Fairfield Connecticut Building Expert Directory

Tender the Defense of a Lawsuit to your Liability Carrier

January 19, 2017 — David Adelstein – Florida Construction Legal Updates
Sometimes you come across a head scratcher. This would be a decision that does not seem to make a whole lot of sense. For instance, if you are sued and you maintain liability insurance that would potentially provide you a defense and indemnification, not notifying your insurance carrier is a head scratcher. You pay substantial dollars towards the premium of that policy. So, not then notifying your carrier about a lawsuit is a head scratcher, and I mean a head scratcher!! If you are sued, not only should the carrier be notified, but the defense of that lawsuit should be tendered to your liability carrier. Read the court decision
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Reprinted courtesy of David Adelstein, Florida Construction Legal Updates
Mr. Adelstein may be contacted at dadelstein@gmail.com

The Fourth Circuit Applies a Consequential Damages Exclusionary Clause and the Economic Loss Doctrine to Bar Claims by a Subrogating Insurer Seeking to Recover Over $19 Million in Damages

February 23, 2016 — William L. Doerler – White and Williams LLP
In Severn Peanut Company, Inc. v. Industrial Fumigant Company, 807 F.3d 88 (4th Cir. (N.C.) 2015), the United States Court of Appeals for the Fourth Circuit (Fourth Circuit), applying North Carolina law, considered whether a consequential damages clause in a contract between the Severn Peanut Company, Inc. (Severn) and Industrial Fumigant Company (IFC) barred Severn and its subrogating insurer, Travelers Property Casualty Company of America (Travelers), from recovering over $19 million in damages that Severn suffered as the result of a fire and explosion at its Severn, North Carolina plant. The Fourth Circuit, rejecting Severn’s unconscionability and public policy arguments related to the consequential damages clause and finding that the economic loss doctrine barred Severn from pursuing negligence claims, affirmed the trial court’s judgment granting summary judgment in IFC’s favor. As noted in the Severn decision, the facts showed that Severn and IFC signed a Pesticide Application Agreement (PAA) requiring IFC to use phosphine, a pesticide, to fumigate Severn’s peanut storage dome and to apply the pesticide “in a manner consistent with instructions . . . and precautions set forth in [its] labeling.” With respect to damages, the PAA specified that IFC’s charge for its services, $8,604 plus applicable sales tax, was “based solely upon the value of the services provided” and was not “related to the value of [Severn’s] premises or the contents therein.” In addition, the PAA specified that the $8,604 sum to which the parties agreed was not “sufficient to warrant IFC assuming any risk of incidental or consequential damages” to Severn’s “property, product, equipment, downtime, or loss of business.” Read the court decision
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Reprinted courtesy of William L. Doerler, White and Williams LLP
Mr. Doerler may be contacted at doerlerw@whiteandwilliams.com

The Year 2010 In Review: Design And Construction Defects Litigation

February 25, 2011 — Candace Matson, Harold Hamersmith, and Helen Lauderdale

This article is the first in a series summarizing construction law developments for 2010

1. Centex Homes v. Financial Pacific Life Insurance Co., 2010 U.S. Dist. LEXIS 1995 (E.D. Cal. 2010)

After settling numerous homeowners’ construction defect claims — and more than ten years after the homes were substantially completed — a home developer brought suit against one of the concrete fabrication subcontractors for the development seeking indemnity for amounts paid to the homeowners, as well as for damages for breach of the subcontractor’s duties to procure specific insurance and to defend the developer against the homeowners’ claims. The subcontractor brought a motion for summary adjudication on the ground the developer’s claims were barred by the ten year statute of repose contained in Code of Civil Procedure Section 337.15.

The District Court agreed the developer’s claim for indemnity was barred by Section 337.15. And it held that because the damages recoverable for breach of the subcontractor’s duty to purchase insurance are identical to the damages recoverable through the developer’s indemnity claim, the breach of duty to procure insurance claim also was time-barred. The District Court, however, allowed the claim for breach of the duty to defend to proceed. The categories of losses associated with such a claim (attorneys’ fees and other defense costs) are distinct from the damages recoverable through claims governed by Section 337.15 (latent deficiency in the design and construction of the homes and injury to property arising out of the latent deficiencies).

2. UDC — Universal Development v. CH2M Hill, 181 Cal. App. 4th 10 (6th Dist. Jan. 2010)

Indemnification clauses in construction agreements often state that one party to the agreement — the “indemnitor” — will defend and indemnify the other party from particular types of claims. Of course, having a contract right to a defense is not the same as actually receiving a defense. Any indemnitor attempting to avoid paying for defense costs can simply deny the tender of defense with the hope that when the underlying claim is resolved the defense obligations will be forgotten. In the past, when parties entitled to a defense — the “indemnitees” — had long memories and pressed to recover defense costs, indemnitors attempted to justify denying the tender by claiming their defense obligations coincided with their indemnity obligations and neither arose until a final determination was made that the underlying claim was one for which indemnity was owed.

