Back Posting with Thoughts on Lien Waivers
May 20, 2015 —
Christopher G. Hill – Construction Law MusingsAfter a week of being unable to post due to the rigors of my solo construction practice, I’m back on the blogging train. For those of you that missed my new musings this past week, I hope that you had a chance to look through some of the past Guest Post Friday posts for some good stuff to read.
During the course of my busy week last week, a question came up regarding the mechanic’s lien waivers that commercial construction companies routinely execute as part of the payment process. The waiver forms vary, but each essentially states that in exchange for payment the payee, whether a subcontractor or supplier (or even general contractor) waives its future rights to record a mechanic’s lien for the work that is covered by the payment received. Most if not all of these forms further require a certification that the funds paid will either be used to pay suppliers or that suppliers have already been paid. This general description is not the reason for this post.
As is always the case in the Commonwealth of Virginia where the contract is king and a court is unlikely to reinterpret any written contractual document, the devil is in how that waiver is worded. Some waivers are worded in such a way that they essentially require a payee to certify receipt of the funds prior to payment being received. These same forms require the same pre-payment certification that all suppliers and subcontractors of the payee have already been paid. In short they require a payee to both place complete trust in the payor that the check will be paid and that the check will not bounce while in many cases (often with an unstated “wink and nod”) claiming payment was already made when all know the likelihood is that it has not.
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Christopher G. Hill, Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
The Buck Stops Over There: Have Indemnitors Become the Insurers of First and Last Resort?
September 17, 2015 —
Garret Murai – California Construction Law BlogInsurance and indemnity are the primary risk management strategies on construction projects. Insurance, such as commercial general liability insurance, insures against third party claims for bodily injury and property damage, and in the case of builder’s risk insurance, insures against first party claims during construction.
Indemnity, on the other hand, shifts liability from one party to another and can be broader than the types of claims covered by insurance although anti-indemnity statutes can limit the breadth of those claims.
Sometimes though insurance and indemnity work in ways you might never have expected, like in the next case, Valley Crest Landscape Development, Inc. v. Mission Pools of Escondido, Inc., Case No. G049060 (July 2, 2015), in which the California Court of Appeals for the Fourth District held a subcontractor liable in the face of both an indemnity claim brought by a general contractor as well as a subrogation claim brought by the general contractor’s insurance company.
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Garret Murai, Wendel Rosen Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
Housing Starts in U.S. Drop to Lowest Level in Three Months
February 23, 2016 —
Michelle Jamrisko – BloombergNew-home construction in the U.S. unexpectedly cooled in January, indicating there is a limit to how much gains in residential real estate will boost growth at the start of 2016.
Housing starts dropped 3.8 percent to a 1.1 million annualized rate, the weakest in three months, from a 1.14 million pace the prior month, a Commerce Department report showed Wednesday in Washington. The median forecast of 76 economists surveyed by Bloomberg was 1.17 million. Permits, a proxy for future construction, were little changed.
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Michelle Jamrisko, Bloomberg
More Details Emerge in Fatal Charlotte, NC, Scaffold Collapse
January 17, 2023 —
Derek Lacey & Jim Parsons - Engineering News-RecordDetails have emerged in the Jan. 2 scaffold collapse at an under-construction apartment high-rise in Charlotte, N.C. that killed three workers and injured two. A work suspension continues during an investigation led by the North Carolina Dept. of Labor's Occupational Safety and Health Division.
Reprinted courtesy of
Derek Lacey, Engineering News-Record and
Jim Parsons, Engineering News-Record
Mr. Lacey may be contacted at laceyd@enr.com
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A Look Back at the Ollies
May 03, 2018 —
Beverley BevenFlorez-CDJ STAFFThe Jerrold S. Oliver Award of Excellence, also known as the “Ollie” award, is presented to “an individual who is outstanding or has contributed to the betterment of the construction defect community.” West Coast Casualty asks members of the construction defect community to nominate those they feel are deserving of the award, and then members vote for one of four nominees. The award is presented at the West Coast Casualty Seminar. Those recognized receive a plaque and a donation in the winner’s name to Habitat for Humanity as well as a local California and Nevada charity.
Jerrold S. Oliver was a “’founding father’ in the alternate resolution process in construction defect claims and litigation. His loyalty and commitment to this community were beyond mere words as he was a true believer in the process of resolution.”
Past Award Winners:
1996 - Awarded to Ross R. Hart, Esq. (Mediator - American Arbitration Assoc.)
