Ninth Circuit Resolves Federal-State Court Split Regarding Whether 'Latent' Defects Discovered After Duration of Warranty Period are Actionable under California's Lemon Law Statute
December 17, 2015 —
Laura C. Williams & R. Bryan Martin – Haight Brown & Bonesteel LLPIn Daniel v. Ford Motor Company (filed 12/02/15), the Ninth Circuit resolved a federal and state court split on the issue of whether consumers can sustain a breach of implied warranty claim under California’s Song Beverly Consumer Warranty Act (aka the “lemon law” statute) for “latent” defects discovered after the warranty period has expired. Answering this question in the affirmative, the Ninth Circuit followed the holding in the California state appellate decision of Mexia v. Rinker Boat Co. 95 Cal.Rptr.3d 285 (2009), which definitively determined there is nothing in California’s lemon law that requires a consumer to discover a latent defect during the duration of the warranty.
The underlying class action lawsuit was brought in federal district court by purchasers of Ford Focus vehicles. The plaintiffs alleged Ford was aware of, but failed to disclose, a rear suspension defect in the Focus that resulted in premature tire wear which can cause decreased vehicle control, catastrophic tire failure and drifting on wet or snowy roads. The plaintiffs alleged a number of claims including violations of California’s Song Beverly Consumer Warranty Act and Magnuson Moss Warranty Act. Ford successfully moved for summary judgment on all claims prompting an appeal.
Reprinted courtesy of
Laura C. Williams, Haight Brown & Bonesteel LLP and
R. Bryan Martin, Haight Brown & Bonesteel LLP
Ms. Williams may be contacted at lwilliams@hbblaw.com
Mr. Martin may be contacted at bmartin@hbblaw.com
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Liability Coverage For Construction Claims May Turn On Narrow Factual Distinctions
March 25, 2024 —
Scott S. Thomas - Payne & FearsIn a recent trial court decision, a Montana federal court reminds us how fragile insurance coverage can be for construction-related insurance claims. Specifically, this case illustrates how seemingly small factual nuances can make or break coverage. The case turned on the application of policy provisions familiar to all who deal with these kinds of cases. (See Nautilus Ins. Co. v. Farrens, No. CV 22-193-M-DWM, 2024 WL 885109 (D. Mont. Mar. 1, 2024))
First, the court rebuffed the insurer’s argument that damage resulting from defective workmanship (in this case, the flawed design and installation of an elaborate floating-floor pool system) is not “caused by an occurrence.” The court correctly applied the test followed by most states: if either act causing injury is unintentional or the resulting injury is unexpected or unintended, the “occurrence” requirement is met. Fortunately, the court distinguished sloppy language from earlier Montana federal court decisions suggesting otherwise.
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Scott S. Thomas, Payne & FearsMr. Thomas may be contacted at
sst@paynefears.com
Drought Dogs Developers in California's Soaring Housing Market
September 17, 2015 —
John Gittelsohn – BloombergCalifornia’s already tight housing market is facing another long-term complication: drought.
The state’s dry spell is creating challenges for developers at a time when home prices are soaring because of limited inventory. The metropolitan areas of San Jose, San Francisco and San Diego had the nation’s biggest gap between the number of new jobs and residential building permits from 2012 to 2014, according to a report Wednesday by the National Association of Realtors. Now the drought, into its fourth year, stands to curb affordability further.
“It’s contributing to price appreciation by restricting supply,” said Mark Boud, founder of Real Estate Economics, a housing-consulting firm based in Irvine, California.
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John Gittelsohn, Bloomberg
Supply Chain Delay Recommendations
August 07, 2022 —
Denise Motta - Gordon & Rees Construction Law BlogThis Bulletin provides guidance to contractors, subcontractors, suppliers, and others to ensure compliance with contractual change order requirements in the event work on a construction project is impacted by supply chain delays.
Contract Protection Tips:
The construction industry is being impacted substantially by inability to obtain necessary construction products due to supply chain issues. Most construction contracts do not accommodate time extensions due to supply chain impacts. To address this gap in contract terms, we recommend including language such as: “lack of or failure of or other inability to obtain necessary transportation, fuel, power, materials, machinery, equipment or facilities, delays caused by other contractors, subcontractors or their subcontractors of any tier, or any materialmen or suppliers” as part of the defined force majeure event under the contract.
