The Five-Step Protocol to Reopening a Business
August 03, 2020 —
Amy R. Patton & Rana Ayazi - Payne & FearsOver the past few months, guidance on how to create a safer, low-risk workplace has frequently changed. Fortunately, the state of California has finally reached a point where comprehensive and concrete advice is now available.
On June 24, 2020, the California Statewide Industry Guidance to Reduce Risk website was updated. In addition to providing industry-specific guidance and opening checklists for approximately 40 different industries, the website now unambiguously requires all businesses—regardless of which “phase” they reopen—to follow a five-step protocol (as described in greater detail throughout this article):
- Perform a detailed risk assessment and create a site-specific protection plan.
- Train employees on how to limit the spread of COVID-19. This includes how to screen themselves for symptoms and when to stay home.
- Set up individual control measures and screenings.
- Put disinfection protocols in place.
- Establish physical distancing guidelines
Reprinted courtesy of
Amy R. Patton, Payne & Fears and
Rana Ayazi, Payne & Fears
Ms. Patton may be contacted at arp@paynefears.com
Ms. Ayazi may be contacted at ra@paynefears.com
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Renee Zellweger Selling Connecticut Country Home
August 06, 2014 —
Emily Heffter – BloombergYou had me at seven fireplaces (and a bread oven).
Actress Renee Zellweger’s Connecticut country home, on the market for $1.6 million, is hardly roughing it.
The luxury farmhouse, built in 1770 and updated in 2004, is a stylish and luxurious country getaway. Set on 38 acres overlooking the Quinebaug River in rural Pomfret Center, the retreat at 96 Cotton Rd is 3,463 square feet with a top-of-the-line kitchen, a bread oven in the family room and a swimming pool.
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Emily Heffter, Zillow
Were Condos a Bad Idea?
June 13, 2022 —
Tyler P. Berding - Berding & Weil LLPIntroduction
Condominiums are a nice idea, but their execution has been less than perfect. Long before the fatal Berkeley, California balcony failure in 2015 or the 2021 Champlain Towers South collapse that killed 98 people in Surfside, Florida, we suspected that all was not right with the basic condo concept. Years ago, there were already signs this "cooperative" housing model was anything but. Whether due to owner apathy, internal disputes, or failure to fund future repairs, sustaining these projects for the long-term has been difficult, leaving their future in doubt. Can this be fixed, or is the concept inherently flawed?
Every enterprise has an organizational "model" to run the business. For-profit corporations obtain revenue from the sale of products or services. The revenue of non-profit condominium corporations are the assessments paid by the owners of the individual units. While these assessments are “mandatory” in the sense they must be paid, they are also “voluntary” since the amount is left to the board of directors to determine. Condos are cheaper to buy, but the sales price may not reflect the real cost of ownership. They are "cooperative" because costs and space are shared, but internal disputes and funding shortfalls operate to shorten the life of these buildings in ways few owners understand.
Internal Disputes
Why is condominium life frequently not “cooperative?” Disputes. Disputes between condominium owners and their associations; among board members; and between individual owners and their neighbors. There are arguments over the right to put a flag on the balcony. There are arguments over swimming pool hours. The right to paint their front door some color other than everyone else's. The right to be free of noise, smoke, or view-blocking plants. And sometimes, the claimed right not to pay assessments needed to maintain the project—all notwithstanding the governing documents to the contrary. The right to use one's property as the owner sees fit is a concept imported from the single-family home experience but not replicated in condominiums where common ownership requires rules to avoid chaos.
But a condominium association's most important concern should not be the color of someone's front door or when they can swim but sustaining the building and keeping owners safe. Maybe we care someone has painted their front door bright green, but should that concern have priority over finding rot that may cause a balcony to collapse with someone on it? Resolving conflicts and enforcing the governing documents have a reasonable success rate. Still, the effort required to do that often distracts the board from more critical issues—damage that can sink the ship. Directors can waste a lot of time re-arranging the deck chairs on the Titanic when, if they look closely, the iceberg is coming.
Maintenance Lacks Priority
Why can't we enforce the rules and do what’s necessary to sustain the building and keep occupants safe? Unfortunately, juggling both behavioral and sustainability issues has proven difficult for many volunteer boards of directors. Rule disputes are always in their face, crowding their agenda, while the damage that could lead to structural failure often remains unknown. Also, enforcing—or resisting—rules can involve a clash of egos that keep those matters front and center. Or, and I suspect this is a primary culprit, the cost of adequate inspections, maintenance, and repair is so high that boards cannot overcome owner resistance to that expense.
