Ready, Fire, Aim: The Importance of Targeting Your Delay Notices
November 08, 2021 —
Bradley Sands, Jones Walker LLP - ConsensusDocsProviding written notice of delay to subcontractors when a project is behind schedule is a regular part of good project documentation practices. A properly targeted delay notice is an important, project correspondence that is an appropriate response to a subcontractor’s specific delay or ongoing delays. However, when a project falls behind schedule and the project management team is in the fog of war, it could seem like a good idea to start firing off project delay notices to any and every subcontractor. While these delay notices may provide a short term burst of productivity, you could find that those same notices are aimed back at you in a future litigation.
This article identifies two potential unintended consequences of sending delay notices that a contractor should keep in its sights and then provides recommendations for properly calibrating future delay notices in light of these potential consequences.
Acceleration: You Might Get What You Ask For
A delay notice to a subcontractor could be interpreted as—or expressly state—direction to the subcontractor to accelerate its work. When a subcontractor is directed to accelerate its work, it may incur additional costs for premium, extended, or overtime labor, additional crews, increased supervision costs, increased overhead costs, and losses due to productivity impacts from the acceleration (e.g., stacking of trades and fatigue). A subcontractor may be entitled to recover these increased costs that are caused by a direction to accelerate.
Read the court decisionRead the full story...Reprinted courtesy of
Bradley Sands, Jones Walker LLPMr. Sands may be contacted at
bsands@joneswalker.com
English v. RKK. . . The Rest of the Story
December 04, 2018 —
Christopher G. Hill - Construction Law MusingsBack in February, I discussed a case relating to indemnity and ambiguity. The opinion in that case, W.C. English, Inc. v. Rummel, Klepper & Kahl, LLP et al., allowed a breach of contract and indemnity claim to move forward despite the fact that conflicting term sheets between the plaintiff and defendant could have been read to violate Virginia law by requiring indemnity for English’s own negligence. In other words, the ambiguity worked in English’s favor (though that is not something to count on). The Court did not however address whether there was any negligence on English’s part and if there was, what was the contractual effect.
I’ll bet you were wondering what happened later in that case. Well, here’s the answer. In a subsequent opinion, the Court looked at the same ambiguous and conflicting term sheets between and among those defendants that were required to provide quality assurance services for the construction of a bridge in western Virginia. For the full procedural and factual analysis, be sure to read the full memorandum opinion linked above.
Read the court decisionRead the full story...Reprinted courtesy of
Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Background Owner of Property Cannot Be Compelled to Arbitrate Construction Defects
November 07, 2012 —
CDJ STAFFIn Truppi v. Pasco Engineering, John Quattro sued Property Management Contractors, Inc. over construction defects in William Truppi’s home. All parties are named in the suit. The California Court of Appeals ruled that Property Management Contractors, Inc. (PMCI) could not compel Mr. Quattro to arbitration.
The background of the case involves two houses built in Encinitas, California by PCMI: one for Mr. Truppi at 560 Neptune, and one for Mr. Quattro at 566 Neptune. Both contracts contained an arbitration provision. Mr. Quattro signed the contract for his residence and Mr. Truppi signed the other. Mr. Quattro then sued PCMI and its principal, William Gregory. Mr. Quattro claimed to be the true contracting party for the 560 Neptune residence and a third party beneficiary of the contract Mr. Truppi signed, and stated that PCMI was aware of this.
PCMI in a demurrer stated that Quattro “had only a ‘prospective beneficial interest in the property upon its eventual sale or lease.’” Mr. Quattro amended his complaint to account for the issues raised by PCMI. The court rejected PCMI’s demurrer to the amended complaint.
Finally, PCMI and Gregory asserted that Quattro was “not the real party in interest” and could not sue. PCMI continues to assert that Quattro lacks standing, but their attorney sent Quattro an e-mail stating, “While my client disputes that you are a party, and that you lack standing to assert the claim, to the extent you do so I believe you are obligated to proceed by way of arbitration.”
The court did not cover the issue of Quattro’s standing in the case, only if he could be compelled to arbitration. The court affirmed the lower court’s finding that Quattro could not be compelled to arbitrate the construction defect claim as neither he nor Gregory signed the contract in an individual capacity. Further, the court noted that PCMI and Gregory “denied the existence of an agreement between themselves and Quattro on the 560 contract,” and cannot compel arbitration on a non-existent agreement. And while non-signatories can, in some situations be compelled to arbitrate, the court found that “these cases are inapplicable because here they seek to have the alleged third party beneficiary (Quattro) compelled by a nonsignatory (Gregory).” The arbitration clause in question “expressly limited its application to persons or entities that signed the 560 contract.”
As Mr. Quattro was not a signatory to that agreement, the court found that he could not be held to its arbitration provision.
Read the court decisionRead the full story...Reprinted courtesy of
Carwash Prosecutors Seek $1.6 Billion From Brazil Builders
February 26, 2015 —
Sabrina Valle – Bloomberg(Bloomberg) -- Some of Brazil’s biggest building companies were targeted for the first time in an investigation into alleged kickbacks at Petroleo Brasileiro SA, with prosecutors seeking 4.47 billion reais ($1.6 billion) in compensation.
