Federal District Court Finds Coverage Barred Because of Lack of Allegations of Damage During the Policy Period and Because of Late Notice
December 29, 2020 —
Robert Dennison - Traub LiebermanIn American Bankers Ins. Co. of Florida v. National Fire Ins. Co. of Hartford, 2020 WL 5630017 (Sept. 21, 2020), the Northern District of California of the United States District Court had occasion to consider whether allegations in an underlying complaint triggered a duty to defend and a late notice defense to coverage.
The underlying actions were a suit against the City of Walnut Creek for damages from flooding allegedly caused by the City’s failure to develop and maintain its storm drains.The City settled the cases then sued its liability insurers who issued its coverage in the period 1968 to 1986 for indemnification of the amounts spent to defend and settle the cases.The published decision involved three Travelers’ policies issued to the City between 1968 and 1976, as to which Travelers sought summary judgment as to the lack of coverage in its policies.
The district court first found that the definition of an “occurrence” in the policies, in one policy “an event or a continuous or repeated exposure to conditions which causes injury to person or damage to property during the policy period” and in the other two “an accident, including injurious exposure to conditions, which results during the period this policy is in effect, in bodily injury or property damage,” fell within the rule of Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, that injury or damage during the policy period must occur in order for the policy to be triggered.The court agreed with Travelers that while there were allegations of flooding for many years, the only claims/allegations of property damage were for the period 2000 and later.Therefore the property damage coverage in the policies was never triggered.
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Robert Dennison, Traub LiebermanMr. Dennison may be contacted at
rdennison@tlsslaw.com
Bad Faith Claim for Investigation Fails
January 07, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe insurer prevailed in summary judgment, disposing of the insured's bad faith claim based upon the investigation of the loss. Nino v. State Farm Lloyds, 2014 U.S. Dist. LEXIS 163993 (S.D. Tex. Nov. 24, 2014).
The insured filed a claim with State Farm for damage resulting from a hailstorm on March 29, 2012. An independent adjuster, Charles Crump, conducted an investigation on behalf of State Farm. Crump inspected the roof, where he noted prior repair to the roof, and found no covered damage to the roof as the result of the 2012 hailstorm. Crump found minimal damage to other parts of the house, totaling $2,311.75, which resulted in no payment after the deduction. Crump provided the insured with a printed copy of his damage estimate.
The insured then hired a public adjuster who found damage totaling $31,991.72, including $10,051.22 in roof repairs.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Substitutions On a Construction Project — A Specification Writer Responds
July 03, 2022 —
Melissa Dewey Brumback - Construction Law in North CarolinaIn response to the post about
Substitute Materials on a construction project, Phil Kabza explains how his company,
SpecGuy, handles tracking of all such materials on a project.
Phil writes:
Excellent and important topic, about which there is much confusion among design professionals and contractors. We try to maintain definitions for:
- Pre-bid requests for prior approval of proposed comparable products where products are named in the specifications
- True pre-bid substitution requests that present an alternate type of product from that specified (ie., not “comparable” but perhaps suitable)
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Reprinted courtesy of Melissa Dewey Brumback, Ragsdale Liggett
Ms. Brumback may be contacted at mbrumback@rl-law.com
New Spending Measure Has Big Potential Infrastructure Boost
February 14, 2018 — Tom Ichniowski – ENR
Construction and engineering companies find lots of good news in a newly enacted budget and appropriations package that keeps federal agencies open until late March, provides $89 billion for post-disaster relief and rebuilding and also holds out the prospect of an additional $20 billion in infrastructure funding over the next two years. Read the court decision
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Reprinted courtesy of Tom Ichniowski, Engineering News-Record
Mr. Ichniowski may be contacted at ichniowskit@enr.com
How California’s Construction Industry has dealt with the New Indemnity Law
October 22, 2014 — Mark S. Himmelstein, Esq. - Newmeyer & Dillion
It has been almost two years since the California legislature enacted changes to the state’s indemnity law affecting commercial construction contracts. Although we do not yet have any court opinions analyzing the new statutes, the attorneys at Newmeyer & Dillion now have real world experience in negotiating such indemnity provisions. It is time to evaluate how the construction community has reacted to the changes. In this article, we examine the practical applications of the new law to various construction agreements.