While boards and management must sustain the project and protect people, raising the funds to do that is another matter. Directors must leap hurdles to increase regular assessments. Imposing large, unexpected, special assessments for major repairs can be political suicide. Unfortunately, few owners realize how deadly serious proper maintenance is until there is a Berkeley or a Surfside, and everyone is stunned by the loss of life and property. While those are extreme cases of faulty construction, inadequate maintenance, natural causes, or all the above, they will not be the last. We know that because experts have seen precursors to those same conditions in other projects.
Our concern for sustainability arises from examining newer projects during construction defect litigation when forensic experts open walls to inspect waterproofing and structural components. It also comes from helping our clients with the re-construction of older buildings and dealing with many years or decades of neglect for which little or no reserves have been allocated.
The economic impact of repairing long-term damage is huge. Rot lying hidden within walls slowly damages the structural framing. Moisture seeping into balcony supports weakens them sometimes to the point of collapse. The cost to repair this damage is frequently out of reach of most condominium associations. In newer projects, when experts find problems early, claims are possible. The Berkeley balcony failure occurred in an eight-year-old building[1], and there was recourse available from the builder. But with older projects, it is often difficult to hold anyone responsible other than the owners themselves.
Is The Condo Model Flawed?
Suppose this is true—and our experience representing condominium projects for over forty years tells us it is—then we are not dealing only with the inexperience of some volunteer directors but rather with a flawed organization model. Board members want to succeed but are constrained by an income stream that depends almost entirely on the will of the individual owners—essentially voluntary funding.
Under most state laws, funding for condominium operations and maintenance is not mandatory[2], and relies instead on the willingness of the directors to assess owners for whatever is needed, and on the willingness of owners to accept the board’s decisions. When a board of directors can set assessments at whatever level is politically comfortable, without adequate consideration, or even knowledge, of long-term maintenance needs, systemic underfunding can result[3]. What the members want are the lowest assessments possible, and directors often accede to those demands. When these factors conspire to underfund maintenance, they will drastically shorten the service life of a building. They also make it potentially unsafe.
Commercial buildings incentivize their owners for good maintenance with increased rents and market value. That incentive is not relevant to a condominium owner because the accumulating deficit is rarely understood at the time of sale and not reflected in the unit’s sales price. With a single-family home, deferred maintenance is more easily identified and is reflected in the purchase price. But condo home inspections are usually confined to the interior of a unit, and do not assess the overall condition of the entire building or project or review any deficit in the funding needed to attend to deficiencies. Thus, market value is not affected by reality.
In most states that require that reserves be maintained for future maintenance and repairs, the statutes require nothing other than cursory surface inspections. Damage beneath the skin of a building is not investigated, and no reserves are recommended for what is not known. California recently enacted legislation that will require condominium associations inspect specific elevated structures for safety, including intrusive testing where indicated. But no other state requires this level of inspection, and few even require a reserve study to determine how much money to save for the obvious problems, never mind those no one knows about[4].
This situation leads to unfair consequences for those owners who find themselves unlucky enough to own a unit when the damage and deficits are finally realized. Damage discovered, say, in year 35 didn’t just happen in year 35. That deterioration likely began earlier in the building's life and lay hidden for decades. It is costly to repair when it finally becomes obvious or dangerous. No prior owner, those who owned and sold their units years ago, will pay any part of the cost of the eventual rehabilitation of that building due to past lack of adequate inspections and years of artificially low assessments. Instead, the present owners will be handed the entire tab for the shortfall from several decades of deferred maintenance or hidden damage—the last people standing when the music stops.
Can this trend be reversed? As condominium buildings age and deterioration continues, the funding deficit increases dramatically. But to reverse that trend and reduce the deficit, someone must know it exists and be willing to address it. That requires more robust inspections early in the building's life and potentially higher assessments to stay even with any decay.
Conclusion
It would not be wrong to blame this on the failure of the basic condominium model. Volunteers rarely have sufficient training or expertise to oversee complex infrastructure maintenance, especially without mandatory funding to pay for it. The model also does not insist that board members have a talent for resolving conflicts. While condominium boards can leverage fines or legal action to enforce the rules, that lacks finesse and can create greater antagonism—a distraction from the more critical job of raising funds to inspect and maintain the building.
Unit owner-managed, voluntarily funded, multi-million-dollar condominium projects were probably a bad idea from the beginning. But sadly, it is way too late to reverse course on the millions of such projects built in the past sixty years. Many are already reaching the end of their service lives, with no plan to deal with that. Robust inspection standards on new and existing projects and enforceable minimum funding for maintenance and repairs should be considered by state legislatures. But whatever the approach, the present system is not staying even with the deterioration of many buildings, and that is just not safe anymore.
