When Subcontractors Sue Only the Surety on Payment Bond and Tips for General Contractors
August 13, 2019 —
Ira M. Schulman & Emily D. Anderson - ConsensusDocsPayment bonds have been a staple of public construction projects since 1874, when the U.S. Congress first passed the Heard Act, which required that contractors obtain payment bonds for public projects to ensure that subcontractors and material suppliers have a way to recover their damages if an upstream contractor fails to pay for work performed and materials furnished on the project. The 1874 Heard Act has since been replaced by the 1935 Miller Act, and the concept has been expanded to construction projects funded by the states through state statutes known as “Little Miller Acts.” But the structure remains the same: On most public projects where the project’s cost exceeds $100,000, the prime contractor (the bond principal) is required to obtain a payment bond from a surety equal to the contract price to guarantee to subcontractors and material suppliers (the bond obligees) that the surety will pay for labor and materials under certain statutory or contractual conditions should the contractor fail to make payment.
A surety is jointly and severally liable with the contractor to the subcontractor, which means that the subcontractor may seek recovery against either the contractor or the surety or both, and the contractor and surety will be liable for the damages together. Put another way, in most states and in federal court, an unpaid subcontractor has the right to sue only the surety on the payment bond without joining the contractor because a contract of suretyship is a direct liability of the surety to the subcontractor.1 When the contractor fails to perform, the surety becomes directly responsible at once — it is unnecessary for the subcontractor to establish that the contractor failed to carry out its contract before the obligation of the surety becomes absolute.
Reprinted courtesy of
Ira M. Schulman, Pepper Hamilton LLP and
Emily D. Anderson, Pepper Hamilton LLP
Mr. Schulman may be contacted at schulmani@pepperlaw.com
Ms. Anderson may be contacted at andersone@pepperlaw.com
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$24 Million Verdict Against Material Supplier Overturned Where Plaintiff Failed To Prove Supplier’s Negligence Or Breach Of Contract Caused A SB800 Violation
June 05, 2017 —
Jon A. Turigliatto & Chelsea L. Zwart - CGDRB News & PublicationsThe Fourth District California Court of Appeal published its decision, Acqua Vista Homeowners Assoc. v. MWI, Inc. (2017) 7 Cal.App.5th 1129, holding that claims against a material supplier under SB800 (Civil Code §895, et. seq.) require proof that the SB800 violation was caused by the supplier’s negligence or breach of contract.
In this case, Acqua Vista Homeowners Association (“the HOA”) sued MWI, a supplier of Chinese pipe used in the construction of the Acqua Vista condominium development. The HOA’s complaint asserted a single cause of action for violation of SB800 standards, and alleged that defective cast iron pipe was used throughout the building. At trial, the HOA presented evidence that the pipes supplied by MWI contained manufacturing defects, that they leaked, and that the leaks had caused damage to various parts of the condominium development. The jury returned a special verdict against MWI, and the trial court entered a judgment against MWI in the amount of $23,955,796.28, reflecting the jury’s finding that MWI was 92% responsible for the HOA’s damages.
MWI filed a motion for a directed verdict prior to the jury’s verdict and motion for judgment notwithstanding the verdict following the entry of judgment, both on the grounds that the HOA had failed to present any evidence that MWI had caused a SB800 violation as a result of its negligence or breach of contract, and had therefore failed to prove negligence and causation as required by SB800. MWI relied on the Fourth District’s prior decision in Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, and its interpretation therein of Civil Code §936, which states, in relevant part, that the statute applies “to general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract….” (emphasis added.) However, the trial court denied both motions, relying on the last sentence of Civil Code §936, which states in part, “[T]he negligence standard in this section does not apply to any…material supplier…with respect to claims for which strict liability would apply.”
