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DIRECTORY AND CAPABILITIES

The Indemnification Limitation in Section 725.06 does not apply to Utility Horizontal-Type Projects

February 07, 2018 — David Adelstein - Florida Construction Legal Updates

One of the most important provisions in construction contracts is the indemnification provision. Appreciating contractual indemnification obligations are critical and certainly should not be overlooked. Ever!

Florida Statute s. 725.06 (written about here and here) contains a limitation on contractual indemnification provisions for personal injury or property damage in construction contracts. There should always be an indemnification provision in a construction contract that addresses property damage or personal injury. Always!

Section 725.06 pertains to agreements in connection with “any construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance, including moving and excavating associated therewith…” If the contract requires the indemnitor (party giving the indemnification) to indemnify the indemnitee (party receiving the indemnification) for the indemnitee’s own negligence, the indemnification provision is unenforceable unless it contains a “monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any.” It is important to read the statute when preparing and dealing with a contractual indemnification provision.

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Reprinted courtesy of David Adelstein, Florida Construction Legal Updates
Mr. Adelstein may be contacted at dadelstein@gmail.com

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Montana Supreme Court: Insurer Not Bound by Insured's Settlement

December 02, 2019 — K. Alexandra Byrd - Saxe Doernberger & Vita, P.C.
In Draggin’ Y Cattle Co., Inc. v. Junkermier, et al.1 the Montana Supreme Court held that where an insurer defends its insured and the insured subsequently settles the claims without an insurer’s participation, a court may approve the settlement as between the underlying plaintiff and underlying defendant, but the settlement will not be presumed reasonable as to the insurer. Therefore, an insurer who defends its insured cannot be bound by a stipulated settlement that the insurer did not expressly consent to. The case involved Draggin’ Y Cattle Company (the “Cattle Company”), a ranching and cattle business that utilized the services of an accounting firm, Junkermier, Clark, Campanella, Stevens, P.C. (“Junkermier”), to structure the sale of real property to take advantage of favorable tax treatment. It was discovered that Junkermier’s employee misinformed the Cattle Company’s owners of the tax consequences of the sale. The Cattle Company’s owners subsequently filed suit against Junkermier and its employee and alleged nearly $12,000,000 in damages due to the error. Junkermier’s insurer, New York Marine, provided a defense for Junkermier and its employee. The Cattle Company’s owners offered to settle the claims against Junkermier and its employee for $2,000,000, the policy limit of the New York Marine policy. New York Marine refused to give its consent or tender the policy’s limit. Subsequently, Junkermier, its employee, and the Cattle Company entered into their own settlement agreement for $10,000,000. The settlement was contingent upon a reasonableness hearing to approve the stipulated agreement. Read the court decision
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Reprinted courtesy of K. Alexandra Byrd, Saxe Doernberger & Vita, P.C.
Ms. Byrd may be contacted by kab@sdvlaw.com

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Iowa Tornado Flattens Homes, Businesses and Wind Turbines

June 17, 2024 — Annemarie Mannion - Engineering News-Record
Business owners and residents are picking up the pieces after a tornado tore through south-central Iowa May 21, devastating the town of Greenfield, about 60 miles southwest of Des Moines, by destroying homes and businesses, toppling MidAmerican Energy Co. wind turbines and damaging the Adair County Memorial Hospital. Reprinted courtesy of Annemarie Mannion, Engineering News-Record Ms. Mannion may be contacted at manniona@enr.com Read the full story... Read the court decision
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Unlicensed Contracting and Florida Statute S. 489.128

February 03, 2025 — David Adelstein - Florida Construction Legal Updates
Florida Statute s. 489.128 is a statute that provides a remedy against unlicensed contracting. However, keep in mind that this argument—the unlicensed contractor argument—is a technical statutory argument. In other words, it’s not so much of a fact-based merits argument, but an argument that’s solely based on the technicality of the statute. This, by no means, is not a recommendation that the argument should not be raised. In instances, it absolutely should be and could have legitimate traction. However, when deciding whether to or how to pursue a dispute, including settlement, you want to keep in mind whether this is an argument you want to bank your outcome on because there are always costs (attorney’s fees, court costs, etc.) that should get factored into any business decision regarding a dispute. Read the court decision
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Reprinted courtesy of David Adelstein, Kirwin Norris, P.A.
Mr. Adelstein may be contacted at dma@kirwinnorris.com