- The collapse of the balcony in Berkeley occurred on an apartment building. But the construction of that building is similar or identical to the construction of most multi-story wood-frame condominiums.
- Boards of directors are empowered by statute or contract to assess members for operation and maintenance costs. However, there are few statutes that set minimum funding or otherwise require boards to exercise that authority.
- Even in states that require reserve studies, the physical inspections are inadequate to uncover some of the costliest damage. California’s reserve study statute—Civil Code Section 5550—only requires inspection of those components that are visible and accessible, leaving damage within walls and other structural components undiscovered and funding for the eventual repairs, unaddressed.
- In May 2022, in response to the Champlain Towers South collapse, Florida enacted mandatory structural inspections for buildings 30 years and older, repeating every 10 years thereafter. The law also includes mandatory reserve funding for structural components.
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Tyler P. Berding, Berding & Weil LLPMr. Berding may be contacted at
tberding@berdingweil.com
Is Settling a Bond Claim in the Face of a Seemingly Clear Statute of Limitations Defense Bad Faith?
October 11, 2021 —
Christopher G. Hill - Construction Law MusingsWe have often discussed payment and performance bonds here at Construction Law Musings, most often in the context of payment bond claims relating to federal and state-owned. construction projects. A late 2020 case out of the Eastern District of Virginia federal court examined what happens after such a claim, in this case, based upon a developer’s subdivision bonds, is made and negotiations commence between the surety and the claimant. Specifically, Fidelity & Deposit Co. of Maryland v. Ransgate Corp., et. al. looked at claims for indemnity by a surety and the principal/indemnitors in the event that the Surety settled such a claim.
In the Ramsgate case, Surety provided two separate subdivision subcontract bonds to Ramsgate. Pursuant to those bonds and the indemnity clause of its indemnity agreement, the Surety sought reimbursement of its $80,000.00 settlement payment to the local building authority that it paid to resolve what was originally a claim for over $420,000.00 by the City. The project was started in 2002 and after many years of failures to complete (according to the City of Suffolk), the City made its claim for expenses in 2017. Ramsgate claimed that it completed the subdivisions in 2003.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Insurance Company’s Reservation of Rights Letter Negates its Interest in the Litigation
November 12, 2019 —
Frank Ingham - Colorado Construction LitigationThe Colorado Court of Appeals held that an insurance company, which issues a reservation of rights letter to its insured, loses its interest in the litigation, pursuant to C.R.C.P. 24(a)(2), when the insured settles the claims and assigns the bad faith action against the insurance company to the plaintiff. Bolt Factory Lofts Owners Association, Inc. v. Auto-Owners Insurance Company, 2019WL 3483901(Colo. App. 2019).
In a 2016 lawsuit in Denver District Court, 2016CV3360, the Bolt Factory Loft Owners Association, Inc. (“Association”) asserted construction defect claims against six contractors. Two of those contractors then asserted claims against other subcontractors, including Sierra Glass Co., Inc. (“Sierra Glass”). After multiple settlements, the only remaining claims were those the Association, as assignee of the two contractors, asserted against Sierra Glass.
Auto-Owners Insurance Company (“AOIC”) issued policies to Sierra Glass and defended it under a reservation of rights. The policy afforded AOIC the right to defend Sierra Glass, and it required Sierra Glass to cooperate in the defense of the legal action. The Association presented a settlement demand of $1.9 million to Sierra Glass, which AOIC refused to pay. To protect itself from an excess judgment that AOIC might not have paid, Sierra Glass entered into an agreement with the Association whereby Sierra Glass would refrain from offering a defense at trial and assign its bad faith claim against AOIC to the Association in exchange for the Association’s promise that it would not pursue recovery against Sierra Glass of any judgment entered against it at trial. Such agreements, known as Bashor or Nunn Agreements, are allowed in Colorado. Nunn v. Mid-Century Insurance Co., 244 P.3d 116 (Colo. 2010). Therefore, Sierra Glass was entitled to protect itself in the face of AOIC’s potential denial of coverage and refusal to settle. Bolt Factory Lofts, at ¶ 15.
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Frank Ingham, Higgins, Hopkins, McLain & Roswell, LLCMr. Ingham may be contacted at
ingham@hhmrlaw.com
Sinking Buildings on the Rise?
