Guessing as to your Construction Damages is Not the Best Approach
November 18, 2019 —
David Adelstein - Florida Construction Legal UpdatesArbitrarily guessing as to your construction damages is NOT the best approach. Sure, experts can be costly. No doubt about it. Having an expert versus guessing as to your construction damages caused by another party’s breach of contract is a no brainer. Engage an expert or, at a minimum, be in a position to competently testify as to your damages caused by another party’s breach of contract. Otherwise, the guessing is not going to get you very far as a concrete subcontractor found out in Patrick Concrete Constructors, Inc. v. Layne Christensen Co., 2018 WL 6528485 (W.D. New York 2018) where the subcontractor could not competently support its delay-related damages or change orders and, equally important, could not support that the damages were proximately caused by the general contractor’s breach of the subcontract.
In this case, the concrete subcontractor entered into a subcontract to perform concrete work for a public project. The project was delayed and the general contractor was required to pay liquidated damages to the owner. Not surprisingly, the subcontractor disputed liability for delays and sued the general contractor for all of its delay-related damages “in the form of labor and materials escalation, loss of productivity, procurement and impact costs, field and home office overhead, idle equipment, inability to take on other work, lost profits, and interest.” Patrick Concrete Constructors, 2018 WL at *1.
The general contractor moved for summary judgment as to the plaintiff’s delay-related damages – the subcontractor’s damages were nothing but guesses and the subcontractor could not prove the general contractor was the cause of the subcontractor’s damages.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Louisiana Court Applies Manifestation Trigger to Affirm Denial of Coverage
June 10, 2015 —
Tred R. Eyerly – Insurance Law HawaiiApplying the manifestation trigger, the Louisiana Court of Appeal affirmed denial of coverage where the property damage manifested after the policy period expired. Landry v. Williamson, 2015 La. App. Unpub. LEXIS 213 (La. Ct. App. May 1, 2015).
On August 28, 2002, the Burkarts purchased a home from the Williamsons. One month later, water started leaking into the home during periods of rainfall. Suit was filed against the contractor, who was insured by Scottsdale. Scottsdale, who was added as a defendant, filed a motion for summary judgment, asserting that it did not insure the developer at the time the alleged property damage occurred. Scottsdale's policy expired on August 1, 2002. The trial court granted Scottsdale's motion, finding coverage under its policy was not triggered because no property damage occurred during the policy period.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Wisconsin High Court Rejects Insurer’s Misuse of “Other Insurance” Provision
March 04, 2019 —
Michael S. Levine & David M. Costello - Hunton Andrews KurthThe Wisconsin Supreme Court held last week in Steadfast Ins. Co. v. Greenwich Ins. Co. that two insurers must contribute proportionally to the defense of an additional insured under their comprehensive liability policies.
In 2008, torrential rainstorms battered the Milwaukee area for two days. The downpour overwhelmed the city’s sewer system, causing significant flooding in homes throughout the region. Out of those floods sprang several lawsuits against the Milwaukee Metropolitan Sewerage District (“MMSD”) for negligent inspection, maintenance, repair, and operation of Milwaukee’s sewage system.
MMSD was an additional insured under liability policies covering two other water service providers responsible for the city’s sewer systems. The first policy was issued by Greenwich Insurance Company for United Water Services Milwaukee, LLC, and the second was issued by Steadfast Insurance Company for Veolia Water Milwaukee, LLC. After learning of the lawsuits, MMSD tendered its defense of the sewage suits to both insurers. Steadfast accepted the defense; but Greenwich refused, claiming that its policy was excess to Steadfast’s based on an “other insurance” clause in Greenwich’s policy.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth and
David Costello, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Costello may be contacted at dcostello@HuntonAK.com
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No Coverage Under Ensuing Loss Provision
September 09, 2011 —
Tred R. Eyerly - Insurance Law HawaiiThe cost of removing and replacing cracked flanges to prevent future leakage was not covered as an ensuing loss under a builder’s risk policy in RK Mechanical, Inc. v. Travelers Prop. Casualty Co. of Am., 2011 U.S. Dist. LEXIS 83958 (D. Colo. Aug. 1, 2011).
