Seattle Washington Building Expert Directory

M&A Representation and Warranty Insurance Considerations in the Wake of the Coronavirus Pandemic

April 06, 2020 — Lori Smith & Patrick Devine - White and Williams Taking Care of Business Blog
Increasingly, M&A transactions are using representation and warranty insurance (RWI) to bridge the gap between a buyer’s desire for adequate recourse to recover damages arising out of breach of representations in the purchase agreement and a seller’s desire to minimize post-closing risk and holdbacks or purchase price escrows traditionally used as the means to satisfy such obligations. When it works, RWI provides a significant benefit to both parties: it mitigates the buyer’s risk in the event that the seller’s representations and warranties prove untrue, and it permits the seller to reduce the portion of the purchase price that it would otherwise have to leave in escrow to cover future claims for breach of those representations and warranties. However, as the coronavirus pandemic ravages the global economy, insurers are now expressly adding COVID-19 exclusions to their RWI policies. If RWI insurers decline coverage for these losses, the allocation of risk in the representations and warranties (and related indemnity provisions) will be more critical than the parties contemplated when they negotiated the transaction documents. Unlike in the case of a natural disaster, insurers cannot quantify the economic fallout that may result from the coronavirus pandemic. This uncertainty breeds systemic concern about the number of insurance claims that covered parties of all varieties will bring, which in turn creates an industry-wide reluctance to cover the claims. Based on discussions with market participants, we understand that, at the present time, 70% to 80% of RWI insurers are broadly excluding losses resulting from COVID-19 and similar viruses, epidemics, and pandemics (including government actions in response thereto), 5% to 10% are narrowly excluding specific coronavirus-related losses that are more likely to be implicated in a particular transaction (e.g., losses caused by business interruption), and 10% to 15% may be willing to narrow their exclusions upon completion of the underwriting process, depending on their comfort level after conducting rigorous and heightened diligence. Insurers’ concerns are wide-ranging, but the representations and warranties causing the greatest distress appear to be those regarding customer retention, supply chain matters, undisclosed liabilities, and the absence of changes between the date of the seller’s most recent financial statements and the transaction closing date. Reprinted courtesy of Lori Smith, White and Williams and Patrick Devine, White and Williams Ms. Smith may be contacted at smithl@whiteandwilliams.com Mr. Devine may be contacted at devinep@whiteandwilliams.com Read the court decision
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Limitations on the Ability to Withdraw and De-Annex Property from a Common Interest Community

October 10, 2013 — Derek Lindenschmidt — Higgins, Hopkins, McLain & Roswell, LLC.
On February 28, 2013, the Colorado Court of Appeals issued its opinion with regard to the ability of an owner (and in this case, a real estate investment owner) to withdraw and de-annex lots from a common interest community. Specifically, in Vista Ridge Homeowners Ass’n., Inc. v. Arcadia Holdings at Vista Ridge, LLC, 300 P.3d 1004 (Colo. App. 2013), the Court denied Arcadia’s appeal of a lower Colorado District Court ruling which invalidated Arcadia’s attempt to withdraw and de-annex 70 single-family lots which it owned from the 94-lot Vista Ridge Filing No. 9. The applicable Declaration reserved the right to withdraw or de-annex any portion of the community in accordance with the Colorado Common Interest Ownership Act (CCIOA), and further limited such right to the extent that “no portion of the Property may be withdrawn or de-annexed after a Lot or Unit in that portion of the Property has been conveyed to an Owner other than a Declarant or a Builder.” The decision ultimately turned on the meaning of a “portion” of the property, as intended by CCIOA, and as applied to the specific language in the Vista Ridge Declaration. Read the court decision
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Reprinted courtesy of Derek Lindenschmidt
Derek Lindenschmidt can be contacted at lindenschmidt@hhmrlaw.com

