A Trivial Case
November 07, 2022 —
Garret Murai - California Construction Law BlogConstruction defect cases leading to physical injury are rarely trivial, at least in the eyes of the injured party, but alas sometimes they are as the next case,
Nunez v. City of Redondo Beach, 81 Cal.App.5th 749 (2022), demonstrates.
The Nunez Case
Monica Nunez, Vice President of Finance and Accounting at a restaurant chain and a part-time fitness instructor at a gym, tripped and fell on a public sidewalk in Redondo Beach. Ms. Nunez, who was in her forties, tripped following a group run when her back foot hit a sidewalk slab that was elevated at its highest point approximately 11/16 inches. Ms. Nunez landed on her left knee and right arm and in the process fractured her kneecap and elbow.
Ms. Nunez sued the City of Redondo Beach for her injuries alleging causes of action for dangerous conditions on public property under Government Code section 835, nuisance under Government Code section 815.2, and failure to perform a mandatory duty under Government Code section 815.6.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Sales of U.S. New Homes Decline After Record May Revision
July 30, 2014 —
Victoria Stilwell – BloombergFewer new U.S. homes were sold in June than forecast and May data showed the biggest downward revision on record, painting a picture of a housing market that is struggling to gain traction.
Sales of newly built homes declined 8.1 percent to a 406,000 annualized pace, the fewest since March and less than any economist surveyed by Bloomberg forecast, Commerce Department figures showed today in Washington. That followed a May reading of 442,000 that was 12.3 percent lower than estimated last month.
Restrictive lending rules, limited land supply, higher mortgage rates and more expensive properties are keeping a lid on how much the housing recovery can accelerate. Continued employment gains and bigger increases in wages will be needed to support further growth in the industry, which has stalled since interest rates started climbing last year.
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Victoria Stilwell, BloombergMs. Stilwell may be contacted at
vstilwell1@bloomberg.net
When an Intentional Act Results in Injury or Damage, it is not an Accident within the Meaning of an Insurance Policy Even When the Insured did not Intend to Cause the Injury or Damage
June 06, 2022 —
Gary L. LaHendro - Haight Brown & Bonesteel LLPIn
Maryam Ghukasian v. Aegis Security Insurance Company (No. B311310, filed April 14, 2022, and certified for publication on May 5, 2022), the Court of Appeal of the State of California, Second Appellate District held that Maryam Ghukasian’s insurer, Aegis Security Insurance Company (“Aegis”), had no duty to defend her in an underlying lawsuit alleging she cleared land and cut trees on her neighbors’ property without their consent. The appellate court explained Ms. Ghukasian’s acts of intentionally cutting the trees and clearing the land were not accidental for purposes of insurance coverage, even if she acted on the good faith but mistaken belief the trees were on her property.
Ms. Ghukasian owns a home in Glendale, California. She purchased a homeowner’s insurance policy from Aegis for the policy period of June 13, 2018 to June 13, 2019 (the “Aegis Policy”). In August 2018, Ms. Ghukasian hired a contractor to clear and cut trees she believed were on her property. However, the trees were on the property of her neighbors, Vrej and George Aintablian.
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Gary L. LaHendro, Haight Brown & Bonesteel LLPMr. LaHendro may be contacted at
glahendro@hbblaw.com
When Licensing Lapses: How One Contractor Lost a $1 Million Dispute
October 28, 2024 —
Matthew DeVries - Best Practices Construction LawAs a construction lawyer, contractor licensing is a very key aspect of my practice. This can include new contractor applications, increase or changes in monetary limits or license classifications, change in ownership or qualifying agent , and, of course, licensing violations.
The recent decision in Incident365 Florida, LLC v. Ocean Pointe V Condominium Association serves as an important reminder for general contractors and subcontractors regarding the significance of proper licensing and thorough contract review in disaster recovery and construction services.
Case Overview
In this case, Incident365 Florida, LLC entered into disaster recovery agreements with several condominium associations (“Associations”) following Hurricane Irma. The agreements involved various tasks such as water damage mitigation, dehumidification, and the removal of unsalvageable materials. However, Incident365 lacked the appropriate contractor’s license when performing the work, which became a focal point in the dispute when the Associations refused to pay the remaining balance of $1 million, citing the absence of the required licensure.
