
Reprinted courtesy of
Steven M. Cvitanovic, Haight Brown & Bonesteel LLP and
David A. Harris, Haight Brown & Bonesteel LLP
Mr. Cvitanovic may be contacted at scvitanovic@hbblaw.com
Mr. Harris may be contacted at dharris@hbblaw.com
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Direct Contractors In California Should Take Steps Now To Reduce Exposure For Unpaid Wages By Subcontractors
February 07, 2018 —
Nora Stilestein, Candace Matson , and Mercedes Cook - Construction & Infrastructure Law BlogAs of January 1, 2018, direct contractors in California who make or take a contract “for the erection, construction, alteration, or repair of a building, structure, or other private work” are jointly and severally liable with their subcontractors for any unpaid wages, fringe benefits and other benefit payments or contributions owed to wage claimants. Governor Brown approved
AB 1701 on October 14, 2017. The new law puts the onus on direct contractors to not only monitor their own payroll practices, but to ensure that their subcontractors and lower tier subcontractors are engaging in proper payroll practices.
Reprinted courtesy of Sheppard Mullin attorneys
Nora Stilestein,
Candace Matson and
Mercedes Cook
Ms. Stilestein may be contacted at nstilestein@sheppardmullin.com
Ms. Matson may be contacted at cmatson@sheppardmullin.com
Ms. Cook may be contacted at mcook@sheppardmullin.com
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Vermont Supreme Court Finds COVID-19 May Damage Property
November 07, 2022 —
Michael S. Levine & Lorelie S. Masters - Hunton Insurance Recovery BlogAs reported on this
blog, policyholders have long been of the view that the presence of substances like COVID-19 and its causative virus SARS-CoV-2, which render property dangerous or unfit for normal business operations, should be sufficient to trigger coverage under commercial all-risk insurance, as has been the case for more than 60 years.
However, many courts, federal courts in particular, despite decades of pro-policyholder precedent, have embraced the view that “viruses harm people, not [property].” Thirty-one months after the start of the pandemic, the first state high court has gone in a different direction, according greater weight to pro-policyholder precedent.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth and
Lorelie S. Masters, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Masters may be contacted at lmasters@HuntonAK.com
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Framework, Tallest Mass Timber Project in the U.S., Is On Hold
August 07, 2018 —
Nadine M. Post - Engineering News-RecordThe tallest mass-timber building development in the U.S. is "on hold for the foreseeable future," according to the developer, named project^. The 12-story mixed-use building, known as Framework, has been under development in Portland, Ore., since 2014. Construction was first delayed a year ago and currently is postponed because of changing market conditions, which have had a negative impact on the development's bottom line. These include inflation, escalating construction costs and fluctuations in the tax credit market, says the developer.
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Nadine M. Post, ENRMs. Post may be contacted at
postn@enr.com
Appellate Court Endorses Discretionary Test for Vicarious Disqualification of Law Firms Due To New Attorney’s Conflict
February 07, 2018 —
David W. Evans and Stephen M. Tye – Publications & Insights In
California Self-Insurer’s Security Fund et al. v. The Superior Court of Orange County (1/26/2018 – No. G054981), the Fourth Appellate District considered whether vicarious disqualification of a law firm is mandatory or discretionary where an attorney with a conflict joins a firm and the firm enacts an ethical screen to prevent transmission of confidential information between the new attorney and the rest of the firm.
This case arose from an effort by the California Self-Insurer’s Security Fund (the “Fund”) to be reimbursed for workers’ compensation benefits advanced on behalf of the Healthcare Industry Self-Insurance Program (the “Program”). The Fund hired Nixon Peabody LLP (“Nixon Peabody”) to represent it in connection with this matter. In November 2013, represented by members of Nixon Peabody’s San Francisco office, the Fund filed a lawsuit naming 304 members of the Program as defendants. Approximately 170 defendants have since settled.
Two of the non-settling defendants (“Moving Parties”), were represented by Michelman & Robinson, LLP (“M&R”). From approximately 2009 until February 1, 2017, attorney Andrew Selesnick served as Chair of M&R’s Health Care Department at the firm’s Los Angeles office, managing a team of attorneys who represented clients in the healthcare industry. Commencing in 2014, a team of four attorneys at M&R, including Selesnick, represented the Moving Parties and four other defendants, the latter of whom have since settled. Selesnick was actively involved, including participating in a confidential discussion pertaining to Moving Parties’ liability and damages and receiving many e-mails containing communications about the common defense of the remaining 170 defendants.
Reprinted courtesy of
David W. Evans, Haight Brown Bonesteel and
Stephen M. Tye, Haight Brown Bonesteel
Mr. Evans may be contacted at devans@hbblaw.com
Mr. Tye may be contacted at stye@hbblaw.com
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How Small Mistakes Can Have Serious Consequences Under California's Contractor Licensing Laws.
February 15, 2018 —
Eric Reed - Myers, Widders, Gibson, Jones & Feingold, LLPIn construction, some risks have nothing to do with how well a contractor executes a project. Licensing problems is one of these risks. Even a brief lapse caused by an unintentional administrative error can give the CSLB grounds to discipline a contractor, or enable a customer to seek disgorgement and other remedies provided by Business and Professions Code section 7031. This article discusses five tips for mitigating the liabilities associated with licensing problems.
Tip 1: Take workers' compensation insurance very seriously. Workers’ compensation insurance problems can trigger license suspension in California. Business and Professions Code section 7125.4 calls for automatic suspension if a contractor cannot provide proof of workers’ compensation insurance for any period of time. This is particularly serious for residential remodelers who claim exemption for workers’ compensation but are later discovered – usually during litigation with a homeowner – to have “off the books” workers helping them. Courts can declare the contractor retroactively unlicensed under these circumstances and order it to disgorge,
i.e., to pay back, every penny paid by the customer for the entire project (even for materials). (Bus. & Prof. Code, § 7031, subd. (b);
Wright v. Issak (2007) 149 Cal.App.4th 1116.) The contractor will also find itself unable to collect any amounts owed to it by the customer. (Bus. & Prof. Code, § 7031, subd. (a).)
