Avoid a Derailed Settlement in Construction
March 28, 2022 —
Patrick Barthet - Construction ExecutiveMore and more construction cases are settling because lawyers know juries can prove to be unpredictable. The litigation process, as well as any actual trial, can be stressful, expensive and quite lengthy. Settlements are, for the most part, private while suits are public. Current reports find more than 90% of civil cases filed in state circuit courts are disposed of before trial. When that doesn't happen, things could go very poorly, as the case below illustrates.
The Case
Adam was seriously injured in a collision with a dump truck owned by Bang and driven by Tomas. While suit by Adam against Bang and Tomas was pending, Adam suggested they settle by having Bang pay him. Upon receipt of the offer, Bang's lawyer reached out confirming that his client was okay with the settlement amount but wished to add that the settlement also include the satisfaction of a lien filed by Adam's workers' compensation carrier. Adam's attorney refused that additional request, but that didn't stop Bang's lawyer. Based on the fact that Adam had agreed to the settlement amount, the lawyer filed a boiler plate notice of acceptance of settlement and had Bang issue a settlement check payable to Adam in the amount Adam had requested. Adam remained unwilling to compromise. He continued to resist the modified terms, which added satisfaction of the worker’s compensation lien. Bang then filed a motion to enforce settlement, arguing that since there was agreement on the settlement amount, Adam was required to do the deal.
Reprinted courtesy of
Patrick Barthet, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Mr. Barthet may be contacted at
pbarthet@barthet.com
How California’s Construction Industry has dealt with the New Indemnity Law
October 22, 2014 —
Mark S. Himmelstein, Esq. - Newmeyer & DillionIt 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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Oregon Construction Firm Sued for Construction Defects
July 31, 2013 —
CDJ STAFFHome Forward, the housing authority in Multnomah County, Oregon, is suing Tom Walsh & Company over allegations of construction defects in low-income housing projects the firm built for the county. Walsh’s firm was hired about ten years ago to construct apartments in Portland and adjacent Gresham. But the housing authority claims that the buildings are suffering water damage.
The authority requested that Tom Walsh & Company repair the problems. Walsh claimed that the problems were not due to construction defects, but to the agency’s failure to maintain the properties.
Home Forward has gone forward with lawsuits of a combined $3.8 million. If the case goes to trial, according to Walsh, it will be only the second time for him in 50 years of business.
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Warranty Reform Legislation for Condominiums – Unfair Practices used by Developers and Builders to avoid Warranty Responsibility for Construction Defects in Newly Constructed Condominiums
June 09, 2016 —
Nicholas D. Cowie – Maryland Condo Construction Defect Law BlogThis article pertains to needed condominium construction defect warranty reform legislation that the Maryland Legislature has been reluctant to enact into law. Below is an explanation of the legislation and a list of practical steps CAI members can take to support the legislation during the upcoming 2017 legislative session.
Background
The warranty reform legislation was unsuccessfully introduced during the 2016 legislative session as “Senate Bill 250” (“SB 250”) and “House Bill 1170” (“HB 1170”). Both bills were identical, one being filed in the Senate and the other in the House of Delegates.
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Nicholas D. Cowie, Cowie & Mott, P.A.Mr. Cowie may be contacted at
ndc@cowiemott.com
Make Sure to Properly Perfect and Preserve Construction Lien Rights
December 07, 2020 —
David Adelstein - Florida Construction Legal UpdatesIf you recording a construction lien (referred to as a claim of lien) and looking to perfect your construction lien foreclosure rights, it is imperative that you work with counsel to ensure your rights are properly preserved. This is good practice!
A claim of lien must be served on an owner within 15 days after recording. Florida Statute s. 713.08(4)(c) says: “The claim of lien shall be served on the owner. Failure to serve any claim of lien in the manner provided in s. 713.18 before recording or within 15 days after recording shall render the claim of lien voidable to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service.”
