Construction Litigation Roundup: “Builder’s Risk Indeed”
October 24, 2023 —
Daniel Lund III - LexologyA contractor for a hotel in Seattle was tasked with constructing the hotel utilizing premanufactured modular hotel rooms. The modular unit portion of the project was the subject of a $15.8 million subcontract between the general contractor and the manufacturer. The manufacturer was also responsible to the GC for shipping and installing the modular units.
Shipping was to be “DDP,” or “Delivery Duty Paid” – which, according to a New York federal court, “is an international shipping term meaning that the seller assumes all responsibilities and costs for delivering property to the named place of destination, including export and import clearance, fees, duties, and taxes.” Additionally, per the subcontract, the manufacturer was responsible for “ensur[ing] all modular units [were] covered, secured[,] and protected from damage during the shipping process….” The modular units were shipped from Poland to Seattle. In the shipping process, the units spent some time in the Port of Everett in Washington state, where the units sustained water damage while sitting in port.
A related damage claim made by the subcontractor against the general contractor’s builder’s risk policy. On the face of the policy, the policy covered subcontractors as “additional insured” parties, covered all manner of materials and the like to be used on the project, and would provide that coverage in the process of transporting the materials insofar as “inland or coastal waters” were concerned. Yet, the builder’s risk insurer refused to cover the claim for the damages to the modular units which occurred while sitting in port in Everett.
Read the court decisionRead the full story...Reprinted courtesy of
Daniel Lund III, PhelpsMr. Lund may be contacted at
daniel.lund@phelps.com
Texas Legislature Puts a Spear in Doctrine Making Contractor Warrantor of Owner Furnished Plans and Specifications
May 31, 2021 —
Paulo Flores, Timothy D. Matheny & Jackson Mabry - Peckar & Abramson, P.C.The Texas Legislature has just sent Senate Bill 219 (“S.B. 219”) to the Governor for signature; if this legislation is signed by the Governor, it will further erode the Texas legal doctrine that makes the contractor the warrantor of owner-furnished plans and specifications unless the prime contract specifically places this burden on the owner.
Background
49 states follow what is known as the Spearin doctrine (named after the U.S. Supreme Court case of United States v. Spearin) in which owners warrant the accuracy and sufficiency of owner-furnished plans and specifications. Texas, on the other hand, follows the Texas Supreme Court created Lonergan doctrine, which has been an unfortunate presence in Texas construction law since 1907. In its “purest form,” as stated by the Texas Supreme Court, the Lonergan doctrine prevents a contractor from successfully asserting a claim for “breach of contract based on defective plans and specifications” unless the contract contains language that “shows an intent to shift the burden of risk to the owner.” Essentially, this then translates into the contractor warranting the sufficiency and accuracy of owner-furnished plans and specifications, unless the contract between them expressly places this burden on the owner. Over the years some Texas courts of appeal had ameliorated this harsh doctrine, but in 2012, the Texas Supreme Court indicated Lonergan was still the law in Texas, in the case of El Paso v. Mastec. In 2019, the Texas Legislature took the first step toward hopefully abrogating the Lonergan doctrine by implementing a new Chapter 473 to the Texas Transportation Code with respect to certain projects undertaken by the Texas Department of Transportation, and Texas political subdivisions acting under the authority of Chapters 284, 366, 370 or 431 of the Transportation Code, adopting, as it were, the Spearin Doctrine in these limited, transportation projects. Now, the legislature has further chipped away at the Lonergan doctrine with the passage of S.B. 219.
Reprinted courtesy of
Paulo Flores, Peckar & Abramson, P.C.,
Timothy D. Matheny, Peckar & Abramson, P.C. and
Jackson Mabry, Peckar & Abramson, P.C.
Mr. Flores may be contacted at PFlores@Pecklaw.com
Mr. Matheny may be contacted at tmatheny@pecklaw.com
Mr. Mabry may be contacted at jmabry@pecklaw.com
Read the court decisionRead the full story...Reprinted courtesy of
A New Statute of Limitations on Construction Claims by VA State Agencies?
March 27, 2019 —
Christopher G. Hill - Construction Law MusingsI have discussed the Hensel Phelps case and the potential issues caused by both poorly drafted indemnity clauses and the lack of a statute of limitations applicable to the Commonwealth of Virginia and its agencies in 2017. New legislation (supported by various contractor groups including my friends at the AGC of Virginia) has been proposed for the 2019 General Assembly session that seeks to address at least part of this issue. While the indemnity provisions of your construction contracts can be addressed by careful drafting with the help of an experienced construction attorney, the proposed legislation (found in HB1667) seeks to address the statute of limitations issue.
The proposed legislation is described as follows:
Provides that no action may be brought by a public body on any construction contract, including construction management and design-build contracts, unless such action is brought within five years after substantial completion of the work on the project and that no action may be brought by a public body on a warranty or guarantee in such construction contract more than one year from the breach of that warranty, but in no event more than one year after the expiration of such warranty or guarantee. The bill also limits the time frame during which a public body, other than the Department of Transportation, may bring an action against a surety on a performance bond to within one year after substantial completion of the work on the project.
Read the court decisionRead the full story...Reprinted courtesy of
The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Failure to Comply with Contract Leaves No Additional Insured Coverage
January 07, 2015 —
Tred R. Eyerly – Insurance Law HawaiiIndemnity obligations and additional insured coverage were at issue in Strauss Painting, Inc. v. Mt. Hawley Ins. Co., 2014 N.Y. LEXIS 3347 (N.Y. Nov. 24, 2014).
