KF-103 v. American Family Mutual Insurance: Tenth Circuit Upholds the “Complaint Rule”
May 12, 2016 —
Adria Robinson – Colorado Construction LitigationIn Colorado, the “complaint rule” requires insurance carriers to provide a defense to its insured when the allegations contained in the complaint allege any set of facts that may fall within an insurance policy. Some insurers have pushed back on this rule arguing that it may cause an insurer to exercise its duty to defend although the underlying facts ultimately do not fall within the policy.
In KF 103-CV, LLC v. American Family Mutual Insurance Company, 2015 WL 6517782, the Tenth Circuit of the United States Court of Appeals upheld the complaint rule. In its decision, the Tenth Circuit cited several Colorado state court rulings recognizing the courts’ intent to incentivize insurers to defend policies that may facially fall within the terms of the policy. Where there is uncertainty about coverage, the Tenth Circuit cited a Colorado Supreme Court case stating, “[t]he appropriate course of action for an insurer who believes that it is under no obligation to defend, is to provide a defense to the insured under the reservation of its rights.”
Read the court decisionRead the full story...Reprinted courtesy of
Adria Robinson, Higgins, Hopkins, McLain & Roswell, LLCMs. Robinson may be contacted at
robinson@hhmrlaw.com
Construction Manager’s Win in Michigan after Michigan Supreme Court Finds a Subcontractor’s Unintended Faulty Work is an ‘Occurrence’ Under CGL
August 03, 2020 —
Gabrielle Szlachta-McGinn - Newmeyer DillionOn June 29, 2020, the Michigan Supreme Court overturned a longstanding precedent that commercial general liability (“CGL”) insurers have historically relied upon to deny insurance coverage for claims involving pre-1986 CGL policies. See Hawkeye-Security Ins. Co. v. Vector Const. Co., 185 Mich. App. 369, 372, 460 N.W.2d 329, 331 (1990). In its recent ruling, the state Supreme Court unanimously agreed that an Insurance Services Office, Inc. (“ISO”) 1986 standard CGL policy, which is sold to construction contractors across the United States, provides coverage for property damage to a policyholder’s work product that resulted from a subcontractor’s unintended faulty workmanship. Skanska USA Bldg. Inc. v. M.A.P. Mech. Contractors, Inc., No. 159510, 2020 WL 3527909 (Mich. June 29, 2020).
In 2008, Skanska USA Building, Inc., the construction manager on a renovation project for Mid-Michigan Medical Center, signed a subcontract with defendant M.A.P. Mechanical Contractors (“MAP”) to install a new heating and cooling (“HVAC”) system. Id. During the renovation, MAP installed some of the expansion joints in the new HVAC system backwards. Id. The defective installation caused approximately $1.4 million in property damage to concrete, steel and the heating system, which Skanska discovered nearly two years after MAP completed the project. Id. After performing the repairs and replacing the damaged property, Skanska sought repayment for the repair costs from MAP and also submitted a claim to Amerisure seeking coverage as an insured under the CGL policy. Id. When Amerisure rejected Skanska’s claim, Skanska sued both parties. Id. Amerisure relied on the holding in Hawkeye and argued that MAP’s defective workmanship was not a covered “occurrence” under the CGL policy, which the policy defined as an accident. Id. at *4.
The Michigan Court of Appeals ignored the express language contained in the CGL policy and applied a prior appellate court precedent from Hawkeye, finding that MAP’s faulty work was not an “occurrence” and thus, did not trigger CGL coverage. Id. at *4. The Court of Appeals further reasoned that Skanska was an Amerisure policyholder and that the only property damage was to Skanska’s own work, which was not covered under the CGL policy. Id. at *5.
In a landmark decision, the Michigan Supreme Court reversed, holding unanimously that the Court of Appeals incorrectly applied the holding of Hawkeye because it failed to consider the impact of the 1986 revisions to standard CGL insurance policies. Id. at *10. Chief Justice Bridget M. McCormack explained that the Hawkeye decision rested on the 1973 version of the ISO form insurance policy, which specifically excluded certain business risks from coverage such as property damage to a policyholder’s own work. Id. The Supreme Court agreed that while Hawkeye was correctly decided, it did not apply here because the 1986 revised ISO policy includes an exception for property damage caused by a subcontractor’s unintentional faulty work. Id.
The Supreme Court said that under the plain reading of the current CGL policy language, an “accident” could include a subcontractor’s unintentional defective work that damaged a policyholder’s work product and thus, may qualify as an “occurrence” covered under the policy. Id. at *9. The Supreme Court defined an “accident” (which was not defined in the Amerisure policy) as “an undefined contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.” Id. at *5; see Allstate Ins. Co. v. McCarn, 466 Mich. 277, 281, 645 N.W.2d 20, 23 (2002). The Supreme Court noted that there was no evidence suggesting that MAP purposefully installed the expansion joints backwards, nor was there evidence indicating that the parties affected by MAP’s negligence anticipated, foresaw, or expected MAP’s defective installation or property damage. Skanska, 2020 WL 3527909, at *4. Therefore, the Supreme Court concluded that an “occurrence” may have happened, which would trigger coverage under the CGL policy. Id. at *10.