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Matthew DeVries, BuchalterMr. DeVries may be contacted at
mdevries@buchalter.com
Illinois Supreme Court Finds Construction Defect Claim Triggers Initial Grant of Coverage
February 26, 2024 —
Tred R. Eyerly - Insurance Law HawaiiThe Illinois Supreme Court found that the underlying allegations addressing construction defects were sufficient to establish "property damage" caused by an "occurrence."Acuity v. M/I Homes of Chicago, LLC, 2023 Ill. LEXIS 1019 (Ill. Nov. 30, 2023).
M/I Homes was the general contractor for a residential townhome development. The Owners' Association sued for breach of conract and breach of the implied warranty of habitability against M/I Homes. The complaint alleged that M/I Homes' subcontractors caused construction defects by using defective materials, conducting faulty workmanship and failing to comply with applicable building codes. The defects included leakage and uncontrolled water with moisture in locations in the buildings where it was not intended or expected. The Association further alleged that M/I Homes did not intend to cause the construction defects nor did it expect or intend the resulting property damage, such as damage to other building materials. The complaint further alleged that M/I Homes did not perform any of the construction work and that the subconractors performed all the work on its behalf.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
A Court-Side Seat: Guam’s CERCLA Claim Allowed, a “Roundup” Verdict Upheld, and Judicial Process Privilege Lost
June 14, 2021 —
Anthony B. Cavender - Gravel2GavelThis is a brief account of some of the important environmental and administrative law cases recently decided.
THE U.S. SUPREME COURT
BP PLC, et al. v Mayor and City of Baltimore
The issue the court confronted was a procedural matter: Can the defendant energy companies use the federal removal statutes (see 28 USC Section 1442) to remove a state law climate change lawsuit to federal court? Here, a group of energy companies were sued by the mayor and city council of Baltimore in state court, where they alleged that the defendants had concealed the adverse environmental effects of the fossil fuel products they promoted and sold in Baltimore City. Several similar lawsuits have been filed in many state courts, where typically it is alleged that the defendants can be sued on various common law theories. Rather than defend these cases in state court, the defendants have sought to remove these cases to federal court because climate change liability appears to be an issue that should be settled at the federal level. These efforts have been unsuccessful, with most federal trial and appellate courts holding that the reasons cited for removal (oftentimes the federal officer removal statute) have not been persuasive. In this case, both the Maryland federal district court and the U.S. Court of Appeals held they had no jurisdiction to authorize removal, and thus returned the case to the state court. Noting that the U.S. Court of Appeals for the Seventh Circuit ruled that a removal action could be countenanced under Section 1442, thus creating a circuit split, the Supreme Court held that a straightforward reading of the removal statute empowers the reviewing court to examine all theories for removal that a district court has rejected. Consequently, the Court remanded the case to the Fourth Circuit where it can decide, “in the first instance,” whether there actually exist grounds to remove this case to federal court.
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Anthony B. Cavender, PillsburyMr. Cavender may be contacted at
anthony.cavender@pillsburylaw.com
Were Condos a Bad Idea?
June 13, 2022 —
Tyler P. Berding - Berding & Weil LLPIntroduction
Condominiums are a nice idea, but their execution has been less than perfect. Long before the fatal Berkeley, California balcony failure in 2015 or the 2021 Champlain Towers South collapse that killed 98 people in Surfside, Florida, we suspected that all was not right with the basic condo concept. Years ago, there were already signs this "cooperative" housing model was anything but. Whether due to owner apathy, internal disputes, or failure to fund future repairs, sustaining these projects for the long-term has been difficult, leaving their future in doubt. Can this be fixed, or is the concept inherently flawed?
Every enterprise has an organizational "model" to run the business. For-profit corporations obtain revenue from the sale of products or services. The revenue of non-profit condominium corporations are the assessments paid by the owners of the individual units. While these assessments are “mandatory” in the sense they must be paid, they are also “voluntary” since the amount is left to the board of directors to determine. Condos are cheaper to buy, but the sales price may not reflect the real cost of ownership. They are "cooperative" because costs and space are shared, but internal disputes and funding shortfalls operate to shorten the life of these buildings in ways few owners understand.
