Condo Owners Suing Bank for Failing to Disclose Defects
January 17, 2014 —
Beverley BevenFlorez-CDJ STAFFThe Option Owners Association Inc., Condo Owners in Lincoln, Nebraska, filed suit against Security First Bank, “alleging the bank failed to disclose ‘hidden defects,’” reported the Lincoln Journal Star. Alleged defects include defective siding, improperly installed siding, and defective flashing. The condo owners are seeking at least $644,000 which they claim is the “fair market value of the repairs needed to fix the alleged construction defects.”
When the Lincoln Journal Star asked Jim Wefso, general counsel for Security First Bank, to comment, he stated, “The bank doesn't feel it has any liability in the case.”
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Reminder: Pay if Paid Not All Encompassing (but Could it be?)
December 09, 2019 —
Christopher G. Hill - Construction Law MusingsOn numerous occasions, I have discussed the need to be careful with so called “pay if paid” clauses in construction contracts. While such clauses are enforceable in Virginia (when phrased correctly), there are exceptions and limitations (for instance in the Miller Act context).
One such exception (that I frankly would have thought to be obvious) is that such clauses do not protect a general contractor from paying all subcontractors. Such a clause only protects a general contractor from payment to those subs for whose work the general contractor has not been paid. In other words, if a general contractor has been paid by an owner for a particular subcontractors work, it cannot use the pay if paid clause to deny payment even in the event that other subcontractors were deficient in their work or the owner has failed to pay the general contractor in full.
In Precision Contractors Inc. v. Masterbuilt Companies Inc. (PDF) the Fairfax, VA Circuit Court reiterated this principal stating that nothing in the contract suggests that either party to the lawsuit had any intention to shift the risk of non-payment by the owner or non-performance of other subcontractors to the plaintiff (Precision).
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Trial Court Abuses Discretion in Appointing Unqualified Umpire for Appraisal
April 25, 2023 —
Tred R. Eyerly - Insurance Law HawaiiThe Texas Court of Appeals agreed with the insurer that the trial court abused its discretion in appointing an attorney as umpire in a property damage dispute. In re State Farm Lloyds, 2023 Tex. App. LEXIS 966 (Tex. Ct. App. Feb. 15, 2023).
The insured filed an application for the appointment of an umpire regarding his insurance claim for property damage to his residence. The home was damaged by a hurricane on July 25, 2020, and the parties disagreed regarding the full extent of the property damage to the residence. The appraisers appointed by the insured and State Farm disagreed on the damages, leading to the insured asking the trial court to appoint a competent and disinterested umpire.
The trial court appointed Derek Salinas, an attorney, as umpire. State Farm challenged the appointment because the policy required the umpire to be either an engineer, architect, adjuster, public adjuster, or a contractor with experience and training in the construction, repair and estimating the type of property damage in dispute. State Farm argued that Salinas met none of the criteria. The trial court rejected State Farm's motion for reconsideration.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
The Risks and Rewards of Sustainable Building Design
July 25, 2021 —
Caroline A. Harcourt & Adam Weaver - Gravel2GavelThe shift towards a “greener” environment has resulted in cities and states implementing electrification mandates, which will have a major impact on both current and future building design. Currently, most commercial and residential end users are already all-electric. However, there are some exceptions, such as space and water heating, that use a significant amount of energy. Several states, including California and New York, have cities that have introduced legislation requiring new construction to be all-electric. This means, for example, using electricity for heating rather than fossil fuels such as natural gas. Mandate or not, building owners and developers should consider the risks and rewards of an all-electric design.
General Rewards
- Reaching Climate Goals: As part of the Clean Energy Plan, as described in a previous post, President Biden has created a goal for the United States of achieving a carbon pollution-free American utility sector by 2035. Because residential and commercial building account for 40 percent of energy consumption in the United States, all-electric building designs will help governments and businesses reach the ambitious climate goals that have been set for the coming years.