Although this landmark decision changes Michigan law, the decision is limited to cases involving the 1986 ISO policy language revisions to CGL insurance policies. Id. The Supreme Court's decision does not overturn Hawkeye, but rather limits Hawkeye’s authority to cases involving the 1973 ISO form. Id.
Gabrielle Szlachta-McGinn was a summer associate at Newmeyer Dillion as part of the firm's 2020 summer class. You may learn more about Newmeyer Dillion's construction litigation services and find the group's key contacts at https://www.newmeyerdillion.com/construction-litigation/.
Read the court decisionRead the full story...Reprinted courtesy of
The United States Court of Appeals, Fourth Circuit, Finds Wrap-Up Exclusion Does Not Bar Coverage of Additional Insureds
February 18, 2020 —
Callie E. Waers - Florida Construction Law NewsThe United States Court of Appeals, Fourth Circuit, recently took a close look at the application of a “controlled insurance program exclusion” (wrap-up exclusion) to additional insureds on a commercial general liability policy. In Cont’l Cas. Co. v. Amerisure Ins. Co., 886 F.3d 366 (4th Cir. 2018), the Fourth Circuit examined the interplay of an enrolled party’s additional insured status on an unenrolled party’s commercial general liability (“CGL”) policy with a wrap-up exclusion. The court applied North Carolina law and found that pursuant to the policy’s own language, the exclusion only applied to the original named insured, not the additional insureds.
The case arose out of an injury incurred by an employee of a second-tier subcontractor during the construction of a hospital. On this particular project, the owner maintained a “rolling owner controlled insurance program” (wrap-up insurance program) in which all tiers of contractors were required to enroll, but enrollment was not automatic. The general contractor was enrolled in the owner’s wrap-up policy, but neither the steel manufacturer subcontractor nor its sub-subcontractor, the steel installation company, were enrolled. The underlying plaintiff was injured while he was an employee of the steel installation company, but he did not name his employer in his personal injury lawsuit.
The Cont’l Cas. Co. case was instituted by Continental Casualty Company (“Continental”) after it defended and settled the underlying plaintiff’s claims against its insured and additional insured, the steel manufacturer and general contractor, respectively. Continental sought to be reimbursed for the $1.7 million settlement and attorneys’ fees and costs incurred for the defense and indemnity of the underlying lawsuit.
Continental alleged that Amerisure Insurance Company (“Amerisure”) breached its duty to defend and Amerisure’s policy provided the primary coverage for both the general contractor and steel manufacturer, who were additional insureds on the Amerisure policy. Amerisure denied a duty to defend the additional insureds based on the presence of the wrap-up exclusion.
Read the court decisionRead the full story...Reprinted courtesy of
Ryan M. Charlson, Cole, Scott & Kissane, P.A.Mr. Charlson may be contacted at
Ryan.Charlson@csklegal.com
Impact of Lis Pendens on Unrecorded Interests / Liens
September 15, 2016 —
David Adelstein – Florida Construction Legal UpdatesIn a previous article, I discussed the importance of recording a lis pendens in a construction lien foreclosure action.
There is another noteworthy point relating to the impact of lis pendens that can provide quite a bit of consternation.
Florida Statute 48.23(1)(d) provides:
Except for the interest of persons in possession or easements of use, the recording of such notice of lis pendens, provided that during the pendency of the proceeding it has not expired pursuant to subsection (2) or been withdrawn or discharged, constitutes a bar to the enforcement against the property described in the notice of all interests and liens, including, but not limited to, federal tax liens and levies, unrecorded at the time of recording the notice unless the holder of any such unrecorded interest or lien intervenes in such proceedings within 30 days after the recording of the notice. If the holder of any such unrecorded interest or lien does not intervene in the proceedings and if such proceedings are prosecuted to a judicial sale of the property described in the notice, the property shall be forever discharged from all such unrecorded interests and liens. If the notice of lis pendens expires or is withdrawn or discharged, the expiration, withdrawal, or discharge of the notice does not affect the validity of any unrecorded interest or lien.
Read the court decisionRead the full story...Reprinted courtesy of
David M. Adelstein, Kirwin NorrisMr. Adelstein may be contacted at
dma@kirwinnorris.com
Construction Defect Claims are on the Rise Due to Pandemic-Related Issues
April 25, 2022 —
Beverley BevenFlorez – CDJ StaffAccording to a recent
New York Times article, pandemic-related issues such as “stop-and-start construction, global supply chain issues, pressure from lenders and yo-yoing housing prices” has caused an increase in construction defect suits for new apartment developments: “Complaints and legal claims are already emerging, signaling that a confluence of all factors amid the Covid crisis could continue to be a problem for new construction — from entry-level studios to top-tier penthouses — for years to come, according to lawyers and development consultants.”
A Times analysis of Department of Buildings data by Marketproof demonstrated an increase in complaints beginning March 1st, 2020: “During the first year of the pandemic, new residential buildings recorded an average of five complaints per building, a 46 percent jump from the same period the previous year.”
