Colorado’s Federal District Court Finds Carriers Have Joint and Several Defense Duties
October 10, 2013 —
Bret Cogdill — Higgins, Hopkins, McLain & Roswell, LLC.An issue that has plagued builders in Colorado construction defect litigation is the difficulty of getting additional insured carriers to fully participate in the builder’s defense, oftentimes leaving the builder to fund its own defense during the course of the litigation.
Many additional insurers offer a variety of positions regarding why they will not pay for fees and costs during the course of a lawsuit. Some insurers argue that, until after trial, it is impossible to determine its proper share of the defense, and therefore cannot make any payments until the liability is determined as to all of the potentially contributing policies. (This is often referred to as the “defense follows indemnity” approach.) Others may make an opening contribution to defense fees and costs, but fall silent as fees and costs accumulate. In such an event, the builder may be forced to fund all or part of its own defense, while the uncooperative additional insured carrier waits for the end of the lawsuit or is faced with other legal action before it makes other contributions.
Recent orders in two, currently ongoing, U.S. District Court cases provide clarity on the duty to defend in Colorado, holding that multiple insurers’ duty to defend is joint and several. The insured does not have to go without a defense while the various insurers argue amongst themselves as to which insurer pays what share.
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Bret CogdillBret Cogdill can be contacted at
cogdill@hhmrlaw.com
Spearin Doctrine 100 Years Old and Still Thriving in the Design-Build Delivery World
January 09, 2019 —
John P. Ahlers - Ahlers Cressman & Sleight PLLCThe Supreme Court’s ruling in United States v. Spearin, [1] also referred to as the Spearin doctrine, is a landmark construction decision.[2] The Spearin doctrine provides that the Owner impliedly warrants the information, plans and specifications which an Owner provides to a General Contractor. If a Contractor is bound to build according to plans and specifications prepared by the Owner, the Contractor will not be responsible for the consequences of defects in the plans and specifications.
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John P. Ahlers, Ahlers Cressman & Sleight PLLCMr. Ahlers may be contacted at
john.ahlers@acslawyers.com
Arizona Court of Appeals Decision in $8.475 Million Construction Defect Class Action Suit
May 09, 2011 —
CDJ STAFFIn the case of Leflet v. Fire (Ariz. App., 2011), which involved an $8.475 million settlement in a construction defect class action suit, the question put forth to the Appeals court was “whether an insured and an insurer can join in a Morris agreement that avoids the primary insurer’s obligation to pay policy limits and passes liability in excess of those limits on to other insurers.” The Appeals court provided several reasons for their decision to affirm the validity of the settlement agreement as to the Non-Participatory Insurers (NPIs) and to vacate and remand the attorney fee awards.
First, the Appeals court stated, “The settlement agreement is not a compliant Morris agreement and provides no basis for claims against the NPIs.” They conclude, “Appellants attempt to avoid the doctrinal underpinnings of Morris by arguing that ‘the cooperation clause did not prohibit Hancock from assigning its rights to anyone, including Appellants.’ This narrow reading of the cooperation clause ignores the fact that Hancock did not merely assign its rights — it assigned its rights after stipulating to an $8.475 million judgment that neither it nor its Direct Insurers could ever be liable to pay. Neither Morris nor any other case defines such conduct as actual ‘cooperation’—rather, Morris simply defines limited circumstances in which an insured is relieved of its duty to cooperate. Because Morris agreements are fraught with risk of abuse, a settlement that mimics Morris in form but does not find support in the legal and economic realities that gave rise to that decision is both unenforceable and offensive to the policy’s cooperation clause.”
The Appeals court further concluded that “even if the agreement had qualified under Morris, plaintiffs did not provide the required notice to the NPIs.” The court continued, “Because an insurer who defends under a reservation of rights is always aware of the possibility of a Morris agreement, the mere threat of Morris in the course of settlement negotiations does not constitute sufficient notice. Instead, the insurer must be made aware that it may waive its reservation of rights and provide an unqualified defense, or defend solely on coverage and reasonableness grounds against the judgment resulting from the Morris agreement. The NPIs were not given the protections of this choice before the agreement was entered, and therefore can face no liability for the resulting stipulated judgment.”
Next, the Appeals court declared that “the trial court abused its discretion in awarding attorney’s fees under A.R.S § 12-341.” The Appeals court reasoned, “In this case, the NPIs prevailed in their attack on the settlement. But the litigation did not test the merits of their coverage defenses or the reasonableness of the settlement amount. And Plaintiffs never sued the NPIs, either in their own right or as the assignees of Hancock. Rather, the NPIs intervened to test the conceptual validity of the settlement agreement (to which they were not parties) before such an action could commence. In these circumstances, though it might be appropriate to offset a fee award against some future recovery by the Plaintiff Leflet v. Fire (Ariz. App., 2011) class, the purposes of A.R.S. § 12-341.01 would not be served by an award of fees against them jointly and severally. We therefore conclude that the trial court abused its discretion in awarding fees against Plaintiffs ‘jointly and severally.’”
