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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Finding Insurer's Declaratory Relief Action Raises Unsettled Questions of State Law, Case is Dismissed
November 05, 2024 —
Tred R. Eyerly - Insurance Law HawaiiThe federal district court for the District of Hawaii dismissed the insurer's action for declaratory relief because it raised issues that were unsettled by Hawaii courts. Association of Apartment Owners of Lahaina Residential Condominium, et al., No. 1-24-cv-00075-JAO-BMK, Order Granting AOAO's Motion to Dismiss (D. Haw. Aug. 29, 2024).
The case addressed whether a property damage exclusion barred coverage over an owner's claim that a condominium association and its property manager failed to obtain adequate insurance before the condominium's property was damaged by the Maui wildfire in August 2023. Great American filed suit seeking a declaration that it had no duty to defend or indemnify the Association and the property manage, Quam Properties Hawaiiana, Inc., in connection with a demand for mediation submitted to the Association and Quam on behalf of one of the owners.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
THE CALIFORNIA SUPREME COURT HAS RULED THAT THE RIGHT TO REPAIR ACT (SB800) IS THE EXCLUSIVE REMEDY FOR CONSTRUCTION DEFECT CLAIMS NOT INVOLVING PERSONAL INJURIES WHETHER OR NOT THE UNDERLYING DEFECTS GAVE RISE TO ANY PROPERTY DAMAGE in McMillin Albany LL
January 24, 2018 —
Chapman, Glucksman, Dean, Roeb, & BargerRICHARD H. GLUCKSMAN, ESQ.
GLENN T. BARGER, ESQ.
JON A. TURIGLIATTO, ESQ.
DAVID A. NAPPER, ESQ.
The Construction Industry finally has its answer. The California Supreme Court ruled that the Right to Repair Act (SB800) is the exclusive remedy for construction defect claims alleged to have resulted from economic loss, property damage, or both. Our office has closely tracked the matter since its infancy. The California Supreme Court’s holding resolves the split of authority presented by the Fifth Appellate District’s holding in
McMillin Albany LLC v. Superior Court (2015) 239 Cal.App.4th 1132, which outright rejected the Fourth Appellate District’s holding in
Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98.
By way of background, the Fourth District Court of Appeal held in
Liberty Mutual that compliance with SB800’s pre-litigation procedures prior to initiating litigation is only required for defect claims involving violations of SB800’s building standards that have not yet resulted in actual property damage. Where damage has occurred, a homeowner may initiate litigation under common law causes of action without first complying with the pre-litigation procedures set forth in SB800. Two years later, the Fifth District Court of Appeal, in
McMillin Albany, held that the California Legislature intended that all claims arising out of defects in new residential construction sold on or after January 1, 2003 are subject to the standards and requirements of the Right to Repair Act, including specifically the requirement that notice be provided to the builder prior to filing a lawsuit. Thus, the Court of Appeal ruled that SB800 is the exclusive remedy for all defect claims arising out of new residential construction sold on or after January 1, 2003.
After extensive examination of the text and legislative history of the Right to Repair Act, the Supreme Court affirmed the Fifth District Court of Appeal’s ruling that SB800 preempts common law claims for property damage. The Complaint at issue alleged construction defects causing both property damage and economic loss. After filing the operative Complaint, the homeowners dismissed the SB800 cause of action and took the position that the Right to Repair Act was adopted to provide a remedy for construction defects causing only economic loss and therefore SB800 did not alter preexisting common law remedies in cases where actual property damage or personal injuries resulted. The builder maintained that SB800 and its pre-litigation procedures still applied in this case where actually property damages were alleged to have occurred.
The Supreme Court found that the text and legislative history reflect a clear and unequivocal intent to supplant common law negligence and strict product liability actions with a statutory claim under the Right to Repair Act. Specifically the text reveals “…an intent to create not merely
a remedy for construction defects but
the remedy.” Additionally certain clauses set forth in SB800 “…evinces a clear intent to displace, in whole or in part, existing remedies for construction defects.” Not surprisingly, the Court confirmed that personal injury damages are expressly not recoverable under SB800, which actually assisted the Court in analyzing the intent of the statutory scheme. The Right to Repair Act provides that construction defect claims not involving personal injury will be treated the same procedurally going forward whether or not the underlying defects gave rise to any property damage.
