New Case Law Alert: Licensed General Contractors Cannot Sue Owners to Recover Funds for Work Performed by An Unlicensed Subcontractor
May 30, 2022 —
Michele A. Ellison & Samantha R. Riggen - Gibbs GidenThe opinion in Kim v. TWA Construction, Inc. (2022 Cal. App. LEXIS 412) issued by the Court of Appeal of California Sixth Appellate District, on May 13, 2022, makes it clear that a properly licensed general contractor cannot bring an action for compensation from an owner for work performed by an unlicensed subcontractor.
California licensing law has long made explicit that an unlicensed contractor cannot bring or maintain any action to collect or recover compensation for work that contractor performed unless they were duly licensed at all times during the performance of that work. This new ruling extends the scope of this restriction to licensed contractors who hired unlicensed subcontractors.
The Underlying Dispute
The case involved a dispute between property owners and their former general contractor and its principal (collectively “TWA”). The property owners hired TWA to construct a home, and during the early stages of the project, TWA hired an unlicensed subcontractor to perform tree trimming services and to remove a large eucalyptus tree. The subcontractor partially removed the eucalyptus tree, but was stopped by a neighbor, and it was discovered that the tree was partly located on the neighbor’s property. The neighbor brought suit against the property owners, and eventually TWA, for the damage. The property owners subsequently filed a cross-complaint against TWA, and TWA in turn filed a cross-complaint against the property owners.
Reprinted courtesy of
Michele A. Ellison, Gibbs Giden and
Samantha R. Riggen, Gibbs Giden
Ms. Ellison may be contacted at mellison@gibbsgiden.com
Ms. Riggen may be contacted at sriggen@gibbsgiden.com
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How Pennsylvania’s Supreme Court Decision Affects Coverage of Faulty Workmanship Claims
March 31, 2014 —
Beverley BevenFlorez-CDJ STAFFDarin J. McMullen of the firm Anderson Kill explained how a recent opinion by the Pennsylvania Supreme Court allows “Pennsylvania policyholders” to “more confidently challenge insurance companies’ denials of faulty workmanship claims.”
The decision in Indalex Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2013 Pa. Super 311 (Dec. 3, 2013) “reverses a nearly decade-long trend of Pennsylvania decisions narrowing the scope of insurance coverage for construction and defect-related claims under commercial general liability insurance policies,” according to McMullen. “Equally important, the Indalex ruling dealt a blow to the insurance industry’s continual efforts to win overbroad expansion of the rulings in Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., and Erie Ins. Exchange v. Abbott Furnace Co., which found that claims of faulty workmanship in some circumstances may not constitute coverage-triggering ‘occurrences.’”
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Recovering Time and Costs from Hurricane Helene: Force Majeure Solutions for Contractors
November 18, 2024 —
Matthew DeVries - Best Practices Construction LawWhen Hurricane Helene struck North Carolina, it caused severe disruptions to construction projects across the state. Baxter International’s North Cove facility in Marion, N.C., was completely shut down after floodwaters damaged the site and bridges leading to it. Elsewhere, landslides and floods wiped out large sections of Interstate 40, making transportation of materials and equipment nearly impossible. Many contractors in western North Carolina found their projects halted, and their schedules thrown off by this force majeure event.
In situations like these, contractors and subcontractor need a plan to mitigate the impact of such natural disasters on their projects. Here are five practical tips to help you secure time extensions and/or compensation for delays:
1. Include a Robust Force Majeure Clause in Your Contract
When disaster strikes, your contract is your first line of defense. A well-drafted force majeure clause can make the difference between bearing the costs yourself and getting an extension or compensation. The clause should clearly list specific events such as hurricanes, floods, and road closures as qualifying force majeure events.
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Matthew DeVries, BuchalterMr. DeVries may be contacted at
mdevries@buchalter.com
The Cost of Overlooking Jury Fees
February 07, 2022 —
Nicholas B. Brummel, Arezoo Jamshidi & Lawrence S. Zucker II - Haight Brown & BonesteelOn January 21, 2022, the Court of Appeal, Second Appellate District, Division Two (Los Angeles), certified for publication a 2-1 decision that serves as an important reminder to California attorneys to post jury fees in a timely manner and to use appropriate channels and consult with appellate counsel in seeking appellate relief from contested rulings.