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Expired Contract Not Revived Due to Sovereign Immunity and the Ex Contractu Clause

September 15, 2016 — David R. Cook Jr. – AHHC Construction Law Blog
A few months ago, a decision by the Supreme Court of Georgia in Georgia Department of Labor v. RTT Associates, Inc. provided a strict rule for contractors who work with state agencies to determine whether a state agency has waived its sovereign immunity. The issue as framed by the Court was “whether an agency’s waiver of immunity from a breach of contract claim as a result of entering into a written contract remains intact in the event the contract is extended without a written document signed by both parties expressly amending the contract, as required by its terms.” The case involved a contract executed on March 1, 2012, by a contractor, RTT Associates, Inc. (RTT), and the Georgia Department of Labor (DOL), whereby RTT was to develop certain computer software for the DOL by the completion date, June 30, 2012. The contract required that amendments be in writing and fully executed by both parties. Time was of the essence and RTT’s obligation under the contract survived the expiration or termination of the contract. Read the court decision
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Reprinted courtesy of David R. Cook Jr., Autry, Hanrahan, Hall & Cook, LLP
Mr. Cook may be contacted at cook@ahclaw.com

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Renters ‘Sold Out’ by NYC Pensions Press Mayor on Housing

May 19, 2014 — Martin Z. Braun – Bloomberg
Elevators break down, ceilings leak and security is lax at the Metro North apartments overlooking the East River in Harlem, says retired rehabilitation technician Bob Montesi, who’s lived there for more than three decades. Even as deterioration accelerates at the 761-unit complex, which used to be in a state affordable-housing program, some tenants are facing rent increases of as much as 80 percent. For Montesi, 74, who worked at a New York City-run hospital for 41 years, the changes are especially galling. One of the owners of the building is his pension fund. Read the court decision
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Reprinted courtesy of Martin Z. Braun, Bloomberg
Mr. Braun may be contacted at mbraun6@bloomberg.net

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Court Reminds Insurer that the Mere Possibility Of Coverage at the Time of Tender Triggers a Duty to Defend in a Defect Action

October 04, 2021 — Jatin Patel - Newmeyer Dillion
It has long been the law in California that an insurer’s duty to defend is broader than the duty to indemnify and that the mere possibility of coverage triggers a duty to defend. Nevertheless, insurers still periodically ignore this clear principle and attempt to narrow the scope of the duty to defend. Recently, a Federal District Court issued a reminder to a wayward insurer. In Pacific Bay Masonry, Inc., v. Navigators Specialty Insurance Company, (N.D. Cal., Sept. 16, 2021, No. C 20-07376 WHA, 2021 WL 4221747 (“Pacific”)), the Court was asked to assess whether a tender of defense by a concrete masonry subcontractor to its insurer for a construction defect action required a defense. Pacific Bay Masonry, Inc. (“PBM”) installed concrete masonry units (also known as “CMUs”) at a new retail shopping center in Oakland, California. The subsequent owner of the retail center filed suit against the general contractor for alleged construction defects, including “efflorescence of roof deck at CMU wall” and “improper waterproofing and flashing of the CMU block wall." The general contractor filed a cross-complaint against PBM. PBM tendered the defense of the case to Navigators Specialty Insurance Company (“Navigators”) along with copies of a preliminary defect list, a description of defects, interrogatory responses and an expert witness damage analysis. Navigators denied coverage and a duty to defend citing to the work product exclusion of the policy. PBM asked Navigators to reconsider. Navigators held firm on its denial. Two years later, PBM filed suit. Read the court decision
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Reprinted courtesy of Jatin Patel, Newmeyer Dillion
Mr. Patel may be contacted at jatin.patel@ndlf.com

