De-escalating The Impact of Price Escalation
August 10, 2021 —
Brian C. Padove - ConsensusDocsWhat happens when construction material prices abruptly rise by 15%, 35%, 50%? Moreover, what happens to a construction project when such volatility occurs? While there is no definite answer, delays in procuring such materials and associated cost overruns will likely impact the construction project. The last 15 months contractors have had to work through extraordinary construction material price increases, such as a 90% price increase for lumber from April 2020 to April 2021. While there is no statistic quantifying the impact these increases have had on the construction industry, the increases surely have had an influence, whether it has been through lost profits, delays, or damage to contractors’ otherwise strong reputation for timely performance.
Considerations Prior To Contract Execution
The first way to mitigate price escalation is identifying materials most susceptible to price volatility during the bidding process and then having an open discussion with upstream parties regarding the potential price volatility. Additionally, the bid may also include either (1) an allowance for the materials providing additional funds, if necessary, should the material price increase, or (2) a shortened timeframe in which the bid is open, which would lessen the time in which a price shift may occur.
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Brian C. Padove, Watt, Tieder, Hoffar & Fitzgerald, LLPMr. Padove may be contacted at
bpadove@watttieder.com
Supreme Court of Washington State Upholds SFAA Position on Spearin Doctrine
September 13, 2021 —
Peter Roth – The Surety & Fidelity Association of AmericaSeptember 9, 2021 (WASHINGTON, DC) –
The Surety & Fidelity Association of America (SFAA) commends the decision of The Supreme Court of The State of Washington to reverse the lower court ruling in the case of Lake Hills Investments, LLC vs. Rushforth Construction Co. As argued by SFAA, the Supreme Court found the contractor should not be responsible for damage caused by the defective design provided by the owner even where the contractor was responsible for certain defective work. In addition, the contractor is not completely barred from asserting this defense if the defects were caused by a combination of deficient performance by the contractor and deficient design, and proportional liability should be determined.
The SFAA, along with the National Electrical Contractors Association Puget Sound Chapter (NECA), Mechanical Contractors Association of Western Washington (MCAWW) and SMACNA-Western Washington (SMACNA), issued an Amici Curiae in support of Petitioner AP Rushforth Construction Co., Inc. d/b/a AP Rushforth, and Adolfson & Peterson, Inc.’s (collectively “AP”) Petition for Discretionary Review. In the brief they argued the Court should grant the Petition because the decision by the lower court is contrary to precedent of limiting a contractor’s liability when the owner’s defective plans and specifications caused the defective work, and upsets settled expectations of allocation of risk and liability between contractors, owners and architects (among others) on construction projects. This allocation of risk and the principle of limiting the contractor’s liability for defective work based on defective plans and specifications is long settled doctrine in Washington State and throughout the country, a doctrine based on the US Supreme Court’s landmark decision in U.S. vs. Spearin more than 100 years ago.
The Surety & Fidelity Association of America (SFAA) is a trade association of more than 425 insurance companies that write 98 percent of surety and fidelity bonds in the U.S. SFAA is licensed as a rating or advisory organization in all states and it has been designated by state insurance departments as a statistical agent for the reporting of fidelity and surety experience. www.surety.org
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Peter Roth, SFAAMr. Roth may be contacted at
proth@surety.org
Insured Versus Insured Clause Does Not Bar Coverage
September 17, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe Fifth Circuit considered whether coverage was barred under the policy's insured versus insured provision. Kinsale Ins. Co. v. Georgia-Pacific, L.L.C., 2015 U.S. App. LEXIS 12976 (5th Cir. July 27, 2015).
Georgia-Pacific hired Advanced Services, Inc. for demolition work at Georgia-Pacific's idled plywood plant. A fire occurred at the plant, damaging equipment Advanced had leased from H&E Equipment for the demolition work.
