New Jersey Federal Court Examines And Applies The “j.(5)” Ongoing Operations Exclusion
October 07, 2019 —
Anthony L. Miscioscia and Timothy A. Carroll - White and Williams LLPIn PJR Construction of N.J. v. Valley Forge Insurance Company, 2019 U.S. Dist. LEXIS 127973 (D.N.J. July 31, 2019) (PJR Construction), a New Jersey federal court held that the “j.(5)” “Ongoing Operations Exclusion” applied to bar coverage for property damage to property on which a construction company allegedly performed faulty work. The court’s opinion follows prior New Jersey state court precedent, including Ohio Casualty Insurance Company v. Island Pool & Spa, Inc., 12 A.3d 719 (N.J. Super. Ct. App. Div. 2011) (Island Pool), but also provides additional guidance on the elements which can make the Ongoing Operations Exclusion applicable to exclude coverage.
In PJR Construction, a commercial property owner engaged a construction company to build a 26,000 square foot swim club and related 3,000 square foot pavilion building in New Jersey. After about 75% of the work was completed, the property owner fired the construction company and denied it access to the property. The owner later sued the construction company in New Jersey state court alleging “shoddy workmanship” in, among other things, sealants, flashing, water resistant barriers, masonry and the handicap ramps. The construction company sought coverage from its CGL insurer, which denied coverage based on, among other things, the j.(5) Ongoing Operations Exclusion. After the denial of coverage, the company sued the insurer in New Jersey federal court seeking a declaration of coverage.
Reprinted courtesy of
Anthony L. Miscioscia, White and Williams LLP and
Timothy A. Carroll, White and Williams LLP
Mr. Miscioscia may be contacted at misciosciaa@whiteandwilliams.com
Mr. Carroll may be contacted at carrollt@whiteandwilliams.com
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Three Reasons Lean Construction Principles Are Still Valid
February 27, 2019 —
Kevin Clary - Construction ExecutiveWhen lean principles were first introduced to the construction industry five years ago, project managers raced to implement the production method. The internet was rife with content about how to easily overhaul a jobsite and transform it into the picture of efficiency.
However, the number of lean construction critics have multiplied significantly in recent months. They claim concepts are near impossible to implement or, even worse, automation eliminates the need for deliberate human processes. These ideas are misleading. Lean principles are still valid for a few key reasons.
1. Lean involves seeing things from the customer’s point of view
One of the defining principles of lean construction is understanding value from the customer’s point of view. The concept encourages stakeholders, including the owner, contractor and supplier, to come together during the early planning stage of the project. The significant level of trust created from this exercise can’t be replicated by machinery. It involves compassion, collaboration and a sense of creativity that artificial intelligence is yet to possess. Moreover, the rapport gained through this service-oriented exercise is worth the time investment.
Reprinted courtesy of
Kevin Clary, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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The American Rescue Plan Act: What Restaurants Need to Act on NOW
March 22, 2021 —
Michael Krueger - Newmeyer DillionThe American Rescue Plan Act (“Act”) was passed by the Senate over the weekend and passed by the House today. President Biden is set to sign the Act into law on Friday, March 12th. The Act has $1.9 Trillion in relief funds with $28.6 Billion set aside for the restaurant industry in the Restaurant Revitalization Fund (“Fund”). The Fund has apportioned funds into two funding groups; $5 Billion for restaurants with annual gross revenue under $500,000 and $23.6 Billion for restaurants over $500,000 in annual gross revenue.
Differences from the Paycheck Protection Program (“PPP”)
This is a grant program with no loan documents or forgiveness applications. Instead, each restaurant entity can apply for and receive up to $10M in grant funds through the Act. The amount a restaurant receives is based on the sum of the restaurant’s gross revenue in 2019 minus the gross revenue in 2020 minus PPP and EIDL money received. For example, Restaurant A made $7M gross revenue in 2019, made $3M gross revenue in 2020 and received $1M in PPP and EIDL combined. ($7M - $3M -$1M =$3M) The restaurant will receive $3M in grant funds directly from the SBA (as long as funds are available).
