Construction Defect Claim Survives Insurer's Summary Judgment Motion Due to Lack of Evidence
December 23, 2024 —
Tred R. Eyerly - Insurance Law HawaiiThe court denied the insurer's motion for summary judgment on a construction defect claim due to lack of evidence. Statesboro Erectors, Inc. v. Owners Ins. Co., 2024 U.S. Dist. LEXIS 176555 (N.D. Ga. Sept. 30, 2024).
Griffco was the general contractor for a construction project. King Steel was hired as the "steel fabricator." King Steel subcontracted with Statesboro Erectors to complete certain construction work at the site. Statesboro agreed to the complete, proper and safe erection of the structural steel.
A steel collapse occurred at the construction site. According to King Steel, the collapse "appeared to have occurred due to lack of temporary cables or bracing for steel columns." Because of the collapse, King Steel was required to supply additional materials to replace the structural damage caused by the collapse.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Shea Homes CEO Receives Hearthstone Builder Humanitarian Award
February 12, 2014 —
Beverley BevenFlorez-CDJ STAFFBert Selva, Shea Homes CEO, received the Hearthstone Builder Humanitarian Award at the 2014 NAHB International Builders’ Show in Las Vegas, Nevada, according to Big Builder. Selva “has served for 11 years on HomeAid's board of directors,” and “is a big supporter of the nonprofit that works to provide housing for homeless families, victims of natural disasters, and veterans.” Furthermore, “Shea Homes has built eight HomeAid shelter projects valued at more than $5.2 million and has contributed nearly $850,000 to HomeAid and its chapters, making it one of the group's largest benefactors.” Not only does Selva actively support HomeAid, he also “serves as a national vice president of the Muscular Dystrophy Association.”
"I ask myself, 'How would it feel if that were me or my family?'" Selva told Big Builder. "When you personalize it, it becomes a lot more real and that's the motivation for me."
The award “includes recognition at an event during the 2014 International Builders' Show and a cash award to a charity of his choice.”
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How California’s Construction Industry has dealt with the New Indemnity Law
October 22, 2014 —
Mark S. Himmelstein, Esq. - Newmeyer & DillionIt has been almost two years since the California legislature enacted changes to the state’s indemnity law affecting commercial construction contracts. Although we do not yet have any court opinions analyzing the new statutes, the attorneys at
Newmeyer & Dillion now have real world experience in negotiating such indemnity provisions. It is time to evaluate how the construction community has reacted to the changes. In this article, we examine the practical applications of the new law to various construction agreements.
Enacted on January 1, 2013, the new legislation was the latest in a series of efforts by subcontractors and their insurers to eliminate “Type I” indemnity clauses. Under a Type I provision, a subcontractor has a duty to indemnify the developer or general contractor for the negligence of the developer or general contractor or other subcontractors, in addition to the negligence of the subcontractor itself. In 2006, the law was changed to preclude Type I provisions regarding “For Sale” residential construction defect claims. At that time, there was no such restriction enacted for commercial construction contracts. However, since then, commercial subcontractors have been seeking similar legislation. Their efforts culminated in the 2013 revisions regarding commercial contracts.
Commercial Subcontracts
Pursuant to the new indemnity statute — Civil Code section 2782.05 — we have revised our clients’ commercial subcontracts to:
(a) Eliminate the requirement that the subcontractor indemnify the general contractor for the general contractor’s “active negligence;” and
(b) Include the subcontractor’s options for defending claims for which they have an indemnity obligation.
Many subcontractors have responded: “Hey, wait a minute, the new legislation eliminated Type I indemnity so you (general contractor) cannot still require any indemnification for the general contractor’s negligence”. Well, that might be the rumor in subcontractor circles, but the new statute does not eliminate indemnity for the general contractor’s passive fault. In addition, the Civil Code lists 13 instances where the new indemnity restrictions do not apply.
Residential Subcontracts
The legislature did not make anyone’s job easier by drafting a different indemnity provision for commercial subcontracts than for residential subcontracts. In fact, the residential and commercial statutes are different in several critical respects. First, the restrictions on indemnity in the residential statute apply only to construction defect claims in newly constructed “For Sale” houses. The statute does not preclude Type I indemnity provisions for any other claims arising out of residential subcontracts. In contrast, the indemnity restrictions in the commercial statute apply to all claims arising out of commercial subcontracts. In addition, the commercial statute allows indemnity for the general contractor’s passive fault. Since some subcontractors on “residential” projects perform off-site “commercial” work as well, we have amended even residential subcontracts to address the subcontractors’ various indemnity obligations for different parts of their work (e.g., residential work versus commercial work).
