Exact Dates Not Needed for Construction Defect Insurance Claim
March 01, 2012 —
CDJ STAFFThe Texas Court of Appeals reversed the decision of the trial court in Vines-Herrin Custom Homes v Great American Lloyds Insurance Company on December 21, 2011. Vines-Herrin Custom Homes built a single-family home in Plano, Texas in 1999. They obtained a commercial general liability policy from Great American, later purchasing coverage from Mid-Continent, which the decision describes as “a sister company of Great American.”
While the home was under construction, Emil G. Cerullo sought to purchase it. At the time, it was under contract to another buyer. Two months later, Vines-Herrin told Cerullo that the deal had “fell through.” Cerullo bought the house with modifications from the original plan. Upon moving in, Cerullo began having water intrusion and other problems. “Cerullo noticed water gathering on window sills and damage to the sheetrock and baseboard.” Additional problems followed, including cracks, leaks, “and in early 2002, the ceiling and roof began to sag.”
Cerullo sued Vines-Herrin, claiming negligent construction. Vines-Herrin filed a claim seeking defense and indemnification under the insurance policies. Coverage was denied and Vines-Herrin filed suit to require coverage and also bringing claims for “breach of the duty of good faith and fair dealing, breach of contract, and DTPA and insurance code violations.”
In May, 2006 Vines-Herrin stated that it had no more defense funds and went into arbitration with Cerullo. The underlying construction defect action was settled for about $2.5 million. As part of the settlement, “Cerullo became the rightful owner of all remaining claims, rights, and causes of action against” Vines-Herrin’s insurers. He then joined the coverage lawsuit.
The non-jury trial was held under the controlling law of the time which “imposed a duty to defend only if the property damage manifested or became apparent during the policy period.” The court concluded in Cerullo’s favor. During the post-judgment motions, the Texas Supreme Court rejected the manifestation rule. Under this ruling, the trial court set aside its judgment and found in favor of the insurance companies. The trial court noted that although “the Residence was covered by an uninterrupted period of insurance (which began before the Residence was constructed) and that the damages to the Residence manifested during the uninterrupted period of insurance coverage,” “Mr. Cerullo failed to allege the date when actual physical damage to the property occurred.”
The first claim by Cerullo and Vines-Herrin was that the “Final Judgment” occurred in October 2004, and that all proceedings thereafter were void. The court rejected this as the “final judgment” is not “final for the purposes of an appeal unless it actually disposes of every pending claim and party or unless it clearly and unequivocally states that it finally disposes of all claims and all parties.” Despite the use of the word “final,” the trial court’s decision did not do this.
The second issue was the application of the Texas Supreme Court case Don’s Building Supply Inc. v. OneBeacon Insurance. In this case, framing rot due to defective stucco was not discovered until after the end of the policy period. The Supreme Court noted that “the key date is when injury happens, not when someone happens on it.”
The appeals court found that the trial court misapplied the Don’s Building Supply decision. Rather than an exact date, “so long as that damage occurred within the policy period, coverage was provided.” The appeals court noted that “Cerullo alleged the house was constructed in 1999 and he purchased it in May 2000.” “By April of 2001, Cerullo noticed that the windowsills in the study were showing signs of leakage and water damage.” As the court put it, “the petitions then alleged a litany of defects.”
The court noted that coverage by Great American was in effect from November 9, 1999 to November 9, 2000. In May of 2000, the house suffered “substantial flooding from a rainstorm that caused damage.” This was during the policy period. “As a matter of law, actual damages must occur no later than when they manifest.”
The court concluded that as damage manifested during the period of coverage, so must have the damage. The court ruled that “contrary to the trial court’s determination otherwise, the evidence showed Great American’s duty to indemnify was triggered, and expert testimony establishing the exact date of injury was not required to trigger the duty.”
