The Dog Ate My Exclusion! – Georgia Federal Court: No Reformation to Add Pollution Exclusion
September 28, 2017 —
Philip M. Brown-Wilusz - Saxe Doernberger & Vita, P.C.While schoolchildren know that the classic “the dog ate my homework” excuse doesn’t work, insurance companies are willing to try a variation of that excuse. Ace American Insurance Company (Ace), sold a property policy (the Policy) to Exide Technologies, Inc. (Exide). Exide sought coverage under the Policy for acid damage at its former battery factory. Ace denied coverage, citing to the pollution exclusion. The only problem? The Policy contained no pollution exclusion!
Exide had procured policies from other insurers for several years prior to the inception of the Policy, all of which contained pollution exclusions. Exide instructed Marsh USA Inc. (Marsh), its broker, to procure insurance “on the same or better terms and conditions.” The resulting policy contained no pollution exclusion, and Exide sought coverage under the Policy for pollution-related losses.
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Philip M. Brown-Wilusz, Saxe Doernberger & Vita, P.C.Mr. Brown-Wilusz may be contacted at
pbw@sdvlaw.com
Roof's "Cosmetic" Damage From Hail Storm Covered
August 19, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe Seventh Circuit affirmed the district court's determination that cosmetic damage to the insured's roof was covered. Advance Cable Co., LLC v. Cincinnati Ins. Co., 2015 U.S. App. LEXIS 9805 (7th Cir. June 11, 2015).
The insured submitted a claim to its insurer, Cincinnati, for damage to the metal roof of its building caused by a hail storm. The insured inspected the roof with a claims representative for Cincinnati. Dents were spotted, but there was little other evidence of damage. The loss was estimated at $1,894.74. A check for this amount was sent to the insured.
Six months later, the insured considered selling the building. A potential buyer inspected the roof and found hail damage. At the request of the insured, Cincinnati conducted another inspection of the roof. Again, dents of approximately 1 inch in diameter were found. The inspector noted that the denting would not affect the performance of the roof panels or detract from their life expectancy.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Florida Duty to Defend a Chapter 558 Right to Repair Notice
July 30, 2015 —
Scott Patterson – CD CoverageIn Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Co., 2015 WL 3539755 (S.D. Fla. 2015), Altman was the general contractor for a residential condominium project. The condominium association served Altman with Chapter 558 notices. A Chapter 558 notice is a statutory prerequisite to a property owner’s construction defect lawsuit and provides the contractor with an opportunity to respond and avoid litigation. Altman demanded that its CGL insurer, Crum & Forster, provide a defense to the Chapter 558 notices by hiring counsel to represent Altman’s interests. While not disputing that the claimed defects may be covered under the policy, Crum & Forster denied any duty to defend against the notices on the basis that they did not constitute a “suit.” Altman filed suit.
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Scott Patterson, CD Coverage
Lease-Leaseback Fight Continues
June 01, 2020 —
Garret Murai - California Construction Law BlogIt’s like the rematch between Rocky Balboa and Apollo Creed.
In the right corner we have the California Taxpayers Action Network. In the left corner, Taber Construction, Inc. The title in contention: Construction of California’s Lease-Leaseback Program and, specifically, whether a construction firm can provide both pre-construction services as well as perform construction or, whether doing so, would be an impermissible conflict of interest under the Lease-Leaseback Law.
In their first appellate court match, California Taxpayers Action Network argued that a lease-leaseback arrangement between Taber Construction and the Mount Diablo Unified School District, whereby the District agreed to lease the site to Taber Construction one dollar (which is permissible) and to pay Taber a “guaranteed project cost” of $14,743,395 comprised of “tenant improvement payments” totaling $13,269,057 prior to the District taking delivery of the project (which was the issue in dispute) and six “lease payment amount[s]” of $345,723 plus interest paid in 30-day intervals, violated the Lease-Leaseback Law because the bulk of the payments by the District to Taber Construction occurred during construction rather than during the lease-term which could only “truly” occur after the District took delivery of the project. The 1st District Court of Appeal sided with Taber Construction, and in doing so created an appellate court split with the 5th District Court of Appeal’s decision in Davis v. Fresno Unified School District, 237 Cal.App.4th 261 (2015), which held that contractor who received all payments prior to turnover of the project to the district violated the Lease-Leaseback Law.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Eighth Circuit Remands to Determine Applicability of Collapse Exclusion
January 06, 2012 —
Tred R. Eyerly - Insurance Law HawaiiThe Eighth Circuit determined a jury instruction regarding the applicability of the "all-risk" policy’s exclusion for "collapse" was inadequate. See KAAPA Ethanol, LLC v. Affiliated FM Ins. Co., 2011 U.S. App. LEXIS 22158 (8th Cir. Nov. 3, 2011).
KAAPA had nine large, cylindrical, stainless steel tanks fabricated at its location. Soon after operations began in 2003, some of the tanks experienced unusual movement and began to shift. A geotechnical engineer found "silty clay" had been used for infill instead of compacted granular fill called for in engineering drawings. A year long plan to repair all nine tanks was implemented.
Affiliated’s "all-risk" policy excluded damage caused by faulty workmanship. It also excluded damage caused by settling or cracking. The settling exclusion went on to provide, "This exclusion will not apply to loss or damage resulting from collapse of: a building or structure; or material part of a building or structure." Affiliated denied coverage because of the faulty workmanship and settling exclusions.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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NLRB Broadens the Joint Employer Standard
September 17, 2015 —
Craig Martin – Construction Contractor AdvisorPerhaps in anticipation of Labor Day, the National Labor Relations Board issued its ruling in Browning-Ferris Indus. of Cal. d/b/a BFI Newby Island Recyclery, establishing an easier standard for unions to prove that a joint employer relationship exists. This will make it easier for unions to make the upstream company, like a parent company, liable for unfair labor practices, even if the upstream company had no direct involvement.
