Construction Case Alert: Appellate Court Confirms Engineer’s Duty to Defend Developer Arises Upon Tender of Indemnity Claim
January 27, 2010 —
Steven M. CvitanovicIn the recent case of UDC-Universal Development, L.P. v. CH2M Hill, 2010 Cal.App.LEXIS 47 (filed January 15, 2010), the Sixth District Court of Appeal provided a stunning illustration of the far-reaching effects of the California Supreme Court’s holding in Crawford v. Weather Shield Manufacturing Inc. (2008) 44 Cal.4th 541. In Crawford, the Court held the duty to defend under an indemnity agreement arose upon the mere tender of defense of a claim covered by the indemnity.
In the UDC case, CH2M Hill provided engineering and environmental planning services to developer UDC on a project that ultimately wound up in a construction defect lawsuit by the homeowners association ( HOA ). UDC tendered its defense to CH2M Hill, the tender was rejected, and UDC filed a cross-complaint for negligence, breach of contract and indemnity against CH2M Hill and others. After the HOA’s construction defect claims were settled, UDC proceeded to trial against CH2M Hill. The jury found in favor of CH2M Hill on the claims for negligence and breach of contract. At the request of the parties prior to trial, the trial court ruled on the application of the indemnity agreement in light of Crawford and, in so doing, found that the defense obligation arose upon the tender and that CH2M Hill breached that duty despite the jury finding in favor of CH2M Hill.
The Court of Appeal affirmed, noting that the defense obligation arose as soon as the defense was tendered and did not depend on the outcome of the litigation, and that the HOA’s general description of the defects along with an allegation that Doe engineers were negligent triggered the duty to defend.
Although this case did not expand the crushing impact of Crawford’s holding, it is
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Point Taken: The UK Supreme Court Finally Confirms the General Law of Liquidated Damages (LDs)
April 04, 2022 —
Vincent C. Zabielski & Julia Kalinina Belcher - Gravel2Gavel Construction & Real Estate Law BlogIn a long-awaited decision which overturned the Court of Appeal’s ruling in the Triple Point Technology vs PTT Public Company case, the UK Supreme Court confirmed the general law of LDs, which is that—absent clear words to the contrary—they accrue up to the date of termination of a contract regardless of whether the contractor completes the work; after that, general damages are recoverable. This approach was held to reflect “commercial reality and the accepted function of liquidated damages.” Although the contract in question was not a construction contract, the decision is equally relevant in the construction sphere.
By way of reminder, Triple Point failed to complete the works under Phase 1 of a contract for the design, installation, maintenance and licencing of software. Despite agreeing a revised project plan, PTT gave notice to terminate.
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Vincent C. Zabielski, Pillsbury and
Julia Kalinina Belcher, Pillsbury
Mr. Zabielski may be contacted at vincent.zabielski@pillsburylaw.com
Ms. Belcher may be contacted at julia.belcher@pillsburylaw.com
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South African Building Industry in Line for More State Support
November 08, 2021 —
Prinesha Naidoo - BloombergSouth Africa’s government is planning more measures to bolster its ailing building industry after banning the use of imported cement on state construction projects.
“Government is undertaking research across a range of construction-related products where there appears to be significant potential for localization,” Stephen Hanival, chief economist at the Department of Trade, Industry and Competition, said in an emailed response to questions. “Further announcements will be made in due course.”
The country’s preferential procurement policy framework enables the department to designate sectors for localization in line with national development and industrial policy goals. While the government has pursued localization since 2014, it has become more strategic since the advent of the pandemic with business, government and labor groups agreeing on an initial list of 42 products and sub-sectors that should be prioritized, Hanival said.
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Prinesha Naidoo, Bloomberg
The California Legislature Passes SB 496 Limiting Design Professional Defense and Indemnity Obligations
June 15, 2017 —
Mark Himmelstein & Jenny Guzman – Newmeyer & Dillion LLPSince 2008 when the California legislature limited subcontractor indemnity obligations, the design professional community has been shouting “what about us?” Well, the legislature finally responded and a new law that limits design professional’s defense and indemnity obligations to their percentage of fault goes into effect on January 1, 2018.
THE NEW LAW – SB 496
SB 496 amends California Civil Code section 2782.8 and states that indemnity agreements must be limited to the negligence, recklessness or willful misconduct of the indemnitee (i.e. no more Type I indemnity with design professionals). The amendment also provides that “in no event shall the cost to defend charged to the design professional exceed the design professional’s proportionate percentage of fault”, with a limited opportunity for reallocation in the event another defendant is judgment proof.
However, the duty to defend still remains and still arises at the time of the tender of the defense (both issues that were unsuccessfully targeted by the design professional lobbyists).
WHAT CAN BE DONE NOW?
Developers and Owners should strongly consider reviewing and revising the indemnity provisions in their consultant contracts to comply with the new legislation before the first of the year. This includes master agreements because project addenda entered into after January 1 are subject to the new law. The statute does not apply to current contracts, so these do not need to be amended.
Questions? Newmeyer & Dillion is happy to assist in navigating the process to ensure you are compliant prior to January’s deadline. Please let us know how we can help.
Mark Himmelstein is a partner focused in the areas of construction, real estate, business and insurance litigation. He has an in-depth experience in drafting and negotiating construction and real estate contracts. You can reach him at mark.himmelstein@ndlf.com.
