Ill-fated Complaint Fails to State Claims Against Broker and FEMA
September 10, 2014 —
Tred R. Eyerly – Insurance Law HawaiiA complaint lodged against the insureds' broker and FEMA was dismissed for failure to state a claim. Lopez v. State Farm Gen. Ins. Co., 2014 U.S. Dist. LEXIS 109803 (E.D. La. Aug. 8, 2014).
The insureds held a Standard Flood Insurance Policy (SFIP) issued by FEMA, but sold by the broker. The insureds alleged that their property was totally destroyed by Hurricane Isaac. FEMA paid the insureds $234,513.02 for damage to their dwelling and $80,566.17 for its contents, for a total of $315,079.19. This was $34,920.81 below the policy limits. The insureds sued, claiming FEMA negligently miscalculated their damages, misvalued their property, and improperly adjusted their claim. The insureds also alleged that the broker failed to properly advise them regarding the nature of their coverage, the true value of their property, or to purchase the correct amount of insurance on their behalf.
The negligent procurement claim against the broker failed because the insureds did not allege any specific facts tending to establish that the broker failed to use reasonable diligence in procuring their insurance. Likewise, the negligent misrepresentation claim against the broker was dismissed. Insurance agents had a duty to supply their customers with correct information, and they could be liable for negligent misrepresentation if they provided incorrect information and an insured was damaged. Here, the insureds did not allege a breach of the duty to supply correct information.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Former Mayor Arrested for Violating Stop Work Order
October 30, 2013 —
CDJ STAFFThe former mayor of Springfield, Florida has been arrested on charges of insurance fraud. More than a year ago, an investigator for the Bureau of Workers’ Compensation found that an employee of Walker’s construction company was working without workers’ compensation and issued a stop work order. Walker’s employees continued work.
The charges were delayed because Walker challenged the stop work order. Once it was determined that the stop work order was issued properly, Walker was charged with a third-degree felony.
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PCL Sues Big Bank for $30M in Claimed NJ Mall Unpaid Work
July 16, 2023 —
Mary B. Powers - Engineering News-RecordDenver-based PCL Construction Services sued JPMorgan Chase Bank in federal court earlier this month for $30 million in claimed unpaid work and interest related to construction of a $5-billion northern New Jersey mall and entertainment center that also faces other financial challenges since its COVID-19-impacted opening in 2019.
Reprinted courtesy of
Mary B. Powers, Engineering News-Record
ENR may be contacted at enr@enr.com
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Foreign Entry into the United States Construction, Infrastructure and PPP Markets
September 11, 2023 —
Robert A. James - Gravel2Gavel Construction & Real Estate Law BlogTwo major forces are combining to create extraordinary opportunities for infrastructure project participants in the United States. One is the long pent-up demand for overhaul of the nation’s roads, ports, dams and other civil works. The American Society of Civil Engineers (ASCE) routinely
awards “C-” or worse grades for the status and safety of the country’s backbone facilities. The lack of prior investment is apparent to anyone who uses public transit in the U.S. and then uses similar conveniences in major cities around the globe.
The other is the set of political incentives laid down by recent legislation including the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, which have authorized over $1 trillion for programs, many of which call for new and expanded facilities. According to the 2023 U.S. Construction Industry Databook Report, the national construction market is expected to record a compound annual growth rate of 5.2% during 2023 – 2027, and the aggregate output is expected to reach $1.7 trillion by 2027.
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Robert A. James, PillsburyMr. James may be contacted at
rob.james@pillsburylaw.com
Massachusetts Business Court Addresses Defense Cost Allocation and Non-Cumulation Provisions in Long-Tail Context
March 06, 2022 —
Eric B. Hermanson & Austin D. Moody - White and WilliamsA business court in Massachusetts has weighed in on two key issues affecting allocation of insurance coverage for long-tail liabilities in Massachusetts. Specifically, in Crosby Valve LLC et al. v. OneBeacon America Insurance Company, et al.,
[1] involving asbestos bodily injury claims, Judge Kenneth Salinger of the Suffolk County Business Litigation Session addressed:
- whether defense costs in long-tail cases were subject to the same pro rata allocation scheme the Supreme Judicial Court (SJC) adopted to govern successively triggered insurers' indemnity obligations in Boston Gas Company v. Century Indemnity Company;[2] and
- whether “non-cumulation” provisions, like those addressed by the New York Court of Appeals in Matter of Viking Pump,[3] were consistent with this pro rata allocation methodology.