Study Finds Construction Cranes Vulnerable to Hacking

May 20, 2019 — Jeff Rubenstone - Engineering News-Record
When securing a jobsite against malicious hackers, most go to protect computer files, and few look up and worry about the tower cranes. But many cranes—whether tower, mobile or industrial—can be remotely run via radio wireless controllers, a useful feature for when operators need a clearer view of the load from the ground. Unfortunately, these wireless signals are vulnerable to hijacking, according to a study released earlier this year by security research firm Trend Micro. It found that the radio signals these crane controllers use are not encrypted over the air in any way, and can be easily intercepted and spoofed using off-the-shelf equipment and a basic knowledge of electronics and radio engineering. Read the court decision
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Reprinted courtesy of Jeff Rubenstone, ENR
Mr. Rubenstone may be contacted at rubenstonej@enr.com

No Global MDL for COVID Business Interruption Claims, but Panel Will Consider Separate Consolidated Proceedings for Lloyds, Cincinnati, Hartford, Society

August 24, 2020 — Eric B. Hermanson & Konrad R. Krebs - White and Williams
In a widely anticipated ruling, the Judicial Panel on Multidistrict Litigation has denied two motions to centralize pretrial proceedings in hundreds of federal cases seeking coverage for business interruption losses caused by the COVID-19 pandemic. However, the Panel has ordered expedited briefing on whether four separate consolidated proceedings should be set up for four insurers – Cincinnati, Society, Hartford, and Lloyds – who appear to be named in the largest number of claims. In seeking a single, industry-wide MDL proceeding, some plaintiffs had argued that common questions predominated across the hundreds of pending federal suits: namely, [1] the question of what constituted ‘physical loss or damage’ to property, under the allegedly standardized terms of various insurers’ policies; [2] the question whether various government closure orders should trigger coverage under those policies, and [3] the question whether any exclusions, particularly virus exclusions, applied. Reprinted courtesy of Eric B. Hermanson, White and Williams and Konrad R. Krebs, White and Williams Mr. Hermanson may be contacted at hermansone@whiteandwilliams.com Mr. Krebs may be contacted at krebsk@whiteandwilliams.com Read the court decision
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Property Owner’s Defense Goes Up in Smoke in Careless Smoking Case

September 23, 2019 — Michael J. Ciamaichelo - The Subrogation Strategist
Property owners owe a duty of reasonable care to avoid causing harm to neighboring properties. When a property owner knows or should know about a condition that poses a risk of danger to neighboring properties, the property owner must exercise reasonable care to make the condition safe. The Court of Special Appeals of Maryland recently held that, where hundreds of discarded cigarette butts had accumulated in a bed of mulch over an extended period of time prior to the fire at issue, the owner of the property with the mulch beds owed a duty of care to its neighbors to prevent a foreseeable fire. In Steamfitters Local Union No. 602 v. Erie Insurance Exchange, 2019 Md. App. LEXIS 430 (May 30, 2019), a fire originated in a strip of mulch at property owned by the Steamfitters Local Union No. 602 (Union) and caused damage to neighboring properties. The fire occurred when an unknown person discarded a cigarette butt into the mulch. Following the fire, investigators found “hundreds, if not thousands of cigarettes” in the mulch where the fire originated. A representative for the Union acknowledged that there were more butts in the mulch “than there should have been” and that, “[i]n the right situation,” a carelessly discarded cigarette could cause a fire. The Union, however, had no rules or signs to prohibit or regulate smoking at the property, where apprentices would often gather prior to class. The insurance companies for the damaged neighbors filed subrogation actions alleging that the Union, as the property owner, failed to use reasonable care to prevent a foreseeable fire. A jury found in favor of the subrogating insurers and against the Union. Read the court decision
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Reprinted courtesy of Michael J. Ciamaichelo, White and Williams LLP
Mr. Ciamaichelo may be contacted at ciamaichelom@whiteandwilliams.com