Tip 2: Watch out for licensing confusion after a merger or acquisition. The economic downturn of 2008 and 2009 resulted in consolidation throughout the building industry. The newly merged or acquired entities often allowed redundant licenses to expire, assuming they could complete all pending projects under the umbrella of the acquiring company's license. Many learned this was a mistake the hard way. Armed with the California Supreme Court's opinion in
MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, customers began refusing to pay invoices and demanding disgorgement under Business and Professions Code section 7031 because the original contractor did not maintain licensure “at all times.” Many of these customers succeeded.
Tip 3: If a license suspension has occurred or is imminent, prepare to prove substantial compliance. Section 7031(a) and (b) give a disgruntled or indebted customer every incentive to capitalize on a contractor's licensing problems. Subdivision (e) is where a contractor must turn to protect its interests if this happens. It allows the contractor to prove “substantial compliance” with licensing requirements and avoid (a)’s and (b)’s sharp edges if it can show the following:
(1) The contractor “had been duly licensed as a contractor in this state prior to the performance of the act or contract”;
(2) It “acted reasonably and in good faith to maintain proper licensure”; and
(3) It “acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure.”
The Court of Appeal confirmed in
Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882 that a contractor, upon request, is entitled to a hearing on these three factors before it is subjected to disgorgement under Section 7031(b). The legislature amended Section 7031 shortly after the Court of Appeal published this case. The Assembly’s floor analysis went so far as to directly quote the opinion’s observation that penalizing a construction firm for “technical transgressions only indirectly serves the Contractors Law’s larger purpose of preventing the delivery of services by unqualified contractors.” (Assem. Com. on Bus. and Prof., Off. of Assem. Floor Analyses, analysis of Sen. Holden's No. 1793 (2015-2016 Reg. Sess.) as amended August 2, 2016, p. 2.) This echoed an industry consensus that clarifying the law was needed to ensure that properly licensed and law-abiding construction firms were not “placed at fatal monetary risk by malicious lawsuits motivated by personal gain rather than consumer protection.” (Assem. Com. on Judiciary, com. on Assem. Bill No. 1793 (2015-2016 Reg. Sess.), pp. 6-7.)
Unfortunately, existing law does not give many examples of what it means to act “reasonably and in good faith to maintain proper licensure” or to act “promptly and in good faith” to fix license problems. A practical approach is for a contractor to work backwards by assuming it will need to prove substantial compliance at some point in the future. Designated individuals within the organization should have clear responsibility over obtaining and renewing the proper licenses and should keep good records. If necessary, these designees can testify about the contractor's internal policies and their efforts to fix licensing problems when they arose. For example, if the suspension resulted from not providing the CSLB proof of workers’ compensation insurance, the designee can testify about the cause (a broker miscommunication, transmission error,
etc.) and produce documents showing how he or she worked promptly to procure a certificate of insurance to send CSLB. Saved letters, emails, and notes from telephone calls will provide designees and their successors with an important resource months or years down the line if a dispute arises and the contractor is required to reconstruct the chronology of a licensing glitch and prove its due diligence.
Tip 4: Don't sign new contracts unless all necessary licenses are active and any problems are resolved. A recently-formed contractor should not begin soliciting and signing contracts until all required licenses are confirmed as “active.” The first requirement of substantial compliance – being “duly licensed as a contractor in this state prior to the performance of the act or contract” – cannot be met by a contractor that first obtains its license mid-project. (Bus. & Prof. Code, § 7031, subd. (e)(1);
Alatriste v. Cesar’s Exterior Designs (2010) 183 Cal.App.4th 656.) A licensed contractor should also consider refraining from signing new contracts if there is any reason to believe its license might be suspended in the near future – especially if the suspension will be retroactive. Having a suspension on record at the time of contracting may complicate the question of whether the contractor was “duly licensed . . . prior to performance” for the purposes of substantial compliance.
Tip 5: Any judgment against a contractor can cause license suspension if not handled promptly and correctly. The Business and Professions Code authorizes the CSLB to suspend the license of a contractor that does not pay a construction related court judgment within 90 days. The term “construction related” is interpreted to include nearly all types of disputes involving a contractor. (16 Cal. Code Reg. 868;
Pacific Caisson & Shoring, Inc. v. Bernards Bros. Inc. (2015) 236 Cal.App.4th 1246, 1254-1255.) This means a contractor should treat a judgment against it for unpaid office rent, for example, as one carrying the same consequences as one arising from a construction defect or subcontractor claim. The contractor should also not assume that filing an appeal, or agreeing with the other side to stay enforcement, automatically excuses the 90-day deadline in the eyes of the CSLB. It does not. A contractor must notify the CSLB in writing before this period expires, then post bond for the amount of judgment, if it wishes to delay payment for any reason. (Bus. & Prof. Code, § 7071.17, subd. (d).) A suspension may result if it does not. This applies even to small claims judgments.
Recent case law and the 2016 amendments to Business and Professions Code section 7031 provide some solace to those caught in the dragnet of California's licensing laws. But avoiding these problems altogether is preferable. Consider licensing the foundation of a successful business and deserving of the same attention as the structures a contractor builds.
Eric R. Reed is a business and insurance litigator in the Ventura office of Myers, Widders, Gibson, Jones & Feingold, LLP.
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Eric Reed, Myers, Widders, Gibson, Jones & Feingold, LLPMr. Reed may be contacted at
ereed@mwgjlaw.com