As to the first issue — i.e., allocation of defense costs — Judge Salinger declined to follow Boston Gas, and found the SJC’s holding in that case was limited to an insurers’ indemnity obligations. The SJC in Boston Gas had focused on the language of the policy insuring agreement, saying “[t]his policy applies to ... property damage ... which occurs anywhere during the policy period.” The SJC had also pointed to the policy definition of “occurrence” as “an accident, including injurious exposure to conditions, which results, during the policy period, in property damage neither expected nor intended from the standpoint of the insured.”
[4]
Reprinted courtesy of
Eric B. Hermanson, White and Williams LLP and
Austin D. Moody, White and Williams
Mr. Hermanson may be contacted at hermansone@whiteandwilliams.com
Mr. Moody may be contacted at moodya@whiteandwilliams.com
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Toolbox Talk Series Recap - The Mediator's Proposal
January 21, 2025 —
Douglas J. Mackin - The Dispute ResolverIn our final edition of the year of Division 1's Toolbox Talk Series on December 19, 2024,
Matthew Argue and
Gene Witkin discussed the use of the Mediator’s Proposal to bridge any final gaps to settlement between parties to a mediation. For those unfamiliar, a Mediator’s Proposal is a settlement proposal that the mediator makes to all parties to the dispute simultaneously. Each party then advises the mediators in confidence whether they accept or reject the proposal. The Mediator will communicate to all the parties that the Mediator’s Proposal is accepted only if all parties accept.
Argue and Witkin emphasized that the Mediator’s Proposal is not a shortcut and should not be used simply to split the difference. Instead, it is a tool available to the mediator to push the parties to resolution after they have had robust negotiations, understand the strengths and weaknesses of the positions of each side, and have made progress towards at least getting within range of one another. A successful Mediator’s Proposal depends on the mediator (and the parties) having sufficient information to make a credible recommendation and creating an environment where all parties will consider the Mediator’s Proposal in good faith.
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Douglas J. Mackin, Cozen O’ConnorMr. Mackin may be contacted at
dmackin@cozen.com
Construction Law Client Alert: California Is One Step Closer to Prohibiting Type I Indemnity Agreements In Private Commercial Projects
June 15, 2011 —
Haight Brown & Bonesteel, LLPOn June 1, 2011 by majority vote, the California Senate passed Senate Bill 474, which would amend Civil Code section 2782, and add Civil Code section 2782.05. The passage of this new law is a critical development for real estate developers, general contractors and subcontractors because it will affect how these projects are insured and how disputes are resolved.
Civil Code section 2782 was amended in 2007 to prohibit Type I indemnity agreements for residential projects only. Since 2007, various trade associations and labor unions have lobbied to expand those very same restrictions to other projects. These new provisions apply to contracts, entered into after January 1, 2013, that are not for residential projects, and that are not executed by a public entity. The revisions provide that any provision in a contract purporting to indemnify, hold harmless, and defend another for their negligence or other fault is against public policy and void. These provisions cannot be waived.
A provision in a contract requiring additional insured coverage is also void and unenforceable to the extent it would be prohibited under the new law. Moreover, the new law does not apply to wrap-up insurance policies or programs, or a cause of action for breach of contract or warranty that exists independently of the indemnity obligation.
The practical impact of this new law is that greater participation in wrap-up insurance programs will likely result. While many wrap-up programs suffer from problems such as insufficient limits, and disputes about funding the self-insured retention, the incentive for the developer or general contractor to utilize wrap-up insurance will be greater than ever before because they will no longer be able to spread the risk of the litigation to the trades and the trade carriers.
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Reprinted courtesy of Steve Cvitanovic of Haight Brown & Bonesteel, LLP.
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Before Celebrating the Market Rebound, Builders Need to Read the Fine Print: New Changes in Construction Law Coming Out of the Recession
November 26, 2014 —
Alan H. Packer - Newmeyer & Dillion, LLPAs the homebuilding market continues to improve, many builders find themselves maneuvering familiar roads. That said, important new realities have taken hold since the market collapse. Navigating these changes requires extra thought for practical and legal reasons.
