Claims for Negligence? Duty to Defend Triggered
July 09, 2019 —
Michael S. Levine & Adriana A. Perez - Hunton Andrews KurthOn June 17, 2019, the First Circuit held that an insurer’s duty to defend was triggered because the underlying complaint set forth claims that required a showing of intent as well as claims that sought recovery for conduct that “fits comfortably within the definition of an ‘accident.’” In Zurich American Ins. Co v. Electricity Maine, LLC, Zurich sought declaratory judgment that, under a D&O policy, it had no duty to defend the insured, Electricity Maine, an electrical utility company being sued in the underlying class action. Zurich argued it had no duty to defend because the underlying complaint failed to allege that Electricity Maine engaged in conduct that qualified as an “occurrence” or that caused “bodily injury” under the terms of the policy. The First Circuit disagreed.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth and
Adriana A. Perez, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Perez may be contacted at aperez@HuntonAK.com
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COVID-19 and Mutual Responsibility Clauses
June 01, 2020 —
Joseph M. Leone - ConsensusDocsAs everyone knows, there is a tremendous amount of uncertainty in the construction industry due to the COVID-19 pandemic. Schedules, productivity, safety processes, and seemingly everything else are being affected. In these difficult times, most contractors are making every effort to work together to solve the problems caused by COVID-19. But what happens when differences arise between project owners, contractors, and subcontractors as to the effect of COVID-19 on a project? One party may want to continue pushing the schedule, others may want to slow down, or, more likely, not be able to keep up with the original schedule because of some reason related to COVID-19. As between a prime contractor and a subcontractor, a mutual responsibility clause can provide some clarity or, unfortunately, depending on how the subcontract is written, confusion.
Almost all subcontracts have a clause which flows down the prime contractor’s obligations on a project to the subcontractor as applicable to the subcontractor’s work. Known as “flow-down” clauses, this clause works in one direction; obligations of the prime contractor “flow-down” to the Subcontractor. A mutual responsibility clause, in essence, works in both directions. The subcontractor is required to perform its obligations consistent with the prime contractor’s obligations to the owner and the subcontractor is granted the same rights against the prime contractor which the prime contractor has against the owner. Obligations flow down and rights flow up. The rights and obligations flowing through the prime contractor include, the obligation to perform the work in accordance with the plans and specifications, the obligation to meet the schedule constraints in the prime agreement, and the right to extensions of time and change orders to the extent the prime contractor obtains the same.
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Joseph M. Leone, Drewry Simmons Vornehm, LLP Mr. Leone may be contacted at
jleone@dsvlaw.com
Florida District Court Finds That “Unrelated” Design Errors Sufficient to Trigger “Related Claims” Provision in Architects & Engineers Policy
March 02, 2020 —
Jason Taylor - Traub LiebermanMost professional liability polices include some form of a “related claims” provision that generally provides where two or more claims or wrongful acts are causally or logically related, they will be deemed to constitute a single claim. Importantly, these provisions typically provide that those “claims” are then deemed to have been “first made” at the time the first claim or act was committed for purposes of the policy’s claims-made and reporting requirements. Understandably, these provisions provide insurers and insureds with some clarity over the number and timing of claims that could involve multiple errors or omissions, and potentially aggregate all related claims or acts into a single policy period. While reasonable in principle, application of such provisions, especially involving large scale design and construction projects, is not always so easy.
Nova Southeastern University, Inc. v. Continental Cas. Co., 18-cv-61842 (S.D. Fla. Dec. 27, 2019), involved such an insurance coverage dispute with a design project gone wrong. DeRose Design Consultants, Inc. (“DeRose”) was hired as a structural engineer to design “ice tanks” to store and chill water for an energy efficient air conditioning facility constructed on the campus of Nova Southeastern University (“NSU”). An early water test on one of the tanks determined the walls of the ice tank deflected, leaked, and cracked when the tank was filled with water. DeRose later discovered that the problems with the ice tank were caused by a structural design error.
The first errors were discovered in early 2009, and reported under DeRose’s professional liability policy with Evanston. DeRose then created a remedial design to repair the tanks, which involved strengthening repairs. Additional leaking and an early indication of corrosion involving the Remedial Design arose as early as October 25, 2009. Several field investigation reports were prepared in 2011 and 2012 confirming these issues with the Remedial Design. A third report in February 2012, however, identified a new error involving the concrete slab under the ice tanks also designed by DeRose. The third report concluded that the concreate slab was overstressed and could not handle the loads of the ice tanks. The report also concluded, however, that the design defects in the concrete slab were “unrelated” to the original design defect of the ice tank walls or Remedial Design.
