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Drafting or Negotiating A Subcontract–Questions To Consider

June 21, 2021 — David Adelstein - Florida Construction Legal Updates
When it comes to drafting and negotiating a subcontract, there are provisions that should be important to you from a risk assessment standpoint. From the subcontractor’s standpoint, below are questions you should ask, or issues you should consider, as you go through the subcontract. These are the same questions and issues that are also important to a contractor as the contractor will want to ensure these issues are included in the subcontract. By asking yourself these questions, you can check to see how the subcontract addresses these issues, and how the risk should be negotiated. Hopefully, you are working with counsel to make sure you understand what risk you are assuming and those provisions you want to try to push back on. Asking yourself these questions, or considering these questions, will help you go through the subcontract with a purpose based on the risk profile of the project and certain risk you don’t want to assume.

Prime Contract –> Does the subcontract incorporate the prime contract? Make sure to request the prime contract since the subcontract will identify the prime contract as part of the Subcontract Documents and will require you to assume towards the contractor the same obligations the contractor is required to assume towards the owner.
Scope of Work –> What is the scope of work? Is it clear. Make sure the scope is clear and you understand the scope.

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Reprinted courtesy of David Adelstein, Kirwin Norris, P.A.
Mr. Adelstein may be contacted at dma@kirwinnorris.com

OSHA Advisory Committee, Assemble!

February 06, 2023 — Rachel E. Pelovitz - Construction Executive
The Occupational Safety and Health Administration (OSHA) has sourced new members for its Advisory Committee on Construction Safety and Health, which was established by the Construction Safety Act to provide “advice and assistance in construction standards and policy matters” to the assistant secretary of labor for occupational safety and health. The committee consists of 15 members, one appointed by the secretary of labor, to represent the interests of employers, employees, state safety and health agencies, in addition to the public. Reprinted courtesy of Rachel E. Pelovitz, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved. Ms. Pelovitz may be contacted at pelovitz@abc.org Read the full story... Read the court decision
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Construction Defect Lawsuit Came too Late in Minnesota

June 28, 2013 — CDJ STAFF
The Minnesota Court of Appeals has upheld a summary judgment in a construction defect case, Lee v. Gorham. Minnesota law requires that contractors warranty that the home will be free of major construction defects during the first ten years, but claims must “be brought within two years of the discovery of the breach.” The Lees received a home inspection report in 2009 that identified a variety of defects, including “several possible structural defects.” The court noted that the report stated, “Contact your builder in writing of the findings, and discuss your options with an attorney.” The Lees contacted the contractor, Gorham Builders. After initial silence, Gorham told the Lees that problems would “have to be ‘turned over to [the] insurance company.’” Rodney noted in his testimony that he had two choices, to either sue Gorham or hire an outside contractor. Mr. Lee had concluded that the legal costs were likely to be equal to the cost of the contractor. In June, 2011, the Lees changed their mind about bringing a suit. Gorham sought and received a summary judgment dismissing the case on the grounds that too much time had passed since the Lees learned of the construction defect. The Lees appealed. The appeals court upheld the summary judgment. The Lees claimed that the 2009 home inspection did not alert them of a “major construction defect,” but the court concluded that the language of the report fit within the Minnesota statutory definition of a “major construction defect.” Nor was the appeals court convinced that at any time did Gorham provide “assurances that it would cure the defects to the home.” Within the same month as the May 2009 inspection, Gorham had made it clear that any problems were an issue for the insurance company. Thus, the appeals court concluded that the Lee’s equitable-estoppel argument was without merit. The Lees also brought to appeal the new argument that they did not realize they were dealing with “major construction defects” until they received a subsequent home inspection in 2011. The court noted that the second report does not detail “new defects or structural issues not identified in the 2009 inspection report.” In addition to being “without merit,” the court noted that this claim was not made in the district court and so the appeals court “need not consider this issue on appeal.” Read the court decision
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Maria Latest Threat to Puerto Rico After $1 Billion Irma Hit

September 20, 2017 — Brian K. Sullivan & Ezra Fieser - Bloomberg
Hurricane Maria was on course to hit Puerto Rico just two weeks after Irma caused as much as $1 billion in damages on the bankrupt island. Maria’s top winds were at 155 miles (250 kilometers) an hour, the National Hurricane Center said in a notice around 6 a.m. New York time. At Category 5, the strongest classification on the five-step Saffir-Simpson scale, Maria was about 35 miles southeast of San Juan in Puerto Rico. Reprinted courtesy of Brian K. Sullivan, Bloomberg and Ezra Fieser, Bloomberg Read the court decision
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2019 Legislative Changes Affecting the Construction Industry

