Revisiting the CMO; Are We Overusing the Mediation Privilege?
November 19, 2021 —
Michael T. Kennedy Jr. - BERDING|WEILOne of the most common features in construction defect cases is the Case Management Order (“CMO”) or Pre-Trial Order (“PTO”) to govern pre-trial and mediation procedures. CMOs and PTOs arose in the days when the HOA would sue the developer, the developer would cross-complaint against the subcontractors, and each defendant and cross-defendant might have 2 or 3 insurance carriers defending, each of whom may retain their own panel counsel. In a large case there may have been 20 parties and 30 defense attorneys. In order to avoid the cost and chaos of all of those parties propounding their own discovery, and in order to prepare these cases for mediation well before trial and the associated costs, it became standard practice in California to include provisions in the CMO to stay all discovery until just before trial.
Plaintiff would provide a Defect List or Statement of Claims and the parties experts would meet and exchange information as part of the mediation process. All of the information exchanged would be subject to mediation privileges and inadmissible at trial. The benefit of this practice was that the parties (and carriers) would avoid the cost of formal discovery and allow the experts to discuss compromised scopes of repair to help settle the case while being able to take a more aggressive position at trial. The disadvantages are that each party uses its privileged initial expert reports to stake out negotiating positions more extreme than what they would put on at trial, with each side losing credibility with the other in assessing the value of the case, and for those cases that did not settle, the parties would be faced with having to do all of the depositions and discovery in the last 60 days, or delaying trial, or both.
Over the last 10 or 15 years with the advent of wrap-up insurance policies, these cases now usually involve 2 sides instead of 20; only the HOA and the developer remain in the case. However, old habits die hard, and the standard CMO/PTO hasn’t evolved with other aspects of these cases. The practice of staying all discovery and exchanging information only under mediation privileges remains, and as a result insurance carriers don’t receive the admissible evidence that they need to determine coverage and evaluate the real settlement value of the case until just before trial. On the plaintiff’s side, if most of the experts’ work is done under the guise of mediation privilege, those costs may not be recoverable. Outside the context of mediation, costs incurred in investigation of the defects and preparation of a scope and cost of repair are recoverable.
This reflexive claim of mediation privilege over all information exchanged during the case has outlived its usefulness. The CMO can and should remain to regulate formal discovery and to help the parties prepare for mediation, but regulated discovery should be opened early in the case. In California, the SB800 process already provides for the exchange of admissible information during the prelitigation right to repair process. Continuing that exchange during the early litigation allows the parties to continue to prepare for mediation, but waiving privileges had advantages for both sides.
A senior claims manager once commented that Plaintiff’s mediation-protected Statement of Claims “might as well be a stack of blank paper” for all of its usefulness to the carrier in assessing the value of the case. If the Plaintiff and it expects are free to inflate their claims early in the case without having to worry about every supporting those claims in front of a jury, they have little or no credibility. And if those claims are inflated or not “real,” not only can the carrier not properly assess the verdict range and settlement value of the case, but it may also be hampered in making a coverage determination. Simply put, if the exchange of real information through formal discovery is put off until just before trial, the defense cannot be ready to settle until then. Worse, the cost of defense goes through the roof in the last 60 days before trial as the lawyers’ scramble to take all of the depositions and to all of the other work that had been stayed for the previous year or two.
The Plaintiff is faced with the same question of credibility of defense experts where they are free to take a “low ball” negotiating position without having to support that position through cross-examination in front of the jury. Just as the carrier behind the defense attorney needs the Plaintiff’s “real” evidence to assess the claim, so does the HIOA Board of Directors behind the Plaintiff’s counsel. Additionally, in California as in most states, the cost of experts’ preparation for mediation may not be recoverable as costs or damages, but investigation of the defects and preparation of the scope and cost of repair is recoverable.
The biggest challenge is resolving construction defect claims for both sides is how to resolve these cases quickly while keeping costs under control. Practices that worked 20 years ago are no longer applicable with changes in insurance, and in light of some of the bad habits that arise when all of the information exchanged was confidential.