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Jason Taylor, Traub LiebermanMr. Taylor may be contacted at
jtaylor@tlsslaw.com
EPC Contractors Procuring from Foreign Companies need to Reconsider their Contracts
July 18, 2018 —
Hwan Kim – Construction & Infrastructure Law BlogA recent California case may force engineering, procurement and construction companies doing business with foreign suppliers to reconsider—and maybe rewrite—their contracts. In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business.
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Hwan Kim, Sheppard, Mullin, Richter & Hampton LLPMr. Kim may be contacted at
hkim@sheppardmullin.com
Coverage Denied for Faulty Blasting and Improper Fill
October 08, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe court found coverage was properly denied based on the subcontractor's failure to follow contract specifications in blasting at the job site. Westfield Ins. Co. v. Carpenter Reclamation, Inc., 2014 U.S. Dist. LEXIS 130752 (S.D. W. Va. Sept. 18, 2014).
Carpenter was hired by the Board of Education (BOE) to perform preliminary site clearing, demolition, rock excavation, and establishment of sub-grade for a building. Carpenter was to excavate to 3.5 feet below the floor subgrade so that plumbing and other utilities could be installed.
Carpenter, however, blasted to depths deeper than required, including some areas that were up to nine feet. The BOE sued, alleging over-blasting and having to pay the cost of remediating the problem, along with breach of contract issues.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
There's No Such Thing as a Free House
April 01, 2015 —
Megan McArdle – BloombergShould people be able to get a free house by refusing to pay their mortgage?
That's the question Florida has to answer. The housing crisis is over, and the housing market is healing itself, though slowly in some places. But a backlog of foreclosures still remains ... and it has been going on so long that some homes are now past the statute of limitations for collecting debt. Lawyers for the homeowners are arguing that this means they get to keep the house. Lawyers for the banks are, unsurprisingly, arguing that each month they fail to pay the mortgage payment starts the statutory clock anew.
Both arguments create problems if the courts endorse them. If failing to pay really restarted the clock every month, then there wouldn't be a statute of limitations on debt -- creditors could just keep sending you bills forever and dun you right up to the edge of your grave. There's a very good reason that we have statutes of limitations on most crimes and most debts: The law recognizes that our interests in justice and contract rights must be balanced against other considerations. People need to be able to plan their lives without decades-old problems coming back to bite them, and also, as cases age, they get harder and harder to prove as witnesses die, evidence gets lost and memories fade.
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Megan McArdle, BloombergMs. McArdle may be contacted at
mmcardle3@bloomberg.net
AI – A Designer’s Assistant or a Replacement?
November 28, 2022 —
Aarni Heiskanen - AEC BusinessOver the last few months, we’ve seen an online explosion of AI-powered text and
image generators. Many non-designers welcome these tools as a way to express themselves and create results that would have taken professionals days to complete. The obvious question is, should designers start feeling scared?
Interior designs from a photo you upload
In
Business of Home, Fred Nicolaus writes about how he tested with an L.A. designer Shaun Crha an online tool called Interior AI. They uploaded pictures of empty rooms, selected basic prompts (“midcentury modern bathroom,” for example), and watched the machine go. After tweaking the tool settings, they started getting impressive results.
Launched in September 2022,
Interior AI is the creation of Pieter Levels, a programmer. He built the site in five days by connecting it to a commercially available AI engine called Stable Diffusion. It has been trained with images from Pinterest and other photo sources.
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Aarni Heiskanen, AEC BusinessMr. Heiskanen may be contacted at
aec-business@aepartners.fi
Right to Repair Reform: Revisions and Proposals to State’s “Right to Repair Statutes”
April 01, 2015 —
Richard H. Glucksman, Jon A. Turigliatto, and David A. Napper – Chapman Glucksman Dean Roeb & Barger BulletinVirtually all of the states in the country have "Right to Repair" statutes. We follow the various states legislatures to determine what trends or developments are occurring. For years, Chapman, Glucksman, Dean, Roeb, and Barger has prepared a compendium that provides the salient points of these Right to Repair statutes. In this extended BULLETIN we provide a discussion of important and very recent developments that are occurring in
Nevada,
Arizona,
Florida, and
Colorado.
In Nevada, Governor Brian Sandoval very recently signed The Homeowner Protections Act of 2015, representing a massive transformation to Nevada's Right to Repair Act in the builder's favor, including but not limited to removal of the attorney fees provision as part of claimant's damages.
In Arizona, Governor Doug Ducey signed House Bill 2578 in March 2015, amending Arizona Revised Statutes § 12-1361 et. Seq. by eliminating a homeowner’s statutory opportunity to recover attorney and expert fees and providing a builder the right to repair the alleged defects.
In Florida, Bill 87 proposes to shorten the statute of limitations, requires more detail in the Homeowner's notice of defects, and allows a builder to use a prior settlement in lieu of repair as an affirmative defense against subsequent claims.
