Federal District Court Continues to Find Construction Defects do Not Arise From An Occurrence
May 10, 2012 —
CDJ STAFFCoverage for construction defects continues to be hotly contested in Hawaii state and federal courts. In a recent decision, Judge Mollway felt bound to follow the Ninth Circuit’s decision in Burlington Ins. Co. v. Oceanic Design & Constr., Inc., 383 F.3d 940, 944 (9th Cir. 2004), where the court found construction defect claims arise from breach of contract, not from an occurrence. Judge Mollway’s most recent decision on the issue is Illinois Nat. Ins. Co. v. Nordic PCL Constr., Inc., 2012 U.S. Dist. LEXIS 58464 (D. Haw. April 26, 2012).
Nordic constructed a grocery store for Safeway. In addition to the grocery store, Nordic built a 165-space rooftop parking deck, retail shops and related improvements. After opening for business in 2007, Safeway experienced significant leaks. Safeway demanded that Nordic repair the parking deck. Nordic sent the demand letter to the insurer, who agreed to appoint counsel subject to a reservation of rights.
Safeway filed suit against Nordic in state court alleging, among other things, breach of contract and negligence. The insurer provided Nordic with a defense, but Nordic hired independent counsel.
The insurer filed for declaratory relief in federal district court.
Read the full story…
Read the court decisionRead the full story...Reprinted courtesy of
Project-Specific Policies and Products-Completed Operations Hazard Extensions
May 31, 2021 —
Jeremiah M. Welch - Saxe Doernberger & Vita1. Understanding the “Products-Completed Operations Hazard”
ISO commercial general liability (“CGL”) policies use the term “products-completed operations hazard” (“PCOH”) to define a category of risk which is treated specially by certain exclusions within the policy and often subject to separate limits of insurance. In construction, we think about PCOH as being about coverage for completed work.
Bodily injury and property damage arising out of completed work is a significant construction risk. Most construction contracts include warranty and indemnity obligations for completed work. All states allow lawsuits to be brought alleging bodily injury or property damage because of completed work based on common law. Contract and common law claims are subject to statutes of limitation – laws which define the time in which suits must be brought. Most states provide exceptions to their statutes of limitation for common law claims – the most common example is an extension to file a lawsuit based on a latent defect until the defect is discovered. Most states also have “statutes of repose” – laws that set a date after which suit may no longer be brought, no matter what the circumstances are. A construction contractor, therefore, has potential liability until the statute of repose period has expired. Thus, a contractor looks to ensure that it has coverage for the PCOH for its full statute of repose liability period.
Read the court decisionRead the full story...Reprinted courtesy of
Jeremiah M. Welch, Saxe Doernberger & VitaMr. Welch may be contacted at
JWelch@sdvlaw.com
Supreme Court of New York Denies Motion in all but One Cause of Action in Kikirov v. 355 Realty Assoc., et al.
April 28, 2011 —
Beverley BevenFlorez CDJ STAFFIn the construction defect suit Kikirov v. 355 Realty Associates, LLC, et al., the Supreme Court of the State of New York granted a dismissal of the plaintiff’s fourth cause of action, but denied the defendants’ motion in all other respects. The plaintiff alleged breach of contract, among other claims. “355 Realty was the sponsor of 355 Kings Highway Condominium, a condominium project located at 355 Kings Highway, in Brooklyn, New York. The condominium units were allegedly marketed as ‘ultra luxury condos,’ and a ‘Manhattan style condominium building,’ which would be the ‘epitome of luxury and quality.’ The construction of the six-story 28 unit residential condominium building began in approximately November 2003. […] Plaintiff entered into a purchase agreement, dated December 21, 2005, with 355 Realty (which was executed on behalf of 355 Realty by Michael Marino, as its member) for the purchase of Unit 2G in the building.”
The plaintiff alleged that construction defects emerged soon after moving into the unit: “After taking occupancy of his condominium unit, plaintiff allegedly experienced serious leakage and moisture problems in his unit, which caused a dangerous mold condition to develop, in addition to causing actual damage to the structural elements of his unit. According to plaintiff, the walls, moldings, and wood floors of his unit are constantly wet and moist, and there is severe buckling of the wood floors. Plaintiff claims that these problems have caused his unit to be uninhabitable. Plaintiff alleges that he has been forced to remove all of his personal belongings from his unit and has been unable to occupy his unit.”
