"My Bad, I Thought It Was in Good Faith" is Not Good Enough - Contractor Ordered to Pay Prompt Payment Penalties
February 23, 2016 —
David A. Harris & Jesse M. Sullivan – Haight Brown & Bonesteel LLPRetention clauses are almost always included in California construction contracts and permit an Owner to withhold a portion of what is owed to the General Contractor as security to ensure the proper completion of the work. General Contractors pass the withholding of retention down to the subcontractors. Thus, if the subcontractor fails to complete its work, or fails to correct deficiencies, the Owner/General Contractor can use the retention to pay the costs of completing or correcting the subcontractor’s work.
The contractor must release any retention it receives from the owner within ten days unless a “good faith dispute exists between the direct contractor and the subcontractor.” (Civil Code section 8814.) Where there is a good faith dispute, the contractor “may withhold from the retention to the subcontractor an amount not in excess of 150 percent of the estimated value of the disputed amount.” (Civil Code section 8814(c).) If the contractor wrongfully withholds retention, it must not only pay the retention but must also pay the subcontractor “a penalty of 2 percent per month on the amount wrongfully withheld.” The contractor must also pay the subcontractor’s costs and reasonable attorney’s fees incurred in collecting the retention. (Civil Code section 8818.)
Reprinted courtesy of
David A. Harris, Haight Brown & Bonesteel LLP and
Jesse M. Sullivan, Haight Brown & Bonesteel LLP
Mr. Harris may be contacted at dharris@hbblaw.com
Mr. Sullivan may be contacted at jsullivan@hbblaw.com
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HB24-1014: A Warning Bell for Colorado Businesses Amid Potential Consumer Protection Changes
February 26, 2024 —
Jennifer Brockel - Colorado Construction Litigation BlogHB24-1014 stands to eliminate the longstanding public impact requirement found within C.R.S. § 6-1-105(2) of the Colorado Consumer Protection Act (“CCPA”). While this proposed change professes the noblest intentions of “public peace, health or safety,” its effect portends a large detriment to Colorado business and an astronomical payday for Colorado plaintiffs’ attorneys.
Brief History
For over 100 years, Colorado recognized the need to protect its citizens from deceptive trade practices through a mechanism akin to the Federal Trade Commission Act that preceded it. In 1915, Colorado passed legislation prohibiting “untrue, deceptive, or misleading” advertising. C.L. 1921 § 6942 evolved into the broader protections afforded in the more recent consumer protection law from 1969 that prohibited “deceptive trade practices, and included protections from unfair, unconscionable, and deceptive acts or practices.”
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Jennifer Brockel, Higgins, Hopkins, McLain & Roswell, LLCMs. Brockel may be contacted at
brockel@hhmrlaw.com
Contractors Liable For Their Subcontractor’s Failure To Pay Its Employees’ Wages And Benefits
November 01, 2022 —
Edward O. Pacer & David J. Scriven-Young - ConsensusDocsRecently, Illinois Governor J.B. Pritzker signed two House Bills that amend the Illinois Wage Payment & Collections Act, 820 ILCS 115 et. seq. (“Wage Act”), to provide greater protection for individuals working in the construction trades against wage theft in a defined class of projects. Pursuant to this new law, every general contractor, construction manager, or “primary contractor,” working on the projects included in the Bill’s purview will be liable for wages that have not been paid by a subcontractor or lower-tier subcontractor on any contract entered into after July 1, 2022, together with unpaid fringe benefits plus attorneys’ fees and costs that are incurred by the employee in bringing an action under the Wage Act. This new wage theft law follows several other states that have considered and passed similar legislation.
These amendments to the Wage Act apply to a primary contractor engaged in “erection, construction, alteration, or repair of a building structure, or other private work.” However, there are important limitations to the amendment’s applicability. The amendment does not apply to projects under contract with state or local government, or to general contractors that are parties to a collective bargaining agreement on a project where the work is being performed. Additionally, the amendment does not apply to primary contractors who are doing work with a value of less than $20,000, or work that involves only the altering or repairing of an existing single-family dwelling or single residential unit in a multi-unit building.
Reprinted courtesy of
Edward O. Pacer, Peckar & Abramson, P.C. (ConsensusDocs) and
David J. Scriven-Young, Peckar & Abramson, P.C. (ConsensusDocs)
Mr. Pacer may be contacted at epacer@pecklaw.com
Mr. Scriven-Young may be contacted at dscriven-young@pecklaw.com
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Illinois Law Bars Coverage for Construction Defects in Insured's Work
September 24, 2014 —
Tred R. Eyerly – Insurance Law HawaiiApplying Illinois law, the Seventh Circuit determined there was no coverage for faulty workmanship causing property damage to the insured's project. Nautilus Ins. Co. v. Board of Directors of Regal Lofts Condominium Ass'n, 2014 U.S. App. LEXIS 16250 (7th Cir. Aug. 21, 2014).