Reprinted courtesy of
Caroline A. Harcourt, Pillsbury and
Adam Weaver, Pillsbury
Ms. Harcourt may be contacted at caroline.harcourt@pillsburylaw.com
Mr. Weaver may be contacted at adam.weaver@pillsburylaw.com
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A Recap of the Supreme Court’s 2019 Summer Slate
September 16, 2019 —
Anthony B. Cavender - Gravel2GavelAs usual, the last month of the Supreme Court’s term generated significant rulings on all manner of cases, possibly presaging the new directions the Court will be taking in administrative and regulatory law. Here’s a brief roundup:
An Offshore Dispute, Resolve – Parker Drilling Management v. Newton
On June 10, 2019, the Court held, in a unanimous ruling, that, under federal law, California wage and hour laws do not apply to offshore operations conducted on the Outer Continental Shelf (OCS). Newton, the plaintiff, worked on drilling platforms off the coast of California, and alleged that he was not paid for his “standby time” which is contrary to California law if not federal law. He filed a class action in state court, which was removed to federal court, where it was dismissed on the basis of a 1969 decision of the U.S. Court of Appeals for the Fifth Circuit, which held that state law applies on the OCS only to the extent that it is necessary to use state law to fill a significant gap or void in federal law, and this is not the case here. On appeal to the Ninth Circuit, that court disagreed with the Fifth Circuit, and ruled that state law is applicable on the OCS whenever it applies to the matter at hand. The Supreme Court, in an opinion written by Justice Thomas, conceded that “this is a close question of statutory interpretation,” but in the end the Court agreed with the argument that if there was not a gap to fill, that ended the dispute over which law applies on the Outer continental Shelf. This ruling, recognizing the preeminent role that federal law plays on the OCS, may affect the resolution of other offshore disputes affecting other federal statutes.
Preemption Prevention – Virginia Uranium, Inc. v. Warren. et al.
On June 17, 2019 the Court decided important cases involving federal preemption and First Amendment issues. In a 6-to-3 decision, the Court held that the Atomic Energy Act does not preempt a Virginia law that “flatly prohibits uranium mining in Virginia”—or more precisely—mining on non-federal land in Virginia. Virginia Uranium planned to mine raw uranium from a site near Coles, Virginia, but acknowledging that Virginia law forbade such an operation, challenged the state law on federal preemption grounds, arguing that the Atomic Energy Act, as implemented by the Nuclear Regulatory Commission, preempts the ability of the state to regulate this activity. However, the majority, in an opinion written by Justice Gorsuch, notes that the “best reading of the AEA does not require us to hold the state law before us preempted,” and that the1983 precedent that Virginia Uranium cites, Pacific Gas & Electric Company v. State Energy Resources Conservation and Development Commission, can easily be distinguished. Justice Gorsuch rejected arguments that the intent of the Virginia legislators in passing the state law should be consulted, that the Court’s ruling should normally be governed by the exact text of the statute at hand. However, both the concurring and dissenting opinions suggest that the what the legislators intended to do is important in a preemption context.
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Anthony B. Cavender, PillsburyMr. Cavender may be contacted at
anthony.cavender@pillsburylaw.com
Protecting Your Business From Liability Claims Stemming From COVID-19 Exposure
June 01, 2020 —
Andrew Hamelsky, Jenifer Scarcella & Joshua Tumen - White and WilliamsBusinesses of every nature – including grocery stores, banks, daycares, gyms and restaurants – may face increasing liability claims from customers and third parties claiming to have been exposed to the novel coronavirus, or COVID-19, while at their location. The novel virus raises issues as to whether businesses have a heightened duty of care to their customers, and what type of exposure businesses face if a customer claims to have been exposed to COVID-19 while at their premises.
Recently, a lawsuit was filed against Princess Cruise lines for gross negligence in allowing passengers to be exposed to COVID-19 on a cruise ship. The lawsuit alleges that the cruise ship was allowed to go out to sea knowing that it was infected from two previous passengers who came down with symptoms of COVID-19. It further claims that the passengers were not warned of the potential exposure either before or after they boarded the ship.
In other news reports around the country, business owners have reported taking extraordinary precautions to prevent customers’ risk of contracting COVID-19. For example, one grocery store recently reported that it discarded $35,000 worth of food after a customer coughed on fresh produce.
Reprinted courtesy of White and Williams LLP attorneys
Andrew Hamelsky,
Jenifer Scarcella and
Joshua Tumen
Mr. Hamelsky may be contacted at hamelskya@whiteandwilliams.com
Ms. Scarcella may be contacted at scarcellaj@whiteandwilliams.com
Mr. Tumen may be contacted at tumenj@whiteandwilliams.com
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Do Construction Contracts and Fraud Mix After All?