This provision can be included in the Change Order section of the contract as well by including a provision such as: “If the Work is delayed by the failure of or other inability to obtain necessary transportation, fuel, power, materials, machinery, equipment or facilities, delays caused by other contractors, subcontractors or their subcontractors of any tier, or any materialmen or suppliers, contractor shall be entitled to a change order for its costs and time associated with the delay.”
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Denise Motta, Gordon Rees Scully Mansukhani, LLPMs. Motta may be contacted at
dmotta@grsm.com
Prospective Additional Insureds May Be Obligated to Arbitrate Coverage Disputes
September 07, 2020 —
Danielle S. Ward - Balestreri Potocki & HolmesThe Court of Appeal closed out 2019 by ruling that an additional insured can be bound to the arbitration clause in a policy when a coverage dispute arises between that additional insured and the carrier. (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal. App. 5th 834, 837.)
In 2009, Future Farmers of America (“Future Farmers”) entered into a license agreement with SMG Holdings Incorporated (“SMG”) to use the Fresno Convention Center. As part of the agreement, Future Farmers was required to secure comprehensive general liability (“CGL”) coverage and name SMG and the City of Fresno as additional insureds (“AI”) on its policies.
Future Farmers purchased a general liability policy from Plaintiff Philadelphia Indemnity Insurance Company (“Philadelphia”). Neither SMG nor the City of Fresno were added as AIs, but the policy contained a “deluxe endorsement” which extended coverage to lessors of premises for “liability arising out of the ownership, maintenance or use of that part of the premises leased or rented” to the named insured. The policy also contained an endorsement that extended coverage where required by a written contract for liability due to the negligence of the named insured. Philadelphia’s policy also stated that if the insurance company and insured “do not agree whether coverage is provided . . . for a claim made against the insured, then either party may make a written demand for arbitration.”
A patron to Future Farmer’s event at the Fresno Convention Center was seriously injured after he tripped over a pothole in the parking lot and hit his head. He sued both Fresno and SMG. In turn, Fresno and SMG tendered their defense to Philadelphia. Philadelphia denied coverage finding that the incident did not arise out of Future Farmer’s negligence, and that SMG had the sole responsibility for maintaining the parking lot. Consequently, Philadelphia concluded that neither Fresno nor SMG qualified “as an additional insured under the policy” for the injury in the parking lot.
The coverage dispute continued, and in 2016, Philadelphia issued a demand for arbitration which was rejected by SMG. Philadelphia then petitioned the state court to compel arbitration arguing that SMG could not avoid the burdens of the policy while seeking to obtain policy benefits. SMG used Philadelphia’s conclusion that it did not qualify as an AI under the policy to argue that Philadelphia was “estopped from demanding arbitration”. In other words, SMG argued that it could not be held to the burdens of the policy without being provided with the benefits of the policy.
The trial court sided with SMG finding that there was no arbitration agreement between the parties. The court noted that while third party beneficiaries can be compelled to arbitration there was no evidence that applied here, and Philadelphia could not maintain its inconsistent positions on the policy as its respects SMG.
Disagreeing with the trial court, the Court of Appeal concluded that SMG was a third-party beneficiary of the policy. The AI obligations in the license agreement and the deluxe endorsement in the Philadelphia policy collectively establish an intended beneficiary status. The Court saw SMG’s tender to Philadelphia as an acknowledgement of that status.
Relatedly, the Court found that SMG’s tender to Philadelphia – its demand for policy benefits – equitably estopped them from avoiding the burdens of the policy. The Court stated it defied logic to require a named insured to arbitrate coverage disputes but free an unnamed insured demanding policy coverage from the same requirement. Conversely, the Court found no inconsistency in Philadelphia’s denial of coverage to SMG and its subsequent demand for arbitration. Philadelphia did not outright reject SMG’s status as a potential insured, but rather concluded that there was no coverage because the injury occurred in the parking lot. In other words, the coverage determination turned on the circumstances of the injury not SMG’s status under the policy.
In short, the Court concluded that the potential insured takes the good with the bad. If one seeks to claim coverage as an additional insured, they can be subject to the restrictions of the policy including arbitration clauses even if they did not purchase the policy.
Securing additional insurance has become increasingly more difficult and limited over the years, and this holding presents yet another hurdle to attaining AI coverage. For those seeking coverage, it is important to note that the Court’s ruling may have turned out differently had the carrier outright denied SMG’s AI status, rather than concluding that the injury was not covered.