Using Old Designs “Off the Shelf”?
The adoption of the California Building Standards Code in 2010, with an updated schedule to go into effect January 1, may complicate the use of older designs. In addition, some builders are contemplating building on pads constructed five or more years ago, temporarily shelved until market conditions improved. Because of changes in both the applicable Code and due to possible changes in the underlying soils and drainage, these projects require additional scrutiny before starting construction.
Mechanic’s Lien Law Changes
Not too long ago, the California Legislature recently overhauled the entire mechanic’s lien law system in California. New forms, new statutory references, new rules and deadlines are all applicable to projects under construction now. Make sure your documents are up to date, as the use of older forms (particularly for liens, progress payments, and final payments) could create legal problems in the future.
Indemnity Law Changes
Since 2006, California lawmakers have passed four rounds of legislation aimed at limiting indemnity provisions in construction contracts. The laws are aimed at two aspects of indemnity law: “Type 1” indemnity provisions, and liability for the costs of defending a claim.
Type 1 Indemnity. California law previously permitted a builder to obtain “Type 1” indemnity from its subcontractors for all claims. Under a Type 1 provision, if a claim arose out of the trade’s work, the trade was fully responsible to defend and indemnify the builder – even if other trades or the Builder were partially at fault. Some cases even allowed, typically in a commercial context, the builder to obtain Type 1 indemnity even if the trade was not negligent, as long as the claim involved its work.
Defense Obligation. In 2008, California’s highest court issued an opinion in Crawford v. Weather Shield, evaluating an indemnity provision requiring trade (a window supplier/manufacturer) to defend the builder in claims involving allegations of damages arising out of the trade’s work. Because the trade had contractually agreed to defend the builder, the Court held it responsible for the builder’s defense costs -- even though, ultimately, the trade was found
not liable for the actual damages claimed.
Recent legislation after Crawford has dramatically shifted how indemnity provisions will be enforced. Builders may no longer obtain Type 1 indemnity for residential construction defect claims covered by SB800; instead, indemnity is limited to the extent a claim arises out of the trade’s work. Even more recent legislation applied these changes to claims arising out of commercial construction projects. The recent legislation allows the trades “options” on how to defend the builder, with an eye toward requiring that they pay only a “reasonably allocated” portion for the builder’s defense costs.
Smart builders are refining their contract documents to take into account these new limitations on indemnity provisions.
Insurance Market Changes
Due to uncertainties in subcontractor insurance and other factors, many builders have also converted their liability insurance from a “bring your own” model to “wrap-up” insurance, where the builder’s policy also covers their trades. Builders should carefully examine their subcontracts in light of this change as well.
Trade Partner Changes
On a practical level, many trade partners, particularly in the residential sector, have gone out of business or moved on to greener pastures. Builders need to find and negotiate contracts with new trade partners on the fly, and educate them on the builders’ procedures for payment and construction.
SB800 documentation
A decade ago, most builders updated their purchase documents and subcontracts for California’s “Right to Repair Law” (also known as SB800), which set forth functionality standards for construction defects in residential housing, and procedures for resolving claims prior to litigation. Builders ramping up to meet market demand should examine how they implemented SB800 changes in contract documents. Issues to consider:
- Whether to opt out of -- or back into -- statutory procedures.
- Whether to include arbitration or judicial reference provisions to control where claims are litigated after the SB800 process.
- Re-training personnel to preserve SB800 rights, including sign-offs on purchase documentation and recordation of key documents.
- Recent Court of Appeal decisions have complicated the SB800 landscape, potentially opening the door to “common law” tort claims in at least subrogation contexts. Strategic planning at the document stage may be a good way to mitigate this risk as the cases wind their way through the judicial process.
The continuing surge in building activity is a welcome sign for builders who have weathered the storm. Before taking too many steps, builders should consult with counsel, their designers, and their insurance advisors to take into account the new realities of this recovering housing market.
About the Author
Alan H. Packer is a partner in the expanding Walnut Creek, CA, office of the law firm of
Newmeyer & Dillion LLP whose specialties include real estate, insurance, and construction litigation. To reach Alan, call 925.988.3200 or email him at alan.packer@ndlf.com.
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