SEATTLE WASHINGTON BUILDING EXPERT
DIRECTORY AND CAPABILITIES

Insurer Has Duty to Defend Despite Construction Defects

January 06, 2012 — CDJ STAFF

In a case the judge attributed to “shoddy masonry work,” the US District Court of Illinois has rendered a decision in AMCO Insurance Company v. Northern Heritage Builders. Northern Heritage built a home in Chicago for Michael McGrath (who joined Northern Heritage as a defendant). According to the decision, “seven months after he moved into the house, McGrath noticed water coming in the house and warped millwork.” This was attributed to porous block, installed by the mason with Northern Heritage’s knowledge.

McGrath sued National Heritage for both the damage to his house and its contents. The court rejected his claim for the contents. For the damages to his house, he was awarded $601,570.50 in damages. He also sued his homeowner’s insurance carrier for damages not covered in his suit against National Heritage. There he was awarded $1,130,680.16.

AMCO informed National Heritage that it had neither duty to defend nor duty to indemnify. The judge considered whether AMCO had a duty to defend. Under Illinois law, “damage to a construction project resulting from construction defects is not an ‘accident’ or ‘occurrence’ because it represents the natural and ordinary consequence of faulty construction.” However, it is noted that while if the defects lead only to damage to the project itself, there is no occurrence, “if the building owner asserts damages to other property besides the construction itself, there is an ‘occurrence’ and ‘property damage.’” The judge further noted that were construction defects an occurrence, “shoddy work” would be rewarded by double pay, once by the homeowner and a second time by the insurer. Judge Kendall concluded that as McGrath had alleged damage to the contents of his house, AMCO had a duty to defend National Heritage.

She then looked at the issue of whether AMCO had a duty to indemnify. Should they pay the $601,570.50? Judge Kendall noted that “the duty to indemnify is narrower than the duty to defend.” The key point here was that once McGrath’s insurance carrier covered him for the damage to the contents of his house, “AMCO’s duty to defend ended.” Once McGrath “only sought damages for the natural consequences of faulty workmanship” there was no occurrence, hence nothing for AMCO to cover.

Judge Kendall granted a summary dismissal of AMCO’s claim that they had no duty to defend while upholding their claim that they had no duty to indemnify.

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Yellowstone Park Aims for Quick Reopening After Floods

July 03, 2022 — The Associated Press (Matthew Brown & Amy Beth Hanson) - Bloomberg
Gardiner, Mont. (AP) -- Most of Yellowstone National Park should reopen within the next two weeks — much faster than originally expected after record floods pounded the region last week and knocked out major roads, federal officials said. Yellowstone Superintendent Cam Sholly said the world-renowned park will be able to accommodate fewer visitors for the time being, and it will take more time to restore road connections with some southern Montana communities. Park officials said Sunday they'll use $50 million in federal highway money to speed up road and bridge repairs. There’s still no timetable for repairs to routes between the park and areas of Montana where the recovery is expected to stretch for months. Yellowstone will partially reopen at 8 a.m. Wednesday, more than a week after more than 10,000 visitors were forced out of the park when the Yellowstone and other rivers went over their banks after being swelled by melting snow and several inches of rainfall. Read the court decision
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Reprinted courtesy of Bloomberg

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New York Court of Appeals Addresses Choice of Law Challenges

August 20, 2018 — Grace V. Hebbel - Saxe Doernberger & Vita, P.C.
In June, the New York Court of Appeals examined the application of a New York Choice of Law provision in a contract – a determinative issue for the case. In Ontario, Inc. v. Samsung C&T Corp., the issue was whether the plaintiff’s claims were subject to Ontario, Canada’s 2-year statute of limitations or New York’s 6-year statute of limitations for breach of contract where the contract contained a broad New York Choice of Law provision. The court found that pursuant to New York’s borrowing statute, Ontario’s more restrictive statute of limitations applied. The action was dismissed as time-barred, serving as a harsh reminder of the potential effects of choice of law and limitations periods. The suit arose out of the following facts. In 2008, an Ontario renewable energy developer, SkyPower Corp. (“SkyPower”), entered into a Non-Disclosure Agreement (NDA) with the defendants which allowed the defendants to review SkyPower’s confidential and proprietary information. The review was conditioned on restricted disclosure and the requirement that the information would be destroyed after review. Read the court decision
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Reprinted courtesy of Grace V. Hebbel, Saxe Doernberger & Vita, P.C.
Ms. Hebbel may be contacted at gvh@sdvlaw.com

