The Evolution of Construction Defect Trends at West Coast Casualty Seminar
May 24, 2018 —
Don MacGregor – Bert L. Howe & Associates, Inc.Twenty-five years ago. 1993. On January 23rd, Bill Clinton was sworn in as the 42nd President of the United States. The average cost of a gallon of gasoline was $1.16, a movie ticket cost $4.00, and the average cost of a new home was $113,200.00.
1993 also marked the first of what would be a quarter century of annual seminars hosted by West Coast Casualty Service, and provided to the combined professionals within the Construction Defect Community. As the seminar has grown both in attendance and prominence within this community under the watchful stewardship of David and Coral Stern, much has changed both with regard to the content of the seminar and the climate within which it was presented. A quick look at the topics addressed over the past 25 years of the Construction Defect Seminar provides one with a veritable history of construction defect litigation and insurance coverage trends across the United States and beyond.
While the first seminar was hosted in 1993, my first attendance didn’t occur until 1999, and the first time I was honored to be a panelist would have to wait until 2007. In the subsequent years, I’ve had the opportunity to sit on panels an additional three times, and each one I gained rare and valuable insights into the Construction Defect Community, its willingness to challenge itself, and the amazing professionals we all have the distinct pleasure of working with every day (and whom we sometimes take too much for granted).
In the mid to late 90’s, topics at the seminar included such subjects as the Montrose Chemical Corp v. Superior Court decision (Montrose) regarding a carrier’s duty to defend and the subsequent Stonewall Insurance case that examined the duty to indemnify in the context of construction defect claims. The California Calderon Act of 1997, laying out the roadmap for HOA’s filing construction defect lawsuits was also a topic of discussion and debate within the West Coast “arena.”
The new millennium saw the landmark Aas v. William Lyon decision, which disallowed negligence claims for construction defects in the absence of actual resultant damage. This was followed by Presley Homes v. American States Insurance wherein the court ruled that a duty to defend applies where there is mere potential for coverage and the duty to defend applies to the entire action. Each of these bellwether decisions was addressed contemporaneously by panels at the West Coast seminar, contemporaneously bringing additional dialog to the CD community, from within the community.
2002 brought what has become the defining legislation in California regarding construction defect litigation and a builder’s right to repair. Senate Bill 800 (SB800), and its subsequent codification as Title 7, Part 2 of Division 2 of the California Civil Code, Sections 895 through 945.5 would become the defining framework for similar legislation across the United States. During the course of its drafting, movement through the legislature, and final adoption in January of 1993, many of the questions raised and debated in committees in Sacramento, had already been and were continuing to be addressed by panelists at the West Coast Seminar. How does SB800 work with Calderon? How does it affect the prior Aas decision? What now constitutes a defect, and what are timeframes established within the complex pre-litigation process? Open the pages of the 2002 – 2004 Seminar invitations and you’ll see panels comprised of the finest members of the insurance law and coverage communities addressing those very questions (and more)!
As the first decade of the new century drew to a close, a brief review of the WCC invitations from that period suggests a trend towards programmatic analyses of key themes selected for the seminar. In 2008, my second opportunity as a guest speaker, topics included a review of the state of construction defect litigation in a post-SB 800 environment. Panelists offered retrospective insight into the state of right to repair statutes in multiple states, while others offered a glimpse at where the industry might be headed, as similar legislation was enacted across the country. As always, pertinent court decisions bearing on construction defect, both in California, and elsewhere were given unique perspective and additional clarity by multiple panels of gifted speakers. In 2009, claims and coverage were examined from multiple unique perspectives, including that of plaintiff, the policyholder, and the insurer. Wrap policies and the gaps in due to self-insured retention obligations were examined.
As we rapidly approach the end of the second decade of the 21st Century, West Coast Casualty’s Construction Defect Seminar continues to lead the Construction Defect Community as the premier source for information and peer dialog on all matters relating to construction law, coverage, and emerging trends. In 2017, the Seminar tackled such broad subjects as the role of women in the construction industry, claims management, and risk management, challenges raised by wrap versus non-wrap litigation, and the emergent trend of apartment to condo conversions (and the attendant coverage challenges).
On May 16th at the Disneyland Resort, in Anaheim California, America’s largest Construction Defect event kicked off its 25th Anniversary celebration. As has been every year since 1993, the Seminar provided insurance, legal, and industry professionals an exciting and informative array of salient and timely panel topics, as well as a stellar faculty of gifted panelists. This year’s West Coast Casualty’s Construction Defect Seminar, like the past 25 years, was not only informative and educational, but also a promise for another 25 years of peerless service to the Construction Defect Community.
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Supreme Court Rejects “Wholly Groundless” Exception to Question of Arbitrability
February 06, 2019 —
Justin Fortescue - White and Williams LLPIn newly appointed Supreme Court Justice Brett Kavanaugh’s first opinion, the United States Supreme Court held that the “wholly groundless” exception to arbitrability, which some federal courts had relied on as justification to decide questions of arbitrability over the express terms of a contract, was inconsistent with the Federal Arbitration Act and Supreme Court precedent. Based on this decision, where a contract delegates the question of arbitrability to an arbitrator, courts must respect the parties’ contract and refer the question to the arbitrator. Schein v. Archer & White, 586 U.S. __ (2019).
In Schein, Archer & White brought a lawsuit against Henry Schein alleging violations of federal and state antitrust laws and seeking both monetary damages and injunctive relief. The relevant contract between the parties contained an arbitration provision that provided:
“Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief . . .) shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association.”