Several lawsuits followed. One was brought by H&E against Advanced. Advanced filed a third-party demand for indemnification against Georgia-Pacific for any damages Advanced was required to pay H&E.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
When an Insurer Proceeds as Subrogee, Defendants Should Not Assert Counterclaims Against the Insured/Subrogor
June 14, 2021 —
Gus Sara - The Subrogation StrategistIn a subrogation action, one party is substituted to the rights and remedies of another with respect to a lawful claim. The substituted party (the subrogee) is legally able to pursue any right or seek any remedy that would be available to the subrogor regarding that claim. But can a defendant in a subrogation action assert any claim against the subrogee that it would have against the subrogor? In Federated Mut. Inc. Co. v. Kosciusko County, No. 3:20-CV-960, 2021 U.S. Dist. Lexis 88735, the United States District Court for the Northern District of Indiana considered whether a defendant could assert counterclaims against the insureds/subrogors in an action filed in the name of their subrogee. The court held that since the insurerds/subrogors were not a party to the action and the defendant could assert the substance of its counterclaim as a defense, the defendant could not file counterclaims against the insureds/subrogors in the insurer’s subrogation action.
Kosciusko County arose from a motor vehicle accident involving a semi-tractor trailer owned by Bellman Oil Company, Inc. (Bellman) and B & B Transport, Inc. (B & B). The accident occurred on a highway in Kosciusko County in October of 2019. The accident caused the semi-tractor trailer containing ethanol fuel to roll over four times and burst into flames. Federated Mutual Insurance Company (FMIC) insured Bellman and B & B for the semi-tractor trailer and issued payments as a result of the accident.
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Gus Sara, White and WilliamsMr. Sara may be contacted at
sarag@whiteandwilliams.com
Mandatory Arbitration Provision Upheld in Construction Defect Case
May 18, 2011 —
CDJ STAFFThe Superior Court of New Jersey reversed the decision in Frumer v. National Home Insurance Company (NHIC) and the Home Buyers Warranty Corporation (HBW), stating that the mandatory arbitration provision within the Frumer’s home warranty policy was binding.
The Frumers alleged that the construction defects were discovered immediately after moving into their million dollar home. After failing to achieve any results from dealing with the builder, they turned to their home warranty. There was some dispute over claims, and a settlement offer was rejected by the Frumers. The Frumers elected to commence litigation rather than utilize the binding arbitration.
The NHIC and the HBW filed a motion to compel arbitration, however, the motion judge denied the motion: “…the Warranty leaves open the option for [plaintiffs] to commence litigation, which [plaintiffs have] done in this case. The clause also states that ‘the filing of a claim against this limited Warranty shall constitute the election of remedy and shall bar the Homeowner from all other remedies.’ However, the provision does not state that the filing of a claim elects arbitration as the exclusive remedy, and any ambiguity in the language must be inferred against the drafter.”
The NHIC and the HBW appealed the decision. The Superior Court reversed the decision: “Where, such as here, the homeowner files a claim against the warranty for workmanship/systems defects, the warranty clearly and unequivocally establishes binding arbitration as the exclusive remedy. There is, however, no election of remedies for a dispute involving a major structural defect claim. The warranty clearly and unequivocally establishes binding arbitration as the exclusive remedy.”
Charles Curley of Halberstadt Curley in Conshohocken, Pa., the local counsel for National Home and Home Buyers, told the New Jersey Law Journal that “the ruling reaffirms New Jersey’s commitment to enforcing arbitration agreements and requiring people to go to mandatory arbitration when the contracts call for it.”
“At this point, their hope is that the warranty company will do what it's supposed to do — repair covered defects,” Eric McCullough, the Frumer’s lawyer said to the New Jersey Law Journal.
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Savera Sandhu Joins Newmeyer Dillion As Partner
March 23, 2020 —
Newmeyer DillionProminent business and real estate law firm Newmeyer Dillion is pleased to announce that
Savera Sandhu has joined the firm's Las Vegas office as a partner. Sandhu's addition formalizes Newmeyer Dillion's
Healthcare practice group, which will draw on the firm's existing strengths and service offerings in the healthcare industry.
"Newmeyer Dillion has been delivering services within the healthcare industry for many years, offering our premier legal services across a large range of sectors," said Office Managing Partner Nathan Owens. "We are excited to welcome Savera to our team, and believe her experience will help us to more broadly service the healthcare industry as we continue to work closely with companies in the Western region."
The firm's Healthcare practice will comprise attorneys from the firm's business, litigation, employment law and real estate practice groups, who have extensive experience advising the healthcare industry in the areas of state and federal regulatory compliance, general business matters, medical malpractice and litigation defense. Newmeyer Dillion offers a range of key legal services to healthcare clients including entrepreneurs, technology companies, physicians, dentists and other healthcare professionals, suppliers, medical device manufacturers, hospitals, physician groups, out-patient and long-term care facilities.
