Product Defect Allegations Trigger Duty To Defend in Pennsylvania
August 31, 2020 —
Stacy M. Manobianca - Saxe Doernberger & VitaThe Third Circuit Court of Appeals recently concluded, in Nautilus Insurance Co. v. 200 Christian Street Partners, LLC., that a duty to defend is triggered when product-related allegations are pled in connection with a claim for defective construction.
In Nautilus, the coverage dispute arose out of two independent underlying lawsuits in which homeowners alleged that the homes built by 200 Christian Street Partners (“Christian Street”) were defectively constructed. Christian Street tendered the claim to its insurer, Nautilus Insurance Co. (“Nautilus”), for defense and indemnity.1
Nautilus filed a lawsuit in the United States District Court for the Eastern District of Pennsylvania, seeking a declaration that it was not obligated to defend Christian Street in the underlying actions.2 Specifically, Nautilus asserted that it was not required to provide a defense in the underlying actions because Pennsylvania law does not consider faulty workmanship to constitute an “occurrence” and, therefore, to trigger the policy’s insuring agreement and the insurer’s duty to defend.3
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Stacy M. Manobianca, Saxe Doernberger & VitaMs. Manobianca may be contacted at
smm@sdvlaw.com
Private Project Payment Bonds and Pay if Paid in Virginia
January 05, 2017 —
Christopher G. Hill – Construction Law MusingsOne of the many items of construction law that has always been about as clear as mud has been the interaction between a contractual pay if paid clause and payment bond claims either under the Federal Miller Act or Virginia’s “Little Miller Act.” While properly drafted contractual “pay if paid” clauses are enforceable by their terms in Virginia, what has always been less clear is whether a bonding company can take advantage of such a clause when defending a payment bond claim. As always, these questions are very fact specific both under the Federal Act and the state statute. I wish that this post would answer this question, but alas, it will not.
A recent case from the City of Roanoke, Virginia looked at the interaction between a payment bond and a “condition precedent” pay if paid clause as it relates to a private project that is not subject to the Little Miller Act. In the case of IES Commercial, Inc v The Hanover Insurance Company, the Court examined a contractual clause between Thor Construction and IES Commercial in tandem with the bond language between Hanover Insurance Company and Thor as it related to a surprisingly familiar scenario. The general facts are these: IES performed, Thor demanded payment from the owner for the work that IES performed and the owner, for reasons that are left unstated in the opinion, refused to pay. IES sues Hanover pursuant to the payment bond and Hanover moves to dismiss the suit because Thor hadn’t been paid by the owner and therefore Hanover could take advantage of the pay if paid language.
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Christopher G. Hill, The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
SEC Approves New Securitization Risk Retention Rule with Broad Exception for Qualified Residential Mortgages
November 26, 2014 —
Neil P. Casey & Lori S. Smith – White and Williams LLPThe Securities and Exchange Commission (SEC) and five other federal agencies recently approved a joint rule (the “Risk Retention Rule”) mandating that sponsors of certain types of securitizations retain a minimum level of credit risk exposure in those transactions and prohibiting such sponsors from transferring or hedging against that retained credit risk.[i]The final Risk Retention Rule will be effective one year after its publication in the Federal Register for securitizations of residential mortgages, and two years after publication for securitizations of all other asset types. The SEC vote was 3-2, with sharp dissents from Commissioners Gallagher and Piwowar concluding that the adopting agencies had missed a prime opportunity to rein in risky mortgage lending practices that had precipitated the 2008 financial crisis.
