Select the Best Contract Model to Mitigate Risk and Achieve Energy Project Success
October 17, 2022 —
Gregory S. Seador - Construction ExecutivePower and energy projects are inherently complex and risky. Therefore, management and proper allocation of risk among project participants are essential to success.
Careful drafting of the engineering, procurement and construction (EPC) contract is a critical first step in managing risk. The standard contract format used for power and energy construction projects is the EPC contract. In its traditional form, the EPC contract makes the EPC contractor responsible for the entire project, including engineering (design of the power plant), procurement (purchase, installation and performance of all equipment) and construction (construction of the plant).
EPC contracts can, however, employ different contract models and pricing structures, each of which carries differing levels of risk for project participants. Selecting the appropriate contract model and pricing structure to meet the unique needs of the project is important.
Reprinted courtesy of
Gregory S. Seador, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Mr. Seader may be contacted at
seador@slslaw.com
New York Court Temporarily Enjoins UCC Foreclosure Sale
September 21, 2020 —
Steven E. Ostrow, Timothy E. Davis, Steven E. Coury & Kristen E. Andreoli - White and WilliamsNew York courts have become a battleground for challenges to foreclosure sales under the Uniform Commercial Code (UCC) amidst the COVID-19 pandemic. Another trial court of the New York State Supreme Court (New York County) issued a preliminary injunction in Shelbourne BRF LLC v. SR 677 Bway LLC, halting a mezzanine lender’s August 19, 2020 UCC foreclosure sale. The decision confirms that the impact of the pandemic on the value of commercial real estate, and upon traditional steps taken to conduct a foreclosure auction, are both key factors that courts will continue to consider in determining whether a UCC foreclosure sale scheduled during the pandemic can be conducted in a commercially reasonable manner as required by the UCC.
THE CASE
In Shelbourne, the mezzanine borrowers owned the membership or equity interests in the companies (collectively, the “Property Owner”) that held title to a 12-story office building in Albany, New York. As security for the $3.35 million mezzanine loan, the mezzanine borrowers pledged their equity interests to the mezzanine lender. In May 2020, the mezzanine lender declared a default under the mezzanine loan as a result of the Property Owner’s default under the $28.5 million senior loan secured by a mortgage against the office building. The mezzanine lender then scheduled a public UCC foreclosure sale of the equity interests in the Property Owner for August 19, 2020. If the sale had been held, the equity interests in the Property Owner (and right to control the Property Owner and office building) would have been transferred to the successful bidder, either the mezzanine lender or a third party purchaser.
Reprinted courtesy of White and Williams attorneys
Steven E. Ostrow,
Timothy E. Davis,
Steven E. Coury and
Kristen E. Andreoli
Mr. Ostrow may be contacted at ostrows@whiteandwilliams.com
Mr. Davis may be contacted at davist@whiteandwilliams.com
Mr. Coury may be contacted at courys@whiteandwilliams.com
Ms. Andreoli may be contacted at andreolik@whiteandwilliams.com
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Contractual “Pay if Paid” and “Pay when Paid” Clauses? What is a California Construction Subcontractor to Do?
November 29, 2021 —
William L. Porter - Porter Law GroupThe Situation California Construction Subcontractors Face in Obtaining Payment:
California construction subcontractors find themselves faced with a significant payment issue every time they are asked to sign a subcontract on a major project. Invariably, the subcontract the prime contractor presents to the subcontractor for signature will contain a clause by which the prime contractor imposes a condition on payment from the prime contractor to the subcontractor. The condition will be either one or the other of two general types. Either the prime contractor will specify that it never has to pay the subcontractor if the prime contractor itself is not paid by the owner (a “pay-if-paid” clause), or the prime contractor will pay the subcontractor only after the prime contractor has first exhausted all its efforts to obtain payment from the owner through litigation, arbitration or otherwise, possibly delaying payment to subcontractors by months or even years (a “pay-when-paid” clause).
Goal of the Article:
The goal of this article is to draw a distinction between the pay-if-paid and pay-when-paid clauses, discuss the legality of these clauses in California, the problems these clauses create for subcontractors, advise the reader of helpful recent legal developments in this area of law, address the possibility of a further legislative remedy to address the issue, and discuss what the subcontractor might do to protect itself while awaiting a legislative remedy that may or may not ever arrive.
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William L. Porter, Porter Law GroupMr. Porter may be contacted at
bporter@porterlaw.com
Insurer Not Required to Show Prejudice from an Insured’s Late Notice When the Parties Contract for a Specific Reporting Period
September 09, 2019 —
Christopher Raney - Gordon & Rees Insurance Coverage Law BlogThe Fifth Circuit Court of Appeals recently affirmed an order granting summary judgment in favor of the Firm’s insurer client on an issue of first impression in Texas. The issue before the trial court was whether, under Texas law, an insurer is required to demonstrate prejudice resulting from an insured’s failure to comply with an agreed term set in an endorsement to the parties’ insurance contract establishing a specific time limit for an insured to give the insurer notice of a claim.
The case involved alleged damage to an insured’s commercial property from a hailstorm. The insured did not report the alleged loss to its insurer until approximately 17 months after the date of loss. The insurer denied the claim based on a one-year notice requirement in a policy endorsement. The Texas Windstorm or Hail Loss Conditions Amendment Endorsement stated that:
In addition to your obligation to provide us with prompt notice of loss or damage, with respect to any claim where notice of the claim is reported to us more than one year after the reported date of loss or damage, this policy shall not provide coverage for such claims.