The CMO/PTO process can still be useful to regulate the discovery and mediation schedule given the volume of documents and other information to be exchanged but exchanging “real” information in a form that may come into evidence at trial should foster earlier resolution, resulting in cost savings for the parties. The CMO can provide for the parties to respond to controlled discovery, and the exchange of expert reports and potentially depositions can and should be done earlier in the case, well before the eve of trial. The parties can then assess the true value of each case and prepare for more substantive mediation without waiting until they are on the figurative courthouse steps.
Construction defect cases have a pattern, and it is tempting for busy lawyers to just put each case through the same algorithms that they have used for years. However, these cases have evolved and those of us handling these cases need to reevaluate our approach to these cases. Taking aggressive negotiating positions that no longer have any credibility with the other side has become counterproductive, and the exchange of real evidence earlier in the case would better serve our clients and carriers.
BERDING|WEIL is the largest and most experienced construction defect and common interest development law firm in California. For more information, please visit https://www.berding-weil.com
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Michael T. Kennedy Jr., BERDING|WEILMr. Kennedy may be contacted at
mkennedy@berdingweil.com
After Breaching its Duty to Defend, Insurer Must Indemnify
August 11, 2011 —
Tred R. Eyerly - Insurance Law HawaiiIn a brief decision analyzing Oregon law, the Ninth Circuit determined that once an insurer breaches its duty to defend, it must indemnify. See Desrosiers v. Hudson Speciality Ins. Co., 2011 U.S. App. LEXIS 12591 (9th CIr. June 21, 2011).
The victim secured a judgment against the insured after he was beaten by another patron outside the insured's bar. Hudson Speciality Insurance refused to defend the insured, claiming the injury arose from an assault and battery, which excluded coverage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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The Hazards of Carrier-Specific Manuscript Language: Ohio Casualty's Off-Premises Property Damage and Contractors' E&O Endorsements
October 05, 2020 —
Theresa A. Guertin & Eric M. Clarkson - Saxe Doernberger & VitaRisk transfer in the construction industry depends heavily on industry-standard insurance language. Insurance provisions in subcontracts typically reference ISO standard insurance terminology or endorsements in order to guarantee (or, at least, attempt to secure) coverage for upstream parties. The contract may require, for example, that a subcontractor maintains general liability insurance on a “current ISO occurrence form,” and name upstream parties as additional insureds, and both parties will have a general understanding of what that entails for purposes of risk transfer.
Problems arise, however, when insurance companies stray from standard language, especially on issues that go to the heart of construction risk transfer. In some instances, provisions that track ISO language may contain subtle changes that seem to meet the contractual insurance requirements. Upon closer scrutiny, it could significantly change how a policy will respond to a given claim. Given the extent of potential liability arising from construction projects, if the insurance programs intended to back up risk transfer and indemnity agreements do not respond as expected, all the potentially liable parties may be left in the lurch.
Reprinted courtesy of
Theresa A. Guertin, Saxe Doernberger & Vita and
Eric M. Clarkson, Saxe Doernberger & Vita
Ms. Guertin may be contacted at tag@sdvlaw.com
Mr. Clarkson may be contacted at emc@sdvlaw.com
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Consolidated Case With Covered and Uncovered Allegations Triggers Duty to Defend
May 20, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe Illinois Court of Appeals held that the insurer had a duty to defend a consolidated case that included one complaint alleging intentional acts and another complaint alleging negligence. Farmers Auto. Ins. Ass'n v. Neumann, 2015 Il. App. 140026 (Ill. Ct. App. March 24, 2015, reh'g denied March 24, 2015).
Neumann allegedly hit Bitner with his automobile as Bitner, a police offier, was directing traffic. Bitner sued Neumann, alleging intentional assault and intentional battery. Farmers rejected Neumann's tender because the policy did not cover intentional acts.
Farmers filed for a declaratory judgment. In his answer, Neumann included an affidavit stating that he did not intend to strike or cause bodily harm to Bitner. The trial court granted the motion to strike the affidavit.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Wildfire Is Efficient Proximate Cause of Moisture Reaching Expansive Soils Under Residence
November 05, 2014 —
Tred R. Eyerly - Insurance Law HawaiiThe court considered whether a wildfire (covered risk) or moisture in the soils (excluded risk) was the cause of damage to the insureds' home. Encompass Ins. Co. v. Berger, 2014 U.S. Dist. LEXIS 142870 (C.D. Cal. Oct. 7, 2014).
