Commonwealth Court Holds That Award of Attorney's Fees and Penalties is Mandatory Under the Procurement Code Upon a Finding of Bad Faith
October 29, 2014 —
William J. Taylor and Michael Jervis – White and Willams LLPIn a decision regarding a payment claim by a highway contractor against the City of Allentown, the Commonwealth Court of Pennsylvania has held that an award of attorney's fees and penalties is mandatory under the terms of the Pennsylvania Procurement Code, 62 Pa.C.S. § 3901 et seq., upon a finding of bad faith by the non-paying government agency, even though the statute only states that a court “may” award such fees and penalties.
In A. Scott Enterprises, Inc. v. City of Allentown, Cmwlth. Ct. No. 2163 C.D. 2013, the plaintiff, A. Scott Enterprises, Inc. (Scott), won a contract with the City of Allentown (City) to construct a one mile roadway. Several weeks after commencing work, Scott learned that soil at the construction site was potentially contaminated with arsenic, and was instructed by the City to suspend its work. Because of the soil contamination, additional work would be required to complete the project and Scott submitted proposals for the additional work plus its suspension costs. However, the City never approved the additional work and the project was never completed. The City never paid Scott for costs incurred due to the suspension of the work and Scott filed suit to recover its losses. The jury found that the City had breached the contract with Scott and had acted in bad faith in violation of the Procurement Code, and awarded damages to Scott for its unreimbursed suspension costs. However, the trial court denied Scott’s request for an award of attorney's fees and penalty interest. Both Scott and the City appealed the final judgment to the Commonwealth Court, which reversed the trial court’s refusal to award attorney's fees and penalties.
Reprinted courtesy of
William J. Taylor, White and Williams LLP and
Michael Jervis, White and Williams LLP
Mr. Taylor may be contacted at taylorw@whiteandwilliams.com; Mr. Jervis may be contacted at jervism@whiteandwilliams.com
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Fifth Circuit Asks Texas Supreme Court to Clarify Construction Defect Decision
November 07, 2012 —
CDJ STAFFThe Fifth Circuit Court has withdrawn its decision in Ewing Construction Company v. Amerisure Insurance Company, pending clarification from the Texas Supreme Court of its decision in Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London. The Fifth Circuit had applied the Gilbert case in determining that a contractual liability exclusion barred coverage for faulty workmanship. The Insurance Journal reports that this decision was both applauded and criticized, with a concern noted that “an insurer would now have its pick of either the ‘your work’ exclusion or the contractual liability exclusion without the exception for subcontracted work.”
The Fifth Circuit is now asking the Texas Supreme Court two questions to clarify Gilbert, which Brian S. Martin and Suzanne M. Patrick see as a sign that the Court has realized that it overly expanded the scope of the earlier ruling. A response is expected from the Texas Supreme Court by spring 2013.
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Are COVID-19 Claims Covered by Builders Risk Insurance Policies?
May 04, 2020 —
Jason M. Adams, Gibbs Giden Locher Turner Senet & Wittbrodt LLP and Cheryl L. Kozdrey, Saxe Doernberger & Vita, P.C.If you are an attorney, insurance broker, or other professional representing developers and contractors, then your clients have likely reached out with concerns about losses related to COVID-19. One common question is whether there is potential coverage under builders risk insurance policies.
The short answer is: It depends. As with most questions pertaining to insurance coverage, the answers depend on the specific policy language and underlying facts required to trigger coverage. Builders risk policies are even more fact specific due to the lack of uniformity of base policy forms and endorsements between insurance carriers.
The first step in any analysis is to gather facts and carefully document any impending and potential damages or delays. The facts are crucial because the coverage analysis may vary depending on the specific reason the project was shut down. For example, the analysis would be different if the project was shut down as a result of an express government order, such as those in Northern California and Washington, versus the project shutting down as a result of workers testing positive for COVID-19. Properly analyzing builders risk coverage involves a granular account of the facts and damages, and can require a great deal of hair splitting with respect to specific policy language.