Enacted on January 1, 2013, the new legislation was the latest in a series of efforts by subcontractors and their insurers to eliminate “Type I” indemnity clauses. Under a Type I provision, a subcontractor has a duty to indemnify the developer or general contractor for the negligence of the developer or general contractor or other subcontractors, in addition to the negligence of the subcontractor itself. In 2006, the law was changed to preclude Type I provisions regarding “For Sale” residential construction defect claims. At that time, there was no such restriction enacted for commercial construction contracts. However, since then, commercial subcontractors have been seeking similar legislation. Their efforts culminated in the 2013 revisions regarding commercial contracts.
Commercial Subcontracts
Pursuant to the new indemnity statute — Civil Code section 2782.05 — we have revised our clients’ commercial subcontracts to:
(a) Eliminate the requirement that the subcontractor indemnify the general contractor for the general contractor’s “active negligence;” and
(b) Include the subcontractor’s options for defending claims for which they have an indemnity obligation.
Many subcontractors have responded: “Hey, wait a minute, the new legislation eliminated Type I indemnity so you (general contractor) cannot still require any indemnification for the general contractor’s negligence”. Well, that might be the rumor in subcontractor circles, but the new statute does not eliminate indemnity for the general contractor’s passive fault. In addition, the Civil Code lists 13 instances where the new indemnity restrictions do not apply.
Residential Subcontracts
The legislature did not make anyone’s job easier by drafting a different indemnity provision for commercial subcontracts than for residential subcontracts. In fact, the residential and commercial statutes are different in several critical respects. First, the restrictions on indemnity in the residential statute apply only to construction defect claims in newly constructed “For Sale” houses. The statute does not preclude Type I indemnity provisions for any other claims arising out of residential subcontracts. In contrast, the indemnity restrictions in the commercial statute apply to all claims arising out of commercial subcontracts. In addition, the commercial statute allows indemnity for the general contractor’s passive fault. Since some subcontractors on “residential” projects perform off-site “commercial” work as well, we have amended even residential subcontracts to address the subcontractors’ various indemnity obligations for different parts of their work (e.g., residential work versus commercial work).
Owner-Contractor Agreements
The January 1, 2013 new indemnity provisions apply not only to subcontracts, but also to owner-contractor agreements. Civil Code section 2782(c)(1) precludes indemnity for an owner’s active negligence. Interestingly, the exclusions contained in Civil Code section 2782.05 for subcontracts do not apply, and the statute does not provide contractors with the option of defending claims set forth in the sections concerning subcontracts. Therefore, we have revised the indemnity provisions in owner-contractor agreements to exclude indemnity for the owner’s active negligence.
Design Professional Agreements
The 2007 revisions with respect to “For Sale” residential contracts (discussed above), and the 2013 revisions for commercial contracts do not apply to design professionals. The new indemnity statute concerning commercial subcontracts specifically excludes design professionals from the “anti-indemnity” benefits provided to subcontractors. Therefore, Type I indemnity provisions are fair game and can still be included in design professional contracts.
Conclusion
In sum, Civil Code sections 2782 et seq. now contain an increasingly complex framework for indemnity rules in construction contracts. For example, there is one set of rules for “For Sale” residential construction defect claims (no indemnity for the developer’s active or passive negligence), another for any other claims arising out of residential construction (Type I indemnity is permitted), another for commercial subcontracts (no indemnity for the general contractor’s active negligence, but indemnity for the general contractor’s passive negligence unless any of the exceptions apply, in which case Type I indemnity is permitted), and yet another for commercial owner contractor agreements (no indemnity for the owner’s active negligence, but indemnity for the owner’s passive negligence with no exceptions).
California’s indemnity laws are complex, and rumors as to the impact of the new legislation have made it even more difficult to negotiate these provisions. It is imperative that indemnity clauses in construction contracts clearly delineate the obligations for the specific type or types of work contemplated by the contract. The legislature’s attempt to simplify indemnity obligations has actually made such provisions lengthier and more cumbersome. As experienced construction attorneys, our task is to draft indemnity provisions that comply with the laws, address potential claims, and are understandable.
Mr. Himmelstein is a partner in the Newport Beach office of Newmeyer & Dillion and practices in the areas of construction, real estate, business and insurance litigation. He also specializes in drafting and negotiating construction and real estate contracts. Mark can be reached at mark.himmelstein@ndlf.com.