Jenny Guzman is a litigation associate in the Newport Beach office, focusing her practice in the areas of business and real estate litigation and transactions. You can reach her at jenny.guzman@ndlf.com.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit http://newmeyeranddillion.com/
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No Collapse Coverage Where Policy's Collapse Provisions Deleted
July 26, 2017 —
Tred R. Eyerly - Insurance Law HawaiiThe federal district court found there was no coverage for the homeowners' collapse claim because the collapse provisions were deleted from the policy. Gueng-Ho Kim v. State Farm Fire & Cas. Co., 2017 U.S. Dist. LEXIS 97871 (D. Conn. June 26, 2017).
The homeowners purchased their home in 2004. They also purchased a homeowners policy from State Farm. In the policy, State Farm deleted the additional coverage for collapse.Also deleted from the policy was language excluding coverage for "collapse, except as specifically provided in Section I - Additional Coverages, Collapse."
The homeowners discovered a problem with the property's foundation when they attempted to sell the house in 2014. The homeowners hired an engineer who found that the interior and exterior foundation had numerous spider-web cracks and the foundation walls in several locations bowed inward by as much as one and a half inches.
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Tred R. Eyerly - Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Construction Contract’s Scope of Work Should Be Written With Clarity
March 06, 2023 —
David Adelstein - Florida Construction Legal UpdatesThe scope of work section in your construction contract should never be overlooked. In numerous instances, it is overlooked which leads to a dispute as to the precise nature of the scope of work. This dispute could be the result of an ambiguity in the scope of work section. Or it could be the result of an omission. Or it could be the result of a lack of clarification. Or it could be the result of not properly reviewing and vetting the scope of work section. This is a section—whether included in the body of your contract or attached as an exhibit—you absolutely, positively want clarity. Otherwise, you are potentially setting yourself up for a future dispute that could include (i) an additional work / change order dispute, (ii) an incomplete work dispute, or (iii) a failure to properly perform your work dispute. These are all disputes you want to avoid, and many times can avoid, by going through and negotiating the scope of work section to bring clarity to this section. Remember, clarity is a positive. Ambiguity or uncertainty is a negative.
An example of such an avoidable scope of work dispute can be found in All Year Cooling and Heating, Inc. v. Burkett Properties, Inc., 2023 WL 2000991 (Fla. 4th DCA 2023). Here, an air conditioning contractor was hired to install six new split air conditioning systems. The scope of work provided that there were currently “two split systems that are currently existing, working perfectly and are not to be replaced as part of this contract.” The property manager claimed the air conditioning contractor was required to bring these two existing split air conditioning systems up to code as the contract provided that notwithstanding anything to the contrary, the contractor “will certify and shall ensure that all split systems in the building, upon completion of all the work, will be fully compliant with all codes and regulations and shall be responsible for any costs relates to the implementation and/or remediation of same.”
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Should CGL Insurer have Duty to Defend Insured During Chapter 558 Notice of Construction Defects Process???
September 01, 2016 —
David Adelstein – Florida Construction Legal UpdatesDoes a CGL insurer have a duty to defend its insured-contractor during Florida Statutes Chapter 558 notice of construction defects pre-suit process? This answer is currently undecided and will be up to the Florida Supreme Court to decide. (It is on appeal stemming from a federal district court saying that an insurer does not have a duty to defend its insured-contractor in the 558 process based on the definition of the word “suit” in the CGL policy.)
Why is this an important issue?
The 558 pre-suit notice of construction defects process is designed to facilitate an avenue for construction defect lawsuits to get resolved without having to file a lawsuit or, at least, have issues narrowed before a lawsuit needs to be filed. (Check here for a summary of the 558 process.) It requires pre-suit notifications so that implicated parties can become aware of the defects and have an opportunity to inspect the defects / damage, test the defects / damage, and respond to the notice of construction defects; it provides an avenue for beneficial pre-suit discovery. Through participating in the 558 process, the contractor and/or design professional (and those downstream from them) can: (i) offer to remedy the defect, (ii) settle the defect, whether through money or a combination of money and repairs, (iii) dispute the defect, or (iv) advise that available insurance proceeds will be determined by its liability insurer. See Fla. Stat. s. 558.004.
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David M. Adelstein, Kirwin NorrisMr. Adelstein may be contacted at
dma@kirwinnorris.com
Automated Weather Insurance Could Offer Help in an Increasingly Hot World
July 10, 2023 —
Michelle Ma - BloombergCarlos José Báez experienced the full brunt of Hurricane Maria when it made landfall in Puerto Rico as a catastrophic storm in 2017.
The auto paint shop owner, who lives in Aguas Buenas, Puerto Rico, saw his home badly damaged by Maria’s ferocious winds and rain. Despite submitting claims to his homeowner’s insurance policy for over $25,000, Báez ultimately received a payout of $11,000.
“We had a lot of property damage and insurance, but they didn’t want to pay,” Báez said in an interview in Spanish.
More than
$1.6 billion in insurance claims remained unresolved more than two years after Maria while others were denied completely. The latter happened to Jonathan González’s mother, who waited nearly a year for an adjuster to come take photos of water damage and a broken wheelchair ramp only for the claim to be denied six months later.
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Michelle Ma, Bloomberg