Strauss Painting, Inc. (Strauss) contracted with the Metropolitan Opera Association, Inc. (the Met) to strip and repaint the rooftop steel carriage track for the opera house's automated window-washing equipment. The contract provided that Strauss would indemnify and hold the Met harmless. Exhibit D to the contract set forth three types of insurance that Strauss was to procure: (1) workers' compensation; (2) owners and contractors protective liability (OCP); and (3) comprehensive general liability. The OCP policy was to add the Met as an additional insured. Strauss failed to obtain the OCP policy.
At the time it contracted with the Met, Strauss had a CGL policy issued by Mt. Hawley. The policy's additional insured endorsement (ICO form CG 20 33 07 04) stated that "an insured" included "any organization for whom Strauss is performing operations when Strauss and such organization have agreed in writing that such organization be added as an additional insured."
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
SNC-Lavalin’s Former Head of Construction Pleads Guilty to Bribery, Money Laundering
October 01, 2014 —
Beverley BevenFlorez-CDJ STAFFRiadh Ben Aissa, a former SNC-Lavalin executive, “pleaded guilty to charges including bribery and money laundering in Switzerland, according to a court filing released on Wednesday,” reported the Wall Street Journal.
SNC-Lavalin “issued a separate statement acknowledging the court's acceptance of Mr. Ben Aissa's guilty pleas, adding it was recognized as ‘an injured party’ in the case and would recover an unspecified amount of money from him.”
Chief Executive Robert Card stated, “SNC-Lavalin's goal is nothing less than to set a new standard for clean business in the engineering and construction industry,” as quoted by the Wall Street Journal. “We've adopted a zero-tolerance policy for ethics violations of any kind. We have the right people in place and systems and procedures which are designed to protect the company and its stakeholders from future fraudulent actions."
Read the court decisionRead the full story...Reprinted courtesy of
Commentary: How to Limit COVID-19 Related Legal Claims
January 11, 2021 —
Joshua Lindsay, Crowell & Moring & Meagan Bachman, Crowell & Moring - ENRWe are 10 months into the global pandemic. Given the magnitude of additional costs and upended expectations and risk-allocation, we foresee a wave of disputes coming soon. Whether it is large or small depends heavily on how well project team members handle the COVID-19 project impacts now.
Reprinted courtesy of
Joshua Lindsay, Crowell & Moring (ENR) and
Meagan Bachman, Crowell & Moring (ENR)
Ms. Bachman may be contacted at mbachman@crowell.com
Mr. Lindsay may be contacted at joshlindsay@crowell.com
Read the full story... Read the court decisionRead the full story...Reprinted courtesy of
Exclusions Bar Coverage for Damage Caused by Chinese Drywall
July 05, 2011 —
Tred R. EyerlyThe insured homeowners were unsuccessful in arguing around the policy's exclusions when seeking coverage for damage caused by Chinese drywall. Ross v. C. Adams. Constr. & Design, L.L.C., 2011 La. App. LEXIS 769 (La. Ct. App. June 14, 2011).
Before the insureds purchased and moved into their home, it was renovated. After moving in, the insures discovered foreign gypsum drywall, or Chinese drywall. The insureds submitted a claim to Louisiana Citizens Property Insurance Company. In an investigation, the insurer confirmed the presence of Chinese drywall and damage to the metal surfaces caused by corrosion. Louisiana Citizens refused coverage and the insureds sued. The trial court denied the insured's motion for summary judgment and granted summary judgment to Louisiana Citizens.
The court of appeal affirmed. Initially, the court determined the insureds sustained a direct physical loss. The inherent qualities of the Chinese drywall created a physical loss to the home and required that the drywall be removed and replaced.
Four exclusions, however, barred coverage. First, damages due to faulty or defective materials were excluded from coverage. The Chinese drywall emitted high levels of sulfuric gas which caused the damage to the insured's plumbing, electrical wiring and metal components.
Read the full story…
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Read the court decisionRead the full story...Reprinted courtesy of
Survey Finds Tough Labor Market Top-of-mind for Busy Georgia Contractors
July 30, 2019 —
Scott Hazy - Construction ExecutiveIn February 2019, the results of the third Annual Georgia Construction Outlook Survey were released. The survey respondents includes general contractors (44%), specialty contractors (53%) and heavy contractors (3%) with gross revenue size that ranged from in excess of $1 billion to less than $5 million. Three-quarters of respondents reported revenues of less than $25 million. Here’s what they had to say about the state of construction in Georgia.
Financial Performance and 2019 Outlook
It was no surprise to see the majority of respondents reporting increased revenues and margins in 2018. Average gross margins from all respondents increased to 11.3%, up from 9.33% in the prior year. Overall, 72% of respondents saw their gross margins increase and/or remain the same. The largest decrease in margins was seen in the heavy contractor sector, with 33% of respondents reporting a decrease in margins. When it comes to backlog, Georgia is seeing a record number of months in the pipeline and 57% of respondents reported higher backlogs than in the previous year. The increase in backlog helps explain why 84% of respondents are expecting increase in revenues in 2019 over 2018. Interestingly, of those expecting increase in revenue, 40% are anticipating an increase of more than 10% from the prior year. So, the overall financial health of Georgia contractors looks to remain strong at least through 2019.
Reprinted courtesy of
Scott Hazy, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
Read the court decisionRead the full story...Reprinted courtesy of
Mr. Hazy may be contacted at
scott.hazy@btcpa.net