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Michael Krueger, Newmeyer DillionMr. Krueger may be contacted at
michael.krueger@ndlf.com
Construction Defects Lead to Demolition
May 26, 2011 —
CDJ STAFFTen years after it was built, demolition of Seattle’s McGuire Building has begun, as Jeanne Lang Jones reports in the Puget Sound Business Journal. Construction defects had rendered the 25-story apartment building uninhabitable. The major problem was corroded steel cabling. According to the report, “the building’s owners reached an undisclosed settlement last year with St. Louis-based contractor McCarthy Building Companies.”
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Manhattan Home Sales Rise at Slower Pace as Prices Jump
July 02, 2014 —
Prashant Gopal – BloombergManhattan apartment sales rose at the slowest pace in more than a year, indicating a surge in demand is easing as prices jump and inventory climbs from record lows.
Purchases of co-ops and condominiums increased 6.3 percent in the second quarter from a year earlier, the smallest gain since the start of 2013, according to a report today from appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The median price rose 5.2 percent to $910,000, and the average price per square foot surged 10 percent to $1,268.
Higher prices are encouraging more sellers to list properties and softening competition among buyers. The market is taking a “breather” after sales rose by an average of 28 percent in each of the previous four quarters, said Jonathan Miller, president of New York-based Miller Samuel.
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Prashant Gopal, BloombergMr. Gopal may be contacted at
pgopal2@bloomberg.net
Insurer Need Not Pay for Rejected Defense When No Reservation of Rights Issued
November 08, 2017 —
Tred R. Eyerly - Insurance Law HawaiiThe Massachusetts Appeals Court reversed the trial court's order that defense costs be paid for a period during which the insured rejected the defense even though no reservation of rights was issued. OneBeacon Am. Ins. Co. v. Celanese Corp., 2017 Mass. App. LEXIS 140 (Mass. App. Ct. Oct. 16, 2017).
Celanese was sued over many years for claims of bodily injury due to asbestos and chemicals allegedly contained in its products and facilities. For many years, Celanese had an agreement with its insurer, OneBeacon, for defense cost-sharing. In April 2009, Celanese terminated this agreement and demanded that OneBeacon defend the cases under the policies previously issued. OneBeacon agreed to defend without a reservation of rights. OneBeacon also agreed to waive any issues of coverage and to indemnify Celanese from any settlements of judgments up to ts full liability limits. However, OneBeacon also sought to assume full control of the defense of claims against Celanese.
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Tred R. Eyerly - Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Eleventh Circuit Rules That Insurer Must Defend Contractor Despite “Your Work” Exclusion, Where Damage Timing Unclear
May 13, 2019 —
Michael S. Levine & David M. Costello - Hunton Andrews KurthThe Eleventh Circuit has reversed an insurer’s award of summary judgment after finding that uncertainty about when the alleged property damage occurred raised questions about whether the damage came within the scope of the “Your Work” exclusion. More specifically, the court found unclear whether the damage occurred before or after the contractor abandoned the job, thereby triggering an exception to the “Your Work” exclusion for damage to work that had “not yet been completed or abandoned.” The decision illustrates how timing can be a critical factor when it comes to triggering coverage for work and completed operations.
In Southern-Owners Insurance Company v. MAC Contractors of Florida, LLC, a pair of trustees hired MAC Contractors (doing business as KJIMS Construction) to serve as the general contractor for a custom residence. After construction began, disputes between the trustees and KJIMS caused the contractor to abandon the job before completing the project. The trustees followed with a lawsuit alleging, among other things, that KJIMS had damaged wood floors and a metal roof, which KJIMS had promised to remediate but never did.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth and
David Costello, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Costello may be contacted at dcostello@HuntonAK.com
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Gillotti v. Stewart (2017) 2017 WL 1488711 Rejects Liberty Mutual, Holding Once Again that the Right to Repair Act is the Exclusive Remedy for Construction Defect Claims
June 05, 2017 —
Richard H. Glucksman, Esq. & Chelsea L. Zwart, Esq. - Chapman Glucksman Dean Roeb & Barger BulletinBackground
In Gillotti v. Stewart (April 26, 2017) 2017 WL 1488711, which was ordered to be published on May 18, 2017, the defendant grading subcontractor added soil over tree roots to level the driveway on the plaintiff homeowner’s sloped lot. The homeowner sued the grading subcontractor under the California Right to Repair Act (Civil Code §§ 895, et seq.) claiming that the subcontractor’s work damaged the trees.