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Reprinted courtesy of Candace Matson, Harold Hamersmith, and Helen Lauderdale, Sheppard Mullin Richter & Hampton LLP. Ms. Matson can be contacted at cmatson@sheppardmullin.com, Mr. Hamersmith can be contacted at hhamersmith@sheppardmullin.com, and Ms. Lauderdale can be contacted at hlauderdale@sheppardmullin.com.

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Virginia Allows Condominium Association’s Insurer to Subrogate Against a Condominium Tenant

August 10, 2020 — Gus Sara - The Subrogation Strategist
In Erie Insurance Exchange v. Alba, Rec. No. 190389, 2020 Va. LEXIS 53, the Supreme Court of Virginia considered whether the trial court erred in finding that a condominium association’s property insurance provider waived its right of subrogation against a tenant of an individual unit owner. The Supreme Court reversed the lower court’s decision, holding that the insurance policy only named unit owners as additional insureds, not tenants, and thus the subrogation waiver in the insurance policy did not apply to tenants. The court also found that the condominium association’s governing documents provided no protections to the unit owner’s tenant because the tenant was not a party to those documents. This case establishes that, in Virginia, a condominium association’s insurance carrier can subrogate against a unit owner’s tenant where the tenant is not identified as an additional insured on the policy. The Alba case involved a fire at a condominium building originating in a unit occupied by Naomi Alba (Alba), who leased the condominium under a rental agreement with the unit owner, John Sailsman (Sailsman). The agreement explicitly held Alba responsible for her conduct and the conduct of her guests. An addendum to the lease stated that Sailsman’s property insurance only applied to the “dwelling itself” and that Alba was required to purchase renters insurance to protect her personal property. Along with the rental agreement, Alba received the condominium association’s Rules & Regulations, Declarations and Bylaws. Read the court decision
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Reprinted courtesy of Gus Sara, White and Williams
Mr. Sara may be contacted at sarag@whiteandwilliams.com

Significant Victory for the Building Industry: Liberty Mutual is Rejected Once Again, This Time by the Third Appellate District in Holding SB800 is the Exclusive Remedy