October 27, 2016 —
Christopher G. Hill – Construction Law MusingsOn several occasions here at Construction Law Musings, I’ve discussed the fact that, with a few exceptions, fraud claims and written construction contract based claims do not mix. One of the exceptions to the so called “economic loss rule” that would seem to preclude both fraud and contract claims in the same lawsuit is where fraud is used to induce the contract in the first place. This exception would only apply where an independent duty, wholly outside of the duties created by the contract, is properly plead and proven to the court. For the same reason, namely a separate duty outside of the contract, the Virginia Consumer Protection Act (“VCPA”) may allow for an exception that would allow a cause of action under this statute.
Up until recently, the courts of Virginia have used these exceptions sparingly. However, the recent Loudoun County, VA Circuit Court opinion in Interbuild, Inc. v. Sayers (opinion also found at Virginia Lawyers Weekly) may signal a broadening of these exceptions. In the Interbuild case, the Court considered a claim for fraud in the inducement and breach of the VCPA. The basic facts plead by the plaintiffs were that Interbuild induced them into the contract through statements that it had been an established business since 1981, the project did not require a building permit, it had obtained all necessary subcontractor prices and would provide full-time project supervision, the project would be completed within 16 weeks, 4000 PSI concrete would be used for the project and that the project would be located in the agreed-upon area depicted and that they reasonably relied on these representations in deciding to enter into the contract to build their recreational facility.
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Christopher G. Hill, The Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
Bad Faith and a Partial Summary Judgment in Seattle Construction Defect Case
February 10, 2012 —
CDJ STAFFThe US District Court of Washington has issued a ruling in the case of Ledcor Industries v. Virginia Surety Company, Inc. Ledcor was the builder of a mixed-use real estate project in Seattle called the Adelaide Project. Ledcor purchased an insurance policy from Virginia Surety covering the project. After the completion of the project, Ledcor received complaints of construction defects from the homeowners, which they forwarded to Virginia Surety.
Virginia Surety denied coverage on several grounds. Absent any lawsuit, Virginia claimed that there was “not yet any duty to defend or indemnify.” Further, as the policy commenced ten days after work on the project was substantially completed, Virginia cited a provision in the policy that excluded coverage for damage that occurred before the policy began. As problems included water intrusion, Virginia noted an exclusion for fungal damage. Finally, Virginia noted that it was not clear whether damage was due to Ledcor’s own actions.
The homeowners sued over the construction defects. Ledcor settled these suits before trial. In this, they were defended by, and settlements were paid by American Home, another of Ledcor’s insurers. Ledcor claims that Virginia Surety acted in bad faith by denying coverage and by its failure to investigate the ongoing nature of the work at the project.
The judge determined that Virginia Surety acted in bad faith when it invoked the fungus exclusion. Virginia noted that fungal damage “‘would have been’ referenced in the list of construction defects,” however, the HOAs claimed only “water stains” and “water damage,” and made no mention of mold or fungus. The court found that Virginia Surety “was not entitled to deny coverage simply because it may have suspected that mold or fungus damage existed.” The court noted that further proceedings would be needed to determine what portion of the settlement Virginia is obligated to pay.
The court found that there were matters of fact to be determined on the further issues in the case. The judge wrote that although Virginia acted in bad faith in invoking the fungus exclusion, it still had to be determined if they were in breach of contract by failing to defend Ledcor. Ledcor still needs to show that the damages claimed by the HOA were due to work actually covered by Virginia Surety.
Ledcor made an additional claim that Virginia Surety violated Washington’s laws concerning the insurance industry. Here, the court noted that the improper exclusion for fungus issues “constitutes a per se unfair trade practice.” Six other claims were made under this law. The court found that Virginia Surety did not misrepresent “pertinent facts or insurance policy provisions.” It also issued its denial letter promptly, satisfying the fifth provision. However, Virginia Surety did violate the second provision, in that it failed “to acknowledge and act reasonably promptly upon communications with respect to claims.” Two other issues could not be determined.
Judge Martinez’s decision granted a summary judgment to Ledcor on the issue of bad faith. An additional summary judgment was granted that Virginia Surety violated Washington’s Insurance Fair Conduct Act. Judge Martinez did not grant summary judgment on any of the other issues Ledcor raised.
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