Cambridge Massachusetts Building Expert Directory

Illinois Law Bars Coverage for Construction Defects in Insured's Work

September 24, 2014 — Tred R. Eyerly – Insurance Law Hawaii
Applying Illinois law, the Seventh Circuit determined there was no coverage for faulty workmanship causing property damage to the insured's project. Nautilus Ins. Co. v. Board of Directors of Regal Lofts Condominium Ass'n, 2014 U.S. App. LEXIS 16250 (7th Cir. Aug. 21, 2014). The developer converted a vacant building into a condominium. The construction was completed in 2000. The Condominium Board took control of the condo association on July 27, 2000. As early as May 2000, one homeowner was aware of water damage problems in the building. Other complaints surfaced. An investigation found that the exterior brick masonry walls were not fully waterproofed, which caused leaks. The investigation further showed that deteriorated conditions had likely developed over many years, even prior to the condominium conversion, but the present water penetration was caused by the inadequate restoration of the walls to a water-tight condition. The underlying action was filed against the developer for failure to properly construct the exterior walls. The developer's carrier, Nautilus, denied coverage. In an amended complaint, the Board added a count of negligence. Again, Nautilus denied coverage. The Board's second amended complaint alleged that the developer's negligence had caused damage to personal property within the building, in addition to the interior of the building and the building itself. For the third time, Nautilus denied coverage and filed for declaratory relief. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com

Repair of Part May Necessitate Replacement of Whole

February 10, 2012 — CDJ STAFF

Judge Gleuda E. Edmonds, a magistrate judge in the United States District Court of Arizona issued a ruling in Guadiana v. State Farm on January 25, 2012. Judge Edmonds recommended a partial summary judgment in favor of the plaintiff.

Ms. Guandiana’s home had water damage due to pluming leaks in September 2004. She was informed that polybutylene pluming in her house could not be repaired in parts “it must be completely replaced.” She had had the plumbing replaced. State Farm denied her claim, arguing that “the tear-out provision did not cover the cost of accessing and replacing those pipes that were not leaking.”

In September 2007, State Farm filed a motion to dismiss. The court rejected this motion, stating that “If Guadiana can establish as a matter of fact that the system that caused the covered loss included all the pipes in her house and it was necessary to replace all the pipes to repair that system, State Farm is obligated to pay the tear-out costs necessary to replace all the pipes, even those not leaking.”

In March 2009, State Farm filed for summary judgment, which the court granted. State Farm argued that “the tear-out provision only applied to ‘repair’ and not ‘replace’ the system that caused the covered leak.” As for the rest of the piping, State Farm argued that “the policy does not cover defective materials.”

In December 2011, Ms. Guadiana filed for summary judgment, asking the court to determine that “the policy ‘covers tear-out costs necessary to adequately repair the plumbing system, even if an adequate repair requires replacing all or part of the system.”

In her ruling, Judge Edmonds noted that Ms. Guadiana’s claim is that “the water damage is a covered loss and she is entitled to tear-out costs necessary to repair the pluming system that caused that covered loss.” She rejected State Farm’s claim that it was not obligated to replace presumably defective pipes. Further, she rejected State Farm’s argument that they were only responsible for the leaking portion, noting “Guadiana intends to prove at trial that this is an unusual case where repair of her plumbing system requires replacement of all the PB plumbing.”

Judge Edmonds concluded by directing the District Court to interpret the tear out issue as “the tear-out provision in State Farm’s policy requires State Farm to pay all tear-out costs necessary to repair the plumbing system (that caused the covered loss) even if repair of the system requires accessing more than the leaking portion of the system.”

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Colorado HB 13-1090: Concerning Payment of Amounts Due Under a Construction Agreement

February 21, 2013 — David M. McLain — Higgins, Hopkins, McLain & Roswell, LLC
On January 17, 2013 Representative Fischer introduced House Bill 13-1090 into the Colorado House of Representatives. HB 1090 was assigned the House Business, Labor, Economic and Workforce Development Committee. The bill, sponsored by Senator Tochtrop in the Senate, sets the following requirements for both private and public construction contracts: The owner and contractor must make regular progress payments approximately every 30 days to contractors and subcontractors for work actually performed. To receive the progress payments, the contractor and subcontractor must submit a progress payment invoice plus any required documents. A contractor must pass on the progress payment to the subcontractor within 5 days or by the end of the billing cycle. Interest accrues on unpaid progress payments. A contract may extend a billing cycle to 60 days, but the contract must duly warn of this. Read the court decision
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Reprinted courtesy of David M. McLain
mclain@hhmrlaw.com

Federal District Court Dismisses Property Claim After Insured Allows Loss Location to Be Destroyed Prior to Inspection