December 15, 2016 — Richard H. Glucksman & Ravi R. Mehta – Chapman Glucksman Dean Roeb & Barger Bulletin
I. Elliott Homes, Inc. v. Superior Court (Certified for Publication, Cal. Ct. App. Dec. 2, 2016 The California Court of Appeal for the Third Appellate District recently elaborated on the scope of the Right to Repair Act, commonly known as SB-800 (“Act”). In Elliott Homes, Inc. v. Superior Court of Sacramento County (Kevin Hicks, et al.) (certified for publication, Cal. Ct. App. Dec. 2, 2016), the Court considered whether the Act (and specifically the Act’s pre-litigation procedure) applies, when homeowners plead construction defect claims based only on common law causes of action, as opposed to violations of the building standards set forth in the Act (Civil Code §896). The Court answered this question affirmatively. The homeowners of seventeen (17) single-family homes filed a Complaint against the builder of their homes, Elliott Homes, Inc. (“Elliott”), alleging common law causes of action for construction defects. Elliott filed a motion to stay the litigation on the ground that the homeowners failed to comply with the pre-litigation procedure set forth in the Act. The trial court denied the motion, agreeing with the homeowners that this pre-litigation procedure did not apply because the homeowners had not alleged a statutory violation of the Act. Elliott appealed. The Court of Appeal purely considered the question of whether the Act, including its pre-litigation procedure, applies when a homeowner pleads construction defect claims based on common law causes of action, and not on statutory violations of the Act’s building standards. To answer this question, the Court analyzed a recent case decided by the Court of Appeal for the Fourth Appellate District: Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC (2013) 219 Cal.App.4th 98. In this subrogation case, a builder’s insurer asserted common law causes of action (but not statutory building standard violations) alleging construction defects against the builder to recover amounts paid to the homeowner after a sprinkler system failure caused extensive damage to the subject property. The trial court sustained the builder’s demurrer to the Complaint on the ground that it was time-barred under the Act. The Court of Appeal reversed the trial court’s order, holding that common law construction defect claims arising from actual damages are not covered by the Act because “the Act does not provide the exclusive remedy in cases where actual damage has occurred.” (Liberty Mutual, 219 Cal.App.4th 98, 109). The Elliott Court declined to follow Liberty Mutual, finding that that Court failed to properly analyze the language of the Act. The Elliott Court analyzed both the statutory scheme and the legislative history of the Act to arrive at the conclusion that common law causes of action for construction defects do indeed fall within the purview of the Act. According to the Elliott Court, the Act “broadly applies to any action seeking recovery of damages arising out of, or related to deficiencies in…residential construction and in such an action, a homeowner’s claims or causes of action shall be limited to violation of the standards set forth in the Act, except as specified.” Further, the Act expressly provides that “no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed.” Civil Code §943(a). In turn, Civil Code §944 allows for a recovery for the cost of repairing a building standard violation, or for the cost of repairing any damage caused by such a violation, among other things. The limited exceptions to the Act’s applicability concern the enforcement of a contract, or any action for fraud, personal injury, or violation of a statute. Civil Code §943(a). Additionally, the Act does not apply to condominium conversions. Civil Code §896. The Elliott Court explains that apart from these exceptions, the Legislature intended the Act to apply to all construction defect claims (regardless of damage) relating to the construction of residential properties whose sales contracts are signed after January 1, 2003. There is no exception in the Act, express or implied, for common law causes of action. Next, the Court turns to the Act’s legislative history to buttress this conclusion. This history makes clear that the Act is a legislative response to the California Supreme Court’s holding in Aas v. Superior Court (2000) 24 Cal.4th 627, that construction defects in residential properties are only actionable in tort when actual property damage manifests. Senate Judiciary Committee hearings indicate that the Act was the product of protracted negotiations between varying interested parties, including construction industry trade groups and consumer protection groups. The Legislature intended (1) to promulgate building standards, violations of which would be actionable, even without damage, and (2) to allow homeowners to recover for actual damage caused by construction defects not covered by the building standards. In other words, the Act was intended to provide homeowners redress regardless of whether damage had manifested. Therefore, the Court concluded that common law causes of action for construction defects, regardless of damage, are subject to the pre-litigation procedure set forth in the Act. The Court issued a writ of mandate directing the trial court to vacate its earlier order, and to enter a new order granting Elliott’s motion to stay the litigation until the homeowners (and Elliott) have satisfied the pre-litigation procedure of the Act. II. McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132 Similar to the Third Appellate District Court’s ruling in Elliott, the Fifth Appellate District Court also rejected the holding of Liberty Mutual in a matter now pending before the California Supreme Court: McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132 (review granted and opinion superseded sub nom. Albany v. Superior Court 360 P.3d 1022). Also similar to Elliott, in McMillin a group of homeowners filed common law construction defect claims against the builder of their homes. The builder, McMillin, moved to stay the litigation pending compliance with the Act’s pre-litigation procedure. The trial court denied the motion, holding that the Act does not apply because the homeowners have not asserted statutory building standard violations contained within the Act. In reasoning substantially similar to that of Elliott, the McMillin Court rejected Liberty Mutual’s holding that the Act is not the exclusive remedy for pursuing construction defect claims, with or without damage. Thus, the McMillin Court issued a writ of mandate to vacate the trial court’s earlier order and to enter a new order granting McMillin’s motion to stay. On November 24, 2015, the California Supreme Court granted the homeowners’ petition for review. In August of 2016, briefing was completed and the matter is now awaiting the scheduling of arguments. CGDRB will continue to closely monitor the pending appeal of this matter to the California Supreme Court, as well as all related developments. Reprinted courtesy of Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and Ravi R. Mehta, Chapman Glucksman Dean Roeb & Barger Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com Mr. Mehta may be contacted at rmehta@cgdrblaw.com Read the court decision
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Preventing Acts of God: Construction Accidents Caused by Outside Factors

September 20, 2017 — Christopher G. Hill - Construction Law Musings
For this week’s Guest Post Friday here at Musings, we welcome back Seth Smiley. Seth, a native of Baton Rouge, is the owner of Smiley Law Firm. He is admitted to practice in all state and federal courts in Louisiana and California. Seth Smiley is the son of a general contractor, and acquired valuable work experience in the construction industry prior to entering law school. He earned his J.D. from Loyola, New Orleans in 2009. In his practice, Seth handles all aspects of construction cases, from initial contracting all the way to final payment once work is complete. Other areas of focus include commercial lease disputes, personal injury, business formation, and insurance property damage claims. Seth loves to fight insurance companies. Seth is currently the primary author of the Smiley Law Blog. The blogs primary focus is to provide value for current and prospective clients regarding trending legal issues in which the attorneys at Smiley Law Firm cover. There are several factors a construction team can control on a job site. The foreman can ensure scaffolding is secure and that all employees are properly trained, and all workers can take steps to ensure a reasonably safe work site. Accidents can and will happen despite the best efforts of those involved. Read the court decision
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Reprinted courtesy of Christopher G. Hill, The Law Office of Christopher G. Hill
Mr. Hill may be contacted at chrisghill@constructionlawva.com

DA’s Office Checking Workers Comp Compliance

February 10, 2012 — CDJ STAFF

The San Bernardino office of the California District Attorney is partnering with the California Contractor’s State License Board to check if subcontractors are holding the required workers compensation insurance. The High Desert Daily Press reports that the process of checking at sites has been going on for several months.

Investigators visit sites and ask supervisors to provide a list of subcontractors which the state then checks for compliance. One worker was quoted that insurance inspections were so rare that he had never seen one before, despite 20 years in construction.

On one day, investigators in two teams visited fourteen construction sites and reviewed the insurance status of twenty-two firms. Three were found out of compliance and stop work orders were issued.

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