Reprinted courtesy of
Jon A. Turigliatto, Chapman Glucksman Dean Roeb & Barger and
Chelsea L. Zwart, Chapman Glucksman Dean Roeb & Barger
Mr. Turigliatto may be contacted at jturigliatto@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com
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Colorado Supreme Court Issues Decisions on Statute of Limitations for Statutory Bad Faith Claims and the Implied Waiver of Attorney-Client Privilege
July 11, 2018 —
Jennifer Arnett-Roehrich - Gordon & Rees Insurance Coverage Law BlogThe Colorado Supreme Court has been busy the past two weeks, issuing a couple rulings that should be of interest to the insurance industry:
Statute of Limitations for Bad Faith Statute: In Rooftop Restoration, Inc. v. American Family Mutual Insurance Co., 2018 CO 44 (May 29, 2018), the Colorado Supreme Court held that the one-year statute of limitations that applies to penalties, does not apply to claims brought under C.R.S. 10-3-1116, Colorado’s statutory cause of action for unreasonable delay or denial of benefits. Section 10-3-1116 provides that a first-party claimant whose claim for payment of benefits has been unreasonably delayed or denied may seek to recover attorney fees, costs, and two times the covered benefit, in addition to the covered benefit. A separate Colorado statute, CRS 13-80-103(1)(d) provides a one-year statute of limitations for “any penalty or forfeiture of any penal statutes.” To arrive at the conclusion that the double damages available under section 10-3-1116 is not a penalty, the Court looked at yet another statutory provision, governing accrual of causes of action for penalties, which provides that a penalty cause of action accrues when “the determination of overpayment or delinquency . . . is no longer subject to appeal.” The Court stated that because a cause of action under 10-3-1116 “never leads to a determination of overpayment or delinquency . . . the claim would never accrue, and the statute of limitations would be rendered meaningless.” Para. 15. Presumably, the default two-year statute of limitations, provided by CRS 13-80-102(1)(i), will now be found to apply to causes of action seeking damages for undue delay or denial of insurance benefits.
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Jennifer Arnett-Roehrich, Gordon & Rees Scully MansukhaniMs. Arnett-Roehrich may be contacted at
jarnett-roehrich@grsm.com
Good Indoor Air Quality Keeps Workers Healthy and Happy
June 10, 2024 —
Ellie Gabel - Construction ExecutiveMost people primarily think of air conditioners as appliances to keep people cool. However, a 2024 study of office air conditioners shows that they promote indoor air quality by minimizing the harmful effects of bushfire smoke.
The research indicated air conditioners used in office environments can trap particles and reduce people’s exposure to harmful elements such as sulfates and nitrates. The researchers collected particulate matter from commercial air conditioner filters during the peak bushfire season in Australia. Evaluations showed the daily particulate matter levels were usually two to three times the average amount. However, some hourly maximums were 10.5 times the usual.
The team took samples for four months, finding the specimens exceeded national air quality standards 19% of the time. Analyses performed in a university showed commercially available air filters captured significant amounts of bushfire smoke, reducing the associated hazards for building occupants.
Reprinted courtesy of
Ellie Gabel, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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New Jersey Court Washes Away Insurer’s Waiver of Subrogation Arguments
May 27, 2019 —
William L. Doerler - The Subrogation StrategistSubrogating insurers often address waiver of subrogation clauses in the form contracts drafted by the American Institute of Architects. In ACE Am. Ins. Co. v. Am. Med. Plumbing, No. A-5395-16T4, 2019 N.J. Super. LEXIS 45 (App. Div.), ACE American Insurance Company (ACE) argued that the waiver clause in the AIA General Conditions form A201-2007 did not extend to the post-construction loss at issue. Adopting what the court termed the “majority” position, the Appellate Division held that, by reading §§ 11.3.5 and 11.3.7 together, the waiver applied to bar the insurer’s subrogation claim. The Appellate Court’s ruling makes pursuing subrogation against New Jersey contractors using AIA contract forms more difficult.
In this matter, Equinox Development Corporation (Equinox Development), ACE’s insured, contracted with Grace Construction Management Company, LLC (Grace Construction) to build the “core and shell” of a new health club (the Work). Grace Construction subcontracted the plumbing work to American Medical Plumbing, Inc. (AM Plumbing).