The Supreme Court further found that the legislative history of SB800 confirms that displacement of parts of the existing remedial scheme was “…no accident, but rather a considered choice to reform construction defect litigation.” Further emphasizing how the legislative history confirms what the statutory text reflects, the Supreme Court offered the following summary: “the Act was designed as a broad reform package that would substantially change existing law by displacing some common law claims and substituting in their stead a statutory cause of action with a mandatory pre-litigation process.” As a result, the Supreme Court ordered that the builder is entitled to a stay and the homeowners are required to comply with the pre-litigation procedures set forth in the Right to Repair Act before their lawsuit may proceed.
The seminal ruling by the California Supreme Court shows great deference to California Legislature and the “major stakeholders on all sides of construction defect litigation” who participated in developing SB800. A significant win for builders across the Golden State, homeowners unequivocally must proceed via SB800 for all construction defect claims arising out of new residential construction sold on or after January 1, 2003. We invite you to contact us should you have any questions.
Reprinted courtesy of Chapman Glucksman Dean Roeb & Barger attorneys
Richard Glucksman,
Glenn Barger,
Jon Turigliatto and
David Napper
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Mr. Barger may be contacted at gbarger@cgdrblaw.com
Mr. Turgliatto may be contacted at jturigliatto@cgdrblaw.com
Mr. Napper may be contacted at dnapper@cgdrblaw.com
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Want to Use Drones in Your Construction Project? FAA Has Just Made It Easier.
March 01, 2017 —
Masaki J. Yamada – Ahlers & Cressman PLLCThe new Part 107 FAA Rules took effect on Monday, August 29, 2016. Unlike the previous requirements for flying a drone commercially, the new rules are much more simplistic and permissive of a broad amount of commercial drone usage.
The following is the basic knowledge you need to legally use a drone on your future projects. To fly a drone commercially, there are now four major requirements:
- You must be at least sixteen years old;
- You must register your drone online;
- You must pass an aviation knowledge test administered at an FAA-approved testing center; and
- You must pass review by the Transportation Security Administration.
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Masaki J. Yamada, Ahlers & Cressman PLLCMr. Yamada may be contacted at
myamada@ac-lawyers.com
Drawing the Line: In Tennessee, the Economic Loss Doctrine Does Not Apply to Contracts for Services
December 11, 2023 —
Gus Sara - The Subrogation StrategistIn Commercial Painting Co. v. Weitz Co. LLC, No. W2019-02089-SC-R11-CV, 2023 Tenn. LEXIS 39 (Weitz), the Supreme Court of Tennessee (Supreme Court) considered whether the economic loss doctrine barred the plaintiff’s claims for fraud, negligent misrepresentation and punitive damages arising out of a contract with the defendant for construction services. The court held that the economic loss doctrine only applies to product liability cases and does not apply to claims arising from contracts for services. This case establishes that, in Tennessee, the economic loss doctrine does not bar tort claims in disputes arising from service contracts.
In Weitz, defendant, Weitz Co. LLC (Weitz), was the general contractor for a construction project and hired plaintiff Commercial Painting Co. (Commercial) as a drywall subcontractor. Weitz refused to pay Commercial for several of its payment applications, claiming that the applications were submitted untimely and contained improper change order requests. Commercial filed a lawsuit against Weitz seeking over $1.9 million in damages, alleging breach of contract, unjust enrichment, enforcement of a mechanic’s lien, and interest and attorney’s fees under the Prompt Pay Act of 1991. Weitz filed a counterclaim for $500,000 for costs allegedly incurred due to Commercial’s delay and defective workmanship. In response, Commercial amended its complaint to add claims for fraud, intentional and negligent misrepresentation, rescission of the contract and $10 million in punitive damages. Commercial alleged that Weitz received an extension of the construction schedule but fraudulently withheld this information from Commercial and continued to impose unrealistic deadlines.
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Gus Sara, White and WilliamsMr. Sara may be contacted at
sarag@whiteandwilliams.com
Federal Miller Act Payment Bond Claim: Who Gets Paid and Who Does Not? What Are the Deadlines?