In Colorado, lawmakers are proposing to place additional conditions in front of an HOA board before filing suit and require alternative dispute resolution for HOA Condominium Defect Claims even if the requirement no longer exists at the time the claim is brought.
NEVADA: GOVERNOR SIGNIFICANTLY MODIFIES NEVADA'S RIGHT TO REPAIR ACT WITH THE SIGNING OF ASSEMBLY BILL 125
Nevada's Right to Repair Act has been extensively modified by the signing of Assembly Bill 125 also known as the Homeowner Protections Act of 2015. The Act considerably revises Chapter 40 of the Nevada Revised Statute ("NRS") governing construction defect actions. According to Governor Brian Sandoval, the signing of the first major bill of the legislative session in Nevada "discourages frivolous litigation and strengthens Nevada's rebounding housing market."1 Among other provisions, the Homeowner's Protection Act removes a claimant's ability to recover reasonable attorney fees as part of the claimant's damages, shortens the statutes of repose, defines the duty to defend, and prohibits a claimant from filing a notice of construction defects unless the claimant has submitted a claim under the homeowner's warranty and the insurer has denied the claim. Only claims that have been denied under the homeowner's warranty may be claimed.
Additionally, the term "construction defect" is now defined as a defect "(1) which presents an unreasonable risk of injury to a person or property; or (2) which is not completed in a good and workmanlike manner and proximately causes physical damage to the resident or appurtenance."
Critically, the Act now requires that the notice of construction defects (1) state in "specific detail" rather than reasonable detail, each defect, damage, and injury to each residence or appurtenance that is subject to the notice; (2) state the exact location of each defect, damage, and injury, rather than describe in reasonable detail the location of the defect; and (3) include a statement signed by the owner of the residence or appurtenance in the notice that the owner verifies that each defect, damage and injury exists in the residence or appurtenance.
Although not every revision is set forth above, the passing of The Homeowner's Protection Act appears to be a colossal victory for builders as the majority of the revisions to NRS Chapter 40 are favorable to the builder while additional or heightened requirements have been placed upon homeowners who wish to bring a claim. The following two Right to Repair updates concern proposed bills that also seek to radically change the pre-claim construction defect landscape.
ARIZONA: BUILDERS NOW HAVE THE RIGHT TO REPAIR INSTEAD OF AN OPPORTUNITY TO REPAIR WHILE HOMEOWNERS NO LONGER HAVE A STATUTORY RIGHT TO ATTORNEY FEES AND EXPERT FEES
In March 2015, Arizona Governor Doug Ducey signed into law House Bill 2578, revising key portions of the Right to Repair pursuant to the Purchaser Dwelling Act (Arizona Revised Statute ("A.R.S.") Section 12-1361 et. seq. Important categories of the Act affected by the new law include the builder's right to repair or replace, the process of repair or replacement, dwelling actions, and homeowners' association dwelling actions. Most notably, prior to filing a construction defect suit, or a "dwelling action" as defined in A.R.S. Section 12-1361 et. seq., a homeowner must provide written notice detailing the basis of a dwelling action and must allow the builder to repair or replace the alleged construction defects.
Another significant revision includes the elimination of the prevailing homeowner's statutory right to reasonable attorney fees, witness fees and taxable costs in a dwelling action. Bill 2578 also revised the definitions of "Construction Codes," "Construction Defect," "Construction Professional," and "Material Deficiency." Homeowner Associations now must disclose additional information regarding the claim to its members and must show compliance with procedures set forth in the community documents. Clearly, Arizona's legislature is seeking to reduce the amount of frivolous construction defects suits with the elimination of a prevailing homeowner's right to reasonable attorney fees and expert fees. Moreover, the Legislature now provides builders in Arizona with the right to make repairs to alleged construction defects if they so choose.
FLORIDA: FLORIDA GENERAL CONTRACTORS SEEK AGGRESSIVE AMENDMENT TO PRE-CLAIM CONSTRUCTION DEFECT PROCESS WITH BILL 87
Florida's Right to Repair Act, Chapter 558 of the Florida Statutes, may be extensively revised in the near future. With the help of the South Florida Chapter of the Associated General Contractors of America, House of Representatives Bill 87 will be presented as an amendment to the Pre-Claim Construction Defect requirements set forth in Chapter 558.
The proposed bill is aggressive and seeks to address issues in the current statute. These deficiencies have seemingly prevented construction defect claims from being resolved without the filing of a civil suit. Notably, the statute of limitations period for a property owner to file suit for construction defects would be shortened based upon the revision of the term "completion of a building or improvement" to include issuance of a temporary certificate of occupancy. Additionally, property owners would be subject to additional requirements for issuing a notice of claim, including specific identification of locations of each alleged construction defect as well as the specific provisions of the building code, project plans, project drawings, project specifications, or other documentation, information or authority that serve as the basis of the claim for each alleged construction defect.
