Coverage Issues: When You Need Your Own Lawyer in a Construction Defect Suit
October 16, 2013 —
CDJ STAFFWhen an insurer hires an attorney on behalf of a client in a construction defect suit, that attorney is the client’s lawyer, but as Mike Curry writes on the website of Pendleton Wilson Hennessey & Crow, PC, a point may come when you need to hire your own additional attorney. Even though an insurance company client may refer to the lawyer as “the insurance carrier’s attorney,” Mr. Curry cites the words of the Colorado Bar Association’s ethics committee, “the insured is the client to whom the lawyer’s duty of loyalty is owed, regardless of any retention agreement the lawyer may have with the carrier.”
Mr. Curry then offers the example of what happens when the insurance company advises its client that it may not cover. “You presumably call your attorney and ask him to explain what’s going on, what the letter means, and what to do next.” All the attorney can say is “I cannot offer legal advice on coverage issues.”
This is the limitation of what Mr. Curry refers to as “the tripartite relationship.” The attorney has been retained for issues related to the construction defect dispute between the insured and the plaintiff. Not between the insurer and its insured. The attorney has, as he points out, a fiduciary obligation to the insurance company.
When coverage issues arise, “an independent attorney — one you hire — can help you with the coverage issues that your insurance-assigned attorney simply cannot address.” He further notes that “personal counsel owes no fiduciary obligation to the insurance company,” and can be “utilized to persuade the carrier to provide coverage or settle the case.”
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Electrical Subcontractor Sues over Termination
November 13, 2013 —
CDJ STAFFMillennium Plus, Inc. has sued the contractor for the Efrain A. Duran Water Treatment Plant Facility and Rio Grande City for failing to pay money due to them and terminating the contract. According to the lawsuit, Millennium is claiming that they are owed $161,781 for their work on the water treatment facility.
According to the city, the project’s contractor was “very unsatisfied with Millennium’s work.” Although the city disclaims any involvement, Millennium claims it was a “joint enterprise.”
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A Closer Look at an HOA Board Member’s Duty to Homeowners
August 27, 2013 —
Derek Lindenschmidt — Higgings, Hopkins, McLain & Roswell, LLCWhenever a homeowner association (HOA) starts thinking in terms of a construction defect lawsuit against its developer and/or builder, its board members will inevitably be confronted with the purported risk and liability to their homeowners if they do not pursue the alleged defects and deficiencies brought to their attention.
Not surprisingly, the board members are on occasion led to believe that pursuing such claims is synonymous with acting in the homeowners’ “best interests.” Further—and unfortunately—board members often feel as though they will breach their obligation to the homeowners if theydon’t agree to proceed with such claims.
Nevertheless, how well do we really know what the board members’ duty actually consists of, when it applies, and what potential liability exists for a board member’s breach of same? The answers might surprise you.
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Derek LindenschmidtDerek Lindenschmidt can be contacted at
lindenschmidt@hhmrlaw.com
Insurers Subrogating in Arkansas Must Expend Energy to Prove That Their Insureds Have Been Made Whole
July 30, 2019 —
Michael J. Ciamaichelo - The Subrogation StrategistArkansas employs the “made whole” doctrine, which requires an insured to be fully compensated for damages (i.e., to be “made whole”) before the insurer is entitled to recover in subrogation.[1] As the Riley court established, an insurer cannot unilaterally determine that its insured has been made whole (in order to establish a right of subrogation). Rather, in Arkansas, an insurer must establish that the insured has been made whole in one of two ways. First, the insurer and insured can reach an agreement that the insured has been made whole. Second, if the insurer and insured disagree on the issue, the insurer can ask a court to make a legal determination that the insured has been made whole.[2] If an insured has been made whole, the insurer is the real party in interest and must file the subrogation action in its own name.[3] However, when both the insured and an insurer have claims against the same tortfeasor (i.e., when there are both uninsured damages and subrogation damages), the insured is the real party in interest.[4]
In EMC Ins. Cos. v. Entergy Ark., Inc., 2019 U.S. App. LEXIS 14251 (8th Cir. May 14, 2019), EMC Insurance Companies (EMC) filed a subrogation action in the District Court for the Western District of Arkansas alleging that its insureds’ home was damaged by a fire caused by an electric company’s equipment. EMC never obtained an agreement from the insureds or a judicial determination that its insureds had been made whole. In addition, EMC did not allege in the complaint that its insureds had been made whole and did not present any evidence or testimony at trial that its insureds had been made whole. After EMC presented its case-in-chief, the District Court ruled that EMC lacked standing to pursue its subrogation claim because “EMC failed to obtain a legal determination that its insureds had been made whole . . . prior to initiating this subrogation action.” Thus, the District Court granted Entergy Ark., Inc.’s motion for judgment as a matter of law and EMC appealed the decision.