Steven D. Sladkus, a partner at Schwartz Sladkus Reich Greenberg Atlas told the Times that his “'phone’s been ringing off the hook' with complaints from homeowners in new condo buildings” regarding “heating problems, poor sound insulation, fire safety issues and faulty elevators.”
Developers have faced a variety of pandemic-related challenges including a disrupted supply chain, shut downs, shipping delays, labor shortages, and increased material prices. In 2020, the lack of availability of vaccines caused some construction to halt: “Suddenly one guy calls in sick and the whole crew of electricians can’t show up,” Steven Zirinsky, co-chair of the building codes committee at the New York chapter of the American Institute of Architects told the Times.
Read the court decisionRead the full story...Reprinted courtesy of
Defective Panels Threatening Profit at China Solar Farms: Energy
January 21, 2015 —
Bloomberg NewsFlaws found in some Chinese solar panels can drastically eat into their efficiency, reducing how much power the panels will produce as the country races to meet aggressive goals to hold the line on fossil fuel emissions.
The defects, found in products set to be used only in China, are in a coating that suppresses reflections on glass, allowing the panels to capture more light. About 23 percent of samples taken from dozens of Chinese companies failed to meet requirements, according to regulators in China. For samples from Jiangsu, the eastern province where much of the glass is made, the rate was as high as 40 percent.
Read the court decisionRead the full story...Reprinted courtesy of
Bloomberg News
Damages or Injury “Likely to Occur” or “Imminent” May No Longer Trigger Insurance Coverage
January 05, 2017 —
Masaki J. Yamada – Ahlers & Cressman PLLCWashington Courts allow an insurer to determine its duty to defend an insured against a lawsuit based only on the face of the complaint and the limitations of the insurance policy. This is otherwise known as the “eight corners” rule (four corners of the complaint plus the four corners of the policy). In other words, the insurance company is not permitted to rely on facts extrinsic to the complaint in order to deny its duty to defend an insured. See Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wn.2d 751, 763 (2002). The laws in Washington provide greater protection to the insured over the insurer when it comes to the insurer’s duty to defend. The duty to defend a claim is triggered if a claim could “conceivably” be covered under the policy. See Woo v. Fireman’s Insurance, 161 Wn.2d 43 (2007). If there is any ambiguity in a policy with regard to coverage, the ambiguity is interpreted in favor of the insured.
As a result, contractors in Washington regularly tender claims or potential claims to their insurers even when damage has not occurred but will occur in the imminent future. Especially in the context of construction defect cases, a contractor will tender such a claim to its insurer to trigger the broad duty of the insurer to provide a defense. We also regularly recommend this to our contractor clients. For example, if a building owner serves a contractor with a claim that the construction and installation of a window system will imminently cause leaks and corrosion, we would recommend that the contractor tender the claim to its commercial general liability insurer. Washington courts have found a duty to defend when there are allegations in the complaint that covered damages will occur in the imminent future.
Read the court decisionRead the full story...Reprinted courtesy of
Masaki J. Yamada, Ahlers & Cressman PLLCMr. Yamada may be contacted at
myamada@ac-lawyers.com
Performing Work with a Suspended CSLB License Costs Big: Subcontractor Faces $18,000,000 Disgorgement
September 17, 2015 —
Steven M. Cvitanovic & David A. Harris – Haight Brown & Bonesteel LLPIn what could lead to a draconian result, the Court of Appeal for the First Appellate District held that a contractor who performs work without a valid license can be required to disgorge all payments received, even if the contractor perfectly performed its work. The case, Judicial Council of California v. Jacobs Facilities, Inc. (Ct. of Appeal, 1st App. Dis., Div. One, A140890, A141393), involved an $18,000,000 contract between Jacobs Facilities, Inc. (“Jacobs Facilities”) and the Judicial Council of California (“Judicial Council”). In April 2006, Jacobs Facilities, a wholly owned subsidiary of Jacobs Engineering Group, Inc. (“Jacobs Engineering”) entered into a three year contract with the Judicial Counsel to maintain 121 courthouses and other judicial branch buildings throughout Southern California (the “Contract”). Jacobs Facilities contracted to provide maintenance and oversight services, while retaining subcontractors to perform the actual maintenance and repair work.
In December 2006, as part of a corporate reorganization, Jacobs Engineering started winding up Jacobs Facilities and transferred its employees to Jacobs Engineering and then subsequently to another wholly owned subsidiary called Jacobs Project Management Co. (“Jacobs Management”). The work that was performed by Jacobs Facilities was taken over by Jacobs Management. As part of the windup, Jacobs Facilities’ Contractor’s State License Board license was allowed to lapse and the license expired by operation of law in November 2008. Although Jacobs Management was now performing the work, it was not added as a party to the contract. Although it appears Judicial Council was aware of the corporate changes, it was not until November 2009 that the parties assigned the contract to Jacobs Management.
Reprinted courtesy of
Steven M. Cvitanovic, Haight Brown & Bonesteel LLP and
David A. Harris, Haight Brown & Bonesteel LLP
Mr. Cvitanovic may be contacted at scvitanovic@hbblaw.com
Mr. Harris may be contacted at dharris@hbblaw.com
Read the court decisionRead the full story...Reprinted courtesy of