The Appeals court made the following conclusion: “we affirm the judgment of the trial court concerning the validity of the settlement agreement as to the NPIs. We vacate and remand the award of attorney’s fees. In our discretion, we decline to award the NPIs the attorney’s fees they have requested on appeal pursuant to A.R.S. § 12-341.01(A).”
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Don’t Believe Everything You Hear: Liability of Asbestos Pipe Manufacturer Upheld Despite Exculpatory Testimony of Plaintiff
May 24, 2021 —
Garret Murai - California Construction Law BlogIn the next case, Morgan v. J-M Manufacturing Company, Inc. 60 Cal.App.5th 1078 (2021), the 2nd District Court of Appeal upheld a $7 million personal injury verdict against an asbestos-cement pipe manufacturer despite exculpatory testimony from the plaintiff, holding that the testimony was an issue of witness credibility rather than sufficiency of the evidence, and holding that the trial court’s denial of a jury instruction requested by the pipe manufacturer was appropriate because, while the requested jury instruction was a recitation of undisputed facts, the purpose of jury instructions is to recite the law rather than facts, even undisputed ones.
The Morgan Case
Norris Morgan was exposed to asbestos at construction sites where he worked in the 1970s and 80s. After he was diagnosed with mesothelioma in December 2017, Morgan and his wife sued a number of defendants, including J-M Manufacturing for personal injuries and loss of consortium.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Study May Come Too Late for Construction Defect Bill
February 14, 2013 —
CDJ STAFFColorado State Senator Mark Scheffel removed his bill, Senate Bill 13-052, from the calendar of the Senate Judiciary Committee in anticipation of a study which he feels would be pertinent to the discussion. The bill would stop communities from suing developers over noise and vibration issues associated with transit facilities, and would also provide for developers fixing construction defects before being sued. Senator Scheffel said that the intent of his bill was to spur development near transit facilities.
The study, commissioned by the Denver Regional Council of Governments, would focus on the effects of the state’s construction defects law on housing. It might not come soon enough for the senator’s bill. The Denver Business Journal reports that the study, which will take four months to complete, doesn’t yet have a contract. The Legislature must adjourn by May 8, so it is not possible for the study to be concluded before the end of this legislative session.
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NEHRP Recommendations Likely To Improve Seismic Design
November 09, 2020 —
Nadine M. Post - Engineering News-RecordCode-based earthquake engineering is on the verge of getting simpler, thanks to the National Earthquake Hazards Reduction Program’s recommendation to replace the traditional seismic hazard maps with an improved seismic hazards database. The recommendation is one of the most significant changes put forth in the 2020 update of the NEHRP seismic design provisions, which are the foundation for the prescriptive seismic design code for buildings and other structures.
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Nadine M. Post, Engineering News-Record
Ms. Post may be contacted at postn@enr.com
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SDNY Vacates Arbitration Award for Party-Arbitrator’s Nondisclosures
April 13, 2017 —
Justin K. Fortescue & Ciaran B. Way - White and Williams LLPThe US District Court for the Southern District of New York recently vacated an arbitration award finding that a party-appointed arbitrator’s undisclosed relationship with the party appointing him was significant enough to demonstrate evident partiality. Certain Underwriting Members at Lloyd’s of London, et. al. v. Ins. Companies of America, Inc., Nos. 16-cv-232 and 16-cv-374 (S.D.N.Y. March 31, 2017).
In the arbitration, the panel was asked to determine whether the reinsurance contracts, covering workers’ compensation policies, only applied when multiple claimants were injured as the result of the same loss occurrence. After a three-day hearing, the arbitration panel issued an award in favor of the ceding company, Insurance Companies of America (ICA). After the award was issued, Lloyd’s discovered that ICA’s arbitrator had significant undisclosed relationships with principals at ICA and moved to vacate the award in federal court.
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Justin K. Fortescue, White and Williams LLP and
Ciaran B. Way, White and Williams LLP
Mr. Fortescue may be contacted at fortescuej@whiteandwilliams.com
Ms. Way may be contacted at wayc@whiteandwilliams.com
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Keeping Detailed Records: The Best Defense to Constructive Eviction
October 24, 2023 —
Ben T. Welch & Ken Brown - Snell & WilmerInevitably, commercial property owners and managers will be faced with a claim by a tenant of constructive eviction. This article is intended to describe what constructive eviction is and to suggest what owners and managers can do to prepare for, and ward off, such claims.