The insured, RK Mechanical Inc., was a subcontractor hired to install plumbing for a residential construction project. RK was an additional insured on the general contractor’s policy with Travelers. RK installed approximately 170 CPVC flanges on the project. Subsequently, two of the flanges cracked, allowing water to overflow and causing water damage to the project. Travelers was notified of the flange failure and resulting water damage.
RK subsequently removed and replaced the two cracked flanges and began water remediation. Travelers paid for the cost of the water damage due to the cracked flanges.
RK then examined all of the flanges installed in the project and discovered many were cracked and/or showed signs of potential failure. RK removed and replaced the cracked flanges. RK tendered a claim and demand for indemnity to Travelers for these repair costs. Travelers denied the claim. RK then sued for breach of contract and declaratory relief. The parties filed cross motions for summary judgment.
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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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City Council Authorizes Settlement of Basement Flooding Cases
March 12, 2014 —
Beverley BevenFlorez-CDJ STAFFLast July in Dearborn, Michigan, “torrential rain” caused flooding to hundreds of basements, according to Press & Guide. Of the 250 claims filed by residents, “the city determined that about 150 were caused by defects in its water or sewer lines. About 125 of the claims to be settled are for more than $3,000; 26 are for $3,000 or less.”
Press & Guide reported that “Attorney Tarek Baydoun, who is representing some clients whose basements flooded, asked about recourse for ‘botched’ claims, and was concerned because the city hasn’t released the list of those with whom it is settling.” The Mayor, Jack O’Reilly, stated that the law department would release the list to the city council.
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Builders Beware: A New Class Of Defendants In Asbestos Lawsuits
January 06, 2016 —
David J. Byassee, Bremer Whyte Brown & O’Meara, LLP & Timothy A. Gravitt, Ulich, Ganion, Balmuth, Fisher & Feld, LLPResidential, commercial and industrial builders face new and potentially significant liability for construction activities that took place in the 1960s, 1970s and 1980s: personal injury lawsuits filed by construction workers from exposure to building products containing asbestos. After emptying the pockets of manufacturers and suppliers of raw asbestos and asbestos-containing products over the last 20 years, plaintiff lawyers are beginning to set their sights on a new class of defendants in asbestos litigation: residential, commercial and industrial builders who unknowingly allowed asbestos-containing products to be incorporated into their projects.
The men and women who have been involved in the building industry for 40 years or more may remember the subject of asbestos surfacing in the 1970s with the enactment of the Occupational Safety and Health Act (OSHA). At that point builders were just beginning to learn that asbestos was a component of some building materials, and the potential risk of cancer presented by asbestos was being debated in scientific and medical journals. Although the use of building materials containing asbestos was mostly phased out by the 1980s, the health risks associated with exposure to asbestos continue – and in fact increase – for the duration of an exposed person’s life.
Today it is generally accepted that exposure to asbestos increases the risk of developing asbestosis and certain kinds of cancer, including mesothelioma. Cancers associated with exposure to asbestos are typically diagnosed at least 15 years (and sometimes up to 50 years) after a person’s exposure to asbestos, meaning that exposures in the 1960s, 1970s and 1980s might not manifest in disease until now. The class of persons who may be at risk for asbestos-related disease is long and varied: insulators, HVAC installers, pipe fitters, plumbers, drywall installers, painters, plasterers and roofers, to name a few. Long-term exposure history, coupled with the theory that “each and every” exposure during a lifetime is a substantial factor increasing the risk of developing cancer, presents potential liability to builders acting as general contractors and/or property owners, as well as the usual defendants in asbestos lawsuits, which include manufacturers, suppliers, and users of asbestos-containing materials.