Background
Following the meltdown of the securitization markets in 2007 (particularly subprime residential mortgage-backed securities), and the resulting global financial crisis, the Dodd-Frank Act mandated that the U.S. federal banking, securities and housing agencies adopt and implement rules to require sponsors of most new securitizations to retain not less than five percent of the credit risk of any assets that the securitizer, through the issuance of an asset-backed security, transfers, sells or conveys to a third party. It was thought that requiring securitization sponsors to keep “skin in the game” would align the interests of the sponsors with the interests of investors and thereby incentivize the sponsors to ensure the quality of the assets underlying the securitization through appropriate due diligence and underwriting procedures when selecting assets for securitization. Although the Dodd-Frank Act explicitly exempted securitizations of certain types of mortgage loans called “qualified residential mortgages” (or “QRMs”) from this risk retention requirement, it invited the rulemaking agencies to define that key term, provided that their definition could be no broader than the definition of “qualified mortgage”adopted by the Consumer Financial Protection Bureau (CFPB) pursuant to the Truth in Lending Act.[ii] In considering how to define QRM, the rulemaking agencies were directed by the Dodd-Frank Act to take into consideration “underwriting and product features that historical loan performance data indicate result in a lower risk of default.”[iii]
Reprinted courtesy of
Neil P. Casey, White and Williams LLP and
Lori S. Smith, White and Williams LLP
Mr. Casey may be contacted at caseyn@whiteandwilliams.com; Ms. Smith may be contacted at smithl@whiteandwilliams.com
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English High Court Finds That Business-Interruption Insurance Can Cover COVID-19 Losses
November 02, 2020 —
Lorelie S. Masters, Scott P. DeVries, Patrick M. McDermott & Jorge R. Aviles - Hunton Insurance Recovery BlogIn a decision that will influence how policyholders and insurers around the world address business-interruption coverage for COVID-19 losses, the English High Court recently handed down its much-anticipated judgment in the “Test Case,” The Financial Conduct Authority (FCA) v. Arch et al. The High Court’s comprehensive analysis will likely serve as an additional tool in policyholders’ arsenal in the ongoing battles over COVID-19 coverage.
The Panel, composed of two well-respected judges, one from the High Court (the UK’s trial court) and the other from the English Court of Appeal, analyzed 21 sample policy wordings in coverage extensions for business-interruption losses due to disease or the issuance of public authority orders. (Many of these wordings are also found in policies sold to US policyholders.) The High Court found that the COVID-19 pandemic and ensuing government actions fell within the coverage provided by the sample policy wordings.
Reprinted courtesy of
Lorelie S. Masters, Hunton Andrews Kurth,
Scott P. DeVries, Hunton Andrews Kurth,
Patrick M. McDermott, Hunton Andrews Kurth and
Jorge R. Aviles, Hunton Andrews Kurth
Ms. Masters may be contacted at lmasters@HuntonAK.com
Mr. DeVries may be contacted at sdevries@HuntonAK.com
Mr. McDermott may be contacted at pmcdermott@HuntonAK.com
Mr. Aviles may be contacted at javiles@HuntonAK.com
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The California Legislature Passes SB 496 Limiting Design Professional Defense and Indemnity Obligations
June 15, 2017 —
Mark Himmelstein & Jenny Guzman – Newmeyer & Dillion LLPSince 2008 when the California legislature limited subcontractor indemnity obligations, the design professional community has been shouting “what about us?” Well, the legislature finally responded and a new law that limits design professional’s defense and indemnity obligations to their percentage of fault goes into effect on January 1, 2018.
THE NEW LAW – SB 496
SB 496 amends California Civil Code section 2782.8 and states that indemnity agreements must be limited to the negligence, recklessness or willful misconduct of the indemnitee (i.e. no more Type I indemnity with design professionals). The amendment also provides that “in no event shall the cost to defend charged to the design professional exceed the design professional’s proportionate percentage of fault”, with a limited opportunity for reallocation in the event another defendant is judgment proof.
However, the duty to defend still remains and still arises at the time of the tender of the defense (both issues that were unsuccessfully targeted by the design professional lobbyists).
WHAT CAN BE DONE NOW?
Developers and Owners should strongly consider reviewing and revising the indemnity provisions in their consultant contracts to comply with the new legislation before the first of the year. This includes master agreements because project addenda entered into after January 1 are subject to the new law. The statute does not apply to current contracts, so these do not need to be amended.
Questions? Newmeyer & Dillion is happy to assist in navigating the process to ensure you are compliant prior to January’s deadline. Please let us know how we can help.
Mark Himmelstein is a partner focused in the areas of construction, real estate, business and insurance litigation. He has an in-depth experience in drafting and negotiating construction and real estate contracts. You can reach him at mark.himmelstein@ndlf.com.