Internal Disputes
Why is condominium life frequently not “cooperative?” Disputes. Disputes between condominium owners and their associations; among board members; and between individual owners and their neighbors. There are arguments over the right to put a flag on the balcony. There are arguments over swimming pool hours. The right to paint their front door some color other than everyone else's. The right to be free of noise, smoke, or view-blocking plants. And sometimes, the claimed right not to pay assessments needed to maintain the project—all notwithstanding the governing documents to the contrary. The right to use one's property as the owner sees fit is a concept imported from the single-family home experience but not replicated in condominiums where common ownership requires rules to avoid chaos.
But a condominium association's most important concern should not be the color of someone's front door or when they can swim but sustaining the building and keeping owners safe. Maybe we care someone has painted their front door bright green, but should that concern have priority over finding rot that may cause a balcony to collapse with someone on it? Resolving conflicts and enforcing the governing documents have a reasonable success rate. Still, the effort required to do that often distracts the board from more critical issues—damage that can sink the ship. Directors can waste a lot of time re-arranging the deck chairs on the Titanic when, if they look closely, the iceberg is coming.
Maintenance Lacks Priority
Why can't we enforce the rules and do what’s necessary to sustain the building and keep occupants safe? Unfortunately, juggling both behavioral and sustainability issues has proven difficult for many volunteer boards of directors. Rule disputes are always in their face, crowding their agenda, while the damage that could lead to structural failure often remains unknown. Also, enforcing—or resisting—rules can involve a clash of egos that keep those matters front and center. Or, and I suspect this is a primary culprit, the cost of adequate inspections, maintenance, and repair is so high that boards cannot overcome owner resistance to that expense.
While boards and management must sustain the project and protect people, raising the funds to do that is another matter. Directors must leap hurdles to increase regular assessments. Imposing large, unexpected, special assessments for major repairs can be political suicide. Unfortunately, few owners realize how deadly serious proper maintenance is until there is a Berkeley or a Surfside, and everyone is stunned by the loss of life and property. While those are extreme cases of faulty construction, inadequate maintenance, natural causes, or all the above, they will not be the last. We know that because experts have seen precursors to those same conditions in other projects.
Our concern for sustainability arises from examining newer projects during construction defect litigation when forensic experts open walls to inspect waterproofing and structural components. It also comes from helping our clients with the re-construction of older buildings and dealing with many years or decades of neglect for which little or no reserves have been allocated.
The economic impact of repairing long-term damage is huge. Rot lying hidden within walls slowly damages the structural framing. Moisture seeping into balcony supports weakens them sometimes to the point of collapse. The cost to repair this damage is frequently out of reach of most condominium associations. In newer projects, when experts find problems early, claims are possible. The Berkeley balcony failure occurred in an eight-year-old building[1], and there was recourse available from the builder. But with older projects, it is often difficult to hold anyone responsible other than the owners themselves.
Is The Condo Model Flawed?
Suppose this is true—and our experience representing condominium projects for over forty years tells us it is—then we are not dealing only with the inexperience of some volunteer directors but rather with a flawed organization model. Board members want to succeed but are constrained by an income stream that depends almost entirely on the will of the individual owners—essentially voluntary funding.
Under most state laws, funding for condominium operations and maintenance is not mandatory[2], and relies instead on the willingness of the directors to assess owners for whatever is needed, and on the willingness of owners to accept the board’s decisions. When a board of directors can set assessments at whatever level is politically comfortable, without adequate consideration, or even knowledge, of long-term maintenance needs, systemic underfunding can result[3]. What the members want are the lowest assessments possible, and directors often accede to those demands. When these factors conspire to underfund maintenance, they will drastically shorten the service life of a building. They also make it potentially unsafe.
Commercial buildings incentivize their owners for good maintenance with increased rents and market value. That incentive is not relevant to a condominium owner because the accumulating deficit is rarely understood at the time of sale and not reflected in the unit’s sales price. With a single-family home, deferred maintenance is more easily identified and is reflected in the purchase price. But condo home inspections are usually confined to the interior of a unit, and do not assess the overall condition of the entire building or project or review any deficit in the funding needed to attend to deficiencies. Thus, market value is not affected by reality.