Constructive eviction occurs where a tenant’s “right of possession and enjoyment” of the leasehold is disrupted by the landlord in a manner that renders the premises “unsuitable for the purposes intended.”i Put another way, it is interference that is so “substantial nature and so injurious as to deprive the tenant of the beneficial enjoyment of a part or the whole of the demised premises.”ii Although easy to describe in theory, constructive eviction can be devilishly difficult to determine in the real world. In litigation, determining when interference crosses over the line to constructive eviction is intensely fact-sensitive and resists sweeping generalizations.iii
For instance, Utah courts have held that tenants have been constructively evicted when they have been subjected to continual harassment or insults by the landlord or the landlord’s agent,iv prevented or impaired in their access to the leased premises during operating hours,v or when a landlord fails to provide an operable elevator (or other essential commercial amenities) necessary for a tenant’s business operations.vi By contrast, claims of “discomfort” or “inconvenience” have been rejected as a basis for constructive eviction.vii The same goes for claims that a landlord wrongfully served a three-day notice to pay or quit.viii
Generally, constructive eviction is an affirmative defense made in response to a landlord’s lawsuit for nonpayment of rent.ix It is not, as is commonly supposed, a basis for a tenant’s premature abandonment of the premises. In other words, the defense is raised after the tenant has vacated as a result of being effectively “evicted.”x Further, the defense requires the tenant to actually abandon the premises and do so within a “reasonable time” after the alleged interference.xi A tenant cannot stay in possession and simply refuse to pay rent on the basis of constructive eviction.xii
The key consideration in preparing for, and responding to, a claim of constructive eviction is keeping good records. A tenant claiming constructive evicting likely must prove that the issue was raised in a timely manner and, despite multiple entreaties, was never resolved.xiii As such, it is critical that landlords acknowledge tenant complaints as well as document in writing their efforts to ameliorate those complaints. While a landlord does not carry the burden of proof for constructive eviction, detailed documentation can thwart a tenant’s claim that a landlord has been inattentive or unwilling to address the tenant’s concerns.
Detailed records are also useful in disputes where a tenant claims substantial interference. “The whole point of constructive eviction is that the landlord basically drove the tenant out through the landlord’s action or inaction.”xiv As such, a landlord that is unable to document the steps taken in response to complaints will be grossly disadvantaged whereas the tenant, which had control and knowledge of the premises, will have a much easier time describing how the alleged interference deprived them of enjoying the premises.
Even with meticulous records, however, owners and managers may still face claims of construction eviction. In such instances, counsel should be retained to properly advise on compiling, preserving, and employing the evidence necessary to refute the tenant’s claims.
i Gray v. Oxford Worldwide Grp., Inc., 139 P.3d 267, 269 (Utah Ct. App. 2006).
ii Gray, 139 P.3d at 270 (citing Neslen, 254 P.2d at 850) (internal formatting omitted).
iii See Gray, 139 P.3d at 269–70 (citing Thirteenth & Washington Sts. Corp. v. Neslen, 254 P.2d 847, 850 (Utah 1953)); Brugger v. Fonoti, 645 P.2d 647, 648 (Utah 1982).
iv See Gray, 139 P.3d at 270–71.
v Thirteenth & Washington Sts. Corp. v. Neslen, 254 P.2d 847 (Utah 1953).
vi See Richard Barton Enterprises, Inc. v. Tsern, 928 P.2d 368, 375, 378 (Utah 1996) (citing Union City Union Suit Co. v. Miller, 162 A.D.2d 101, 556 N.Y.S.2d 864 (1990)).
vii See Myrah v. Campbell, 163 P.3d 679, 682–84 (Utah Ct. App. 2007).
viii Barton v. MTB Enterprises, 889 P.2d 476, 477 (Utah Ct. App. 1995); see also Brugger, 645 P.2d at 648 (stating that the tenant’s complaints revolved around standard problems commonly associated with building maintenance and did not rise to the level of substantial interference); viv Reid v. Mutual of Omaha Ins. Co., 776 P.2d 896, 898–900 (Utah 1989) (upholding trial court’s findings of fact concerning insufficiency of disruption so as to justify claim for constructive eviction).
ix See Kenyon v. Regan, 826 P.2d 140, 142 (Utah Ct. App. 1992).
x See Kenyon, 826 P.2d at 142.
xi See Kenyon, 826 P.2d at 142; see also Barton v. MTB Enterprises, Inc., 889 P.2d 476, 477 (Utah Ct. App. 1995); Brugger, 645 P.2d at 648.
xii See Kenyon, 826 P.2d at 142 (citing Fernandez v. Purdue, 518 P.2d 684, 686 (Utah 1974)).
xiii See Brugger, 645 P.2d at 648 (noting that while the tenant had raised legitimate issues concerning state of the premises, the landorld had taken steps to remedy the problems within a reasonable time) (citing 49 Am.Jur.2d, Landlord and Tenant, § 617).
xiv Barton, 889 P.2d at 477.
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Ben T. Welch, Snell & Wilmer and
Ken Brown, Snell & Wilmer
Mr. Welch may be contacted at bwelch@swlaw.com
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