Regardless of the strength of the insured’s facts and damages, or the breadth of its policy language, the policyholder still likely faces an uphill battle in finding coverage for COVID-19 related claims. The unfortunate reality of most builders risk policies is that they are property policies that require some evidence of physical loss or damage to trigger coverage. Whether or not COVID-19 claims constitute property damage will be the subject of great debate and litigation over the coming months and years. The outcome will likely depend on how the insured’s jurisdiction ultimately rules on the litany of COVID-19 cases that have already been filed – specifically, how broadly each court interprets the meaning of “physical loss or damage.”
Although these key issues have yet to be clearly defined by the courts, some policies are better than others and there are specific variables that could affect the likelihood of coverage. For example, some of the more policyholder-friendly insurance programs may contain coverage extensions for delay in completion, business interruption, loss of rental income, or civil authority that may not be tied to the property damage requirement, and which would tend to support coverage for COVID-19 claims.
Even if the insured crosses the initial threshold and can demonstrate a covered claim, the following common endorsements and exclusions may require additional analysis depending on the facts.
- Virus or Pandemic Exclusions: Virus or pandemic exclusions are not as common on builders risk policies as they may be on other forms of coverage. However, they do exist and, if present, result in a significant barrier to coverage. As with the policy itself, every endorsement is different and should be analyzed in terms of the express language contained in the endorsement and the facts.
- Abandonment or Cessation of Work: Most builders risk policies include provisions that preclude coverage in the event of the abandonment of the project or a lengthy cessation of work. As a result, the insured should take steps to articulate to the carrier that the project has not been abandoned, and that there exists an intent to return as soon as possible. The insured should also maintain a record of ongoing project oversight and protection efforts taken during the period when construction operations are suspended.
- Security and Safety Requirements: Many builders risk policies contain provisions requiring the insured to maintain protective safeguards and security protocols throughout the pendency of the project. Safety fencing, lighting and security guards are common examples. The policy should be analyzed to ensure that the policyholder can meet any such requirements during a COVID-19 related shutdown. For example, can the insured continue to staff a security guard? If not, arrangements will likely need to be made with the carrier depending on the language of the policy.
- Insurable Limits: Builders risk policies are typically underwritten based upon the total completed value of the structure, including materials and labor. The insured will need to analyze the policy to consider whether increased material or labor costs as a result of COVID-19 will alter the terms of coverage, trigger any escalation clauses, or result in an increase in premium due. If increased cost projections become apparent, the insured should report these changes to the carrier immediately.
- Extensions of Coverage: The insurance industry was facing a hard market even before the COVID-19 pandemic, which resulted in higher premiums and limited coverage options. The COVID-19 pandemic has only exacerbated these issues and it may be difficult to obtain coverage extensions on projects that have been shut down. The insured should work with its risk management team (risk manager, insurance broker and lawyer) to engage the carriers to negotiate any necessary coverage extensions resulting from COVID-19 related project delays.
To summarize, builders risk coverage for COVID-19 claims is far from certain, but not impossible. Insureds should provide notice of a claim to all potentially applicable carriers in order to preserve their rights. The insured should also report increased construction cost and articulate its intent to return to the project to preserve their escalation clause and avoid arguments that they have abandoned the project. The insured should continue to document its claims and damages, and be ready to substantiate its claims and push back on any coverage denial. Throughout the entirety of this process, the insured should work with its risk management team to get out in front of any extensions it may need to complete the project. In a climate where insurance carriers are receiving an insurmountable number of claims, the insured should be prepared to fight for coverage and not simply throw up its hands in the face of a denial. Given the intense social, legislative and executive pressure to cover COVID-19 claims, there may be a tendency for the courts to find coverage in gray areas, particularly if the insured was fortunate enough to have purchased one of the broader coverage forms referenced above.