In May 2009, the Jesusita Fire caused damage to the insureds' home and surrounding area. The west wall of the house was burned, causing damage to a bedroom. A shed, hot tub, wooden decks and some vegetation, including eucalyptus trees, were damaged.
The insureds submitted a claim to Encompass. Eventually, Encompass spent $400,000 repairing the property.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Does the Russia Ukraine War Lead to a Consideration in Your Construction Contracts?
April 04, 2022 —
David Adelstein - Florida Construction Legal UpdatesMaterial costs are still affecting the construction industry. Supply chain impacts too. The volatility started with COVID-19 (and, in certain cases, before with the imposition of tariffs) and has continued through present date.
But what about the war between Russia and Ukraine and the impact this has had or may have on the supply chain? I think the spillover from the war (with oil, gas, the energy sector, etc.), including the imposition of any sanctions, is not fully realized other than the concern exists in an economy that is already battling through material costs and supply chain disruptions.
How does this affect you?
It may not.
Or you may regularly enter into construction contracts in which you would be smart to address material costs and supply chain impacts. The reason being is that everything from a risk standpoint should begin with your construction contract. Not addressing an issue does not actually mitigate the risk. Confronting the issue does mitigate the risk because you are contractually addressing a concern and know where the other party stands relating to that concern so that business decisions can be made.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Hake Law Attorneys Join National Law Firm Wilson Elser
April 02, 2014 —
Beverley BevenFlorez-CDJ STAFFIn a press release published on PRWEB, the national law firm Wilson Elser announced “that Bill Hake, founder of Bay Area–based Hake Law, and 15 members of his team, including attorneys, paralegals and staff, have joined the firm’s San Francisco office effective April 1.”
Specifically, “Wilson Elser has added a total of four partners from Hake Law, including Bill Hake, Melissa Ippolito, Nicolas Martin and Lucy Hoff, and four associates, including Gardiner McKleroy, Jeremy Berla, Molly Friend and Whitney Barnecut, bringing the total attorney headcount in Wilson Elser’s San Francisco office to 40.”
According to the release, “Hake Law was primarily a defense litigation firm focused on product liability, construction defects, D&O, catastrophic injury, toxic tort, white collar criminal, class action and complex litigation defense.” Wilson Elser is a “full-service and leading defense litigation law firm… with nearly 800 attorneys in 25 offices in the United States, one in London and through a network of affiliates in key regions globally.”
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Cal/OSHA ETS: Newest Version Effective Today
January 17, 2022 —
Amy R. Patton, Matthew C. Lewis & Rana Ayazi - Payne & FearsThe newest version of the Cal/OSHA ETS goes into effect today, Jan. 14, 2022, and will expire on April 15, 2022. A redline of the recently expired Cal/OSHA ETS and the newest Cal/OSHA ETS is available HERE. The newest Cal/OSHA ETS, which was drafted prior to Dec. 16, 2021, is already partially out-of-date based on the California Department of Public Heath’s Guidance For the Use of Masks (released Jan. 5, 2022) and the CDPH’s Guidance for Local Health Jurisdictions on Isolation and Quarantine of the General Public (released Jan. 8, 2022); these changes have been addressed in the Cal/OSHA ETS FAQs.
With all of these changes occurring (not to mention all of the litigation surrounding the now-stayed federal OSHA ETS), California employers are asking: How do I comply with the current Cal/OSHA ETS and the updated CDPH Guidance? Here are the key points to ensure you are in compliance:
- New Shorter Isolation and Quarantine Periods
Isolation: When an employee has COVID-19 (even without symptoms).
- Day 0: First day of symptoms or the day a positive test specimen was collected. Begin isolation.
- Day 1: First full day after symptoms developed or positive test specimen was collected.
- Day 5: Recommended day to take COVID-19 test.
Reprinted courtesy of
Amy R. Patton, Payne & Fears,
Matthew C. Lewis, Payne & Fears and
Rana Ayazi, Payne & Fears
Ms. Patton may be contacted at arp@paynefears.com
Mr. Lewis may be contacted at mcl@paynefears.com
Ms. Ayazi may be contacted at ra@paynefears.com
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