Seattle Washington Building Expert Directory

Court Grants Summary Judgment to Insurer in HVAC Defect Case

August 04, 2011 — CDJ STAFF

The US District Court in Colorado has determined in the case of RK Mechanical, Inc. v. Travelers Property Casualty Company of America that Travelers did not breach its insurance contract when it refused to cover RK Mechanical.

RK Mechanical performed an HVAC installation for a residential project for which J.E. Dunn Rocky Mountain was the general contractor. As part of the work, RK “installed approximately one hundred seventy-one CPVC flanges, which were manufactured by Charlotte Pipe and Foundry Company.” Two of these flanges failed in June, 2009 leading to water damage. RK replaced the cracked flanges and engaged in water remediation. “Travelers paid Dunn and RK for the costs associated with the water damage associated with the Flange Failure.” The court notes that Travelers did not pay for the cracked flanges, however.

Subsequently, RK examined the remaining flanges, finding many cracked ones. These were replaced with new ones. Later, all the Charlotte flanges were replaced with ones from another manufacturer. RK applied for coverage.

All sides brought in their experts: “Microbac Laboratories, Inc. prepared a report on behalf of RK concluding that the Flange Failure was due, in part, to an assembly or workmanship defect in addition to manufacturing defects in the flanges. Higgins & Associates prepared a report on behalf of Travelers concluding that the flanges failed due to improper installation. Plastic Failure Labs prepared a report on behalf of the flange manufacturer concluding that the flanges failed due to improper installation by RK.”

At this point, Travelers denied coverage. RK sued alleging that the coverage for flange failure and water damage implicitly includes mitigation costs. The court rejected this claim, noting it would do so even if Travelers had paid for the replacement of the first two flanges. Nor did the court find that replacement of the faulty flanges is not "a covered cause of loss." RK also argued that as it was required to mitigate, Travelers was obligated to cover costs. However, the court found that “the mitigation costs expended by RK were not incurred in an effort to avoid damages from a potential breach of contract by Travelers.” The court additionally noted that despite RK’s claims, the Colorado courts have not found a common law duty to mitigate. Finally, the court found that the exclusions in the policy were not in violation of public policy.

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Fifth Circuit Holds Insurer Owes Duty to Defend Latent Condition Claim That Caused Fire Damage to Property Years After Construction Work

September 21, 2020 — Jeremy S. Macklin - Traub Lieberman
Most general liability policies only provide coverage for “property damage” that occurs during the policy period. Thus, when analyzing coverage for a construction defect claim, it is important to ascertain the date on which damage occurred. Of course, the plaintiffs’ bar crafts pleadings to be purposefully vague as to the date (or period) of damage to property. A recent Fifth Circuit decision applying Texas law addresses this coverage issue in the context of allegations of a condition created by an insured during the policy period that caused damage after the policy expired. In Gonzalez v. Mid-Continent Cas. Co., 969 F.3d 554 (5th Cir. 2020), Gilbert Gonzales (the insured) was a siding contractor. In 2013, the underlying plaintiff hired Gonzales to install new siding on his house. In 2016, the underlying plaintiff’s house was damaged in a fire. The underlying plaintiff sued Gilbert in Texas state court alleging that when Gonzalez installed the siding in 2013, he hammered nails through electrical wiring and created a dangerous condition that caused a fire three years later in 2016. At the time Gilbert performed construction work, he was insured by Mid-Continent Casualty Company. Mid-Continent disclaimed coverage to Gonzales on the basis that the complaint unequivocally alleged that property was damaged in 2016 and there were no allegations that property damage occurred prior to 2016 or was continuing in nature. Read the court decision
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Reprinted courtesy of Jeremy S. Macklin, Traub Lieberman
Mr. Macklin may be contacted at jmacklin@tlsslaw.com

Bad Faith and a Partial Summary Judgment in Seattle Construction Defect Case

February 10, 2012 — CDJ STAFF

The US District Court of Washington has issued a ruling in the case of Ledcor Industries v. Virginia Surety Company, Inc. Ledcor was the builder of a mixed-use real estate project in Seattle called the Adelaide Project. Ledcor purchased an insurance policy from Virginia Surety covering the project. After the completion of the project, Ledcor received complaints of construction defects from the homeowners, which they forwarded to Virginia Surety.

Virginia Surety denied coverage on several grounds. Absent any lawsuit, Virginia claimed that there was “not yet any duty to defend or indemnify.” Further, as the policy commenced ten days after work on the project was substantially completed, Virginia cited a provision in the policy that excluded coverage for damage that occurred before the policy began. As problems included water intrusion, Virginia noted an exclusion for fungal damage. Finally, Virginia noted that it was not clear whether damage was due to Ledcor’s own actions.

The homeowners sued over the construction defects. Ledcor settled these suits before trial. In this, they were defended by, and settlements were paid by American Home, another of Ledcor’s insurers. Ledcor claims that Virginia Surety acted in bad faith by denying coverage and by its failure to investigate the ongoing nature of the work at the project.

The judge determined that Virginia Surety acted in bad faith when it invoked the fungus exclusion. Virginia noted that fungal damage “‘would have been’ referenced in the list of construction defects,” however, the HOAs claimed only “water stains” and “water damage,” and made no mention of mold or fungus. The court found that Virginia Surety “was not entitled to deny coverage simply because it may have suspected that mold or fungus damage existed.” The court noted that further proceedings would be needed to determine what portion of the settlement Virginia is obligated to pay.