Perhaps most importantly, the bill provides that if a construction defect is settled by repairs offered by the contractor during the Chapter 558 claims process but the repairs fail to fully correct the defects and the owner or association then files suit because the issue was not resolved, the defendant may claim that the issue was previously resolved and the plaintiff owner may face sanctions. Even if the bill as proposed does not pass in its current form, on the heels of Nevada's Right to Repair Act overhaul, it may serve to encourage other states, including California, to take another look at their Right to Repair Act procedures.
COLORADO: UPDATE FROM CGDRB SEPTEMBER 2014 BULLETIN: COLORADO PROPOSED LEGISLATION RE: HOA CONDOMINIUM DEFECT CLAIMS
In September 2014, we provided an important discussion of potential significant tort reform legislation presented in Colorado regarding construction claims by homeowner associations for condominiums. This Bulletin serves as an update to that discussion as intense debate over legislative reform to provide condominium builders in Colorado more legal protections has heated up again.
On October 13, 2014, the city of Lakewood became the first Colorado municipality to pass a “right to repair” measure with respect to common interest communities. The Lakewood measure gives builders a right to repair construction defects before homeowner associations take legal action and requires a homeowner majority approval before legal action is taken.
On February 10, 2015, two bipartisan Senators introduced Senate Bill 177, a bill proposing changes to the prerequisites for a homeowner association to file a construction defect action under the Colorado Common Interest Ownership Act. SB 177, if passed in its current form, would require:
- That when the governing documents of a common interest community require mediation or arbitration of a construction defect claim and the requirement is later amended or removed, mediation or arbitration is still required for a construction defect claim;
- That the mediation or arbitration take place in the judicial district in which the common interest community is located;
- That the arbitrator (1) be a neutral third party; (2) make certain disclosures before being selected; and (3) be selected as specified in the community's governing documents or, if not specified, in accordance with the Uniform Arbitration Act;
- That before a construction defect claim is filed on behalf of the homeowner association: (1) the parties must submit the matter to mediation; and (2) the board must give advance notice to all unit owners, together with a disclosure of the projected costs, duration, and financial impact of the construction defect claim, and must obtain the written consent of a majority of the unit owners.
- That the disclosures required prior to the purchase and sale of property in a common interest community a notice that the community's governing documents may require binding arbitration of certain disputes.
As explained in our previous Bulletin, currently, in Colorado, homeowner association boards are only required to obtain two condominium owners’ consent to file a construction defect suit. Similar to SB 220, which proposed a number of the same requirements, SB 177 would likely have the potential effect of reducing the number of lawsuits filed against builders and decrease the treat of frivolous claims; and allow the parties an opportunity to resolve their issues short of litigation.
On March 18, 2015, the Colorado Senate Committee on Business, Labor, and Technology voted 6-2 to forward SB-177 to the full Senate with four minor amendments. The amendments provide:
- The homeowner association’s attorney can prepare the disclosures that must be presented to unit owners prior to filing a construction defect claim;
- Voting may be done by proxy;
- The parties must agree on an arbitrator. If they cannot agree, they may petition the court to appoint one. Preference will be given to the arbitrator designated in the community’s governing documents; and
- A different list of disclosure topics is required.
Also introduced this year is SB 091, a bill to shorten the Colorado’s construction defect statute of repose to a homeowner from bringing an action after three years. On March 16, 2015, the Colorado Senate Committee on State, Veterans & Military Affairs voted to pass SB 091 to the full Senate with two substantive amendments. The first amendment excludes any multifamily developments from being effected by the shortened statute of repose. The second amendment proposes the statute of repose only be shortened to five years, plus an additional year if the defect manifests in year five. Currently, in Colorado, if a homeowner does not discover a construction defect within six years of a house’s completion, the homeowner may forfeit all legal rights to seek repair. Again, SB 091 would protect builders from frivolous or untimely claims by homeowners.
We will continue to monitor development of these bills and others that may be proposed in the future. If we can provide any further information concerning these developments or you are interested in receiving our compendium of the various right repair statutes please let us know.
1 As reported by KTVN-TV in Reno, Nevada: http://www.ktvn.com/story/28163519/senate-passes-constructiondefect-bill-sends-to-governor-sandoval.
Reprinted courtesy of Chapman Glucksman Dean Roeb & Barger attorneys
Richard H. Glucksman,
Jon A. Turigliatto and
David A. Napper
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Mr. Turigliatto may be contacted at jturigliatto@cgdrblaw.com
Mr. Napper may be contacted at dnapper@cgdrblaw.com
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