Federal prosecutors in Parana state accused Camargo Correa, Mendes Junior, OAS, Galvao Engenharia, Grupo Engevix and Sanko of diverting public funds and called for them to be banned from new state contracts, the prosecutors said in an e-mailed statement Friday.
The allegations -- called acao de improbidade in Portuguese, or misconduct action -- mark the first time companies have been singled out in connection with Brazil’s biggest-ever corruption scandal, in which Petrobras executives are accused of accepting bribes from a cartel of builders. Until now, only individuals have been accused of wrongdoing. Executives from companies including OAS and Camargo Correa have been jailed since November as part of the first sweep against contractors in the case known as Carwash.
Read the court decisionRead the full story...Reprinted courtesy of
Sabrina Valle, BloombergMs. Valle may be contacted at
svalle@bloomberg.net
Umbrella Policy Must Drop Down to Assist with Defense
May 12, 2016 —
Tred R. Eyerly – Insurance Law HawaiiThe court determined that an umbrella carrier was obligated to assist the general liability insurer in defending the insured. Am. States Ins. Co. v. Insurance Company of the State of Pennsylvania, 2016 U.S. Dist LEXIS 38128 (E.D. Cal. March 23, 2016).
Sierra Pacific Industries obtained rights to timber harvesting operation on a parcel of land in northern California. Sierra hired Howell's Forest Harvesting to perform certain timber harvest operations under the terms of a logging agreement. The logging agreement required Howell to obtain a CGL policy and to name Sierra as an additional insured.
Read the court decisionRead the full story...Reprinted courtesy of
Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Gaps in Insurance Created by Complex Risks
January 22, 2024 —
The Hartford Staff - The Hartford InsightsFrom slips, trips and falls to extreme weather and cyberattacks, businesses are regularly confronted with risks to operations and profitability. In 2023, elevated building costs, increased flooding, and growing ransomware attacks made it compelling for business owners to make sure they had adequate insurance to stay ahead of property and liability exposures. However, if left unchecked, these trends can lead to gaps in coverage. As 2024 approaches, now is the time to assess your risk and collaborate with the right resources to fill any potential voids in insurance.
Economic inflation for example has changed property valuations, which can result in coverage gaps if policyholders have not examined their replacement costs recently.
Read the court decisionRead the full story...Reprinted courtesy of
The Hartford Staff, The Hartford Insights
Court Affirms Summary Adjudication of Bad Faith Claim Where Expert Opinions Raised a Genuine Dispute
July 06, 2020 —
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLPIn 501 East 51st Street etc. v. Kookmin Best Ins. Co., Ltd. (No. B293605, filed 4/2/20, ordered pub. 4/16/20), a California appeals court affirmed summary adjudication and dismissal of a bad faith claim based on the genuine dispute doctrine.
501 East 51st Street Long-Beach-10, LLC (501) was the owner of a 10-unit apartment complex, insured by Kookmin Best. In 2017, an underground water main alongside the building burst which, according to 501, caused the building to move and crack. 501 made a claim and supplied a geotechnical report finding cracks in the foundation walls, cracks in the stucco and significant floor deformation and tilting near the water leak. The engineer’s opinion concluded that that “existing building distress was substantially contributed to by the water main break. The water introduced to the soil medium appears to have triggered differential foundation movement causing the stress features to develop.”
Kookmin retained its own engineers to investigate, who returned an opinion that the leak had exacerbated long-term pre-existing settlement which would continue. Under the policy, damage to the building caused by earth movement and settlement were excluded, but water damage resulting from an “accidental discharge” of water was covered. Kookmin then obtained an opinion from coverage counsel, who opined that only damage allocable to the water leak would be covered.
Reprinted courtesy of
Christopher Kendrick, Haight Brown & Bonesteel LLP and
Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com
Read the court decisionRead the full story...Reprinted courtesy of
The Murky Waters Between "Good Faith" and "Bad Faith"
September 30, 2019 —
Theresa A. Guertin - Saxe Doernberger & VitaIn honor of Shark Week, that annual television-event where we eagerly flip on the Discovery Channel to get our fix of these magnificent (and terrifying!) creatures, I was inspired to write about the “predatory” practices we’ve encountered recently in our construction insurance practice. The more sophisticated the business and risk management department is, the more likely they have a sophisticated insurer writing their coverage. Although peaceful coexistence is possible, that doesn’t mean that insurers won’t use every advantage available to them – compared to even large corporate insureds, insurance companies are the apex predators of the insurance industry.
In order to safeguard policyholders’ interests, most states have developed a body of law (some statutory, some based on judicial decisions) requiring insurers to act in good faith when dealing with their insureds. This is typically embodied as a requirement that the insurer act “fairly and reasonably” in processing, investigating, and handling claims. If the insurer does not meet this standard, insureds may be entitled to damages above and beyond that which they could otherwise recover for breach of contract.
Proving that an insurer acted in “bad faith,” however, can be like swimming against the riptide. Most states hold that bad faith requires more than just a difference of opinion between insured and insurer over the available coverage – the policyholder must show that the insurer acted “wantonly” or “maliciously,” or, in less stringent jurisdictions, that the insurer was “unreasonable.”
Read the court decisionRead the full story...Reprinted courtesy of
Theresa A. Guertin, Saxe Doernberger & VitaMs. Guertin may be contacted at
tag@sdvlaw.com