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Despite Misapplying California Law, Federal Court Acknowledges Virus May Cause Physical Alteration to Property

October 26, 2020 — Scott P. DeVries, Michael S. Levine & Michael L. Huggins - Hunton Insurance Recovery Blog
On August 28, Judge Stephen V. Wilson of the Central District of California, entered the latest ruling in the ongoing saga of the COVID-19 business interruption coverage dispute between celebrity plaintiff’s attorney Mark Geragos and Insurer Travelers. The case, 10E, LLC v. The Travelers Indemnity Co. of Connecticut, was filed in state court. Travelers removed to federal court, where Geragos sought remand and Travelers moved to dismiss. Judge Wilson denied remand and granted the Motion to Dismiss, finding plaintiff did not satisfactorily allege the actual presence of COVID-19 on insured property or physical damage to its property. This holding is inconsistent with long standing principles of California insurance law and appears to improperly enhance the minimal pleading threshold under Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (To survive a motion to dismiss, a complaint need only allege a claim “that is plausible on its face.”). After rejecting Geragos’ attempt to have the case remanded based on a finding that Geragos had fraudulently joined a defendant to avoid removal, the Judge proceeded to the Motion to Dismiss which raised three issues: (1) the effect of the Virus Exclusion in the Travelers’ Policy, (2) whether plaintiff failed to allege that the governmental orders prohibited access to its property, and (3) whether plaintiff could “‘plausibly allege that it suffered ‘direct physical loss or damage to property’ as required for civil authority coverage.’” Rather than address the effect of the exclusion, which would be the narrowest issue (this exclusion is not present in all policies), the Court proceeded directly to the third issue, which has the broadest potential application. Reprinted courtesy of Scott P. DeVries, Hunton Andrews Kurth, Michael S. Levine, Hunton Andrews Kurth and Michael L. Huggins, Hunton Andrews Kurth Mr. DeVries may be contacted at sdevries@HuntonAK.com Mr. Levine may be contacted at mlevine@HuntonAK.com Mr. Huggins may be contacted at mhuggins@HuntonAK.com Read the court decision
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Coverage Found for Faulty Workmanship Damaging Other Property

January 06, 2016 — Tred R. Eyerly – Insurance Law Hawaii
The district court found that under Illinois law, the damage caused by the insured's faulty workmanship to portions of building beyond the scope of its own work was covered under a CGL policy. Westfield Ins. Co. v. Nat'l Decorating Serv., 2015 U.S. Dist. LEXS 159140 (N.D. Ill. Nov. 25, 2015). 200 North Jefferson, LLC was the owner and developer of a 24- story condominium building. 200 North Jefferson retained as the general contractor McHugh Construction Co. McHugh Construction retained National Decorating Service, Inc. as the subcontractor to perform all painting work on the project. The Condominium Association sued 200 North Jefferson, McHugh Construction, MCZ/Jameson Development Group, LLC, National Decorating for faulty workmanship. The alleged damages included:(1) cracking of the exterior concrete walls, interior walls and ceilings; (2) significant leakage through the exterior concrete walls, balconies, and windows; (3) defects to the common elements of the building; and (4) damage to the interior ceilings, floors, interior painting, drywall and furniture in the units. 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

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Illinois Supreme Court Limits Reach of Implied Warranty Claims Against Contractors