September 16, 2019 —
William L. Porter - Porter Law GroupWhen working on federal public works construction projects there are no Stop Payment Notice or Mechanics Lien remedies available to protect subcontractors’ and suppliers’ right to payment. Instead, unpaid subcontractors and suppliers must resort to making a claim for payment under a federal law known as the AMiller Act@ (40 USCS 3131 et seq.). Many claimants however, do not realize that the right to make a Miller Act claim is not available to all subcontractors and suppliers. Before committing to performing work on a federal project it is important for subcontractors and suppliers to understand whether or not a Miller Act claim will be available. For those who have no Miller Act rights, careful consideration must be given to whether it is worth the risk to take on the project. For those who have valid Miller Act claim rights, important deadlines must be considered.
Who Gets Paid Under a Miller Act and Who Does Not
For federal projects in excess of $100,000, contractors who have a contract directly with the Federal Government must obtain Miller Act Payment Bond intended for the protection of Subcontractors, laborers and material suppliers to the project.
As a general rule, every subcontractor, laborer, or material supplier who deals directly with the prime contractor and is unpaid may bring a lawsuit for payment against the Miller Act Payment Bond. Further, every unpaid subcontractor, laborer, or material supplier who has a direct contractual relationship with a first-tier subcontractor may bring such an action. The deadlines for these claims are described below.
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William L. Porter, Porter Law GroupMr. Porter may be contacted at
bporter@porterlaw.com
Dust Infiltration Due to Construction Defect Excluded from Policy
September 09, 2011 —
CDJ STAFFA summary judgment was affirmed in the case of Brown v. Farmers Group, by the California Court of Appeals. The Browns bought a new home in Oakley, California. At the time, they signed disclosure statement “acknowledging that the area around their home experienced gusty winds and would be in development for years to come, which might result in dust and airborne mold.”
The Browns found an unusual amount of dust in their home, which became worse when they ran their heating and air conditioning system. Shelia Brown was later diagnosed with chronic valley fever, which was attributed to airborne mold. The Browns contacted Farmers which investigated the house. Although the adjustor from Farmers said the Browns would be covered, Farmers denied the claim.
After the Browns moved out of the house, an inspector found that the HVAC line in the attic was disconnected, sending dust into the home. The Browns brought action against Mid-Century Insurance, which managed the policy, and Farmers. The identified the HVAC defect, window problems, and valley fever as causes, suing for breach of contact, breach of implied covenant of good faith and fair dealing, and the intentional infliction of emotional distress.
The court rejected all these claims. The policy with Farmers excluded losses due to defective construction. This ruled out the faulty HVAC system and any problems there might have been from the windows. The policy also specifically excluded losses from contamination, fungi, pathogens, and noxious substances. The court further found that the adjustor’s opinion was irrelevant to the question of what the policy actually covered. Finally, the court found no evidence of intentional infliction of emotional stress.
On review, the appeals court upheld the trial court’s conclusions and affirmed the summary judgment.
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Real Estate & Construction News Roundup (9/4/24) – DOJ Sues RealPage, Housing Sales Increase and U.S. Can’t Build Homes Fast Enough
October 07, 2024 —
Pillsbury's Construction & Real Estate Law Team - Gravel2Gavel Construction & Real Estate Law BlogIn our latest roundup, environmental regulations tighten for commercial properties, Wells Fargo sells most of its commercial mortgage services business, first-time home buyers struggle with housing affordability, and more!
- The U.S. Department of Justice announced that it is suing the real estate company RealPage, saying it engaged in a price-fixing scheme to drive up rents. (Jennifer Ludden, NPR)
- As environmental regulations for commercial buildings and properties tighten across the U.S., green leases and technologies offer owners and operators opportunities to reduce their portfolios’ carbon footprints, generate cost savings and further align with ESG goals. (Nish Amarnath, Construction Dive)
- Wells Fargo & Co. agreed to sell most of its commercial mortgage servicing business to Trimont LLC, ceding the title of biggest US commercial and multifamily mortgage servicer to the Atlanta-based firm. (Hannah Levitt and Scott Carpenter, Yahoo)
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Pillsbury's Construction & Real Estate Law Team