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New California "Construction" Legislation

November 08, 2018 — Richard H. Glucksman, Esq. & Chelsea L. Zwart, Esq. - Chapman Glucksman Dean Roeb & Barger

Governor Jerry Brown signed two potentially impactful Senate Bills relating to the construction of apartment buildings late last month. These Bills, discussed further below, were introduced, in part, in response to the Berkeley balcony collapse in June 2015, which was determined by the California Contractors State License Board to be caused by the failure of severely rotted structural support joists the repair of which were deferred by the property manager, despite indications of water damage.

SENATE BILL 721 ESTABLISHES HEIGHTENED “LOAD-BEARING” INSPECTION REQUIREMENTS

On August 21, 2018, the California State Senate passed SB 721, one of two bills by Senator Jerry Hill introduced this year seeking to address the safety of multifamily rental residences. Now that the Governor has signed the Bill, a new section will be added to the California Health and Safety Code, requiring that every 6 years, destructive testing be performed on at least 15% of each type of load-bearing, wood framed exterior elevated element (such as balconies, walkways, and stair landings) in apartment buildings with 3 or more units. Interestingly, prior to being passed by the State Senate, SB 721 was revised in June 2018, such that the inspection requirements do not apply to common interest developments (i.e., condominiums).

As set forth in the new Health and Safety Code Section 17973:

"the purpose of the inspection is to determine that exterior elevated elements and their associated waterproofing elements are in a generally safe condition, adequate working order, and free from any hazardous condition caused by fungus, deterioration, decay, or improper alteration to the extent that the life, limb, health, property, safety, or welfare of the public or the occupants is not endangered."

The inspection must be paid for by the building owner and performed by a licensed contractor, architect, or civil or structural engineer, or a certified building inspector or building official from a recognized state, national, or international association. Emergency repairs identified by the inspector must be made immediately. For non-emergency repairs, a permit must be applied for within 120 days and the repair completed within 120 days of the permit’s issuance. If repairs are not completed within 180 days, civil penalties of $100-$500 per day may be imposed.

The required inspection must be completed by January 1, 2025 and every 6 years thereafter, unless an equivalent inspection was performed during the 3 years prior to January 1, 2019, the effective date of the new law. For a building converted to condominiums that will be sold after January 1, 2019, the inspection required by Health and Safety Code Section 17973, must be performed prior to the first close of escrow.

SENATE BILL 1465 SETS CONTRACTOR REPORTING REQUIREMENTS

The Governor also signed SB 1465, adding Sections 7071.20, 7071.21, and 7071.22 to the California Business and Professions Code. The new law requires that a contractor licensed with the Contractors’ State License Board "report to the registrar in writing within 90 days after the licensee has knowledge of any civil action resulting in a final judgment, executed settlement agreement, or final arbitration award in which the licensee is named as a defendant or crossdefendant, filed on or after January 1, 2019," that meets certain and specific criteria, including that it is over $1 million and arises out of an action for damages to a property or person allegedly caused by specified construction activities of the contractor on a multifamily rental residential structure.

Where more than one contractor was named as a defendant or cross-defendant, each of the contractors apportioned more than $15,000 in liability must report the action. Importantly, the new statute also imposes similar reporting requirements on insurers of contractors. SB 1465 also addresses an impacted party’s failure to comply with the reporting requirements.

COMMENT

Both SB 721 and SB 1465 are potentially significant and seek “legislative reform” to address construction issues by placing a greater burden on apartment owners as well as builders and subcontractors. How pragmatic and what impact they will have on the industry is obviously developing. If you are interested in receiving further detail concerning the Bills, please contact us. We are analyzing the new legislation and its intent and will be providing our ongoing comments.

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Reprinted courtesy of RICHARD H. GLUCKSMAN, ESQ. CHELSEA L. ZWART, ESQ., CGDRB
Chelsea L. Zwart may be contacted at czwart@cgdrblaw.com

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