Your insurance scenario may vary from the case discussed above. Please contact legal counsel before making any decisions. BPH’s attorneys can be reached via email to answer your questions.
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Danielle S. Ward, Balestreri Potocki & HolmesMs. Ward may be contacted at
dward@bph-law.com
A Court-Side Seat: NWP 12 and the Dakota Access Pipeline Easement Get Forced Vacations, while a Potential Violation of the Eighth Amendment Isn’t Going Anywhere
August 10, 2020 —
Anthony B. Cavender - Gravel2GavelHere’s a report on several new decisions made over the past few days.
U.S. SUPREME COURT
U.S. Army Corps of Engineers v. Northern Plains Resources Council
On July 8, 2020, the Court has issued a partial stay of the decision of the U.S. District Court for Montana, which had held that the nationwide use by the Corps of Engineers of its Nationwide Permit 12 to permit oil and gas pipelines must be vacated because the Corps, when it reissued these permits in 2012, failed to follow the requirements of the Endangered Species Act. The breadth of this ruling seems to have surprised and alarmed many past and perspective permittees of the Corps. The stay will not apply to the ongoing Ninth Circuit litigation.
FEDERAL COURTS OF APPEAL
Vega, et al. v. Semple (The U.S. Court of Appeals for the Second Circuit)
On June 29, 2020, the court refused to dismiss a putative class action by past and present inmates of Connecticut’s Garner Correctional Institution who alleged that state correctional officials exposed them to excessive amounts of radon gas in violation of the Eighth Amendment. These officials are alleged to have been “deliberately indifferent” to inmate safety. A 1993 Supreme Court decision, Helling v. McKiney, clearly established the law in this area, and the Garner facility opened in 1992. The defense clams of limited immunity as to federal law violations were rejected.
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Anthony B. Cavender, PillsburyMr. Cavender may be contacted at
anthony.cavender@pillsburylaw.com
Real Estate & Construction News Round-Up (08/17/22) – Glass Ceilings, Floating Homes and the Inflation Reduction Act
September 12, 2022 —
Pillsbury's Construction & Real Estate Law Team - Gravel2Gavel Construction & Real Estate Law BlogThis week’s round-up features the construction industry’s latest happenings: the Inflation Reduction Act, women shattering the glass ceiling, eco-friendly floating homes, and more.
- The Inflation Reduction Act contains approximately $5 billion for programs to accelerate the construction industry’s shift toward green building materials. (Julie Strupp, Construction Dive)
- According to a new analysis from consultancy Rider Levett Bucknall, the speed of growth for construction costs has only gotten faster. (Erik Sherman, Globe St.)
- Record vacancies in the construction industry has created the opportunity for women to step into what’s previously been an all-male business. (Craig Torres & Maria Paula Mijares Torres, Bloomberg)
- A midlife crisis hits office buildings, with the late-30s/early-40s stable of office product accounting for about a third of the national market today. (Commercial Observer)
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Pillsbury's Construction & Real Estate Law Team
Insurer Able to Refuse Coverage for Failed Retaining Wall
October 28, 2011 —
CDJ STAFFThe Eleventh District of the US Court of Appeals has ruled in the case of Nix v. State Farm Fire & Casualty Company. In this case, the Nixes filed a claim after a portion of the retaining wall in their home collapsed and their basement flooded. State Farm denied the claim “on the ground that the policy excluded coverage for collapses caused by defects in construction and for damage caused by groundwater.”
The court reviewed the Nixes’ policy and found that State Farm’s statement did specifically exclude both of these items. In reviewing the lower court’s ruling, the appeals court noted that State Farm’s expert witness, Mark Voll, determined that the retaining wall “lacked reinforcing steel, as required by a local building code, and could not withstand the pressure created by groundwater that had accumulated during a heavy rainfall.” Additionally, a french drain had been covered with clay soil and so had failed to disperse the groundwater.
The Nixes argued that the flooding was due to a main line water pipe, but their opinions were those of Terry Nix and the contractor who made temporary repairs to the wall. “Those opinions were not admissible as lay testimony. Neither Nix nor the contractor witnessed the wall collapse or had personal knowledge about the construction of the Nixes’ home.”
The lower court granted a summary judgment to State Farm which has been upheld by the appeals court.
Read the court’s decision…
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