April 10, 2019 — Thomas Cronin - Gordon & Rees Construction Law Blog
In a recent decision, the Illinois Supreme Court held that a purchaser of a newly constructed home could not assert a claim for breach of the implied warranty of habitability against a subcontractor where the subcontractor had no contractual relationship with the purchaser. Sienna Court Condo. Ass’n v. Champion Aluminum Corp., 2018 IL 122022, ¶ 1. The decision overruled Minton v. The Richards Group of Chicago, which held that a purchaser who “has no recourse to the builder-vendor and has sustained loss due to the faulty and latent defect in their new home caused by the subcontractor” could assert a claim of a breach of the warranty of habitability against the subcontractor. 116 Ill. App. 3d 852, 855 (1983). In Sienna Court Condo. Ass’n, the plaintiff alleged that the condo building had several latent defects which made individual units and common areas unfit for habitation. 2008 IL 122022 at ¶ 3. The Court rejected the plaintiff’s argument that privity should not be a factor in determining whether a claim for a breach of the warranty of habitability can be asserted. Id. at ¶ 19. The Court also rejected the plaintiff’s argument that claims for a breach warranty of habitability should not be governed by contract law but should instead be governed by tort law analogous to application of strict liability. Id. The Court reasoned that the economic loss rule, as articulated in Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 91 (1982), refuted the plaintiff’s argument that the implied warranty of habitability should be covered by tort law. 2008 IL 122022 at ¶ 20. Under the economic loss rule, a plaintiff “cannot recover for solely economic loss under the tort theories of strict liability, negligence, and innocent misrepresentation.” National Tank Co., 91 Ill. 2d at 91. The Court explained that the rule prevented plaintiffs from turning a contractual claim into a tort claim. 2008 IL 122022 at ¶ 21. The Court further noted that contractual privity is required for a claim of economic loss, and an economic loss claim is not limited to strict liability claims. Id. Because the plaintiff’s claim was solely for an economic loss, it was a contractual claim in nature; therefore, the Court concluded that “the implied warranty of habitability cannot be characterized as a tort.” Id. at ¶ 22. Read the court decision
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Reprinted courtesy of Thomas Cronin, Gordon & Rees Scully Mansukhani
Mr. Cronin may be contacted at tcronin@grsm.com

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Contractor’s Coverage For Additional Insured Established by Unilateral Contract

November 18, 2011 — Tred R. Eyerly - Insurance Law Hawaii

The contractor was covered as an additional insured under the subcontractor’s policy even though the parties had never actually signed an agreement to add the contractor to the policy. Evanston Ins. Co. v. Westchester Surplus Lines Ins. Co., 2011 U.S. App. LEXIS 20081 (9th Cir. Oct. 3, 2011).

The policies held by Bellevue Master, the general contractor, required it to be an additional insured under any subcontractor’s liability policy. Northwest Tower Crane Services was a subcontractor. Bellevue Master LLC, faxed a message that Northwest could continue to be a subcontractor on the project if it complied with Bellevue Master’s insurance requirements. Northwest contacted its insurance broker and requested an insurance certificate be issued to Bellevue Master so that it would be an additional insured under Northwest’s policy.

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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com

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Lumber Liquidators’ Home-Testing Methods Get EPA Scrutiny

June 10, 2015 — Matthew Townsend – Bloomberg
The home testing method Lumber Liquidators Holdings Inc. is using to reassure customers that their floors are safe is being questioned by the U.S. Environmental Protection Agency. In response to allegations that its Chinese-made laminate flooring emitted excessive levels of formaldehyde, a known carcinogen, Lumber Liquidators sent thousands of do-it-yourself tests to people who’d purchased the products. Customers use a device in the kit to measure the air in their homes for 24 hours, then send the package back to have the results evaluated. While the EPA didn’t take a position on the specifics of Lumber Liquidators’ test program, the agency said on its website that home air testing “may not provide useful information due to the uncertainties” of the method. Air tests don’t pinpoint the specific source of a contaminant, and there are no widely accepted standards for indoor formaldehyde levels, the agency said. Read the court decision
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Reprinted courtesy of Matthew Townsend, Bloomberg

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