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Justin Fortescue, White and Williams LLPMr. Fortescue may be contacted at
fortescuej@whiteandwilliams.com
Part II: Key Provisions of School Facility Construction & Design Contracts
July 21, 2018 —
David R. Cook - Autry, Hall & Cook, LLPIn
Part I of this article, published in late April, we discussed the performance risk and time risk involved with construction and design contracts, and in Part II, we will cover cost risk and political risk.
Cost Risk
School budgets are limited for many reasons, and the construction budget is no exception. As a result, contracts should guard against unwarranted cost increases and claims. In the absence of a written change order signed by the appropriate officer, the contract should absolutely prohibit additional compensation for changes in the work. It should forbid claims for all events except those within the school authority’s sole control. Even for permitted claims, the contractor must provide written notice so that the authority might alleviate the problem and control its costs. To encourage the contractor to limit costs and claims, the contract could include a shared-savings clause, which grants an incentive payment for completion within the budget.
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David R. Cook, Autry, Hall & Cook, LLPMr. Cook may be contacted at
cook@ahclaw.com
Contractors Admit Involvement in Kickbacks
December 09, 2011 —
CDJ STAFFTwo New Jersey contractors have pleaded guilty to charges that they made false representations for a government contract in a case related to kickbacks for construction work done in two school districts. New Jersey is recommending that the two men, Martin Starr and Stephen Gallagher, will each pay $50,000 in penalties, serve up to a year in jail, and be unable to accept public contracts for five years.
Last month, another individual in the case, Kenneth Disko, who had been the engineer for the school district, pleaded guilty on a similar charge. In addition to a $50,000 penalty, he will be serving three to five years in prison. A fourth conspirator, Robert Berman, the former business administrator for one of the school districts, has to pay a $13,000 fine and cooperate with the investigation. He is also barred from public employment in New Jersey and has been terminated from his position.
Starr admitted to preparing fictitious quotes which appeared to be from other contractors in order that his firm would seem to be the lowest bidder. Gallagher helped in preparing the fictitious bids and also provided cash kickbacks to Disko.
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Five Construction Payment Issues—and Solutions
October 03, 2022 —
Michael Bignold - Construction ExecutiveSales are important for construction companies that want to succeed. However, while companies certainly need to spend time on sales and marketing, having a full order book is only part of the equation. They still need to do the work and, even more importantly, they need to be able to collect payment from customers.
Here are common payment issues in the construction industry and what leaders can do to prevent or mitigate them.
1. Change Order Disputes
If a project goes exactly as planned and quoted, billing the customer is a fairly simple matter. However, it’s very rare that any job goes exactly according to the quote in the construction business. Change orders, omissions and additions are typical on jobs of any size across the industry. If contractors are not handling those changes properly by getting everything in writing, they could be in trouble when the time comes to send invoices.
Reprinted courtesy of
Michael Bignold, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Excess Carrier Successfully Appeals Primary Insurer’s Summary Judgment Award
December 09, 2011 —
Tred R. Eyerly - Insurance Law HawaiiAlthough the excess carrier was given inadequate notice of the underlying arbitration, the trial court determined it shared responsibility with the primary carrier for the arbitration award. Finding disputed issues of fact, the Washington Court of Appeals reversed in Am. States Ins. Co. v. Century Surety Co., 2011 Wash. App. LEXIS 2488 (Wash. Ct. App. Oct. 31, 2011).
The primary insurer, American States, issued two liability policies to Professional Home Builders (PHB), a siding contractor. The policies were for successive years, 1998-1999 and 1999-2000. Each policy had annual limits of $1 million per occurrence. PHB also had a commercial excess liability policy for 1999-2000 with Century Surety Company.
PHB was sued by Residential Investment Partners (RIP) for construction defects after moisture entered the building envelope, causing decay and damage. Century’s expert determined the decay started before the 1999-2000 policy period.
RIP and PHB went to arbitration.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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Disjointed Proof of Loss Sufficient
June 11, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe court found that when considered as a whole, separately filed proofs of loss and estimates of damage were sufficient to meet the requirements of a flood policy. Young v. Imperial Fire & Cas. Ins. Co., 2014 U.S. Dist. LEXIS 51863 (April 15, 2014).
On August 29, 2012, plaintiffs' property sustained flood damage due to Hurricane Isaac. After Imperial's adjustor inspected the property, advance payments were made for $5000 under the building coverage and $5000 under the contents coverage.
On October 26, 2012, the plaintiffs' adjustor submitted a proof of loss for building damages, stating the amount of loss was $175,100, which was the policy limit minus the deductible. The insured wife signed the proof of loss. The actual case value, full cost of replacement or repair, and applicable depreciation were listed "undetermined."
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Obama Asks for $302 Billion to Fix Bridges and Potholes
May 01, 2014 —
Laura Litvan – BloombergThe Obama administration sent to Congress legislation that would provide $302 billion for road and transit projects over four years, a measure needed to keep the U.S. Highway Trust Fund from running dry.
The Transportation Department proposal would boost the highway fund $87 billion above current levels to generate more money for deficient bridges and aging transit systems. The bill also addresses the General Motors Co. (GM) ignition-switch recall by raising almost 10-fold to $300 million the maximum fine on carmakers that fail to quickly recall deficient vehicles.
Congressional transportation leaders in both parties have said they want to pursue six-year measures, though there is little consensus on how to finance the proposals. The Transportation Department has said the Highway Trust Fund -- which relies on gasoline and diesel-fuel taxes -- may not be able to meet its obligations as soon as this year. That risks leading states to slow or halt work in a recovering economy.
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Laura Litvan, BloombergMs. Litvan may be contacted at
llitvan@bloomberg.net