Some Background
BFI runs a recycling plant and contracts with Leadpoint to provide workers to sort garbage in the recycling plant. The staffing agreement specifically stated that Leadpoint was the sole employer of the personnel it supplied and Leadpoint handled supervision of the employees, not BFI.
Leadpoint’s employees sought to unionize and an election was held. The union filed a petition seeking a determination that Leadpoint and BFI were a joint employers.
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Craig Martin, Lamson, Dugan and Murray, LLPMr. Martin may be contacted at
cmartin@ldmlaw.com
Know and Meet Your Notice Requirements or Lose Your Payment Bond Claims
May 17, 2021 —
Chris Broughton, Jones Walker LLP - ConsensusDocsTime is of the essence in the construction industry, and failing to provide timely notice of your payment bond claim can end your chance of recovery. Payment bonds guarantee payment for the subcontractors and suppliers who provide labor or materials on covered construction projects. Federal and state statutes governing payment bonds on public projects and the specific terms of non-statutory, private payment bonds have strict notice and timing requirements. Claimants who fail to provide timely notice can forfeit their chance of recovery. This article provides a brief overview of the notice requirements for payment bond claims – who has to give notice, what notice is required, and when you have to give notice.
Payment bond protection is a frequent feature in construction. Payment bonds are required on most federal construction projects of over $100,000 under the federal Miller Act. Similar state statutes, typically referred to as “Little Miller Acts,” also require payment bonds on most state and local construction projects. Owners on private projects may require their general contractor to provide a payment bond to protect the property from liens. Finally, general contractors may also require subcontractors to provide payment bonds on public or private projects.
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Chris Broughton, Jones Walker LLPMr. Broughton may be contacted at
cbroughton@joneswalker.com
When Customers Don’t Pay: What Can a Construction Business Do
June 06, 2022 —
Patrick Hogan – Handle.comLate payments are not unusual in construction. From general contractors to subs and material suppliers, every construction project participant has dealt with delayed payments as part of business. However, there’s the issue of clients who refuse to pay. Not late--just no payment. For businesses big and small, a client who refuses to pay can make a significant impact financially and operationally. Many construction transactions are made on trust, and when a client doesn’t pay, some contractors and suppliers may make poor decisions. Yet, to get out of a project going sideways--with payment in hand or lessons learned--you need to be smart and proceed with your business interest in mind.
Why is the customer not paying?
This is where it begins. You must first identify the reasons why a customer refuses to pay. Were they unsatisfied with the quality of work? Do they feel that what was delivered was not aligned with what’s contractually obligated? Do they feel like the work was rushed or the materials used inferior? Was the job finished later than agreed? All these are possibilities that need to be investigated.
If the customer has not volunteered any of this information, it’s best to personally visit the project or set a meeting with the customer to discuss issues in person. If the problems the customer has raised are valid, plan how to resolve them right away. Suppose, after the discussion, you’ve determined that the customer demands things beyond what’s contractually obligated, and you cannot resolve them without incurring unreasonable time and costs. In that case, you might have a delinquent customer in your hands.
Let the customer know your decision. If you’ve decided to proceed and fix the issues they’ve raised, send the invoice for the unpaid work immediately upon commencing the remedial work. Of course, there is no guarantee that addressing their concerns will result in swift payment, so exercise your best judgment. If you think you’ve exhausted all the cordial means to get them to pay as the contract requires, you might need to consider your legal options.
A legal option to recover payments: Filing a mechanics lien
State laws protect construction providers like contractors and material suppliers from non-payment through lien laws. Mechanics liens work by placing a hold on the property where the work or materials were provided as a security in case of non-payment. Mechanics liens can result in a sale of the property where the lien is attached, and the proceeds will be used to pay unpaid vendors.
When a client fails to pay after a good-faith pursuit to resolve the payment issue, filing a mechanics lien becomes the smartest next move. However, note that to file a mechanics lien, you must have fulfilled the requirements of lien laws specific to the state where the project is located. For many states, the main requirement is sending a preliminary or pre-lien notice to secure your right to file liens. It’s only good business practice to
file preliminary notices for every project you work on. It’s not an indication of distrust in the client’s ability to pay–and that is mentioned in the wording of many statutory statements included in preliminary notices. It’s just industry standard to file prelim notices.
Filing a mechanics lien includes a period where the client still has the opportunity to pay arrears before the lien is enforced. Suppose the client fails to pay in this period. You are now allowed to enforce the mechanics lien through a lawsuit. This is a complex process, but it presents itself as the last resort to recover payments. As long as all your documents are in check, you’ve filed the necessary notices in the time and manner required by law, and you’ve fulfilled your contractual obligations to the client, a ruling in your favor is the likely outcome.
Promoting timely payments
It’s in your best interest to promote timely payments from your customers. While construction contracts are primarily reliant on trust, there are many things you can do to encourage and facilitate timely payments from your clients. Here are some ideas:
- Use detailed contracts and progress billing
- Vet clients through background research, credit history, references, and public financial records
- Send regular on-time invoices
- Ensure your invoices are aligned with the formats used by your client’s payables department
- Provide multiple payment methods
- File the necessary preliminary notices throughout the project
In the case of construction payments, the adage prevention is better than cure applies. There are many reasons why payments get delayed or skipped, some malicious, some not. It’s in your best interest to ensure that you are doing everything from your end to promote timely payments and that you’re fully protected by rights granted to construction businesses by law.
About the Author:
Patrick Hogan is the CEO of
Handle.com, where they build software that helps contractors and material suppliers with lien management and payment compliance. The biggest names in construction use Handle on a daily basis to save time and money while improving efficiency.
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