In TriCoast Builders, Inc. v. Nathaniel Fonnegra, (B303300, Jan. 21, 2022), a construction defect dispute, the trial court set a jury trial at defendant’s request. However, on the day trial was set, defendant waived jury trial. Plaintiff objected and made an oral request for jury trial. The trial court denied the request finding that plaintiff waived its right to a jury trial by failing to timely post jury fees. The matter proceeded to a bench trial, and the court ruled in favor of defendant. Plaintiff appealed, having failed to seek a writ of mandate, which the appellate court noted “is the proper remedy to secure a jury trial allegedly wrongfully withheld.”
Reprinted courtesy of
Nicholas B. Brummel, Haight Brown & Bonesteel,
Arezoo Jamshidi, Haight Brown & Bonesteel and
Lawrence S. Zucker II, Haight Brown & Bonesteel
Mr. Brummel may be contacted at nbrummel@hbblaw.com
Ms. Jamshidi may be contacted at ajamshidi@hbblaw.com
Mr. Zucker may be contacted at lzucker@hbblaw.com
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Montrose III: Vertical Exhaustion Applies in Upper Layers of Excess Coverage
May 18, 2020 —
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLPIn Montrose Chemical Corp. of Cal. v. Superior Court (No. S244737, filed 4/6/20) (Montrose III), the California Supreme Court held that, as between excess insurers at differing levels of coverage, a rule of “vertical exhaustion” or “elective stacking” applies, whereby the insured may access any excess policy once it has exhausted other excess policies with lower attachment points in the same policy period. The Court limited the rule to excess insurance, stating that “[b]ecause the question is not presented here, we do not decide when or whether an insured may access excess policies before all primary insurance covering all relevant policy periods has been exhausted.”
Montrose manufactured the insecticide DDT in Torrance from 1947 to 1982. In 1990, the state and federal governments sued Montrose for environmental contamination and Montrose entered into partial consent decrees agreeing to pay for cleanup. Montrose claimed to have expended in excess of $100 million doing so, and asserted that its future liability could exceed that amount.
Reprinted courtesy of
Christopher Kendrick, Haight Brown & Bonesteel LLP and
Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com
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Important Insurance Alert for Out-of-State Contractors Assisting in Florida Recovery Efforts!
November 01, 2022 —
Richard W. Brown & Stephanie A. Giagnorio - Saxe Doernberger & VitaSignificant portions of Florida suffered extensive damage from Hurricane Ian. Many out-of-state contractors have sent their workers to Florida to help with the cleanup and rebuilding process.
SDV is sending out this important notice for all out-of-state contractors to contact their workers’ compensation brokers and insurers to ensure their out-of-state workers’ compensation policy will cover workers in Florida. The state of Florida does not recognize the “All States Endorsement” on workers’ compensation policies, and in some instances could potentially result in out-of-state contractors being without coverage in the State of Florida.
As per the
Florida Division of Workers’ Compensation: “Out of State Employers must notify their insurance carrier that they are working in Florida. If there is no insurance, the out-of-state employer is required to obtain a Florida Workers’ Compensation Insurance policy with a
Florida approved insurance carrier which meets the requirements of Florida law and the Florida Insurance Code. This means that ‘Florida’ must be specifically listed in Section 3A of the policy (on the Information Page).”
Reprinted courtesy of
Richard W. Brown, Saxe Doernberger & Vita and
Stephanie A. Giagnorio, Saxe Doernberger & Vita
Mr. Brown may be contacted at RBrown@sdvlaw.com
Ms. Giagnorio may be contacted at SGiagnorio@sdvlaw.com
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Insurer Must Defend Insured Against Construction Defect Claims
November 14, 2018 —
Tred R. Eyerly - Insurance Law HawaiiFinding various exclusions inapplicable, the Federal District Court ruled that the insurer owed a defense to the general contractor based upon Texas law. Mt. Hawley Ins. Co. v. Slay Engineering, 2018 U.S. Dist. LEXIS 139363 (W.D. Texas Aug. 15, 2018).