July 01, 2019 —
Jason M. Adams - Gibbs GidenBy now everyone in the construction and insurance industries is familiar with the 58-story Millennium Tower building in San Francisco that has sunk 17 inches and tilted another 14 inches to the northwest. Another recent New York lawsuit alleges that a 58-story luxury Manhattan condo high-rise is also sinking and causing significant damage. With construction booming in the Southeast and other areas with questionable soils, sinking building cases may be on the rise. Given this reality, the issue of subsidence should be of paramount importance to every construction and insurance professional when insuring a project.
Most insurance carriers will include a subsidence and/or other earth movement exclusion on a commercial general liability ("CGL") quote for insurance as a matter of course. Construction professionals (owners/developers, general contractors, and subcontractors) or their brokers may be under the mistaken impression that they have no choice but to accept these subsidence exclusions as part of a standard construction policy. This is not the case. To the contrary, most insurance carriers are willing to remove subsidence exclusions if the underwriters are provided with acceptable geotechnical/soils reports when considering the project.
The insured construction professional often pushes back on the insurance carrier's request for soils reports because the insured sees the request as an unnecessary hassle, expense or unwelcome interference in the job. However, the carrier's soils review is designed to benefit everyone. If potential soils issues are discovered during the underwriting process they can be addressed at the outset of the project rather than after the project is built, which will typically cost substantially more to remedy. Moreover, a thorough analysis of the condition of the soils at the outset of the project allows the risk management team to recognize any potential issues and ensure that the proper coverage is obtained in order to provide protection down the road. Even if the insurance carrier charges more money to sign off on questionable soils after a review of the reports, the slight increase in premium is likely a worthwhile investment in the event of a subsidence loss.
The lesson is that the insured should not blindly accept a subsidence exclusion and should negotiate its removal. The insured should provide its broker and the insurance carrier the information they need in order to make a fully-informed decision as it pertains to the soils. Once the insurance carrier has had the opportunity to review and sign off on the condition of the soil, the carrier should feel comfortable enough to remove any subsidence exclusions or other similar earth movement limitations.
Subsidence is a relatively straightforward issue to deal with as long as the project team’s lawyers, brokers, risk managers and insurance company underwriters are working together toward the common goal of properly evaluating the risk and adequately insuring the project. This simple cooperative process between the entire risk management team could mean the difference between being covered or not covered in the event of a loss related to earth movement.
Jason M. Adams, Esq. is Senior Counsel at Gibbs Giden representing construction professionals (owners/developers, contractors, architects, etc.) in the areas of Construction Law, Insurance Law and Risk Management, Common Interest Community Law (HOA) and Civil Litigation. Adams is also a licensed property and casualty insurance broker and certified Construction Risk & Insurance Specialist (CRIS). Gibbs Giden is nationally and locally recognized by U. S. News and Best Lawyers as among the “Best Law Firms” in both Construction Law and Construction Litigation. Chambers USA Directory of Leading Lawyers has consistently recognized Gibbs Giden as among California’s elite construction law firms. Mr. Adams can be reached at jadams@gibbsgiden.com.
The content contained herein is published online for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel. The transmission of information by email, or any transmission or exchange of information over the Internet, or by any of the included links is not intended to create and does not constitute an attorney-client relationship. This publication may not be reproduced or used in whole or in part without written consent of the author. Copyright 2019 ©
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No Coverage Under Exclusions For Wind and Water Damage
March 30, 2016 —
Tred R. Eyerly – Insurance Law HawaiiThe Mississippi Supreme Court affirmed the granting of summary judgment to the insurer that there was no coverage under the all risk policy for loss caused by wind and water. Porter v. Grand Casino of Miss., Inc., 2016 Miss. LEXIS 3 (Miss. Jan. 7, 2016).
Cherri Porter's home was destroyed during Hurricane Katrina. The destruction occurred when the barge operated by Grand Casino of Mississippi came loose from its moorings and collided with her home.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
New Jersey Supreme Court Ruled Condo Association Can’t Reset Clock on Construction Defect Claim
September 20, 2017 —
David Suggs – Bert L. Howe & Associates, Inc.The New Jersey Law Journal reported that New Jersey Supreme Court “justices reversed an Appellate Division ruling that found three suits filed against contractors by the Palisades at Fort Lee Condominium Association on various dates in March and April 2009 and September 2010 were within the six-year limit because the association received notice of construction defects in the building in an engineer's report issued in June 2007.”
The justices stated that the statute of limitations is not reset when property changes hands: "An owner of a building cannot convey greater property rights to a purchaser than the owner possessed. If the building's owner knew or reasonably should have known of construction defects at the time of the sale of the property, the purchaser takes title subject to the original owner's right—and any limitation on that right—to file a claim against the architect and contractors."
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