After the jury found the subcontractor was not negligent, the trial court entered judgment in favor of the subcontractor. The homeowner appealed, arguing that the trial court improperly construed the Right to Repair Act as barring a common law negligence theory against the subcontractor and erred in failing to follow Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98. The Third District Court of Appeal disagreed and affirmed the trial court’s judgment in favor of the subcontractor.
Impact
This is the second time the Third District Court of Appeal has held that Liberty Mutual (discussed below) was wrongly decided and held that the Right to Repair Act is the exclusive remedy for construction defect claims. The decision follows its holding in Elliott Homes, Inc. v. Superior Court (Hicks) (2016) 6 Cal.App.5th 333, in which the Court of Appeal held that the Right to Repair Act’s pre-litigation procedures apply when homeowners plead construction defect claims based on common law causes of action, as opposed to violations of the building standards set forth in the Right to Repair Act. Elliott is currently on hold at the California Supreme Court, pending the decision in McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132, wherein Liberty Mutual was rejected for the first time by the Fifth District. CGDRB continues to follow developments regarding the much anticipated McMillin decision closely, as well as all related matters.
Discussion
The Right to Repair Act makes contractors and subcontractors not involved in home sales liable for construction defects only if the homeowner proves they negligently cause the violation in whole or part (Civil Code §§ 911(b), 936). As such, the trial court in Gillotti instructed the jury on negligence with respect to the grading subcontractor. The jury found that while the construction did violate some of the Right to Repair’s building standards alleged by the homeowner, the subcontractor was not negligent in anyway. After the jury verdict, the trial court found in favor of the grading subcontractor.
The homeowner moved for a judgment notwithstanding the verdict or a new trial on the grounds that the trial court improperly barred a common law negligence theory against the grading subcontractor. The trial court denied the motions on the grounds that “[t]he Right to Repair Act specifically provides that no other causes of action are allowed. See Civil Code § 943.” The trial court specifically noted that its decision conflicted with Liberty Mutual, in which the Fourth District Court of Appeal held that the Right to Repair Act does not eliminate common law rights and remedies where actual damage has occurred, stating that Liberty Mutual was wrongly decided and that the Liberty Mutual court was naïve in its assumptions regarding the legislative history of the Right to Repair Act.
In Gillotti, the Third District Court of Appeal stated that the Liberty Mutual court failed to analyze the language of Civil Code § 896, which “clearly and unequivocally expresses the legislative intent that the Act apply to all action seeking recovery of damages arising out of, or related to deficiencies in, residential construction, except as specifically set forth in the Act. The Act does not specifically except actions arising from actual damages. To the contrary, it authorizes recovery of damages, e.g., for ‘the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards....’ ([Civil Code] § 944).”
The Court also disagreed with Liberty Mutual’s view that because Civil Code §§ 931 and 943 acknowledge exceptions to the Right to Repair Act’s statutory remedies, the Act does not preclude common law claims for damages due to defects identified in the Act. The Court stated: “Neither list of exceptions, in section 943 or in section 931, includes common law causes of action such as negligence. If the Legislature had intended to make such a wide-ranging exception to the restrictive language of the first sentence of section 943, we would have expected it to do so expressly.”
Additionally, the Court of Appeal rejected the argument that Civil Code § 897 preserves a common law negligence claims for violation of standards not listed in Civil Code § 986. It explained that the section of Civil Code § 897, which provides, “The standards set forth in this chapter are intended to address every function or component of a structure,” expresses the legislative intent that the Right to Repair Act be all-encompassing. Anything inadvertently omitted is actionable under the Act if it causes damage. Any exceptions to the Act are made expressly through Civil Code §§ 931 and 934. The Court concluded in no uncertain terms that the Right to Repair Act precludes common law claims in cases for damages covered by the Act.
The homeowner further argued that she was not precluded from bringing a common law claim because a tree is not a “structure,” and therefore the alleged tree damage did not fall within the realm of the Right to Repair. The Court of Appeal also rejected this argument, holding that while the tree damage itself was not expressly covered, the act of adding soil to make the driveway level (which caused the damage) implicated the standards covered by the Right to Repair Act. The Court explained that since under the Act a “structure” includes “improvement located upon a lot or within a common area” (Civil Code § 895(a)), as the driveway was an improvement upon the lot, the claim was within the purview of the Right to Repair Act. As the soil, a component of the driveway, caused damage (to the trees), it was actionable under the Act.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and
Chelsea L. Zwart, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com
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