1997 - Awarded to Merv Thompson, Esq. (Mediator in private practice)
1999 - Awarded to Tom Craigo, (Adjuster - C.N.A. Insurance Company)
2000 - Awarded to Kristi Cole, (Adjuster - Safeco Insurance Company)
2001 - Awarded to Karen Rice, (Claims Manager - ACE / USA)
2002 - Awarded to Stephen Henning, Esq. (Wood, Smith, Henning and Berman, LLP)
2003 - Awarded to Ross Feinberg, Esq. (Feldscott, Lee, Feinberg, Grant and Mayfield LLP)
2004 - Awarded to Janet Shipes (Adjuster – C.N.A. Insurance Company)
2005 - Awarded to Edward Martinet (Expert – MC Consultants)
2006 - Awarded to Hon. Victoria V. Chaney (Judge – Los Angeles Superior Court)
2007 - Awarded to Bruce Edwards, Esq. (Mediator) JAMS
2008 - Awarded to Gerald Kurland, Esq. (Mediator) JAMS
2009 - Awarded to Keith Koeller, Esq. (Koeller, Nebecker, Carlson and Haluck, LLP)
2010 - Awarded to Terry Wolcott – (Construction Defect Manager – Travelers Ins. Co.)
2011 - Awarded to George Calkins, Esq. (Mediator) JAMS
2012 - Awarded to Joyia Greenfield, Esq. (Lorber, Greenfield and Polito, LLP)
2013 - Awarded to Margee Luper (Claim Manager – XL Insurance Group)
2014 - Awarded to Matt Liedle, Esq. (Liedle, Lounsbery, Larson & Lidl, LLP)
2015 - Awarded to Robert A. Bellagamba, Esq. (Special Master/Mediator, Castle & Dekker)
2016 - Awarded to Lisa Unger, (Senior Claims Examiner, Global Management Liability Markel)
2017 - Awarded to Caryn Siebert, (Vice President, Claims, Knight Insurance Group)
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Properly Trigger the Performance Bond
January 05, 2017 —
David Adelstein – Florida Construction Legal UpdatesA performance bond is a valuable tool designed to guarantee the performance of the principal of the contract made part of the bond. But, it is only a valuable tool if the obligee (entity the bond is designed to benefit) understands that it needs to properly trigger the performance bond if it is looking to the bond (surety) to remedy and pay for a contractual default. If the performance bond is not properly triggered and a suit is brought upon the bond then the obligee could be the one materially breaching the terms of the bond. This means the obligee has no recourse under the performance bond. This is a huge downside when the obligee wanted the security of the performance bond, and reimbursed the bond principal for the premium of the bond, in order to address and remediate a default under the underlying contract.
A recent example of this downside can be found in the Southern District of Florida’s decision in Arch Ins. Co. v. John Moriarty & Associates of Florida, Inc., 2016 WL 7324144 (S.D.Fla. 2016). Here, a general contractor sued a subcontractor’s performance bond surety for an approximate $1M cost overrun associated with the performance of the subcontractor’s subcontract (the contract made part of the subcontractor’s performance bond). The surety moved for summary judgment arguing that the general contractor failed to property trigger the performance bond and, therefore, materially breached the bond. The trial court granted the summary judgment in favor of the performance bond surety. Why?
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dma@katzbarron.com
Be Proactive Now: Commercial Construction Quickly Joining List of Industries Vulnerable to Cyber Attacks
June 15, 2017 —
Jeffrey M. Dennis & Nathan Owens – Newmeyer & Dillion LLPCommercial contractors have long faced their own unique business risks - labor and material shortages, delay claims, bonding issues, and defects in workmanship. But, in today's ever-evolving cyber world, it is imperative that contractors understand they are vulnerable to risks beyond finishing a project on time and on budget. As we are seeing more and more each day, cyber threats impact all businesses, including the construction industry, and the failure to protect against these threats will cost your company millions in damages and reputational harm.
UNDERSTANDING CYBER THREATS
Traditionally, cyber threats are thought of as the theft of employee and customer information over the internet. Given the construction industry is the largest employer in the world, the need to protect this information is obvious. The release or loss of personnel or consumer data could lead to extensive liability under a variety of potential claims, including statutory fines. In addition to securing confidential information, companies have to protect against outside agents accessing control of a company’s security protocols, equipment or encrypting files using malicious software. The recent “WannaCry” attack demonstrates that no business is immune from cyber attacks.
EXAMPLES OF RELATED BREACHES
For those that think these scenarios do not happen, here are two examples of these types of breaches:
* In May 2013, Chinese hackers stole floor plans, server information, and security system designs from an Australian prime contractor. Fearing the risks of compromised physical and network security, the contractor incurred additional costs of $132.6 million in project delays and costs to rework the various components that had been stolen.
* Then, in December 2014, a German governmental office reported that a steel mill suffered massive damage when malware prevented a blast furnace from being properly shut down. Hackers gained access to key technology within the company, which eventually allowed them to control the production line.
THE NEW WORLD OF THE IoT
In addition to these types of “traditional” hacking threats, cybersecurity risks continue to evolve and become more complicated every day. Some of these new threats are driven by the development of a phenomenon known as the Internet of things, or IoT. The IoT is most basically defined as the interconnection of devices with on / off switches to the Internet and each other. Since the IoT is estimated to be 20 billion or more devices within 3 years, and can be combined with malicious software, IoT poses one of the most challenging risks for contractors to protect against.