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A Court-Side Seat: Coal-Fired Limitations, the Search for a Venue Climate Change and New Agency Rules that May or May Not Stick Around
February 15, 2021 — Anthony B. Cavender - Gravel2Gavel
This is a brief review of recent significant environmental and administrative law rulings and developments. With the change in presidential administrations, the fate of at least some of the newly promulgated rules is uncertain.
THE U.S. SUPREME COURT
BP PLC v. City and County of Baltimore
On January 19, 2021, the Court heard oral argument in BP PLC v. City and County of Baltimore. The respondents filed a Greenhous Gas Climate Change lawsuit in state court, alleging that BP, like other energy companies, is liable for significant damage caused by the sale and promotion of petroleum products while knowing that the use of these products and the resulting release of greenhouse gases damages the environment and public property. Several similar lawsuits have been filed in state courts, pleading common law violations as well as trespass and nuisance law violations The energy companies have tried, unsuccessfully to date, to remove these cases to federal court. The petitioners argue that the federal removal statutes allow the federal courts of appeal to review the lower court’s remand, thus opening the possibility that some of the issues presented in these cases can be tried in federal court, presumably a friendlier forum. A decision on this procedural issue should be rendered in a few months. Read the court decision
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Reprinted courtesy of Anthony B. Cavender, Pillsbury
Mr. Cavender may be contacted at anthony.cavender@pillsburylaw.com
U.S. District Court of Colorado Interprets Insurance Policy’s Faulty Workmanship Exclusion and Exception for Ensuing Damage
August 15, 2022 — Carin Ramirez - Colorado Construction Litigation
Recently, the United States District Court for the District of Colorado interpreted a faulty workmanship exclusion in a property insurance policy in The Lodge at Mountain Village Owner Association v. Eighteen Certain Underwriters of Lloyd’s of London, 22 U.S Dist. Ct LEXIS 48883*, decided on March 18, 2022. The Court held that the faulty workmanship exclusion at issue extended to preclude coverage for later ensuing damage that arose from the faulty workmanship, even though the damage was weather related, because faulty workmanship was the primary cause of the ensuing damage.
The claims in The Lodge at Mountain Village arose from maintenance work performed on log siding at three multi-unit condominium buildings in Telluride. The maintenance work to the log siding included staining, finishing, and chinking repairs to joints between the logs. About a year after completion of the work, The Lodge at Mountain Village Owners Association (“The Lodge”) notified the maintenance contractor that logs were extremely weathered and that its work was defective. The Lodge retained an expert who prepared a report stating that the log finish and underlying wood was deteriorating because of the contractor’s work and that some areas were not properly protected from exposure to snow, rain, and brine from ice-melting salt. The Lodge pursued and settled its claims against the contractor. Read the court decision
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Reprinted courtesy of Carin Ramirez, Higgins, Hopkins, McLain & Roswell, LLC
Ms. Ramirez may be contacted at ramirez@hhmrlaw.com
Statute of Limitations Bars Lender’s Subsequent Action to Quiet Title Against Junior Lienholder Mistakenly Omitted from Initial Judicial Foreclosure Action
October 19, 2020 — Lyndsey Torp - Snell & Wilmer Real Estate Litigation Blog
A recently issued opinion by the Court of Appeal, Fifth Appellate District tells a cautionary tale regarding a lender’s failure to name a junior lienholder in its initial judicial foreclosure action.
In Cathleen Robin v. Al Crowell, — Cal.Rptr.3d —-, 2020 WL 5951506, plaintiffs sued defendant, a junior lienholder, for quiet title, having failed to name him in the initial judicial foreclosure action. Defendant raised the statute of limitations defense, but the trial court found in favor of plaintiffs. The court of appeal reversed, holding that the 60-year statute of limitations which the trial court applied only applied to a nonjudicial trustee’s sale, and the trial court could not exercise the trustee’s power of sale after the expiration of the statute of limitations on a judicial action to foreclose.
In 2006, plaintiffs loaned Steve and Marta Weinstein (the “Weinsteins”) $450,000, secured by a deed of trust on one parcel of the Weinstein’s property. In 2007, the Weinsteins and defendant Al Crowell (“Crowell”) recorded a second deed of trust on the property, securing a promissory note executed by the Weinsteins in 2004. Read the court decision
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Reprinted courtesy of Lyndsey Torp, Snell & Wilmer
Ms. Torp may be contacted at ltorp@swlaw.com
