FAIRFIELD CONNECTICUT BUILDING EXPERT
DIRECTORY AND CAPABILITIES

Reminder: Pay if Paid Not All Encompassing (but Could it be?)

December 09, 2019 — Christopher G. Hill - Construction Law Musings
On numerous occasions, I have discussed the need to be careful with so called “pay if paid” clauses in construction contracts. While such clauses are enforceable in Virginia (when phrased correctly), there are exceptions and limitations (for instance in the Miller Act context). One such exception (that I frankly would have thought to be obvious) is that such clauses do not protect a general contractor from paying all subcontractors. Such a clause only protects a general contractor from payment to those subs for whose work the general contractor has not been paid. In other words, if a general contractor has been paid by an owner for a particular subcontractors work, it cannot use the pay if paid clause to deny payment even in the event that other subcontractors were deficient in their work or the owner has failed to pay the general contractor in full. In Precision Contractors Inc. v. Masterbuilt Companies Inc. (PDF) the Fairfax, VA Circuit Court reiterated this principal stating that nothing in the contract suggests that either party to the lawsuit had any intention to shift the risk of non-payment by the owner or non-performance of other subcontractors to the plaintiff (Precision). Read the court decision
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Reprinted courtesy of The Law Office of Christopher G. Hill
Mr. Hill may be contacted at chrisghill@constructionlawva.com

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Another Case Highlighting the Difference Between CGL Policies and Performance Bonds

January 07, 2015 — David M. McClain – Colorado Construction Litigation
During the summer of 2011, Ellis Construction hired Cool Sunshine Heating & Air Conditioning to install the HVAC systems in a single-family home it was building for Gary Doberman and Ellen Robertson in Boulder, Colorado. The homeowners took issue with much of the work performed on their home and tried to negotiate directly with Ellis Construction. When those negotiations broke down, the homeowners sent a notice of claim pursuant to the Construction Defect Action Reform Act, C.R.S. § 13-20-801, et seq. One of the defects alleged in the notice of claim was that the SEERS 13 compressor installed by Cool Sunshine was inappropriate for the system and that because it was installed to run on only one stage, it did not meet the City of Boulder’s code requirements for noise levels. The homeowners therefore requested that the compressor be replaced with a SEERS 20 compressor, which would comply with the Boulder City Code. Read the court decision
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Reprinted courtesy of David M. McLain, Higgins, Hopkins, McLain & Roswell, LLC
Mr. McLain may be contacted at mclain@hhmrlaw.com

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Ninth Circuit Reverses Grant of Summary Judgment to Insurer For Fortuitous Loss

July 01, 2019 — Tred R. Eyerly - Insurance Law Hawaii
The Ninth Circuit reversed the district court's issuance of summary judgment regarding coverage for damages when the insured's plant had to be shut down due to an accident. Ingenco Holdings, LLC v. Ace American Ins. Co., 2019 U.S. App. LEXIS 10946 (9th Cir. April 15, 2019). Ingenco operated a gas purification plant which converted raw landfill gas into usable natural gas. The final step in the purification process involved the removal of excess nitrogen from the landfill gas. The gas was directed through adsorbent beads, to which nitrogen adhered, contained within pressure vessels.The beads could not withstand the direct pressure of the landfill gas inflow. which, if untreated, could grind the beads down into dust. To reduce the force of the gas flow on the beads, a "diffuser basket" was suspended from the top of each bead-filled pressure vessel. The diffuser basket acted as a shield that prevented the full force of the incoming landfill gas from striking the beads directly. In 2010, metal brackets securing a diffiuser basket broke. This resulted in damage to other components and an eventual shutdown of the entire facility. The plant remained idle for several months as Ingenco investigated alternative nitrogen filtration options and undertook repairs. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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Hudson River PCB Cleanup Lands Back in Court

September 03, 2019 — Mary B. Powers - Engineering News-Record
As it previously had warned, New York state on Aug. 21 filed a federal lawsuit against the U.S. Environmental Protection Agency seeking to reverse its certification that General Electric Co.'s removal of PCBs from the Hudson River was complete, despite the agency’s five-year review finding that the cleanup was not adequate to protect human health and the environment. Read the court decision
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Reprinted courtesy of Mary B. Powers, ENR
ENR may be contacted at ENR.com@bnpmedia.com

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No Coverage for Faulty Workmanship Where Underlying Claim is Strictly Breach of Contract

June 30, 2016 — Tred R. Eyerly – Insurance Law Hawaii
Considering certified questions from the federal district court, the Arkansas Supreme Court followed a prior decision in deciding there was no coverage for property loss caused by faulty workmanship based solely on breach of contract. Columbia Ins. Group, Inc. v. Cenark Project Mgt. Services, Inc., 2016 Ark. LEXIS 185 (Ark. April 28, 2016). The homeowners entered a contract in 2005 with Arkansas Infrastructure, Inc. (AII) to construct pads for the construction of six homes. The contract provided that AII would perform the work in accordance with the plans, specifications, and drawings developed by CENARK Project Management Services, Inc. In 2012, the homeowners sued AII for breach of contract, alleging that AII had failed to construct the pads in accordance with the plans and specifications designed by CENARK. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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More (and Simpler) Options Under New Oregon Retention Law