In recent years, plaintiff lawyers have set their sights on builders as the financial wherewithal of traditional asbestos defendants has dried up. Plaintiff lawyers have created a new theory of liability which they use to rope builders in as defendants in asbestos lawsuits: that the builder knew – or should have known – that a deadly ingredient (asbestos) was contained in the building materials used in construction, and the builder failed to warn its subcontractors or anyone else on the project that exposure to asbestos could harm them.
Builders have unique legal defenses to claims brought by employees of subcontractors who have developed asbestos-related disease. For example, the California Supreme Court in Privette v. Superior Court (1993) 5 Cal.4th 689, held that an injured employee of a subcontractor cannot maintain a claim against the hirer (builder) for the employee’s injury absent affirmative contribution on the part of the builder to the injury. Thus the first line of defense in an asbestos exposure case is to argue that the developer had no direct role in the plaintiff’s exposure to asbestos and therefore the Privette doctrine precludes the plaintiff from suing the builder. But resourceful plaintiff lawyers are coming up with arguments to get around this so-called Privette defense in asbestos lawsuits by claiming that builders’ activities such as cleanup of asbestos-containing materials, or assertion of control over the work of the subcontractor, directly contributed to the plaintiff’s injuries and therefore provide exceptions to Privette and allow the claim to proceed.
A practical question is raised in asbestos cases: How is a plaintiff able to prove, decades after working on a project, what building materials contained asbestos, or that a builder knew or should have known in the 1960s, 1970s or 1980s that asbestos-containing materials were used on their project, or that asbestos presented a health risk? To answer the first part of the question (what building materials contained asbestos), plaintiff’s experts will say that during the relevant timeframe asbestos was a common ingredient in many building products, e.g., drywall joint compounds, stucco/plaster/gun cement, acoustic ceiling products, cement pipe, insulation, roofing mastic, caulk and plumber’s putty; this can be further proven by reference to product manufacturers’ disclosures made pursuant to the Asbestos Information Act. Also, through the decades of asbestos litigation against product manufacturers and suppliers, resourceful plaintiff lawyers have developed vast banks of data and documentation identifying the manufacturers of asbestos-containing building products, the end-users of those products, and the projects where those products were supplied. With this bank of knowledge, all that is necessary for them to make the claim against a builder is to have the plaintiff identify a construction project where he or she remembers working during the relevant timeframe. Once that identification is made, it is a simple matter for the lawyers to dig and find out who developed the building/project, who then becomes a defendant in an asbestos lawsuit.
The answer to the second part of the question (whether the developer knew or should have known that the products brought to their projects contained asbestos) requires a detailed investigation into the dates at which the products were supplied to the project, the manufacturer of the product, and what information was available in the market place about the material content of the particular product.
The answer to the third part of the question (knowledge that asbestos presented a health risk) is trickier. One of the first standards set by OSHA in 1972 related to permissible levels of exposure to asbestos. It is a common tactic for plaintiff lawyers to argue that the existence of OSHA standards created a presumption of knowledge in the building industry about the dangers of asbestos. But what about pre-OSHA knowledge? Here plaintiff lawyers will argue that well before OSHA, going back as far as 1936, exposure to asbestos was regulated in California under General Industry Safety Orders relating to Dusts, Fumes, Mists, Vapors and Gases. They argue that the General Industry Safety Orders put builders “on notice” of the dangers of asbestos by virtue of being regulated by the State of California, and, by extension, builders had “knowledge” of the health risks associated with asbestos.
There are defenses that skilled defense counsel can utilize to defeat asbestos claims, assuming the Privette defense is not available. The first is to thoroughly investigate and evaluate all of the plaintiff’s potential exposures to asbestos throughout his entire lifetime, and identify those sources that likely were the major contributors to his disease. Next, counsel has to properly investigate the project at which the plaintiff is alleged to have been exposed to asbestos, identify all of the possible sources of exposure, i.e., the products that were used or might have been used at the project, and finally how the plaintiff was allegedly exposed at the project. As most builders do not maintain records of what products were used in their projects dating back 15 years or more, let alone the identities of the trades that worked on the projects, knowledgeable defense counsel can be a valuable partner in unearthing the brands of products typically in use in the locale where the construction took place, and identifying the manufacturers of those products. Defense counsel must analyze the frequency, duration, proximity and intensity of the exposure, as well as the type of asbestos the plaintiff was allegedly exposed to (not all asbestos is created equal – some types are more toxic than others). This will involve careful evaluation of the levels of exposure created by the alleged activity of the builder, to determine, through experts and a thorough understanding of the scientific and medical studies on the subject, whether the levels of asbestos exposure created by the activity could be considered a “substantial factor” in contributing to the risk of the plaintiff’s development of his asbestos-related disease.