Economic Loss Rule Bars Claims Against Manufacturer

November 02, 2020 — David Adelstein - Florida Construction Legal Updates
The economic loss rule lives to bar a claim against a product manufacturer in a real estate transaction. In a products liability action, there needs to be personal injury or property damage, other than to the property itself, in order to recover economic damages. Otherwise, the economic loss rule will bar the recovery of such economic losses when the economic losses deal to the product itself. This is important to keep in mind in any product liability action against a manufacturer. In a recent case, 2711 Hollywood Beach Condominium Assoc’n, Inc., v. TRG Holiday, Ltd., 45 Fla. L. Weekly D2179a (Fla. 3d DCA 2020), a condominium association purchased the condominium from the developer. Subsequently, it noticed leaks with the fire suppression system in the condominium and sued multiple parties for damages for repairs due to the leaks and the replacement of the fire suppression system. One of the parties sued in negligence and strict liability was a manufacturer of pipe fittings used in the fire suppression system. The manufacturer moved for summary judgment based on the economic loss rule and relying on the 1993 Florida Supreme Court opinion in Casa Clara Condominium Assoc’n v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla. 1993), holding “the economic loss rule limited a defendant’s tort liability for allegedly defective products to injuries caused to persons or damage caused to property other than the defective product itself.” 2711 Hollywood Beach Conominium Assoc’n, supra. The trial court agreed with the manufacturer and granted summary judgment. On appeal, the Third District affirmed based on the economic loss rule:

The Association bargained for, purchased and received a building; [the manufactuer’s] fittings were only a component of the FSS [fire suppression system], incorporated into the building. Applying the rule set forth in Casa Clara, the Association purchased a completed building from the developer. [The manufactuer’s] fittings were “an integral part of the finished product and, thus, did not injure ‘other’ property.” Injury to the building itself is not injury to “other” property because the product purchased by the Association was the building. See Casa Clara, 620 So. 2d at 1247. The economic loss rule therefore bars the Association’s recovery as to [the manufacturer] to the extent that it sought damages to replace the FSS [fire suppression system] and repair damage to the building.

2711 Hollywood Beach Conominium Assoc’n, supra (internal citations omitted).

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Reprinted courtesy of David Adelstein, Kirwin Norris, P.A.
Mr. Adelstein may be contacted at dma@kirwinnorris.com

Boston Nonprofit Wants to Put Grown-Ups in Dorms

March 19, 2015 — Patrick Clark – Bloomberg
Here's a broad summary of millennials' housing problems: Stagnant wages and heavy debt loads have made it hard to afford a house, while high demand for rental units in the most happening cities allow landlords to raise rents, making it even harder to save for a down payment. In Boston, where these forces are particularly acute, urban policy wonks are offering a new solution: Put the young people in pens. OK, not quite. The authors of a new report from the Boston Foundation, a philanthropic organization that funds local nonprofits, prefer the phrase "millennial villages," dorm-like developments that maximize space by combining smaller living spaces with lots of common areas. Specifically, the report suggests building 10,000 units that make up for cramped living quarters by including shared lounges, health clubs, and shared areas for study, music practice, or launching a technology startup. For young tenants really interested in cutting costs, some could be built with shared kitchens. Read the court decision
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Reprinted courtesy of Patrick Clark, Bloomberg
Mr. Clark may be contacted at jclark185@bloomberg.net

Water Bond Would Authorize $7.5 Billion for California Water Supply Infrastructure Projects

October 29, 2014 — Garret Murai – California Construction Law Blog
When California voters cast their votes on November 4, 2014 they will decide the fate of a $7.5 billion water bond proposal – Proposition 1 – which would authorize $7.12 billion in new general obligation bonds and reallocate $425 million in previously authorized but unissued bonds for water supply infrastructure projects. Proposition 1 – The Water Quality, Supply and Infrastructure Improvement Act of 2014 If you live in California you know that the state is in the midst of its third straight year of drought. And it’s no ordinary drought. According to some, it’s the severest drought on record, as nearly the entire state experiences “severe” to “exceptional” drought conditions across its counties. The California Water Resources Board has implemented emergency water conservation regulations including hefty fines for those who don’t comply and even Governor Brown has allowed the grounds of the State Capitol to go brown to underscore the severity of the situation. Read the court decision
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Reprinted courtesy of Garret Murai, Kronick Moskovitz Tiedemann & Girard
Mr. Murai may be contacted at gmurai@kmtg.com

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