Jenny Guzman is a litigation associate in the Newport Beach office, focusing her practice in the areas of business and real estate litigation and transactions. You can reach her at jenny.guzman@ndlf.com.
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 http://newmeyeranddillion.com/
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Newark Trial Team Obtains Affirmance of Summary Judgment for General Contractor Client
January 21, 2025 —
Lewis Brisbois NewsroomNewark, N.J. (December 31, 2024) - Days after
obtaining an Appellate Division victory affirming a “no cause” jury verdict, Newark Partner Afsha Noran and Managing Partner Colin Hackett obtained a
second appellate court victory affirming a trial court's dismissal of a complaint against another firm client, a general contractor.
The team had previously obtained summary judgment at the trial level on the grounds plaintiff could not establish a prima facie case against the client. The plaintiff appealed the grant of summary judgment and dismissal of her claim to the Appellate Division.
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Lewis Brisbois
Homeowner Has No Grounds to Avoid Mechanics Lien
September 01, 2011 —
CDJ STAFFThe California Court of Appeals has rejected a motion by a homeowner in a dispute with the contractor who built an extension to his home. In McCracken v. Pirvulete, Mr. McCracken filed a mechanics lien after Mr. Pirvulete failed to complete payment. The matter went to trial with a series of exhibits that showed “the contractual relationship was strained and the parties disagreed over performance and payment.” As a result of the trial, the court awarded Mr. McCracken, the contractor, $1,922.22.
Mr. Pirvulete appealed, contending that the court had not allowed his daughter to act as a translator, that the court had failed to give him sufficient time to present his case, that the mechanics lien should have been dismissed, and several other claims, all before a formal judgment was issued. After the court formalized its judgment and rejected the appeal, Mr. Pirvulete appealed again.
The appeals court found that Mr. Pirvulete did not provide an adequate record for review. The court dismissed Mr. Pirvulete’s claims. The court notes that Mr. Pirvulete claimed that a request for a discovery period was denied, however, he has provided neither the request nor the denial. The trial court has no record of either.
Nor was there a record of a request that Mr. Pirvulete’s daughter provide translation. The court notes, “so far as we can glean from the record provided, the Register of Actions states, ‘Trial to proceed without Romanian Interpreter for Defendant; Daughter present to interpret if needed.’” Additionally, the court found that “there has been no showing that his facility with the English language is or was impaired in any way or that there was any portion of any proceeding, which he did not understand.”
Further, the appeals court found there were no grounds for a new trial, despite Mr. Pirvulete’s filings. The court concluded, “The owner has failed to provide a record adequate for review of most, if not all, of the claims of error. Some issues are not cognizable because they relate to entirely separate proceedings, and not the trial below. To the limited extent that the claims are examinable, the owner has made no showing of error.” The court affirmed the judgment of the lower court against Mr. Pirvulete.
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Nonresidential Construction Employment Expands in August, Says ABC
December 16, 2019 —
Associated Builders and Contractors - Construction ExecutiveThe construction industry added 14,000 net new jobs in August, according to an Associated Builders and Contractors analysis of data released by the U.S. Bureau of Labor Statistics. On a year-over-year basis, industry employment has expanded by 177,000 jobs, or 2.4%.
Nonresidential construction employment increased by 11,600 net jobs in August and is up by 114,200 net jobs over the last 12 months, translating into 2.5% growth. The majority of job gains emerged from nonresidential specialty trade contractors, which added 5,400 jobs last month and nearly 103,000 positions over the past year. Heavy and civil engineering added 4,400 net new jobs, while nonresidential building added 1,800 jobs on a monthly basis.
The construction unemployment rate stood at 3.6% in August, up 0.2 percentage points from the same time last year. Unemployment across all industries stood at 3.7% in August, unchanged from the previous month.
“While job growth across all industries fell short of projections, today’s employment report was just about perfect,” said ABC Chief Economist Anirban Basu. “Yes, employment growth has been softening for quite some time, with average monthly job growth totaling 150,000 during the last six months after approaching 200,000 during the prior six-month period. And employment growth estimates were also revised lower for both June and July. That said, looking beyond the headline number, August’s labor market performance was more than respectable, even accounting for about 25,000 of the jobs being added for temporary Census work.
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ABC, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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