October 21, 2024 — Michael Yelle - Ahlers Cressman & Sleight PLLC
Similar to the changes made by the Washington Legislature last year, the Oregon Legislature recently changed its retention law. Oregon public works agencies and large commercial project owners are now required to accept surety bonds in lieu of withholding retainage on construction projects. There is also no longer a requirement to deposit retention funds in an interest-bearing escrow account. The owner or public agency must accept the bond in lieu of retainage unless specific grounds exist. For example, public agencies must find there is “good cause” for rejection of the bond based on the “unique project circumstances. Private owners have less discretion to reject a bond and if the bond meets the statutory requirements, per ORS 701.435(1)(a) “the owner and lender shall accept” the bond “in lieu of all or any portion of the retainage…” Courts have not analyzed when “good cause” exists for public agencies to reject bonds or exactly what will allow a private owner to reject a bond. However, an agency or owner cannot have a general policy to reject retention bonds. The statute does not provide next steps if the contractor disagrees with a decision to reject the bond. It may be necessary to proceed under the contract’s dispute resolution procedure or it may be more appropriate to take the issue directly to the courts. Read the court decision
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Reprinted courtesy of Michael Yelle, Ahlers Cressman & Sleight PLLC
Mr. Yelle may be contacted at michael.yelle@acslawyers.com

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Mass. Gas Leak Follows NTSB Final Report, Call for Reforms

November 24, 2019 — Johanna Knapschaefer - Engineering News-Record
A major natural-gas leak forced Lawrence, Mass., residents to evacuate their homes early on Sept. 27. National Grid cut power to more than 1,300 customers to avoid another disaster like last year’s natural-gas explosions and fires in Lawrence and two other towns north of Boston. The leak came just days after federal officials called for changes to national pipeline regulations as they released a final report on the causes of the Sept. 13, 2018, disaster. Reprinted courtesy of Johanna Knapschaefer, Engineering News-Record ENR may be contacted at ENR.com@bnpmedia.com Read the full story... Read the court decision
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Think Twice Before Hedging A Position Or Defense On A Speculative Event Or Occurrence

July 13, 2020 — David Adelstein - Florida Construction Legal Updates
Sometimes, hedging a position on a potential occurrence is not prudent. Stated differently, hedging a position on a contingent event is not the right course of action. The reason being is that a potential occurrence or contingent event is SPECULATIVE. The occurrence or event may not take place and, even if it does take place, the impact is unknown. An example of hedging a defense on such a potential occurrence or contingent event can be found in a construction dispute involving a federal project out of the Eastern District of Virginia, U.S. f/u/b/o Champco, Inc. v. Arch Insurance Co., 2020 WL 1644565 (E.D.Va. 2020). In this case, the prime contractor hired a subcontractor to perform electrical work, under one subcontract, and install a security system, under a separate subcontract. The subcontractor claimed it was owed money under the two subcontracts and instituted a lawsuit against the prime contractor’s Miller Act payment bond. The prime contractor had issued the subcontractor an approximate $71,000 back-charge for delays. While the subcontractor did not accept the back-charge, it moved for summary judgment claiming that the liability for the back-charge can be resolved at trial as there is still over $300,000 in contract balance that should be paid to it. The prime contractor countered that the delays caused by the subcontractor could be greater than $71,000 based on a negative evaluation in the Contractor Performance Assessment Reporting System (“CPARS”). A negative CPARS rating by the federal government due to the delays caused by the subcontractor would result in a (potential) loss of business with the federal government (i.e., lost profit) to the prime contractor. The main problem for the prime contractor: a negative CPARs rating was entirely speculative as there had not been a negative CPARs rating and, even if there was, the impact a negative rating would have on the prime contractor’s future business with the federal government was unknown. To this point, the district court stated:

In this case, [prime contractor’s] claim for damages is wholly speculative. [Prime contractor] has not produced any evidence that its stated condition precedent—a negative CPARS rating—will actually occur and will have a negative impact on its future federal contracting endeavors. Specifically, [prime contractor] has not identified any facts that indicate that it will be subject to a negative CPARS rating or any indication of the Navy’s dissatisfaction with its work as the prime contractor on the Project… Further, a CPARS rating is only one aspect taken into consideration when federal contracts are awarded. In sum, there is no evidence of the following: (1) a negative CPARS rating issued to [prime contractor]; (2) [prime contractor’s] hypothetical negative rating will be the result of the delay [prime contractor] alleges was caused by [subcontractor]; or (3) [prime contractor’s] hypothetical negative CPARS rating will result in future lost profits.

U.S. f/u/b/o Champco, Inc., supra, at *2 (internal citation omitted).

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Reprinted courtesy of David Adelstein, Kirwin Norris, P.A.
Mr. Adelstein may be contacted at dma@kirwinnorris.com

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