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William L. Doerler, White and Williams LLPMr. Doerler may be contacted at
doerlerw@whiteandwilliams.com
Newmeyer Dillion Attorneys Selected To The Best Lawyers In America© And Orange County "Lawyer Of The Year" 2020
September 03, 2019 —
Newmeyer DillionProminent business and real estate law firm Newmeyer Dillion is pleased to announce that ten of the firm's attorneys were recently recognized in their respective practice areas in The Best Lawyers in America© 2020. In addition, two attorneys have been named Best Lawyers ® 2020 "Lawyer of the Year." Greg Dillion was recognized by Best Lawyers as the 2020 Construction Law "Lawyer of the Year" award winner, while Thomas Newmeyer was recognized by Best Lawyers as the 2020 Litigation - Real Estate "Lawyer of the Year" award winner.
Attorneys named to The Best Lawyers in America, include:
Jason Moberly Caruso
Personal Injury Litigation – Plaintiffs, Product Liability Litigation – Plaintiffs
Michael S. Cucchissi
Real Estate Law
Jeffrey M. Dennis
Insurance Law
Gregory L. Dillion
Commercial Litigation, Construction Law, Insurance Law, Litigation – Construction, Litigation - Real Estate
Joseph A. Ferrentino
Litigation – Construction, Litigation - Real Estate
Jon Janecek
Real Estate Law
Thomas F. Newmeyer
Commercial Litigation, Litigation - Real Estate
John O'Hara
Litigation – Construction
Bonnie T. Roadarmel
Insurance Law
Jane Samson
Real Estate Law
Newmeyer Dillion is immensely proud of our lawyers, whose consistent recognition demonstrates their contributions to the firm, our clients and the legal profession.
With a history of over 35 years, Best Lawyers is the oldest peer review publication within the legal profession. Universally regarded as the definitive guide to legal excellence, Best Lawyers lists are compiled based on an exhaustive peer-review evaluation in which leading lawyers confidentially evaluate their professional peers. Their listings are published in 77 countries worldwide and are recognized for their reliable and unbiased selections. Only one lawyer for each specialty and location is recognized as the "Lawyer of the Year," an award given to the individual with the highest overall peer-feedback for a specific practice area and geographic region.
About Newmeyer Dillion
For 35 years, Newmeyer Dillion has delivered creative and outstanding legal solutions and trial results that align with the business objectives of clients in diverse industries. With over 70 attorneys working as an integrated team to represent clients in all aspects of business, employment, real estate, privacy & data security and insurance law, Newmeyer Dillion delivers tailored legal services to propel clients' business growth. 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 Nevada, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949.854.7000 or visit www.newmeyerdillion.com.
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Lessons Learned from Implementing Infrastructure BIM in Helsinki
February 07, 2018 —
Aarni Heiskanen – AEC Business BlogFinland’s capital is currently experiencing a construction boom. Old industrial citadels are turning into residential areas with new commercial centers. Consequently, Helsinki needs to build new infrastructure. To improve the efficiency and quality of infrastructure construction, the city has started using BIM, and is now learning how to get the most value from it.
Ville Alajoki, Team Leader in Helsinki’s Urban Development Division, is a keen proponent of BIM. “Infrastructure construction is still in its early stages when it comes to using BIM. For the most part, BIM implementation has not been systematic in our city yet. We tend to use it in our own structural design and often in building construction. However, in infrastructure project management, its active individuals who have set the pace,” Ville admits. He believes that the city’s strategy for 2017–2021 will spur the use of new technologies, including BIM. “Helsinki aims to be the city in the world that makes the best use of digitalization,” Mayor
Jan Vapaavuori has declared.
A good start, but there’s room for improvement.
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Aarni Heiskanen, AEC Business Blog Mr. Heiskanen may be contacted at
info@aepartners.fi
Coverage Doomed for Failing Obtain Insurer's Consent for Settlement
January 22, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe Fourth Circuit affirmed the district court's determination that there was no duty to indemnify after the insured settled without consent of the insurer. Perini/Tompkins Joint Venture v. ACE American Ins. Co., 2013 U.S. App. LEXIS 24865 (4th Cir. Dec. 16, 2013).
The insured, a joint venture, was hired as manager for the construction of a $900 million hotel and convention center. OCIP and excess policies were obtained through ACE. The project was also insured by a Builders Risk Policy through Factory Mutual Insurance Company.
During construction, a rod eroded, causing the atrium to collapse. Substantial property damage occurred and the completion of the project was delayed for several months.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