According to the plaintiff, Foremost attempted to repair the defects, but only made the situation worse: “Specifically, plaintiff asserts that Foremost’s contractors opened his walls to remove the stained drywall, but never corrected the cause of the leaks, destroyed the walls, and never properly taped and painted the sheet rock. Plaintiff alleges that Foremost repaired the openings in a defective manner. Plaintiff also claims that his floor was repaired at that time by a subcontractor hired by Foremost, but the basic structural problem was never resolved and the leaks continued, compromising the beams and causing the mold conditions, in addition to all of the physical damage present in the unit. On or about July 16, 2009, plaintiff allegedly sent a notice of the defects to 355 Realty and to the managing agent designated by the condominium board, by certified mail, return receipt requested. Plaintiff asserts that defendants have failed and refused to repair and remedy the defective condition, and that the damage is extensive and requires major structural repairs.”
The plaintiff filed suit on May 4, 2010, and the original complaint asserted eight causes of action. “By decision and order dated September 13, 2010, the court granted a motion by defendants to dismiss plaintiff’s second cause of action for breach of implied covenants of good faith and fair dealing, his third cause of action for breach of implied warranties, his fifth cause of action for negligence as against 355 Realty, Michael Marino, Anthony Piscione, Ahron Hersh, and Toby Hersh, his seventh cause of action for negligence as against Vision, Foremost, and MMJ, and his eighth cause of action for violations of General Business Law § 349 and § 350, and granted plaintiff leave to replead his first cause of action for breach of contract as against 355 Realty, Michael Marino, Anthony Piscione, Ahron Hersh, and Toby Hersh, his fourth cause of action for breach of statutory warranties, and his sixth cause of action for breach of contract as against Vision, Foremost, and MMJ.”
The plaintiff amended their complaint on October 18, 2010, and “has repleaded these three causes of action by asserting a first cause of action for breach of contract as against 355 Realty, Michael Marino, Anthony Piscione, Ahron Hersh, and Toby Hersh, a second cause of action for breach of statutory warranties, and a third cause of action for breach of contract as against Vision, Foremost, and MMJ. In addition, plaintiff, in his amended complaint, has added a fourth cause of action for fraud.”
The defendants, on the other hand, “argue that each of the four causes of action alleged by plaintiff in his amended complaint fail to state a claim upon which relief may be granted, and that plaintiff’s amended complaint must be dismissed pursuant to CPLR 3211 (a) (7). Defendants also cite to CPLR 3211 (a) (1), and (5), asserting that dismissal is also required based upon documentary evidence and the Statute of Limitations contained in the limited warranty.” The defendants’ motion to dismiss the first cause of action, breach of contract against 355 Realty, was denied: “While defendants dispute that the alleged defects are actually structural in nature, plaintiff’s allegations as to their structural nature are sufficient, at this juncture, to withstand defendants’ motion to dismiss. Thus, dismissal of plaintiff’s first cause of action must be denied.”
Next, the court reviewed the second cause of action, which was breach of statutory warranties: “Defendants’ motion also seeks dismissal of plaintiff’s second cause of action for breach of statutory warranties, which alleges that, under applicable law, including General Business Law § 777-a, et seq., the sponsor warranted to purchasers of units that the units would be constructed in a skillful, careful, and workmanlike manner, consistent with proper design, engineering, and construction standards and practices, and free of material latent, design, and structural defects. Defendants argue that General Business Law § 777-a, known as the housing merchant implied warranty, is inapplicable to this case because it is limited to the construction of a ‘new home,’ defined in General Business Law § 777 (5) as ‘any single family house or for-sale unit in a multi-unit residential structure of five stories or less.’ As noted above, the building in which plaintiff’s condominium unit is located is a six-story building.”
The motion to dismiss the second cause of action is denied. The court provided this reasoning: “the full text of the offering plan has not been provided, the court is unable to examine the entire written agreement so as to determine the purpose of the inclusion of the text of General Business Law § 777.”
