Construction Costs Must Be Reasonable
May 17, 2021 —
David Adelstein - Florida Construction Legal UpdatesWhen it comes to proving a construction cost, particularly a cost in dispute, the cost must be REASONABLE. Costs subject to claims must be reasonably incurred and the party incurring the costs must show the costs are reasonable.
An example of the burden falling on the contractor to prove the reasonableness of costs is found in government contracting.
“[T]here is no presumption that a [government] contractor is entitled to reimbursement ‘simply because it incurred…costs.’” Kellogg Brown & Root Services, Inc. v. Secretary of Army, 973 F.3d 1366, 1371 (Fed. Cir. 2020) (citation omitted). Stated differently, a federal contractor is not entitled to a presumption of reasonableness just because it incurs costs. Id.
In government contracting, the Federal Acquisition Regulations (known as “FAR”) puts the burden of reasonableness on the contractor that incurred the costs. Id.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Construction Activity on the Upswing
October 25, 2013 —
CDJ STAFFConstruction industry experts are now predicting that not only will 2013 be a growth year for construction, but that the industry will continue to grow through 2015. Predictions at the recent webinar, “The 2014 Outlook: Emerging Opportunities for Construction,” included that growth in the housing market will endure, commercial construction will improve, and that overall construction spending will increase.
This is in the face of what Bernard Markstein, the chief economist at Reed Construction Data, calls “barely acceptable” economic growth. Mr. Markstein also feels that the government shutdown will have an effect on growth of the gross domestic product.
One area of construction that is not expected to do well in the short term is retail. The economists noted that more shoppers are turning to online buying. Need for office space is also shrinking. Despite this, the group projected “high-single-digit growth” through 2014.
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Allegations that Carrier Failed to Adequately Investigate Survive Demurrer
July 30, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe California Court of Appeal reversed the trial court's dismissal of a complaint alleging bad faith for the insurer's failure to adequately investigate the claim. Maslo v. Ameriprise Auto & Home Ins., 2014 Cal. App. LEXIS 564 (Cal. Ct. App. June 27, 2014).
The insured was injured in an auto accident caused by an uninsured motorist. The insured sought policy limits of $250,000 from the insurer. In response, the insurer demanded arbitration. The arbitrator awarded $164,120.91.
The insured sued, alleging the breach of the covenant of good faith and fair dealing. The First Amended Complaint (FAC) alleged the insured was not at fault. The police report found that the uninsured motorist was the sole cause of the accident. The insured provided the police report and medical records to the insurer. When the insured demanded the $250,000 policy limits, the insurer did not respond.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Contractor Beware: Design-Build Firms Must Review Washington’s Licensing Requirements
October 16, 2018 —
John Krawczyk - Ahlers Cressman & Sleight PLLCDesign-build contracting is a method of project delivery where the contractor provides both architectural/design and building services to the owner. Yet rarely do firms perform both design and building work in equal measure. Rather, in many instances, firms perform the vast majority of their work on the building side while advertising and providing design services for smaller projects using in-house architects.
Regardless of the volume of design-build contracting a firm performs, any firms practicing this method of project delivery must be aware of Washington State’s registration requirement under RCW 18.08.420(1), and specifically the condition that a “designated architect” must serve as a partner, manager or director of the firm’s governing structure.
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John Krawczyk, Ahlers Cressman & Sleight PLLCMr. Krawczyk may be contacted at
john.krawczyk@acslawyers.com
Hunton Insurance Partner, Larry Bracken, Elected to the American College of Coverage Counsel
March 04, 2019 —
Michael S. Levine - Hunton Andrews KurthLawrence J. Bracken II, a partner in Hunton Andrews Kurth’s Insurance Coverage practice group, has been elected to the American College of Coverage Counsel (ACCC), which is the preeminent association of U.S. and Canadian lawyers who represent the interests of insurers and policyholders. The ACCC’s mission is to advance the creative, ethical and efficient resolution of insurance coverage and extracontractual disputes; to enhance the civility and quality of the practice of insurance law; to provide peer-reviewed scholarship; and to improve the relationships among the members of our profession. The ACCC engages in a rigorous vetting process prior to inviting a lawyer to become a fellow. ACCC fellows include many of the most prominent members of the insurance law bar.
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Michael S. Levine, Hunton Andrews KurthMr. Levine may be contacted at
mlevine@HuntonAK.com
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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California Makes Big Changes to the Discovery Act
March 04, 2024 —
Dolores Montoya - Bremer Whyte Brown & O'Meara LLPBeginning January of 2024, California amended the Civil Discovery Act to mirror the Federal Rules and require that any party appearing in a civil action to provide initial disclosures to any other party demanding the same.
In January of 2024, California amended the Civil Discovery Act, specifically C.C.P. section 2016.090, to affirmatively require that any party appearing in a civil action to provide initial disclosures to any other party demanding the same. In an effort to reflect the Federal Rule 26 disclosure requirements, as many other States have adopted, California will now also mandate (upon demand) that a party produce evidence without an arduous and possibly duplicative effort. In other words, this initial disclosure will require a party making initial disclosures of persons or records to additionally disclose persons or records that are relevant to the subject matter of the action and to disclose information and records regarding insurance policies or contracts that would make a person or insurance company liable to satisfy a judgment.
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Dolores Montoya, Bremer Whyte Brown & O'Meara LLP
Determining Occurrence for Injury Under Commercial General Liability Policy Without Applying “Trigger Theory”
July 19, 2021 —
David Adelstein - Florida Construction Legal UpdatesOftentimes an occurrence in a commercial general liability policy is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” It is this occurrence that causes the bodily injury or property damage that may be covered by the policy.
An interesting non-construction case determined an occurrence under a commercial general liability policy occurred when the negligent act occurred irrespective of the date of discovery or the date the claim was discovered or asserted. See Certain Underwriters at Lloyd’s, London Subscribing to Policy No. J046137 v. Pierson, 46 Fla.L.Weekly D1288c (Fla. 4thDCA 2021). This is interesting because the appellate court did NOT apply a “trigger theory” to first determine the occurrence’s policy period. The appellate court found it did not need to determine which “trigger theory” applied to determine the occurrence for the injury and relied on a cited case: “trigger theories are generally used in the context of deciding when damage occurred ‘in cases involving progressive damages, such as latent defects, toxic spills, and asbestosis’ because the time between the ‘injury-causing event (such as defective construction, a fuel leak, or exposure to asbestos), the injury itself, and the injury’s discovery or manifestation can be so far apart.” Pierson, supra, citing and quoting Spartan Petroleum Co. v. Federated Mut. Ins. Co., 162 F.3d 805, 808 (4th Cir. 1998).
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