Huser Construction had a CGL policy issued by Mt. Hawley Insurance Company. Huser contracted to design and construct a municipal sports complex with the City of Jourdanton. The project consisted of four baseball fields, a softball field, parking lots and swimming pool. Huser subcontracted with Cody Pools, Inc. to design and build the swimming pool. Huser also subcontracted with Q-Haul, Inc. to perform earth work, grading and storm drainage work at the site.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
COVID-19 Information and Resources
May 04, 2020 —
Richard H. Glucksman, Esq. & Brian D. Kahn, Esq. – Chapman Glucksman Dean & Roeb BulletinINTRODUCTION
The current COVID-19 health crisis has greatly impacted nearly every aspect of our business and personal lives. The constant flow of rapidly evolving, and often contradictory information creates its own challenges for those who are responsible for ensuring compliance with relevant regulations and best practices while still moving forward with their business and family activities.
This bulletin differs from most Chapman, Glucksman, Dean & Roeb bulletins in that it does not highlight a recent case, statute or a single development, but rather acts as a resource and “links” to provide you with needed information and to simplify your search for critical information during this unusual and challenging time.
CIVIL LITIGATION: CLOSURES AND RESTRICTIONS
The State and Federal Court systems in California have drastically reduced their operations. The Governor issued Executive Order N-38-20, this suspends certain limitations on the Chief Justice’s authority, making it possible for orders to be issued adapting the Court’s operations to address the COVID-19 health crisis. As of this time, the most recent statewide order from the Chief Justice is the March 30, 2020 Order which allows Courts to utilize remote technology when possible. The March 30, 2020 Order also clarifies a prior Order suspending all trials for 60 days. As many of you are aware, civil trials in California must commence within five years of the initiation of the action, this is commonly referred to as the “five year rule”. While the five year time period was initially extended by the Chief Justice for 60 days, the Judicial Council subsequently adopted a series of Emergency Rules, including one which extends this to six months for all civil actions filed on or before April 6, 2020. The Judicial Council also adopted rules tolling the statutes of limitation for civil causes of action are tolled from April 6, 2020 to 90 days after the state of emergency has ended.
In addition to the statewide orders and rules, counties have enacted their own rules. Los Angeles Superior Court, for instance, has closed some locations while others remain open on a limited basis. On March 17, 2020 an Order was issued limiting the Court to “essential functions” through April 16, 2020. However, on April 15, 2020, a further Order extended the closure through May 12, 2020. While truly urgent Ex Partes may go forward, all regularly set hearings will be continued until after June 22, 2020. Trials will begin after June 22, 2020 with non-priority trials anticipated to start in later August or September. Notably, any deadlines imposed by current trial or hearing dates still stand until the specific dates are continued.
As with other aspects of the COVID-19 health crisis, the impact upon Civil Litigation continues to evolve, for the most up to date information we include the following links to the California Courts. The first page includes links to all the State and County Orders, the second page is for the Judicial Council Rules.
Links:
https://newsroom.courts.ca.gov/news/court-emergency-orders-6794321
https://newsroom.courts.ca.gov/news/judicial-branch-emergency-actions-criminal-civil-and-juvenile-justice
STATE AND LOCAL STAY AT HOME ORDERS
The State of California declared a state of emergency on March 4, 2020. On March 13, 2020 the President declared a national state of emergency. On March 19, 2020 Governor Newsom issued Executive Order N-33-20, also known as the “Stay at Home” order. This orders all Californian’s to stay at home, unless they are part of an essential businesses are exempt which generally includes construction and insurance. Generally, Californians are allowed to run essential errands, but they are not to congregate with those outside of their household.