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Michael J. Ciamaichelo, White and Williams LLPMr. Ciamaichelo may be contacted at
ciamaichelom@whiteandwilliams.com
Privileged Communications With a Testifying Client/Expert
June 10, 2019 —
Shannon M. Warren - The Subrogation StrategistIn
In re City of Dickinson, 568 S.W.3d 642 (Tex. 2019), the Supreme Court of Texas recently assessed whether a client’s emails with its counsel were subject to disclosure after the client was designated as a testifying expert witness. In re City of Dickinson involved a coverage dispute between a policyholder and its insurer. The policyholder moved for summary judgment on the issue of causation, essentially alleging that its insurer did not pay all damages caused by Hurricane Ike. In responding to the motion, the insurer relied upon an affidavit by one of its employees, a claims examiner, that included both factual testimony and expert witness testimony.
The policyholder subsequently filed a motion to compel, seeking the production of emails between the claims examiner and the insurer’s counsel that were generated while the affidavit was being drafted. The emails contained numerous revisions of the affidavit. The insurer objected, asserting that the emails were protected by the attorney-client privilege and were generated in the course of the rendition of legal services.
The trial court granted the motion to compel, ordering production. Ultimately, after a series of appeals, the Supreme Court had to decide whether the documents in dispute were subject to discovery. In resolving this issue, the court examined the rules pertaining to expert disclosures. As noted by the court, the rules authorize the production of all documents provided to a testifying expert witness. Thus, the court was faced with determining if its rules required the disclosure of documents that are also subject to the attorney-client privilege.
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Shannon M. Warren, White and WilliamsMs. Warren may be contacted at
warrens@whiteandwilliams.com
The Small Stuff: Small Claims Court and Limited Civil Court Jurisdictional Limits
June 10, 2024 —
Garret Murai - California Construction Law BlogSometimes the small stuff matters.
And when it comes to legal disputes this can pose a problem for clients as well as their attorneys because litigation and arbitration, the two most frequently utilized venues to resolve legal disputes in the United States, can be and usually are expensive.
Data on the cost of civil litigation is sparse. According to a 2013 survey of trial lawyers conducted by the National Center of State Courts, the median cost of litigating a contract dispute – which is the category that most construction disputes would fall under – is $90,575. And this is in 2013 dollars. With inflation, that number rises to nearly $120,000 in 2023, and based upon our experience litigating and arbitrating complex (and even not so complex) construction disputes, it can be many multiples over that.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Terminating the Notice of Commencement (with a Notice of Termination)
July 19, 2017 —
David Adelstein - Florida Construction Legal UpdatesThe notice of commencement is important for purposes of construction lien priority. Stock Bldg. Supply of Florida, Inc. v. Soares Da Costa Const. Services, LLC, 76 So.3d 313, 317 (Fla. 3d DCA 2011) (“[A] notice of commencement serves to determine the priority of liens under the Construction Lien Law.”). A lien relates back in time to the date the notice of commencement was recorded assuming the notice of commencement is still in effect when the lien is recorded (or an amended noticed of commencement is recorded). Lien priority is very important and the reason why a contractor should always want to ensure there is an effective notice of commencement in place rather than an expired notice of commencement.
For the same reasons why a contractor wants to ensure there is an effective notice of commencement, there are times an owner wants to terminate a notice of commencement. An owner may want to terminate the potential priority of a construction lien. For instance, say the owner is refinancing or obtaining a construction loan in the midst of construction. A lender will want to ensure its mortgage maintains first priority and certainly priority over a potential construction lien. Otherwise, why would a lender finance the construction if it does not maintain first priority. It generally will not. Thus, an owner needs to terminate the notice of commencement so that the closing occurs on the loan and the mortgage recorded before a new notice of commencement is recorded and construction continues.
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
Dadelstein@gmail.com
Deadline for Hurricane Ian Disaster Recovery Applications Announced
October 17, 2022 —
Lewis BrisboisWashington, D.C. (October 11, 2022) - On Friday, October 7, 2022, the Florida Division of Emergency Management (FDEM) announced that applications for the Federal Emergency Management Agency’s (FEMA) Public Assistance Grant Program are due by October 29, 2022.
FEMA provides disaster recovery assistance to eligible individuals, families, governments, and private non-profit entities. However, the process for recovering costs is complicated, and FEMA has broad discretion to determine whether applicants and their expenses are eligible. All too often, failure to understand FEMA regulations or submit sufficient documentation results in FEMA denying applicants’ claims, leaving individuals, local governments, and non-profits to bear the full cost of recovery.
While ensuring successful recovery through the FEMA grant program can be challenging, clients can increase their likelihood of success when preparing the initial application and documentation by enlisting experienced legal counsel who understand the FEMA process and regulations.
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Lewis Brisbois