Owner-Contractor Agreements
The January 1, 2013 new indemnity provisions apply not only to subcontracts, but also to owner-contractor agreements. Civil Code section 2782(c)(1) precludes indemnity for an owner’s active negligence. Interestingly, the exclusions contained in Civil Code section 2782.05 for subcontracts do not apply, and the statute does not provide contractors with the option of defending claims set forth in the sections concerning subcontracts. Therefore, we have revised the indemnity provisions in owner-contractor agreements to exclude indemnity for the owner’s active negligence.
Design Professional Agreements
The 2007 revisions with respect to “For Sale” residential contracts (discussed above), and the 2013 revisions for commercial contracts do not apply to design professionals. The new indemnity statute concerning commercial subcontracts specifically excludes design professionals from the “anti-indemnity” benefits provided to subcontractors. Therefore, Type I indemnity provisions are fair game and can still be included in design professional contracts.
Conclusion
In sum, Civil Code sections 2782 et seq. now contain an increasingly complex framework for indemnity rules in construction contracts. For example, there is one set of rules for “For Sale” residential construction defect claims (no indemnity for the developer’s active or passive negligence), another for any other claims arising out of residential construction (Type I indemnity is permitted), another for commercial subcontracts (no indemnity for the general contractor’s active negligence, but indemnity for the general contractor’s passive negligence unless any of the exceptions apply, in which case Type I indemnity is permitted), and yet another for commercial owner contractor agreements (no indemnity for the owner’s active negligence, but indemnity for the owner’s passive negligence with no exceptions).
California’s indemnity laws are complex, and rumors as to the impact of the new legislation have made it even more difficult to negotiate these provisions. It is imperative that indemnity clauses in construction contracts clearly delineate the obligations for the specific type or types of work contemplated by the contract. The legislature’s attempt to simplify indemnity obligations has actually made such provisions lengthier and more cumbersome. As experienced construction attorneys, our task is to draft indemnity provisions that comply with the laws, address potential claims, and are understandable.
Mr. Himmelstein is a partner in the Newport Beach office of Newmeyer & Dillion and practices in the areas of construction, real estate, business and insurance litigation. He also specializes in drafting and negotiating construction and real estate contracts. Mark can be reached at mark.himmelstein@ndlf.com.
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Construction Defect Claim Did Not Harm Homeowner, Court Rules
September 30, 2011 —
CDJ STAFFThe Minnesota Court of Appeals has ruled in Creswell v. Estate of Howe, a case in which a woman bought a home and then sued the seller’s estate, both sets of real estate agents, and the homeowner’s association over construction defects. A district court ruled against her, granting summary judgment to the other parties.
After buying a townhome “as is,” Catherine Creswell claims to have shared a thought with her agent that the homeowners association was, in the words of her agent, “trying to hide something.” Later, Creswell found that a few days before her closing, the board had discussed problems with “roofs, siding and soundproofing of the townhomes.” The court noted that “it was clear from the documents that appellant [Creswell] received that the association had known about various construction defects for many years, some of which affected [her] unit.”
Creswell initially sued the estate, the man who negotiated the sale for his mother’s estate, the real estate companies and the agents involved, the homeowners association, and four board members. Later she sued for punitive damages, dropped a claim for interference with contractual relations, and dismissed her claims against the individual board members. The court dismissed all of Creswell’s claims awarding costs to those she sued.
The appeals court has affirmed the decision of lower court, noting that Creswell “did not provide us with any argument why the district court erred in dismissing her unjust-enrichment, breach of contract, or rescission claims against the various respondents.” Nor did she provide evidence to support her claims of “breach of duty, fraud, and violation of consumer protection statutes.”
The court noted that Creswell could not sue the homeowners association over the construction defects because she “failed to prove that she was damaged by the association’s nondisclosure.” The court noted that “there are no damages in this case,” as Creswell “was never assessed for any repairs, she had not paid anything out-of-pocket for repairs, and she has presented no evidence that the value of her individual unit has declined because of the alleged undisclosed construction defects.”
The court granted the other parties motion to dismiss and denied Creswell’s motion to supplement the record. Costs were awarded to the respondents.
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Congratulations to Partners Nicole Whyte, Keith Bremer, Peter Brown, Karen Baytosh, and Associate Matthew Cox for Their Inclusion in 2022 Best Lawyers!