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Second Circuit Affirms Win for General Contractor on No Damages for Delay Provision
September 02, 2024 —
Bill Wilson - Construction Law ZoneIn NASDI, LLC v. Skanska Koch Inc. Kiewit Infrastructure Co. (JV), 2024 WL 1270188 (2d Cir. Mar. 26, 2024), the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s grant of summary judgment dismissing a subcontractor’s delay claim against a general contractor on a public project in New York state. The Court enforced a typical no-damages-for-delay provision to bar the subcontractor’s breach of contract claim. The no-damages-for-delay provision in the subcontract at issue provided:
NO DAMAGE FOR DELAY. Except as otherwise provided …, Subcontractor agrees that it shall have no Claim against Contractor for any loss or damage it may sustain through delay, disruption, suspension, stoppage, interference, interruption, compression, or acceleration of Subcontractor’s Work (‘Delay Damages’) caused or directed by Contractor for any reason, and that all such Claims shall be fully compensated for by Contractor’s granting Subcontractor such time extensions as it is entitled to as a result of any of the foregoing.
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Bill Wilson, Robinson & Cole LLPMr. Wilson may be contacted at
wwilson@rc.com
The Johnstown Dam Failure, as Seen in the Pages of ENR in 1889
April 08, 2024 —
Scott Lewis - Engineering News-RecordThe small headline of the Engineering News article shown here belies the gravity of the disaster: the deadliest dam failure in U.S. history. The South Fork Dam in Pennsylvania was a 72-ft-tall, 931-ft long earth and rockfill structure. After a stop-and-start construction process over a dozen years, it was completed in 1853. The dam went through several changes of ownership and was repaired inadequately. Fish screens were installed that obstructed the spillway and caused water to overtop and erode the structure. This mass of water uprooted trees, rocks, houses, rail cars and animals as it thundered down the valley before smashing into a stone railway embankment. Fires ignited by wrecked locomotives burned for three days. The death toll was 2,208.
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Scott Lewis, Engineering News-Record
Mr. Lewis may be contacted at lewisw@enr.com
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New York Team’s Win Limits Scope of Property Owners’ Duties to Workers for Hazards Inherent in Their Work
May 20, 2024 —
Lewis Brisbois NewsroomNew York, N.Y. (May 9, 2024) - New York Partners Jennifer Oxman and Andrew Harms recently secured dismissal of a personal injury plaintiff’s complaint on summary judgment in Queens County, with a state judge accepting their argument that a porter who allegedly tripped and fell on loose wood in a stairwell had no cause of action against the property owner because it was his job to clean the stairs in the first instance. The porter was not an employee of the property owner, but rather an employee of a property management company. Therefore, the workers compensation bar did not apply to the employee’s claims.
In a four-page decision, Justice Chereé A. Buggs of Queens County Supreme Court found that plaintiff’s duties as a porter included cleaning the stairwell and that he saw and cleaned loose pieces of wood on occasions prior to his accident. Justice Buggs held that while the wood debris likely came from an “outside source”, i.e. a contractor performing work at a neighboring building, the source of the debris was not relevant. Rather, what mattered was the fact that the hazard upon which plaintiff tripped was “inherent in or related to” plaintiff’s work responsibilities. By contrast, Justice Buggs held that the contractor who allegedly was the source of the wood was not entitled to summary judgment under the same legal theory because it arguably caused and created the hazard upon which plaintiff tripped.
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Lewis Brisbois
California Court Holds No Coverage Under Pollution Policy for Structural Improvements
October 02, 2018 —
Brian Margolies - TLSS Insurance Law BlogIn its recent decision in Essex Walnut Owner L.P. v. Aspen Specialty Ins. Co., 2018 U.S. Dist. LEXIS 138276 (N.D. Cal. Aug. 15, 2018), the United States District Court for the Northern District of California had occasion to consider the issue of a pollution liability insurer’s obligation to pay for the redesign of a structural support system necessitated by the alleged presence of soil contamination.
Aspen’s insured, Essex, owned a parcel of property it was in the process of redeveloping for commercial and residential purposes. The project required excavation activities in order to construct an underground parking lot, and as part of this process, Essex designed a temporary shoring system comprising tied-in retaining walls in order to stabilize the area outside of the excavation. During the excavation work, construction debris was encountered requiring removal. Aspen agreed to pay for a portion of the costs to remove and dispose the debris under the pollution liability policy it issued to Essex.