Florida Statute s. 713.18, hyperlinked for your review, includes the statutory ways to serve “notices, claims of lien, affidavits, assignments, and other instruments permitted or required under [Florida Statutes Chapter 713].”
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Dispute Resolution Provision in Subcontract that Says Owner, Architect or Engineer’s Decision Is Final
March 29, 2021 —
David Adelstein - Florida Construction Legal UpdatesIn subcontracts, it is not uncommon to see a provision that says something to the effect:
Should any dispute arise between the parties respecting the true construction or interpretation of the Plans, Specifications and/or the Contract Requirements, the decision of the Owner or the Owner’s designated representative as set forth in the General Contract shall be final.
This is a provision in a subcontract dealing with dispute resolution, typically when there is a dispute as to whether the subcontractor is performing extra-contractual or base contract work regarding an “interpretation of the Plans, Specifications, and/or the Contract Requirements.” It is not uncommon for there to be a dispute as to whether certain work is within the subcontractor’s scope of work or outside the subcontractor’s scope of work and subject to a change order.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Pennsylvania’s Supreme Court Clarifies Pennsylvania’s Strict Liability Standard
January 14, 2015 —
William Doerler and Edward Jaeger, Jr. – White and Williams LLPIn Tincher v. Omega Flex, Inc., -- A.3d --, 2014 WL 6474923 (Pa. Nov. 19, 2014), the Supreme Court of Pennsylvania discussed the Commonwealth of Pennsylvania’s products liability law and, overturning prior precedent, clarified the law. In particular, the Court, overturned Azzarello v. Black Brothers Company, 480 Pa. 547, 391 A.2d 1020 (1978), clarified the role of the judge and the jury in products liability cases and settled the question of whether Pennsylvania would adopt the Restatement (Third) of Torts: Products Liability §§ 1, et. seq. (Third Restatement) as the standard for deciding Pennsylvania products liability cases. The Tincher decision makes clear that Pennsylvania will continue to apply § 402A of the Restatement (Second) of Torts (Second Restatement) in products liability cases and that jurors, not the court, will decide the question of whether a product is in a defective condition. Plaintiffs may prove that a product is defective using either the consumer expectations test or the risk-utility test.
Background
The Tincher case arose out a fire that occurred at the home of Terrance and Judith Tincher on June 20, 2007. The Tinchers alleged that the fire started when a lightning strike near their home caused a small puncture in corrugated steel tubing (CSST) carrying natural gas to a fireplace located in their home. The defendant, Omega Flex, Inc. (Omega Flex) manufactured the CSST.
Reprinted courtesy of
William Doerler, White and Willams LLP and
Edward Jaeger, Jr., White and Williams LLP
Mr. Doerler may be contacted at doerlerw@whiteandwilliams.com; Mr. Jaeger may be contacted at jaegere@whiteandwilliams.com
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No Friday Night Lights at $60 Million Texas Stadium: Muni Credit
March 26, 2014 —
Darrell Preston and Aaron Kuriloff – BloombergPervasive cracking has shuttered the $60 million home of a high-school football championship team in Texas after less than two years. Investors in the tax-free bonds that paid for the stadium are unscathed.
Taxpayers in Allen Independent School District north of Dallas and the $29 billion Texas Permanent School Fund, a state bond insurer, are responsible for $119 million of debt that paid for the venue and other facilities, leading officials to find a new site for graduation and possibly games after closing 18,000-seat Eagle Stadium last month.
The development suggests the fund, created in 1854 to help pay for education, shouldn’t be used for stadiums, said Colby Harlow, president of hedge fund Harlow Capital Management. The Permanent Fund has top credit ratings and secures about $55 billion of bonds, according to the Texas Education Agency. The pool has at times reached the limit of debt it can back, preventing districts from accessing it. The guarantee is still a boon to bondholders.
Mr. Merelman may be contacted at smerelman@bloomberg.net; Mr. Sillup may be contacted at msillup@bloomberg.net
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Darrell Preston and Aaron Kuriloff, Bloomberg