The court found that there were matters of fact to be determined on the further issues in the case. The judge wrote that although Virginia acted in bad faith in invoking the fungus exclusion, it still had to be determined if they were in breach of contract by failing to defend Ledcor. Ledcor still needs to show that the damages claimed by the HOA were due to work actually covered by Virginia Surety.

Ledcor made an additional claim that Virginia Surety violated Washington’s laws concerning the insurance industry. Here, the court noted that the improper exclusion for fungus issues “constitutes a per se unfair trade practice.” Six other claims were made under this law. The court found that Virginia Surety did not misrepresent “pertinent facts or insurance policy provisions.” It also issued its denial letter promptly, satisfying the fifth provision. However, Virginia Surety did violate the second provision, in that it failed “to acknowledge and act reasonably promptly upon communications with respect to claims.” Two other issues could not be determined.

Judge Martinez’s decision granted a summary judgment to Ledcor on the issue of bad faith. An additional summary judgment was granted that Virginia Surety violated Washington’s Insurance Fair Conduct Act. Judge Martinez did not grant summary judgment on any of the other issues Ledcor raised.

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Ex-Turner Exec Gets 46 Months for Bloomberg Construction Bribes

July 11, 2021 — Eydie Cubarrubia - Engineering News-Record
A third New York City-based construction executive was sentenced to federal prison June 15, receiving 46 months, as part of the $15-million bribery scheme involving interiors work for financial giant Bloomberg LLP at its Manhattan headquarters. Reprinted courtesy of Eydie Cubarrubia, Engineering News-Record Ms. Cubarrubia may be contacted at cubarrubiae@enr.com Read the full story... Read the court decision
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U.K. Construction Unexpectedly Strengthens for a Second Month

March 05, 2015 — Bloomberg News
(Bloomberg) -- U.K. construction growth unexpectedly accelerated for a second month in February, led by a strengthening in homebuilding. Markit Economics said its Purchasing Managers’ Index rose to 60.1, the highest in four months, from 59.1 in January. It fell to a 17-month low of 57.6 in December. Economists forecast the gauge would slip to 59 in February, according to the median estimate in a Bloomberg News survey. Read the court decision
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Reprinted courtesy of Bloomberg News
Scott Hamilton may be contacted at shamilton8@bloomberg.net

Falls Requiring Time Off from Work are Increasing

January 14, 2015 — Beverley BevenFlorez-CDJ STAFF
The Safety News Alert reported that while “overall occupational injuries that require time off from work” have decreased, other injuries, such as falls, have increased, according to findings from the Bureau of Labor Statistics (BLS) annual report. “The rate of falls on the same level increased to 15.4 in 2013 from 14.8 in 2012, with increases in construction, wholesale trade, and transportation and warehousing,” Safety News Alert wrote. Furthermore, “Incidence rates and counts for private sector heavy and tractor-trailer truck drivers and food preparation workers increased in 2013.” Read the court decision
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A Brief Discussion – Liquidating Agreements

June 27, 2022 — Gerard J. Onorata - Peckar & Abramson, P.C.
During a construction project, it is not uncommon for disputes to arise between a general contractor and a subcontractor. Frequently, these disputes involve claims for extra work and delay damages that can be attributed to the owner of the project due to deficient design or unforeseen conditions. When these occasions arise, the parties can often resolve these claims without the need for litigation or arbitration by entering into a “liquidating agreement.” What is a Liquidating Agreement? Because there is no direct contractual relationship between a subcontractor and an owner, there does not exist a legal basis for a subcontractor to assert a breach of contract claim against a project owner. In legal parlance, this is known as “lack of contractual privity.” A liquidating agreement bridges this contractual gap and allows a subcontractor to pass its claim against the owner through the general contractor. Essentially, with a liquidating agreement, the general contractor acts as a conduit for passing through the subcontractor’s claim. Read the court decision
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Reprinted courtesy of Gerard J. Onorata, Peckar & Abramson, P.C.
Mr. Onorata may be contacted at gonorata@pecklaw.com

Construction in the Time of Coronavirus

March 30, 2020 — Christopher G. Hill - Construction Law Musings
One cannot look look at one’s phone, computer or even the road outside the window without seeing signs of the impact that coronavirus (COVD-19) is having on the world at large. Schools are shut down, traffic is lighter and there is the daily count of new confirmed cases, in Virginia and elsewhere. “Social distancing” is the buzzword of the day. I am writing this post from a home office because of CDC and other guidance regarding the best way to “flatten the curve.” We have all been told to avoid large groups and stay close to home. All of this is well and good, but construction must go on. In travelling around Richmond, I see construction vehicles on the road quite a bit. This is a good thing. It seems that most of the Richmond, Virginia area contractors are trying to stay as close to “business as usual” as possible while still remaining vigilant and careful to follow CDC and OSHA guidelines on workplace activity and COVD-19. However, the situation is ever changing and government and other outside forces could lead to project slowdowns, project shutdowns or other virus related impacts to everything from permitting to staffing of a project. As I have discussed, likely ad nauseam, any commercial or residential construction project is controlled by a series of contracts (hopefully well drafted) that control the relationships on the job. Subcontractors in particular have the provisions of their subcontract and those of the prime contract to worry about. One of the major provisions that could trip up any construction professionals on these jobs is the notice provision of the subcontract (thanks for the reminder go to a friend and fellow construction lawyer Mark Cobb at his blog). Read the court decision
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Reprinted courtesy of The Law Office of Christopher G. Hill
Mr. Hill may be contacted at chrisghill@constructionlawva.com

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