About the Authors
Jason M. Adams, Esq. (jadams@gibbsgiden.com) is a partner at Gibbs Giden representing construction professionals in the areas of Construction Law, Insurance Law and Risk Management and Business/Civil Litigation. Adams is also a licensed property and casualty insurance broker and certified Construction Risk & Insurance Specialist (CRIS). Jason represents developers, contractors, public entities, investors, lenders, REITs, design professionals, and other construction professionals at all stages of the construction process. Jason is a published author and sought-after speaker at seminars across the country regarding high level construction risk management and insurance topics. Gibbs Giden is nationally and locally recognized by U. S. News and Best Lawyers as among the “Best Law Firms” in both Construction Law and Construction Litigation. Chambers USA Directory of Leading Lawyers has consistently recognized Gibbs Giden as among California’s elite construction law firms.
Cheryl L. Kozdrey, Esq. (clk@sdvlaw.com) is an associate at Saxe Doernberger & Vita, P.C., a national insurance coverage law firm dedicated exclusively to policyholder representation and advocacy. Cheryl advises insurance brokers, risk managers, and construction industry professionals regarding optimal risk transfer strategies and insurance solutions, including key considerations for Builder’s Risk, Commercial General Liability, D&O, and Commercial Property policies. She assists clients with initial policy reviews, as well as renewals and modification(s) of existing policies to ensure coverage needs are satisfied. Cheryl also represents policyholders throughout the claims process, and in coverage dispute litigation against insurance carriers. She is currently working on some of the largest construction defect cases in the country. Cheryl is a published author and is admitted to practice in the State of California and all federal district courts within the State.
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A Bill for an Act Concerning Workers’ Compensation – 2014 Edition
January 13, 2014 —
W. Berkeley Mann, Esq. - Higgins, Hopkins, McLain & Roswell, LLCWorkers’ compensation (“WC”) costs are a significant portion of the labor costs experienced by construction companies. These costs have typically risen over time due to the “experience modification factor.” This term means the amortized cost of past claims recovered through future premiums charged by an insurer to an employer. As a company’s claims go up in both number of claims and total expense of claims over time, the experience modifier increases as a multiplier of the base WC premium. As with other general medical costs, the question is not whether the cost of claims with a medical component will go up, but rather the rate at which they will increase from year to year.
It is with these facts of life in mind that it is reported that the Colorado legislature will take up a bill concerning WC benefits in the 2014 session. This bill, if passed, will have the likely effect of dramatically increasing the cost of WC claims to the construction industry - along with all other Colorado employers.
The draft bill has three distinct changes for the current law, each of which serves to change the delicate balance of rights and obligations of employers and employees under existing law.
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W. Berkeley Mann, Esq.W. Berkeley Mann, Esq. can be contacted at
mann@hhmrlaw.com
Will On-Site Robotics Become Feasible in Construction?
April 13, 2017 —
Aarni Heiskanen – AEC BusinessOver the last few years we’ve seen concepts and pilot projects for construction site robotics. Peter Novikov, Enrico Dini, Wolf D. Prix, and others have shown what on-site robotics can already accomplish. There are still hurdles to overcome, but the convergence of several technologies is making the automated construction site look attainable.
Construction robotics is not a fad. In his keynote at AEC Hackathon Munich in April 2017, Professor Thomas Bock showed examples of construction robotics beginning in the early 1970s. The first construction robots were designed in Japan for manufacturing prefabricated modular homes. Already in the late 1970s, plans were made for extensive use of on-site construction robots.
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Aarni Heiskanen, AEC BusinessMr. Heiskanen may be contacted at
aarni@aepartners.fi
Traub Lieberman Attorneys Lisa M. Rolle and Vito John Marzano Secure Dismissal of Indemnification and Breach of Contract Claims Asserted against Subcontractor
November 24, 2019 —
Lisa M. Rolle & Vito John Marzano - Traub Lieberman PerspectivesOn August 7, 2019, TLSS Partner Lisa M. Rolle and associate Vito John Marzano obtained a dismissal of all claims on behalf of their client, the subfloor subcontractor at the worksite, in a severed action filed in the Supreme Court of the State of New York, County of Kings.