The developer converted a vacant building into a condominium. The construction was completed in 2000. The Condominium Board took control of the condo association on July 27, 2000. As early as May 2000, one homeowner was aware of water damage problems in the building. Other complaints surfaced. An investigation found that the exterior brick masonry walls were not fully waterproofed, which caused leaks. The investigation further showed that deteriorated conditions had likely developed over many years, even prior to the condominium conversion, but the present water penetration was caused by the inadequate restoration of the walls to a water-tight condition.
The underlying action was filed against the developer for failure to properly construct the exterior walls. The developer's carrier, Nautilus, denied coverage. In an amended complaint, the Board added a count of negligence. Again, Nautilus denied coverage. The Board's second amended complaint alleged that the developer's negligence had caused damage to personal property within the building, in addition to the interior of the building and the building itself. For the third time, Nautilus denied coverage and filed for declaratory relief.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Negligence Claim Not Barred by Gist of the Action Doctrine
February 18, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe Pennsylvania Supreme Court held that the insureds' negligence claim survived because it was not based upon breach of a duty created by the policy, but upon the alleged breach of a duty imposed by tort law. Bruno v. Erie Ins. Co,, 2014 Pa. LEXIS 3319 (Dec. 15, 2014).
After purchasing their home, the insureds obtained a homeowner's policy from Erie. A separate endorsement covered loss to the property caused by "fungi," which was included as any form of mold. The endorsement obligated Erie to pay up to $5,000 for loss caused by mold. The policy required Erie to pay the cost of testing the air to confirm the absence or presence of mold. If mold was present, Erie was to pay for the cost of removal, including the cost of tearing out any part of the property needed to gain access to the mold.
While renovating the basement, the insureds discovered two areas of black mold in close proximity to leaking water pipes. Erie was notified and sent an adjuster to view the mold. The adjuster took no action, but returned a couple of days later with an engineer. The adjuster and engineer informed the insureds that the mold was harmless and that health problems associated with mold were a media frenzy and overblown.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Not to Miss at This Year’s Archtober Festival
October 15, 2014 —
Carrie Hojnicki – BloombergNew York architecture fanatics everywhere can rejoice: Archtober has arrived. In its fourth annual iteration, the monthlong festival throws a spotlight on the importance of architecture and design in the five boroughs, calling special attention to the city’s rich built history and exciting future. In addition to a lineup of lectures, openings, and workshops, the American Institute of Architects (AIA) New York Chapter–sponsored initiative highlights a “Building of the Day,” with on-site tours led by the architects themselves.
Here are five events not to miss this Archtober.
1. AIA’s New York chapter puts its own spin on the architecture tour: a boat ride. Guides from the AIA will share their wisdom as the cruise circles the tip of Manhattan, passing architectural marvels aplenty. October 3, 10 am and 1:30 pm, Classic Harbor Line
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Carrie Hojnicki, Bloomberg
Why You Make A Better Wall Than A Window: Why Policyholders Can Rest Assured That Insurers Should Pay Legal Bills for Claims with Potential Coverage
March 14, 2018 —
Alan Packer and Graham Mills - Newmeyer & Dillion, LLPUnfortunately, policyholders, such as manufacturers and contractors, routinely face the unnecessary challenge of how to access all of the insurance coverage which they have purchased. Frequently, the most pressing need is to get the insurance company to pay the legal bills when the policyholders have been sued. The recent Iowa federal district court opinion in
Pella Corporation v. Liberty Mutual Insurance Company should help a policyholder in a dispute to require its insurance company to pay those legal bills sooner rather than later by highlighting that the duty to defend arises from the potential for coverage, and the insurer may not force the policyholder to prove the damage to obtain a defense.
In
Pella, a window manufacturer purchased several years of insurance coverage from Liberty Mutual. Similar to many companies, Pella had many “layers” of insurance coverage in any given year. These layers collectively function like a tower. The general idea is that each layer provides a certain amount of coverage after the insurance policy below it had paid its money. The Liberty Mutual insurance policies provided excess coverage.
After the
Pella window manufacturer made and sold its windows, it was sued in numerous lawsuits alleging that its windows were defective and that those defective windows caused a wide variety of damage to the structures in which they were installed. The window manufacturer tendered those lawsuits to its insurance companies in its tower of coverage, asking that the insurance companies pay its legal bills incurred in its defense. As to Liberty Mutual, the window manufacturer argued that the Liberty Mutual insurance policies were triggered, and so obligated to reimburse it, if a window was installed during the years that those policies provided coverage or if there was a mere allegation that a window was installed during the years that those policies provided coverage. Liberty Mutual opposed, arguing that the date of installation of the windows was insufficient to trigger the policies, and that the manufacturer was required to demonstrate the date that damage actually occurred to trigger a defense.