September 13, 2021 —
Dolores Montoya - Bremer Whyte Brown & O'Meara LLPBremer Whyte Brown & O’Meara, LLP is proud to announce Partners Nicole Whyte, Keith Bremer, Peter Brown, and Karen Baytosh have been selected by their peers for inclusion in the 2022 Edition of The Best Lawyers in America, and Associate Matthew Cox has been included in the Second Edition of Best Lawyers: Ones to Watch. Each person is being recognized for their diligent work in the areas of Family Law, Construction, Commercial, and Personal Injury Litigation.
Best Lawyers is the most respected peer-review publication in the history of the legal profession. Acknowledgment in both The Best Lawyers in America and Best Lawyers: Ones to Watch edition is widely regarded by both clients and legal professionals as a significant honor, bestowed on a lawyer by his or her peers.
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Dolores Montoya, Bremer Whyte Brown & O'Meara LLP
NYC Luxury-Condo Buyers Await New Towers as Sales Slow
September 24, 2014 —
Oshrat Carmiel – BloombergSales at One57, the ultra-luxury Manhattan condominium tower that set off a high-end residential construction boom, have slowed to a trickle amid competition from newer properties reaching the market.
Only two units at Extell Development Co.’s Midtown property went under contract this year through June 30, according to filings on the Tel Aviv Stock Exchange, where the company sells debt to investors. There were no sales in the final three months of 2013 at the building, which had earlier found buyers for two penthouses at more than $90 million each. About 25 of the 94 units on the market were unsold as of June 30, the filings show.
“This is not a normal pace,” Jonathan Miller, president of New York-based appraiser Miller Samuel Inc., said in an interview. “This building had many price increases when it was the only building out there, so maybe they overdid it. In other words, the sky is not the limit.”
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Oshrat Carmiel, BloombergMs. Carmiel may be contacted at
ocarmiel1@bloomberg.net
Resolving Subcontractor Disputes with Pass-Through Claims and Liquidation Agreements
May 13, 2024 —
Stephanie Cooksey - Peckar & Abramson, P.C.Imagine a project where you are unable to reach final completion due to an unresolved subcontractor claim. If the project owner is responsible for the claim, and both the owner and subcontractor are entrenched in their positions, how would you resolve this dispute?
The default option is a three-party lawsuit where the subcontractor sues you in your capacity as general contractor. By denying the claim, you bring the owner into the lawsuit as a liable party to the subcontractor’s claim. This option is efficient from the judicial system’s perspective, as it means one lawsuit instead of two. The subcontractor cannot sue the owner since the two have no contract between them. Thus, the subcontractor’s recourse is limited to suing the contractor. In the three-party lawsuit, you argue that if the subcontractor prevails in its claim against you, the owner is liable. If the owner successfully defends against the claim, the subcontractor takes nothing.
Putting judicial economy aside, it may not make economic sense for contractors to have a lawyer involved in litigating a case where they have no skin in the game. Fortunately, there is a better option than the three-party lawsuit on multi-party construction projects.
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Stephanie Cooksey, Peckar & Abramson, P.C.Ms. Cooksey may be contacted at
scooksey@pecklaw.com
DE Confirms Robust D&O Protection Despite Company Demise
February 18, 2015 —
James Yoder, Michael Onufrak and Siobhan Cole – White and Williams LLPOn Feb. 5, 2015, the United States Bankruptcy Court for the District of Delaware, per Judge Brendan L. Shannon, entered proposed findings of fact and conclusions of law in favor of the former president and CEO of Ultimate Escapes Inc., James M. Tousignant, and its chairman, Richard Keith, after determining that Tousignant’s actions in negotiating and executing a controversial asset purchase agreement were protected by the business judgment rule, despite the demise of the company a short time later. The failure of a business strategy, in and of itself, does not create liability on the part of the former directors and officers of a bankrupt company.
Background
Ultimate Escapes was a luxury destination club that provided its members with access to high-end vacation residences around the world. Unfortunately, Ultimate Escapes’ business suffered greatly from the economic downturn that began in 2008, and on Sept. 20, 2010, Ultimate Escapes filed voluntary petitions for relief pursuant to Chapter 11 of the Bankruptcy Code.
Reprinted courtesy of White and Williams LLP attorneys
James Yoder,
Michael Onufrak and
Siobhan Cole
Mr. Yoder may be contacted at yoderj@whiteandwilliams.com
Mr. Onufrak may be contacted at onufrakm@whiteandwilliams.com
Ms. Cole may be contacted at coles@whiteandwilliams.com
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