In the third cause of action, the plaintiff alleges “a breach of contract claim as against Vision, Foremost, and MMJ based upon their contract with 355 Realty, pursuant to which they agreed to be the general contractors/construction managers for the condominium, to undertake oversight responsibility for the design and construction of the condominium, to prepare and/or review drawings, plans, and specifications for the condominium, and to otherwise manage and oversee the project. Plaintiff alleges that Vision, Foremost, and MMJ breached their contractual obligations in that the condominium units were improperly and inadequately designed and constructed, and completed in an incompetent and unworkmanlike manner, with material design and construction defects.”
The motion to dismiss the third cause of action was denied as well: “Plaintiff alleges, in his amended complaint, that Vision, Foremost, and MMJ have acknowledged notice of the defects and have not denied that they are responsible for providing a warranty to plaintiff. Plaintiff also refers to this warranty, in his amended complaint, by noting that paragraph 16 of the purchase agreement stated that the ‘[s]eller shall not be liable to . . . the [p]urchaser for any matter as to which an assignable warranty . . . has been assigned . . . to [p]urchaser and in such case the sole recourse of such . . . [p]urchaser . . . shall be against the warrantor . . . except that in the event a contractor or subcontractor is financially unable or refuses to perform its warranty . . . [s]eller shall not be excused from its obligations enumerated in the [offering p]lan under Rights and Obligations of Sponsor.’ Consequently, the court finds that dismissal of plaintiff’s third cause of action as against Foremost and MMJ must also be denied.”
In the fourth cause of action, the plaintiff alleges “that defendants made false statements and representations orally, in advertisements, and in the purchase agreement, that the condominium was properly and adequately designed and constructed and completed in a competent and workmanlike manner, in accordance with the condominium plans and specifications and proper design, engineering, and construction standards and practices consistent with applicable standards for a first class, luxury condominium in Brooklyn.”
The court dismissed the fourth cause of action stating, “it must be dismissed because it is duplicative of his first cause of action for breach of contract.” Therefore, “defendants’ motion to dismiss plaintiff’s amended complaint is granted to the extent that it seeks dismissal of plaintiff’s fourth cause of action, and it is denied in all other respects.”
Read the court’s decision… Read the court decisionRead the full story...Reprinted courtesy of
Lennar Profit Tops Estimates as Home Prices Increase
March 26, 2014 —
John Gittelsohn – BloombergLennar Corp. (LEN), the biggest U.S. homebuilder by market value, reported a fiscal first-quarter profit that beat analysts’ estimates as the company sold more homes at increased prices.
Net income climbed to $78.1 million, or 35 cents a share, in the three months through February, from $57.5 million, or 26 cents, a year earlier, the Miami-based company said in a statement today. Analysts expected earnings of 28 cents a share, the average of 17 estimates compiled by Bloomberg.
Publicly traded builders have been increasing prices to take advantage of a tight supply of new and existing homes while using their economies of scale to reduce costs and widen profit margins. Lennar’s profit, deliveries and orders grew even as inclement weather threatened home sales in much of the U.S. during the quarter, according to Drew Reading, a Bloomberg Industries analyst.
“Lennar followed KB Home (KBH) in reporting order trends indicating a strong start to the spring selling season,” Reading said in a note after the earnings were released.
Read the court decisionRead the full story...Reprinted courtesy of
John Gittelsohn, BloombergMr. Gittelson may be contacted at
johngitt@bloomberg.net
Court Slams the Privette Door on Independent Contractor’s Bodily Injury Claim
May 06, 2019 —
Brett G. Moore, Michael C. Parme, Lindsey N. Ursua & Lawrence S. Zucker II - Haight Brown & Bonesteel LLPIn Johnson v. The Raytheon Company, Inc., Case No. B281411 (2019) WL 1090217, plaintiff Laurence Johnson (Johnson) was a maintenance engineer employed by an independent contractor that provided control room staff to defendant Raytheon Company, Inc. (“Raytheon”). Johnson was monitoring the computers in the control room when he received low water level alarms pertaining to the water cooling towers. Johnson went to the cooling tower wall in order to look over the wall and verify the water level. Johnson saw the upper half of an extension ladder leaning against the cooling tower’s wall. The ladder had a warning sign which said, “CAUTION” and “THIS LADDER SECTION IS NOT DESIGNED FOR SEPARATE USE.” Despite these warnings, Johnson used the ladder. As he was climbing the ladder it slid out causing him to fall and suffer injuries.