In April 2014, plaintiff commenced suit against several defendants, including the general contractor, after he sustained an injury when he fell through temporary plywood while installing a staircase at a worksite in Brooklyn. In May 2018, plaintiff filed a note of issue and certified the matter as ready for trial. Immediately thereafter, the general contractor initiated a second third-party action against the subcontractor seeking common-law and contractual indemnification and breach of contract. The Court subsequently granted Traub Lieberman’s motion to sever the second third-party action and instructed the general contractor to file a new action.
After the general contractor recommenced suit, Traub Lieberman, on behalf of its client, the subcontractor, immediately moved to dismiss for failure to state a cause of action. In relevant part, Traub Lieberman pointed to the deposition testimony of the general contractor’s principal to establish that the subcontractor had finished its work on the permanent subfloor no less ten months to over a year prior to plaintiff’s accident, and that the subfloor required no alteration, repair or maintenance prior to or as a result of plaintiff’s accident. Further, the general contractor’s testimony pointed to work performed by another subcontractor that directly resulted in plaintiff’s injuries. It was also brought to the Court’s attention that plaintiff had testified that he fell through a temporary plywood floor, and that the subcontractor had only installed a permanent subfloor.
Reprinted courtesy of
Lisa Rolle, Traub Lieberman and
Vito John Marzano, Traub Lieberman
Ms. Rolle may be contacted at lrolle@tlsslaw.com
Mr. Marzano may be contacted at vmarzano@tlsslaw.com
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Florida Legislative Change Extends Completed Operations Tail for Condominium Projects
December 10, 2024 —
Holly A. Rice - Saxe Doernberger & Vita, P.C.The Florida Legislature recently passed House Bill 1021 which amended Florida Statute § 718.124. The July 1, 2024 amendment changes Florida’s statute of repose (“SOR”) trigger date for condominium projects. Now, the SOR trigger for existing condominium projects will be governed by Florida Statute §718.124, not Florida Statute § 95.11. Most critically, Florida Statute § 718.124 changes the trigger events for when the “clock” starts running and impacts how long the SOR runs. Notably, Florida Statute § 718.124 already governed the trigger event for the statute of limitations (“SOR”) for condominium projects.
One important overarching takeaway for contractors to carefully assess is that the change in the “trigger” event may result in the SOR concluding at a later date than originally planned – affecting time on the risk and, critically, the availability of insurance. The standard approach of using a static 10-year completed operations tail on a condominium construction insurance program may now be insufficient in certain circumstances.
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Holly A. Rice, Saxe Doernberger & Vita, P.C.Ms. Rice may be contacted at
HRice@sdvlaw.com
Ten Years After Colorado’s Adverse Possession Amendment: a brief look backwards and forwards
September 25, 2018 —
Luke Mecklenburg - Snell & Wilmer Real Estate Litigation BlogIn response to national outrage over an infamous adverse possession case in Boulder, Colorado, in which a lawyer and a judge intentionally took their neighbors’ undeveloped land through adverse possession, the Colorado legislature amended the state’s adverse possession statute (C.R.S. § 38-41-101) to make the claim significantly harder to prove. It did this because it believed “there were insufficient ‘obstacles’ to establishing a claim for adverse possession under the existing law.”[1] Effective July 1, 2008, the amendment created a heightened burden of proof, additional element requirements, and the possibility of a losing defendant recovering money from successful plaintiffs for the value of the land they took and the taxes the defendant had paid on that land.
The Boulder case eventually settled, but the resulting statutory amendments have drastically changed the landscape of Colorado’s adverse possession law. Ten years later, this blog post takes a brief look at the amended statute, the impact it has had, and questions that have yet to be resolved.
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Luke Mecklenburg, Snell & WilmerMr. Mecklenburg may be contacted at
lmecklenburg@swlaw.com