The key issue before the
Pella Court in this decision was a simple one: which insurance policies, if any, issued by Liberty Mutual had an obligation to pay the window manufacturer’s legal bills? The answer to that question is critical and financially significant. Getting an insurance company to honor its obligations and start paying the legal bills as soon as possible is very important for a policyholder because of the cost of defending oneself in a lawsuit; often the key reason why an insurance policy is even purchased is to provide the policyholder with the right to call upon the insurance company’s financial resources to defend it should it be sued.
In a ruling that will be welcomed by policyholders, the
Pella Court held that Liberty Mutual’s multiple insurance policies were triggered, and so obligated to pay for the window manufacturer’s defense, if one of two events occurred during the years in which those insurance policies provided coverage: (1) a window was actually installed during a year when the insurance policy provided coverage or (2) the window was alleged to be installed in the year that the insurance policy provided coverage. The Court agreed with the policyholder that once the windows were installed, property damage was alleged and “may
potentially have occurred” from that point on, thus the policies on the risk from that point forward. The practical effect of this ruling meant that Liberty Mutual had to reimburse the window manufacturer for the defense fees and costs that it had paid.
While
Pella was decided under Iowa law, the principles upon which it relied are similar to those applied under California law. Importantly, both California and Iowa law hold that an insurance company must provide a defense in response to a claim that is, or could be, covered by the insurance policy. The mere potential that the claim might be covered is enough for the insurance company to be obligated to pay for policyholder’s legal fees and costs.
Establishing that an insurance company must pay legal fees and costs as soon as possible allows a policyholder to save its own money. Why should a policyholder pay legal bills when it purchased an insurance policy as protection to ensure that it did not have to pay those bills? The answer is that a policyholder should not and, under
Pella, the policyholder does not have to. Rather, the insurance company must start paying for that defense from a very early date. Pella confirms for policyholders the position that their insurance companies should pay legal bills earlier rather than later.
Alan Packer is a partner in the Walnut Creek office for Newmeyer & Dillion, LLP, representing homebuilders, property owners, and business clients on a broad range of legal matters, including risk management, insurance matters, wrap consultation and documentation, efforts to counter solicitation of homeowners, subcontract documentation, as well as complex litigation matters. Alan can be reached at alan.packer@ndlf.com.
Graham Mills is a partner in the Walnut Creek offce of Newmeyer & Dillion, LLP, representing clients in the area of complex insurance law with an emphasis on insurance recovery, construction litigation, real estate litigation, and business litigation. He regularly examines and analyzes a wide variety of insurance policies. Graham can be reached at graham.mills@ndlf.com.
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The “Up” House is “Up” for Sale
May 07, 2015 —
Garret Murai – California Construction Law BlogYou might remember the 2009 Pixar/Disney 3-D animated movie “Up,” about an aging widower, Carl Frederickson, who learns to let go of his past and live his dream of moving he and his beloved late wife’s “clubhouse” to a cliff overlooking Paradise Falls in Venezuela where the once young couple’s hero, Charles Muntz, a famous but now disgraced explorer, was said to have discovered the skeleton of a rare bird which skeptics alleged was fabricated.
In the movie, the “clubhouse” is integral to the plot. In the opening scenes of the movie the audience learns that the clubhouse, which had been Mr. Frederickson’s deceased wife’s clubhouse that the couple later turned into their home, is sitting in the middle of a construction zone because old Mr. Frederickson has refused to sell his house to a developer who has proceeded to build around his house anyway. When a large loader knocks over his mailbox and a construction worker tries to fix it, Mr. Frederickson struggles with the worker not wanting him to touch any of his memories, and in the process inadvertently strikes the man with his cane. Later, in court, Mr. Frederickson learns that he has to leave the house and go to a retirement home. Apparently, justice is quick and decisive in their town. However, instead of going to a retirement home peaceably, codgy Mr. Frederickson rigs the clubhouse with thousands of balloons and proceeds to fly away, home and all. And, so the movie begins.
Soon, however, what some have called the real life “Up house” will be sold. And the story behind the house is about as a interesting as its movie counterpart. And, because we lawyers are into disclosures, I will disclose that “counterpart” is more accurate than “adaption,” since the movie Up was in production before the events giving rise to the real life Up house took place.
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Garret Murai, Wendel Rosen Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