July 09, 2019 — Melinda S. Gentile & Cadian T. Baker - Peckar & Abramson, P.C.
The 2019 Florida Legislative Session recently concluded and a number of important construction-related House Bills (HB) and Senate Bills (SB) were presented during the Session. Below is a summary of those construction-related bills set to become law in 2019. Bills Becoming Law in 2019 HB 1247: Relating to Construction Bonds. This bill passed both the House and the Senate and is awaiting the Governor’s signature. Once the Governor has approved the bill it becomes effective as of October 1, 2019. This bill addresses how to properly perfect a claim against a contractor’s payment bond. (1) The Notice of Nonpayment that must be served on the contractor and the surety, must be made under oath and include the following provisions: The nature of the labor or services performed or to be performed; The materials furnished or to be furnished; The amount paid on the account; and if known, the amount owed and the amount to become due. A Notice of Nonpayment that includes the sums for retainage must specify the portion of the amount claimed for retainage. (2) A subcontractor, laborer, or material supplier (claimant) who files a fraudulent Notice of Nonpayment loses their rights under the bond. The filing of a fraudulent notice is a complete defense to claimant’s claim against the bond. A notice is fraudulent if the claimant willfully exaggerated the amount due, willfully included a claim for work not performed or materials not furnished or prepared the notice with willful and gross negligence, which resulted in willful exaggeration. However, a minor mistake in the notice, or a good faith dispute as to the amount due, is not considered fraudulent. Please note that this provision mirrors the existing statute relative to a fraudulent lien. Read the court decision
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Reprinted courtesy of Melinda S. Gentile, Peckar & Abramson, P.C.
Ms. Gentile may be contacted at mgentile@pecklaw.com

Quick Note: Notice of Contest of Claim Against Payment Bond

January 31, 2018 — David Adelstein - Florida Construction Legal Updates
On private jobs where the general contractor has an unconditional payment bond, subcontractors, sub-subcontractors and suppliers need to serve a notice of nonpayment to preserve payment bond rights. Read the court decision
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Reprinted courtesy of David Adelstein, Florida Construction Legal Updates
Mr. Adelstein may be contacted at dadelstein@gmail.com

The Colorado Court of Appeals Rules that a Statutory Notice of Claim Triggers an Insurer’s Duty to Defend.

October 23, 2012 — David M. McLain, Higgins, Hopkins, McLain & Roswell

Gene and Diane Melssen d/b/a Melssen Construction (“Melssen”) built a custom home for the Holleys, during which period of time Melssen retained a CGL insurance coverage from Auto Owners Insurance Company. Soon after completion of the house, the Holleys noticed cracks in the drywall and, eventually, large cracks developed in the exterior stucco and basement slab. Thereafter, the Holleys contacted Melssen, the structural engineer, an attorney, and Auto-Owners, which assigned a claims adjuster to investigate the claim.

In April 2008, the Holleys sent Melssen a statutory notice of claim pursuant to C.R.S. § 13-20-803.5 (“NOC”). In this NOC, the Holleys claimed approximately $300,000 in damages related to design and construction defects. The Holleys also provided a list of claimed damages and estimated repairs, accompanied by two reports from the Holleys’ consultant regarding the claimed design and construction defects. In June 2008, Melssen tendered the defense and indemnity of the claim to Auto-Owners. While Auto-Owners did not deny the claim at that time, it did not inspect the property or otherwise adjust the claim. Thereafter, in October 2008, Auto-Owners sent Melssen a letter denying coverage on the basis that the damage occurred outside of the applicable policy period.

Ultimately, Melssen settled the claims against it for $140,000.

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Reprinted courtesy of David McLain, Higgins, Hopkins, McLain & Roswell, LLC. Mr. McLain can be contacted at mclain@hhmrlaw.com

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Insurer Has Duty to Defend Sub-Contractor

July 25, 2022 — Tred R. Eyerly - Insurance Law Hawaii
Interpreting Connecticut law, the federal district court had that the insured sub-contractor was entitled to a defense. County Wide Mech. Servs. LLC v. Regent Ins. Co., 2022 U.S. Dist. LEXIS 86726 (D. Conn. May 13, 2022). The underlying plaintiff, The Saybrook at Haddam, entered a contract with PAC Group to serve as general contractor for construction of an addition to The Saybrook's facility. PAC Group sub-contracted with County Wide Mechanical Services to install the HVAC system. The HVAC system was put into service on November 14, 2014. In October 2019, The Saybrook filed the underlying action against PAC group, County Wide, and others. The underlying complaint alleged that there had been at least seven "critical failures" of the HVAC system. As a result, The Seabrook had to replace multiple compressors and several circuit boards, valves, and other components. Further, the entire system had to be replaced. The underlying complaint alleged breach of contract against PAC Group and County Wide. In addition to the alleged breach of contract between The Saybrook and County Wide, the Saybrook also alleged it was a third-party beneficiary of PAC Group's contract with County Wide regarding installation of the HVAC system. PAC Group cross-claimed against County Wide, asserting one count of contractual indemnification and one count of breach of contract under the PAC Group's contract with County Wide. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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