"Is the Defective Work Covered by Insurance?"
January 04, 2018 —
David Adelstein – Florida Construction Legal UpdatesOriginally Published by CDJ on March 16, 2017
I have been asked this question quite a bit from owners, in particular: “The contractor committed defective work, but it has insurance. Doesn’t the insurance cover this defective work?” Ugh, NO! There is this misconception that liability insurance, specifically, is the be-all-and-end-all when it comes to defective work. This could not be further from the truth. Don’t get me wrong – liability insurance is important; it is very, very important. However, liability insurance does not cover the risk of an insured’s defective work. Rather, liability insurance is designed to cover the risk of resulting damage: damage resulting from defective work. This is a significant distinction and one that is often overlooked. This is also why anyone encountering defective work should be working with an attorney to maximize insurance coverage or realize that the issue is not covered by insurance.
Reprinted courtesy of David Adelstein, Florida Construction Legal Updates
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
July 1, 2015 Statutory Changes Affecting Virginia Contractors and Subcontractors
June 10, 2015 —
Christopher G. Hill – Construction Law MusingsAs always seems to be the case, this year, as in others, the Virginia General Assembly has seen fit to “tweak” a few construction related statutes. All of these changes will go into effect on July 1, 2015.
The big one, and one that I posted about a while back is the change to the Virginia mechanic’s lien statute to prohibit contractual waiver of lien, payment bond or claims for additional costs prior to the furnishing of labor or materials. This one is big because it relieves a bit of the angst in the pre-contract negotiations between subcontractors and general contractors.
Another significant change, this one to the wording of Virginia Code 2.2-4309, found in House Bill 1628, clarifies the fact that this Virginia statute does not limit the amount a government contractor may claim or recover against a public body under a contract dispute. This is a big one considering the ruling in the Carnell Construction Corp. v. Danville Redevelopment Housing Authority LLC limiting such claims.
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Christopher G. Hill, Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
Bright-Line Changes: Prompt Payment Act Trends
September 16, 2024 —
Stephanie L. Cooksey - Peckar & Abramson, P.C.Untimely payment by the owner for contract work and additional work on construction projects can place an unfair financial burden on contractors and subcontractors. Most states have attempted to eliminate or mitigate this inequity in construction contracting through Prompt Payment Acts that govern payment deadlines and provide remedies for untimely payment. This article addresses the legislative trends aimed at minimizing the risk of non-payment, overdue payment, and withholding retainage in favor of downstream parties to a construction contract.
Fortifying Contractor Protections with “Bright-Line” Language
Over the last decade, states have been tightening prompt payment laws by replacing broad, general statutory language with bright-line rules. What is a bright-line rule? A specific or definite figure, a quantifiable marker—i.e., something owners, contractors, subcontractors, and suppliers should be aware of. Practically speaking, the more bright-line a prompt payment statute is, the greater the likelihood it will affect a construction project in your state.
A standard form construction contract, if not reviewed carefully, can create conflicts or confusion if it gives a party more leeway on payment deadlines than the applicable Prompt Payment Act. For example, consider an owner-issued Construction Change Directive (“CCD”) that requires a contractor to commence additional work immediately while a formal change order is negotiated. Consequently, a CCD can push financial burdens downstream, whether inadvertently or not, and may conflict with statutory payment deadlines. Nevertheless, an owner can be justified in its utilization of a CCD to maintain the project schedule. How should the parties competing interests be resolved?
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Peckar & Abramson, P.C.
Pool Contractor’s Assets Frozen over Construction Claims
October 22, 2013 —
CDJ STAFFThe State of Florida has frozen the assets of Nationwide Pools over claims of deceptive practices. Nationwide will be allowed to engage in pool construction during the lawsuit. The Florida Attorney General’s office alleges that Nationwide Pools failed to pay subcontractors, misrepresented warranties, and left customers with unfinished pools. The State of Florida is seeking restitution to consumers who did business with Nationwide Pools.
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CAPSA Changes Now in Effect
November 14, 2018 —
Wally Zimolong - Supplemental ConditionsBack in June, I posted about changes coming to the Pennsylvania Contractor and Subcontractor Payment Act (CAPSA), 73 P.S. Section 501, et. seq. The Act applies to virtually all private construction projects in Pennsylvania. As of last week (Oct. 10), those changes are effective. While there is some argument to the contrary, these changes are NOT retroactive and apply to all projects going forward from that date. To recap, here are some of the important changes you need to be aware of:
- Contractual waivers. Parties cannot waive the applicability of the act through contract. Therefore, any clause in a contract purporting to waive the Payment Act’s applicability is void.
- Suspension of work. Unpaid contractors and subcontractors have always enjoyed a common law right to suspend performance until payment was made. Now, they also have a statutory right to do so. Section 5 of the Payment Act ads a subpart (e) which states that an unpaid contractor or subcontractor can suspend performance without penalty if it is not paid.
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
There's No Such Thing as a Free House
April 01, 2015 —
Megan McArdle – BloombergShould people be able to get a free house by refusing to pay their mortgage?
That's the question Florida has to answer. The housing crisis is over, and the housing market is healing itself, though slowly in some places. But a backlog of foreclosures still remains ... and it has been going on so long that some homes are now past the statute of limitations for collecting debt. Lawyers for the homeowners are arguing that this means they get to keep the house. Lawyers for the banks are, unsurprisingly, arguing that each month they fail to pay the mortgage payment starts the statutory clock anew.
Both arguments create problems if the courts endorse them. If failing to pay really restarted the clock every month, then there wouldn't be a statute of limitations on debt -- creditors could just keep sending you bills forever and dun you right up to the edge of your grave. There's a very good reason that we have statutes of limitations on most crimes and most debts: The law recognizes that our interests in justice and contract rights must be balanced against other considerations. People need to be able to plan their lives without decades-old problems coming back to bite them, and also, as cases age, they get harder and harder to prove as witnesses die, evidence gets lost and memories fade.
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Megan McArdle, BloombergMs. McArdle may be contacted at
mmcardle3@bloomberg.net
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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Construction Legislation Likely to Take Effect July 1, 2020
April 27, 2020 —
Christopher G. Hill - Construction Law MusingsCoronavirus is dominating the news and planning for the effects of COVID-19 is a big deal for construction companies in the Commonwealth. However, these issues, though immediate, are not the only ones that have popped up here at the beginning of 2020. Several bills that I have been monitoring (here and here) have recently passed both the House of Delegates and the Virginia Senate and are on their way to the Governor for signature (a signature that is most likely going to happen in each case).
Among those bills that did not pass are a bill that would have eliminated right to work in Virginia and allowed so called “closed shops” as well as fair share fees legislation that would have required those that were not part of a union to pay certain portions of union expenses.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