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Brian Margolies, Traub Lieberman Straus & Shrewsberry LLPMr. Margolies may be contacted at
bmargolies@tlsslaw.com
An Insurance Policy Isn’t Ambiguous Just Because You Want It to Be
December 20, 2021 —
David Adelstein - Florida Construction Legal UpdatesWhen it comes to insurance contracts, there is a rule of law that states, “where interpretation is required by ambiguity in insurance contracts[,] the insured will be favored.” Pride Clean Restoration, Inc. v. Certain Underwriters at Lloyd’s of London, 46 Fla. L. Weekly D2584a (Fla. 3d DCA 2021) (citation and quotation omitted). Stated another way: ambiguities in insurance contracts will be interpreted in favor of the insured and against the insurer.
With this rule of law in mind, insureds oftentimes try to argue ambiguity even when there is not one. This was the situation in Pride Clean Construction. In this case, the property insurance policy contained a mold exclusion that stated the policy did NOT insure for “a. loss caused by mold, mildew, fungus, spores or other microorganism of any type, nature, or description including but not limited to any substance whose presence poses an actual or potential threat to human health; or b. the cost or expense of monitoring, testing, removal, encapsulation, abatement, treatment or handling of mold, mildew, fungus, spores or other microorganism as referred to in a) above.” Not only did the policy not insure for loss caused by mold, it went further to state it was NOT insuring for any mold testing or abatement.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Civil RICO Case Against Johnny Doc Is Challenging
October 20, 2016 —
Wally Zimolong – Supplemental ConditionsNews that a non-union contractor had filed a Lawsuit against IBEW Local 98 and its leader, John Dougherty, made headlines this week. While making fodder for local media, the plaintiffs must bound several legal hurdles before IBEW Local 98 and “Johnny Doc” face any threat of liability.
Background on RICO
The lawsuit was filed under a set of laws known as the Racketeer Influenced and Corrupt Organizations Act (RICO). I have written about RICO’s impact on labor unions on this blog before and predicted that recent federal court cases made RICO claims against more viable. RICO is a Nixon era set of laws that were originally passed to combat organized crime. There is both a civil and criminal component to RICO. (Interestingly, the RICO act remained relatively dormant until then U.S. Attorney Rudy Giuliani began effectively using it to prosecute the mob in the 1980’s.) Although recent decisions have made RICO claims against unions more viable, any RICO claim is still challenging. Indeed, some courts require a plaintiff in civil RICO cases to file a separate RICO case statement detailing its allegations. RICO claims are powerful. Some have called RICO claims a “thermonuclear” litigation device because the law permits the award of trebel (triple) damages and attorneys fees.
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
An Occurrence Under Builder’s Risk Insurance Policy Is Based on the Language in the Policy
April 03, 2023 —
David Adelstein - Florida Construction Legal UpdatesBuilder’s risk insurance coverage is a vital property insurance coverage during the course of construction. Builder’s risk insurance is not a one-size-fits-all product so please make sure you are working with your insurance broker to procure this product that factors in and covers risk associated with the project.
Builder’s risk insurance is typically an occurrence-based policy. No different than other occurrence-based policies (such as commercial general liability), a dispute may arise as to the occurrence. This could be due to the triggering of the actual policy during the coverage period or it could be due deductible obligations, as in the case discussed below. When dealing with a builder’s risk insurance policy–again, no different than any policy–the language in the policy matters. Definitions used in the policy to define specific terms matter and, in numerous cases, the ordinary dictionary meanings of terms matter. But it all starts with the policy language.
In KT State & Lemon, LLP v. Westchester Fire Insurance Co., 2023 WL 2456499 (M.D.Fla. 2023), a builder’s risk policy provided coverage from April 2018 through the end of November 2019. There was a $50,000 per occurrence deductible for loss caused by or from water damage. An extension to the builder’s risk policy was negotiated through the end of January 2020 that increased this water damage deductible to $250,000 per occurrence. During construction and the testing of the fire suppression (sprinkler) system, leaks started to occur resulting in water damage. Two leaks occurred in September 2019, one leak in October 2019, one leak in November 2019, and two leaks in December 2019 (during the extension and higher water damage deductible period).
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