September 29, 2021 — James M. Eastham - Traub Lieberman
In BMJ Partners LLC v. Arch Specialty Insurance Co., No. 20-CV-03870, 2021 WL 3709182 (N.D. Ill. Aug. 20, 2021), the United States District Court for the Northern District of Illinois dismissed, with prejudice, a coverage action filed by an insured based on a failure to comply with a request to inspect the involved property under Rule 34 of the Federal Rules of Civil Procedure. The loss at issue involved a hail-damaged building in Carpentersville, Illinois. During the discovery phase of the litigation, the property insurer served a request to inspect the subject property under FRCP Rule 34. After ignoring numerous requests to schedule the inspection, the insurer filed a motion to dismiss for failure to prosecute or, alternatively, to compel an inspection. After the motion was filed, a status hearing was conducted where the insured’s counsel advised the Court of his intention to file a motion to withdraw from representation of the insured. After the date set to file the motion to withdraw passed without anything being filed, the Court entered an order directing the insured to show cause why the matter should not be dismissed for lack of prosecution. In response to the order to show cause, the insured advised the Court that instead of responding to the property insurer’s discovery requests, the insured sold the property to a buyer who subsequently tore down the building. In light of what the Court described as the insured’s “flabbergasting admission”, the Court was compelled to grant the motion to dismiss and do so with prejudice. In support of the “extreme sanction” of dismissing the matter with prejudice, the Court first noted that the insured had not come close to justifying a discharge of the pending show-cause order. Rather, the insured’s responsive filing refers to the Court's show cause order only indirectly and does not deny, or offer any justification for, disregarding case-related communications for several months. Even if that were not enough, the Court further held that the insured’s spoliation of evidence likewise provides sufficient basis for dismissal given that Courts have inherent authority to sanction parties for failure to preserve potential evidence. According to the Court, dismissal with prejudice was the only appropriate sanction in light of the insured’s violation of the obligation to preserve the property. Not only did the insured ignore multiple requests from the insurer to inspect, but during the same time frame the insured found time to allow inspections of the building as part of the sale by both the Village of Carpentersville and the property's buyer. Read the court decision
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Reprinted courtesy of James M. Eastham, Traub Lieberman
Mr. Eastham may be contacted at jeastham@tlsslaw.com

Giant Floating Solar Flowers Offer Hope for Coal-Addicted Korea

March 21, 2022 — Heesu Lee - Bloomberg
More than 92,000 solar panels in the shape of plum blossoms, floating on the surface of a reservoir in South Korea, offer a vision of how land-scarce developed nations can overcome local resistance to giant renewable-energy projects. The 17 giant flowers on the 12-mile-long reservoir in the southern county of Hapcheon are able to generate 41 megawatts, enough to power 20,000 homes, according to Hanwha Solutions Corp., which built the plant. It’s one of the biggest floating solar plants in the world, and it’s in a nation that has been a laggard in adopting renewable energy, even though South Korea’s industrialized economy relies heavily on imported fossil fuels. Read the court decision
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Reprinted courtesy of Heesu Lee, Bloomberg

Tesla Powerwalls for Home Energy Storage Hit U.S. Market

May 12, 2016 — Dana Hull – Bloomberg
To Steve Yates, the best thing about his new Tesla Powerwall is that he doesn’t have to worry anymore about the lights going out during a storm. Or maybe it’s how cool an addition it is to the entryway of his house in Monkton, Vermont. “I’ve always wanted to have a backup power source,” said Yates, who was without electricity for 36 hours during Hurricane Irene in 2011. He also admires the Powerwall’s sleek white contours. “It’s kind of art-deco looking.” A year after Elon Musk unveiled the Powerwall at Tesla Motors Inc.’s design studio near Los Angeles, the first wave of residential installations has started in the U.S. The 6.4-kilowatt-hour unit stores electricity from home solar systems and provides backup in the case of a conventional outage. Weighing 214 pounds and standing about 4-feet tall, it retails for around $3,000. But hookup by a trained electrician is required, as is something called a bi-directional inverter that converts direct-current electricity into the kind used by dishwashers and refrigerators. The costs add up quickly -- which has fueled skepticism about Musk’s dream of changing the way the world uses energy. Read the court decision
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Reprinted courtesy of Dana Hull, Bloomberg

Georgia Court Reaffirms Construction Defect Decision

August 27, 2013 — CDJ STAFF
In 2011, the Georgia Supreme Court ruled that construction defects could count as “occurrences” under a general liability policy. John Watkins, writing in Law360, notes that the ruling “has potentially broad implications for Georgia insureds.” He goes on to look at a later Georgia Supreme Court case, in which the court reaffirmed its decision in the 2011 Hathaway case. In the 2013 case, Taylor Morrison Services Inc. v. HDI-Gerlins Ins., the court held that the property damage had to happen to something other than the work performed by the insured, and that a breaches of warranty without fraud claims may be covered. But Watkins notes that this points to “the continuing efforts of insurers to deny coverage for construction defects under CGL policies.” This overruled some of the past decisions of the United States District Court for the Northern District of Georgia. Watkins noted that the Eleventh Circuit seemed to wonder about the scope of Hathaway, but with Taylor Morrison, “the Georgia Supreme Court provided a clearly stated response.” Looking at the implications, he gives an example in which if a window installer work causes a window to leak and the water intrusion damages a floor, the floor, but not the window would be covered. But he cautions, “the result may turn on the policy language and the particular facts.” In any case, he assures us that “coverage disputes regarding construction defects are sure to continue.” Read the court decision
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Poor Record Keeping = Going to the Poor House (or, why project documentation matters)

June 11, 2014 — Melissa Dewey Brumback – Construction Law in North Carolina
You are an engineer or architect. You understand the importance of thorough designs. What about thorough documentation of the daily happenings on the construction project? That is equally important. As regular readers of this blog know, I have often spoken of the importance of proper record keeping on construction projects. In fact, lack of good project records is one of the 7 mistakes in my white paper 7 Critical Mistakes that Engineers & Architects make During Project Negotiation and Execution that Sabotage their Projects & Invite Litigation. Now, a construction management expert, who, like me, sees the ugly when construction projects turn bad, has weighed in with perhaps the authoritative reasoning and rationale (pdf) for good project records. Read the court decision
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Reprinted courtesy of Melissa Dewey Brumback, Construction Law in North Carolina
Ms. Brumback may be contacted at mbrumback@rl-law.com

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