In addition to health care, Sandhu expands the firm's capabilities to service clients in the transportation, finance, entertainment and construction industries.
For over a decade, Sandhu has worked intimately with the healthcare industry as their legal advocate, offering solution-oriented approaches to the business side of healthcare. As a partner with the firm, Sandhu counsels a wide range of corporate and healthcare clients on business and litigation matters throughout the state and nationwide. Embracing the firm's commitment to propel businesses forward, she combines a deep knowledge of commercial litigation with finely-honed experience as a trusted legal advisor to Fortune 100 companies. She also brings a broad perspective to her work with healthcare clients, based on her exceptional knowledge of corporate law, healthcare litigation, and state and federal regulatory matters.
Sandhu believes that her effectiveness as legal counsel is enhanced by her strong commitment to both her profession and to the communities where she lives and works. Dedicated to the tenets of diversity and inclusion rooted in the firm's culture, she has held leadership roles as a long-time member of the Southern Nevada Association of Women Attorneys (SNAWA) and the South Asian Bar Association.
Sandhu received her B.A. from the University of Washington and her J.D. from Seattle University School of Law.
About Newmeyer Dillion
For 35 years, Newmeyer Dillion has delivered creative and outstanding legal solutions and trial results that achieve client objectives in diverse industries. With over 70 attorneys working as a cohesive team to represent clients in all aspects of business, employment, real estate, environmental/land use, privacy & data security and insurance law, Newmeyer Dillion delivers holistic and integrated legal services tailored to propel each client's success and bottom line. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California and Nevada, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949.854.7000 or visit www.newmeyerdillion.com.
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President Trump Nullifies “Volks Rule” Regarding Occupational Safety and Health Administration (OSHA) Recordkeeping Requirements
April 13, 2017 —
Louis “Dutch” Schotemeyer – Newmeyer & Dillion LLPOSHA requires employers to maintain safety records for a period of five years. The Occupational Safety and Health Act contains a six month statute of limitations for OSHA to issue citations to employers for violations. In an effort to close the gap between the five years employers are required to keep records and the six month citation window, the Obama Administration implemented the “Volks Rule,” making recordkeeping requirements a “continuing obligation” for employers and effectively extending the statute of limitations for violations of recordkeeping requirements from six months to five years.
On March 22, 2017, the Senate approved a House Joint Resolution (H.J. Res. 83) nullifying the “Volks Rule” and limiting the statute of limitations to six months for recordkeeping violations. President Trump signed the resolution nullifying the “Volks Rule” on April 3, 2017. The nullification appears to be in line with President Trump’s stated goal of generally eliminating governmental regulations.
What Does This Mean for California Employers?
California manages its own OSHA program, which generally follows the federal program, but is not always in lock-step with Federal OSHA. Cal/OSHA, under its current rules, may only cite employers for recordkeeping violations that occurred during the six months preceding an inspection or review of those records. To date, there has been no indication that California’s Division of Occupational Safety and Health (DOSH) has plans to adopt the “Volks Rule.” Barring a change, California employers will continue to operate under the status quo and be required to maintain safety records for five years, but will only be exposed to citations for recordkeeping violations occurring within the last six months.
Current Cal/OSHA Recordkeeping Requirements
Cal/OSHA form 300 (also known as the “OSHA Log 300”) is used to record information about every work-related death and most work-related injuries that cannot be treated with onsite first aid (specific requirements can be found in the California Code of Regulations, Title 8, Sections 14300 through 14300.48). Currently, California Code of Regulations, Title 8, Section 14300.33 requires employers to retain OSHA Log 300 for a period of five years following the end of the calendar year during which the record was created, despite the fact that Cal/OSHA can only cite employers for failing to maintain such records for up to six months preceding an inspection.
Looking to the Future
Cal/OSHA is working on regulations that would require electronic submission of OSHA Log 300 records in California. This would bring Cal/OSHA more in line with Federal OSHA, which already requires electronic submission.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit www.ndlf.com.
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Louis "Dutch" Schotemeyer, Newmeyer & Dillion LLPMr. Schotemeyer may be contacted at
dutch.schotemeyer@ndlf.com
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