In most states that require that reserves be maintained for future maintenance and repairs, the statutes require nothing other than cursory surface inspections. Damage beneath the skin of a building is not investigated, and no reserves are recommended for what is not known. California recently enacted legislation that will require condominium associations inspect specific elevated structures for safety, including intrusive testing where indicated. But no other state requires this level of inspection, and few even require a reserve study to determine how much money to save for the obvious problems, never mind those no one knows about[4].
This situation leads to unfair consequences for those owners who find themselves unlucky enough to own a unit when the damage and deficits are finally realized. Damage discovered, say, in year 35 didn’t just happen in year 35. That deterioration likely began earlier in the building's life and lay hidden for decades. It is costly to repair when it finally becomes obvious or dangerous. No prior owner, those who owned and sold their units years ago, will pay any part of the cost of the eventual rehabilitation of that building due to past lack of adequate inspections and years of artificially low assessments. Instead, the present owners will be handed the entire tab for the shortfall from several decades of deferred maintenance or hidden damage—the last people standing when the music stops.
Can this trend be reversed? As condominium buildings age and deterioration continues, the funding deficit increases dramatically. But to reverse that trend and reduce the deficit, someone must know it exists and be willing to address it. That requires more robust inspections early in the building's life and potentially higher assessments to stay even with any decay.
Conclusion
It would not be wrong to blame this on the failure of the basic condominium model. Volunteers rarely have sufficient training or expertise to oversee complex infrastructure maintenance, especially without mandatory funding to pay for it. The model also does not insist that board members have a talent for resolving conflicts. While condominium boards can leverage fines or legal action to enforce the rules, that lacks finesse and can create greater antagonism—a distraction from the more critical job of raising funds to inspect and maintain the building.
Unit owner-managed, voluntarily funded, multi-million-dollar condominium projects were probably a bad idea from the beginning. But sadly, it is way too late to reverse course on the millions of such projects built in the past sixty years. Many are already reaching the end of their service lives, with no plan to deal with that. Robust inspection standards on new and existing projects and enforceable minimum funding for maintenance and repairs should be considered by state legislatures. But whatever the approach, the present system is not staying even with the deterioration of many buildings, and that is just not safe anymore.
- The collapse of the balcony in Berkeley occurred on an apartment building. But the construction of that building is similar or identical to the construction of most multi-story wood-frame condominiums.
- Boards of directors are empowered by statute or contract to assess members for operation and maintenance costs. However, there are few statutes that set minimum funding or otherwise require boards to exercise that authority.
- Even in states that require reserve studies, the physical inspections are inadequate to uncover some of the costliest damage. California’s reserve study statute—Civil Code Section 5550—only requires inspection of those components that are visible and accessible, leaving damage within walls and other structural components undiscovered and funding for the eventual repairs, unaddressed.
- In May 2022, in response to the Champlain Towers South collapse, Florida enacted mandatory structural inspections for buildings 30 years and older, repeating every 10 years thereafter. The law also includes mandatory reserve funding for structural components.
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Tyler P. Berding, Berding & Weil LLPMr. Berding may be contacted at
tberding@berdingweil.com
Common Construction Contract Provisions: Indemnity Provisions
January 19, 2017 —
David R. Cook Jr. - Autry, Hanrahan, Hall & Cook, LLP BlogUpcoming blog posts will focus on common contract provisions found in construction contracts. Such provisions are not solely limited to construction contracts and can be found in many other types of business contracts as well. This post will highlight indemnity clauses.
An indemnity clause is a common contract provision used to allocate risk between parties to a contract. The clause obligates one party (the Indemnitor) to protect the other party (the Indemnitee) from certain losses, typically arising from claims of third parties. It may require the Indemnitor to reimburse the Indemnitee for losses or expenses, or satisfy judgments, or even defend the Indemnitee in a lawsuit.
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David R. Cook Jr., Autry, Hanrahan, Hall & Cook, LLPMr. Cook may be contacted at
cook@ahclaw.com