In addition to the State, many cities and counties have enacted additional orders regarding whether certain types of businesses can remain open, use of parks, trails and other public amenities as well as what type of protective measures must be adhered to such as covering your face in public. As with Civil Litigation, the State and Local Government regulations continue to evolve. A link to the State’s COVID-19 page is below and we also encourage you to check your local City and County sites for additional information.
https://covid19.ca.gov/
BUSINESS AND FINANCIAL GUIDELINES
The impact of COVID-19 is unprecedented. While “essential businesses” may remain open for customers, steps must be taken to protect the health of both employees and customers. There are both State and, in many instances, Local Government regulations addressing these precautions. In addition to taking safety measures to protect the health of all involved, there are a multitude of financial concerns to be addressed. While most people have already heard about the moratorium on residential and commercial evictions, this does little to address how property owners will receive funds to pay their financial obligations, how tenants can pay their other obligations, how either can make payroll and most importantly, how employees who can no longer work due to their “non-essential” business being closed can put food on their tables.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES” act) may provide financial relief for many business by means of loans, some of which may be forgivable, and tax credits. The CARES act also modifies the Family Medical Leave Act (“FMLA”) to provide paid leave for those who cannot work due to COVID-19 as well as other benefits. The IRS has extended the deadline to file and pay taxes to July 15, 2020. Additionally, there are other Federal and State benefits which may be available for those whose jobs are impacted.
The financial impacts of COVID-19 are far reaching and continue to evolve. The Department of Insurance ordered insurance companies to return premiums for at least the months of March and April. This applies to certain lines of insurance where the risk of loss has fallen substantially. However, business interruption, environmental and pollution claims have increased exponentially. While most such policies require some physical damage in order to trigger an occurrence, there has been some discussion of legislation deeming the COVID-19 pandemic to fulfill the physical damage requirement.
If your business has been closed or impacted by COVID-19 we encourage you to review your insurance policies and key contracts to ascertain what your rights and obligations are as well as whether you may have any coverage for your losses. Just as importantly, speak with your business partners including vendors, customers and employees to ascertain their capabilities and willingness to work through this crisis.
US Department of Labor OSHA Guidelines:
https://www.osha.gov/SLTC/covid-19/
California Labor & Workforce Development Agency Resource Page:
https://www.labor.ca.gov/coronavirus2019/
California Employment Development Department:
https://www.edd.ca.gov/about_edd/coronavirus-2019.htm
CONSTRUCTION GUIDELINES
Many of our clients are involved in the construction industry. Construction has been deemed an essential activity and is exempt from many of the “stay at home” orders but certain protections and regulations still apply. In addition to the general workplace guidelines discussed above certain jurisdictions are providing guidance as to how to provide a safe construction site workplace. We have included a link the Los Angeles Department Building and Safety guidelines below.
However, in some instances work on a project may be delayed or may not be able to progress due to the project owner stopping work or the inability of subcontractors or suppliers to continue as originally intended. In this case one should review their contracts to see what justifies delay and inability to perform by either party and the impact thereof. Contracts should also be evaluated to ascertain whether the costs associated with compliance with the new COVID-19 regulations are a recoverable cost under the contract. As with the general business discussion above, contractors should review all available insurance, including builder’s risk to ascertain the existence of possible coverage.
LA DBS guidelines:
https://ladbs.org/docs/default-source/publications/misc-publications/construction-site-guidance.pdf
SUMMARY
The COVID-19 health crisis has had and, for the foreseeable future, will have a broad and severe impact on our society. The variety of evolving regulations on the Federal, State and Local Government levels make it challenging to comply, especially for businesses in operation. There are also a variety of resources available to help ensure compliance with these regulations as well as the financial and physical viability of our communities’ companies and employees. Please do not hesitate to contact us if you need any assistance in navigating these rules and resources.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean & Roeb and
Brian D. Kahn, Chapman Glucksman Dean & Roeb
Mr. Glucksman may be contacted at rglucksman@cgdrlaw.com
Mr. Kahn may be contacted at bkahn@cgdrlaw.com
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