The insured sued the insurer in Houston federal court, alleging causes of action for breach of contract and violations of the Texas Insurance Code. The insured argued the insurer was required to show prejudice from the insured’s late notice; the insurer argued that a showing of prejudice was not required. The trial court recognized that this issue had not been decided by the Texas Supreme Court of the Fifth Circuit Court of Appeals.
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Christopher Raney, Gordon & Rees Scully MansukhaniMr. Raney may be contacted at
craney@grsm.com
Washington Supreme Court Finds Agent’s Representations in Certificate of Insurance Bind Insurance Company to Additional Insured Coverage
February 03, 2020 —
Jason Taylor - Traub LiebermanIn T-Mobile USA Inc. v. Selective Ins. Co. of Am., 450 P.3d 150 (Wash. 2019) the Washington Supreme Court addressed whether an insurance company is bound by its agent’s written representation—made in a certificate of insurance—that a particular corporation is an additional insured under a given policy. The question arose in a case where: (1) the Ninth Circuit had already ruled that the agent acted with apparent authority, but (2) the agent’s representation turned out to be inconsistent with the policy and (3) the certificate of insurance included additional text broadly disclaiming the certificate’s ability to “amend, extend or alter the coverage afforded by” the policy. According to the Court, under Washington law the answer is yes: an insurance company is bound by the representation of its agent in those circumstances. Otherwise, the Court reasoned, an insurance company’s representations would be meaningless and it could mislead without consequence.
At the heart of this case were two T-Mobiles entities: T-Mobile USA and T-Mobile Northeast (“T-Mobile NE”), which were distinct legal entities. T-Mobile NE engaged a contractor to construct a cell phone tower on a rooftop in New York City. The contract between T-Mobile NE and the contractor required the contractor to obtain a general liability insurance policy, to annually provide T-Mobile NE “with certificates of insurance evidencing [that policy’s] coverage,” and to name T-Mobile NE as an additional insured under the policy. T-Mobile USA was not a party to the contract, but was nonetheless aware of it and approved the contract as to form.
The contractor obtained the required insurance policy from Selective. The policy provided that a third party would automatically become an “additional insured” under the policy if the contractor and the third party entered into their own contract that required the contractor to add the third party to its insurance policy as an additional insured. Because T-Mobile USA did not have a contract with the contractor, it did not automatically become an additional insured under the policy. Nevertheless, over the course of several years, Selective’s agent issued a series of certificates of insurance to “T-Mobile USA Inc., its Subsidiaries and Affiliates” that stated that those entities were “included as an additional insured [under the policy] with respect to” certain areas of coverage. The agent signed those certificates as Selective’s “Authorized Representative.”
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Jason Taylor, Traub LiebermanMr. Taylor may be contacted at
jtaylor@tlsslaw.com
Fence Attached to Building Covered Under Dwelling Provisions
March 01, 2017 —
Tred R. Eyerly – Insurance Law HawaiiThe Texas Supreme Court determined that a damaged fence attached to the insureds' dwelling was covered under the dwelling provisions, not the "other structure" portion of the policy. Nassar v. Liberty Mutual Fire Ins. Co., 2017 Tex. LEXIS 113 (Tex. Jan. 27 ,2017).
The insureds' owned six acres of property. Hurricane Ike caused significant damage to the property on September 13, 2008. The insureds submitted a claim to Liberty Mutual under their homeowners' policy. Liberty Mutual paid several claims, but disputes arose over the value of various items of damaged property, including the fencing on the property. The insured's fencing spanned over 4,000 linear feet, including a white picket fence at the northeast corner of the dwelling, an ornamental iron fence in front of the dwelling, numerous cross fences, garden fences, and a larger, perimeter fence.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Construction Defect Scam Tied to Organized Crime?
July 31, 2013 —
CDJ STAFFThe Las Vegas Review-Journal reports that the initial tip-off came from Scott Canepa, a construction defect attorney who alerted the FBI about Leon Benzer’s activities in taking over homeowner boards. Canepa learned that Nancy Quon was taking part in the scheme and went to the FBI with the information. After FBI officials met with Canepa, they launched an investigation, which they named “Operation GrandMaster.”
Although a Benzer associate stated that Benzer claimed not to have ties to organized crime, and according to the Review-Journal, “preferred to think of himself as ‘just a bully,’” the case involves connections to a number of figures with ties to organized crime. Benzer with associated with John V. Spilotro, a lawyer whose uncle was an alleged overseer for Chicago organized crime operating in Las Vegas in the 70s and 80s. Another conspirator, Paul Citelli, reportedly has ties to organized crime in Buffalo.
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Insurance Policy to Protect Hawaii's Coral Reefs
December 26, 2022 —
Tred R. Eyerly - Insurance Law HawaiiThe New York Times recently reported on an insurance policy issued to the non-profit Nature Conservancy to protect coral reefs in Hawaii. Cihistopher Flavelle, Catrin Einhorn, In a First, Nonprofit Buys Insurance for Hawaii's Threatened Coral Reefs, N.Y. Times, Nov. 21, 2022.
If damaged by a storm, coral reefs need immediate attention if they are going to recover. The Nature Conservancy plans a four step process to save damaged reefs:
- Purchase a policy for all 400,000 acres of coral reefs surrounding the Hawaii island.
- If reefs are sufficiently damaged by a storm the policy will pay out within two weeks.
- The Nature Conservancy will ask the State of Hawaii, owner of the reefs, for a permit to repair the storm damage.
- Finally, if the state officials issue the permit, the insurance proceeds will pay teams of divers to repair the damage. Crews will have about six weeks before coral begins to die.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