Asbestos lawsuits present a significant risk to the unsuspecting and unprepared builder. Money damages available to a plaintiff are substantial. Medical expenses for treatment of asbestos-related disease typically run into the hundreds of thousands of dollars, lost income (including retirement benefits) can also be significant, and jury awards for pain, suffering and emotional distress can be staggering - often millions of dollars. In some cases punitive damages are even awarded.
The bottom line is that a builder runs a big risk if it treats an asbestos claim like any other claim. The level of analysis and investigation to properly defend against the claim requires prompt action by knowledgeable counsel, and frequently there is no insurance coverage.
David J. Byassee is an attorney with the firm
Bremer Whyte Brown & O’Meara, LLP, and is a litigator who has devoted nearly a decade to representation of real estate developers and builders. He can be reached at: dbyassee@bremerwhyte.com.
Timothy A. Gravitt is an attorney with the firm
Ulich, Ganion, Balmuth, Fisher & Feld, LLP who is devoted to defending real estate developers and builders in a variety of litigation. He can be reached at: tgravitt@ulichlaw.com.
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Loss Ensuing from Faulty Workmanship Covered
April 28, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe court found coverage for damage resulting from faulty workmanship. Drury Co. v. Mo. United Sch. Ins. Counsel, 2014 Mo. App. LEXIS 319 (Mo. Ct. App. March 25, 2014).
The School District entered a contract with general contractor, Penzel Construction Company, Inc., to build an addition to a high school. Under the prime contract, the School District was to purchase property insurance, including builder's risk "all-risk" coverage. The policy was to cover the interests of the owner, the contractor, subcontractors and sub-subcontractors in the project.
The School District obtained a policy from Missouri United School Insurance Counsel (MUSIC). Exclusions in the all-risk policy included loss due to faulty workmanship or materials, "unless loss by a peril not otherwise excluded ensues and then MUSIC shall be liable only for such ensuing loss."
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Corporate Formalities: A Necessary Part of Business
February 18, 2020 —
Hannah Kreuser - Porter Law GroupMany benefits exist in choosing to create a corporation or limited liability company (“LLC”) as your business entity. However, what attracts most people to these entities is the protection they afford the business owner(s) against personal liability for the business’ obligations, debts, and other liabilities. Whatever reason prompts your decision to form a corporation or LLC, if you are like many smaller businesses, once the formation process is over its back to business as usual.
However, in order to keep the protection against personal liability associated with a corporation or LLC, the business must engage in, what are known as corporate formalities. Corporate formalities are formal actions that must be taken by a corporation or LLC in order to maintain the benefits associated with that business entity. These corporate formalities may be required under California law, by the bylaws, and/or by the operating agreement of your business.
When your business is formed as a corporation, many of the corporate formalities exist as part of California’s Corporations Code (“CCC”). These formalities include: (1) holding annual meetings (CCC § 600); (2) regularly electing directors (CCC § 301); (3) keeping meeting minutes (CCC § 1500); and (4) maintaining accurate corporate records (CCC § 1500). While these are only a few of the corporate formalities existing for corporations in the State of California, these formalities are often overlooked or put off by smaller businesses because they are either unknown to the business or are intended to be complied with later, as the actual running of the business takes priority.
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Hannah Kreuser, Porter Law GroupMs. Kreuser may be contacted at
hkreuser@porterlaw.com