Johnson sued Raytheon, the hirer of the independent contractor, arguing the ladder, among other things, was unsafe and lead to Johnson’s injuries. Johnson believed that Raytheon’s course of conduct of leaving a platform ladder (as opposed to the extension ladder) at the wall constituted an implied agreement to always have one present, on which the independent contractor’s employees relied. Johnson further argued that Raytheon was negligent in providing a dangerous extension ladder, as opposed to a platform ladder, at the wall on the night of the accident.
Reprinted courtesy of Haight Brown & Bonesteel LLP attorneys
Brett G. Moore,
Michael C. Parme,
Lindsey N. Ursua and
Lawrence S. Zucker II
Mr. Moore may be contacted at bmoore@hbblaw.com
Mr. Parme may be contacted at mparme@hbblaw.com
Ms. Lindsey may be contacted at lursua@hbblaw.com
Mr. Lawrence may be contacted at lzucker@hbblaw.com
Read the court decisionRead the full story...Reprinted courtesy of
Consumer Prices Rising as U.S. Housing Stabilizes: Economy
June 18, 2014 —
Jeanna Smialek and Shobhana Chandra – BloombergConsumer prices rose in May by the most in more than a year, showing U.S. companies are gaining some pricing power as the economy strengthens, and the homebuilding industry stabilized after a first-quarter swoon.
The cost of living increased 0.4 percent, the biggest advance since February 2013, according to Labor Department data released today in Washington. Other figures showed builders broke ground on 1 million homes at an annualized rate after 1.07 million in April, the best two-month reading since late 2013.
The reports will be welcome news to Federal Reserve policy makers meeting today and tomorrow as the pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth. Central bankers are projected to continue scaling back their bond-buying program, while an increase in interest rates is delayed until well into 2015.
Ms. Smialek may be contacted at jsmialek1@bloomberg.net; Ms. Chandra may be contacted at schandra1@bloomberg.net
Read the court decisionRead the full story...Reprinted courtesy of
Jeanna Smialek and Shobhana Chandra, Bloomberg
US Court Disputes $1.8B AECOM Damage Award in ‘Remarkable Fraud’ Suit
April 26, 2021 —
Mary B. Powers - Engineering News-RecordA federal appeals court has thrown out a $1.8-billion award granted by a lower court three years ago to an AECOM unit in a bizarre legal battle involving a Nevada company that claimed to have won multiple contracts using the name of Morrison Knudsen—the former well-known Boise-based construction contractor that was sold in 1996, and through acquisitions, became part of design-build giant AECOM in 2014.
Reprinted courtesy of
Mary B. Powers, Engineering News-Record
ENR may be contacted at ENR.com@bnpmedia.com
Read the full story... Read the court decisionRead the full story...Reprinted courtesy of
Yellen Has Scant Power to Relieve U.S. Housing Slowdown
June 11, 2014 —
Rich Miller and Victoria Stilwell - BloombergThe hesitant housing recovery has surprised and concerned Federal Reserve Chair Janet Yellen and her colleagues at the central bank. It’s not clear how much they can do about it.
While the industry is rebounding from a weather-ravaged first quarter, the pickup will probably fall short of previous projections, according to economists at Goldman Sachs Group Inc. of New York and Macroeconomic Advisers LLC in St. Louis. As a result, they trimmed their forecasts for economic growth in the second half of 2014 to about 3.25 percent from 3.5 percent.
“Housing is a growing worry,” said Macroeconomic Advisers’ senior economist Ben Herzon.
Mr. Miller may be contacted at rmiller28@bloomberg.net; Ms. Stilwell may be contacted at vstilwell1@bloomberg.net
Read the court decisionRead the full story...Reprinted courtesy of
Rich Miller and Victoria Stilwell, Bloomberg