The technology included in today's commercial buildings clearly opens this avenue of risk. A centralized computer control center, typically employed in new buildings, controls and maintains the systems that are vital to the operation of the building, e.g., power, elevators, HVAC, lighting, and security. What happens if a hacker gains control to one of these systems, let alone all of them? What if a hacker simply utilizes an IoT attack to overwhelm a building’s computer systems? In either scenario, at a minimum, significant disruption would occur. Worse, the health and safety of those within the building could be jeopardized. A hacker may utilize ransomware in combination with an IoT attack to take over control of the building and hold it and possibly the occupants “hostage” until a ransom is paid.
The first significant IoT attack happened in October 2016 when a major web hosting company was attacked through the IoT, causing the host site to crash. The attack did not steal information, it simply caused the site to crash. But, that crash caused world-wide disruption across the Internet.
Hackers used malicious software to access a hundred thousand common household devices — web cameras, fitness trackers, DVR’s, smart TVs and even baby monitors — to flood the hosting company’s servers with incredibly high internet traffic. This attack showed that everyday items can be hacked and controlled by cyber criminals and then used against anyone else.
As we have all seen in recent news, the WannaCry cyber attack impacted businesses across the globe. Days after the attacks, hospitals were still left feeling its impact with continued appointment and planned operation cancellations, and delays in service. We should expect to see these types of attacks increasing in frequency.
PAY ATTENTION OR FACE THE CONSEQUENCES
Make no mistake about it, the stakes are incredibly high in the realm of cyber security protection. By 2021, the annual worldwide cost attributable to cyber attacks is estimated to reach the trillions of dollars. If any of these potential attacks occur, a contractor faces significant exposure, in many forms, including:
* Monetary. Cybersecurity events result in direct monetary losses in the form of notification costs, data recovery costs, and, of course, legal and public relations fees. States are also starting to impose strict standards on companies which will result in significant regulatory punishment in the cases of cyber breaches, including the added costs associated with agency investigations, regulatory fines and consumer redress funds.
* Reputation. Perhaps more important than the monetary risk, a contractor may incur substantial reputational harm if such a breach or attack is successful. Recent data has shown that small to medium-sized companies that experience a significant cybersecurity breach go out of business within six months of the breach – due to not only high monetary costs, but severe reputational damage.
* Criminal. The recently passed New York cybersecurity regulations place potential criminal penalties on compliance personnel. Other states are likely to follow New York.
As a business leader and commercial builder, the time to act is now. While the purchase of specific cyber insurance is an important part of protecting against the risks of a cyber attack, many cyber policies contain exclusionary language embedded in the policy making coverage potentially illusory. Additional steps can and need to be taken immediately, including an honest discussion of internal cybersecurity protections, examination of risk management strategy, and the training of employees. Failure to take these important steps could result in a disastrous cybersecurity breach and the loss of millions of dollars.
Jeffrey M. Dennis currently serves as Newmeyer and Dillion’s Managing Partner and, as a business leader, advises his clients on cybersecurity related issues, introducing contractual and insurance opportunities to lessen their risk. You can reach Jeff at jeff.dennis@ndlf.com.
J. Nathan Owens is the Managing Partner for Newmeyer & Dillion’s Las Vegas office. With more than 10 years in the construction industry as a former contractor himself, Nathan understands the complex issues builders and developers face in all aspects of development and construction. You can reach Nathan at nathan.owens@ndlf.com.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit http://www.newmeyeranddillion.com/.
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Top Five Legal Mistakes in Construction
April 04, 2022 —
Jonathan A. Cass, Nicholas F. Morello & John A. Greenhall - Construction ExecutiveMany contractors repeatedly make the same mistakes in negotiating contracts. Here are the most common mistakes contractors make—and how they can be avoided.
1. Not Being Careful With Force Majeure Clauses
To protect themselves from liability in the event of unforeseen circumstances like fires, floods, wars, unusual delays in deliveries, strikes, pandemics or acts of God, contractors should ensure their contracts contain robust force majeure provisions. These provisions state that in the event of any extenuating circumstances outside of its control, the contractor is not liable for any damages that result from a delay to the project completion date and is entitled to a time extension. This clause has been critical in addressing COVID-19-related disruptions and the current material shortages. Contractors should be wary, however, of “no damage-for-delay” language, which often appears in conjunction with these clauses.
Reprinted courtesy of
Jonathan A. Cass, Nicholas F. Morello and John A. Greenhall, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
Mr. Cass may be contacted at jcass@cohenseglias.com
Mr. Greenhall may be contacted at jgreenhall@cohenseglias.com
Mr. Morello may be contacted at nmorello@cohenseglias.com
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