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DIRECTORY AND CAPABILITIES

Navigating the Construction Burrito: OCIP Policies in California’s Construction Defect Cases

November 16, 2023 — Alexa Stephenson & Ivette Kincaid - Kahana Feld
In the early 2000’s, Owner-Controlled Insurance Programs (OCIP) or WRAPS, were traditionally used in large commercial projects of over $50 million in construction costs. As construction defect lawsuits became more prevalent, subcontractors found themselves unable to meet the insurance requirements of their contracts with developers and general contractors because they could not find insurance companies that were willing to insure the risk. This presented a problem for developers and general contractors and left them with no option but to look into new insurance products that would insure them and all subcontractors who worked on the project. OCIPs became in some instances the only insurance option for developers, general contractors, and subcontractors to build single-family or multi-family projects in California and other western states. OCIPS or WRAPS, often likened to the layers of a savory burrito, offer both enticing benefits and potential pitfalls. Just as a burrito’s ingredients can harmonize or clash, OCIP policies can shape the outcome of legal battles, impacting contractors, developers, and insurers alike. Pros – Savoring the OCIP Burrito: 1. Wrapped Protection: Much like a well-folded burrito envelops its contents, OCIP policies offer comprehensive coverage for construction projects. Developers, general contractors, and subcontractors find comfort in knowing that their liability risks are bundled into a single policy, ensuring all enrolled parties have coverage in the event of a claim. Reprinted courtesy of Alexa Stephenson, Kahana Feld and Ivette Kincaid, Kahana Feld Ms. Stephenson may be contacted at astephenson@kahanafeld.com Ms. Kincaid may be contacted at ikincaid@kahanafeld.com Read the court decision
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Colorado General Assembly Sets Forth Prerequisites for an Insurance Company to Use Failure to Cooperate as a Defense to a Claim for First Party Insurance Benefits

August 10, 2020 — Christine Kroupa, John Palmeri & Katelyn Werner - Gordon & Rees
Despite first party insurance policies generally requiring cooperation from an insured in the investigation of a claim, insurers can no longer rely on the failure to cooperate as a defense in a claim for first party insurance benefits in Colorado unless certain conditions are met. The Bill: On July 2, 2020, Colorado Governor Jared S. Polis signed House Bill 20-1290 which addresses the ability of an insurer to use a failure to cooperate defense in an action where the insured has made a claim for benefits under an insurance policy. This bill bars an insurer from raising the failure to cooperate unless the following conditions are met:

• The insurer submitted a written request to the insured or the insured’s representative for the information (via electronic means if consent was given by insured or insured’s representative, or via certified mail);
• The information is not available to the insurer without the assistance of the insured;
• The written request provides the insured 60 days to respond;
• The written request is for information a reasonable person would determine the insurer needs to adjust the claim filed by the insured or to prevent fraud; and
• The insurer gives the insured an opportunity to cure, which must:
• Provide written notice to the insured of the alleged failure to cooperate, describing with particularity the alleged failure within 60 days after the alleged failure; and
• Allow the insured 60 days after receipt of the written notice to cure the alleged failure to cooperate.

Reprinted courtesy of Gordon & Rees attorneys Christine Kroupa, John Palmeri and Katelyn Werner Ms. Kroupa may be contacted at ckroupa@grsm.com Mr. Palmeri may be contacted at jpalmeri@grsm.com Ms. Werner may be contacted at kwerner@grsm.com Read the court decision
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Properly Trigger the Performance Bond

January 05, 2017 — David Adelstein – Florida Construction Legal Updates
A performance bond is a valuable tool designed to guarantee the performance of the principal of the contract made part of the bond. But, it is only a valuable tool if the obligee (entity the bond is designed to benefit) understands that it needs to properly trigger the performance bond if it is looking to the bond (surety) to remedy and pay for a contractual default. If the performance bond is not properly triggered and a suit is brought upon the bond then the obligee could be the one materially breaching the terms of the bond. This means the obligee has no recourse under the performance bond. This is a huge downside when the obligee wanted the security of the performance bond, and reimbursed the bond principal for the premium of the bond, in order to address and remediate a default under the underlying contract. A recent example of this downside can be found in the Southern District of Florida’s decision in Arch Ins. Co. v. John Moriarty & Associates of Florida, Inc., 2016 WL 7324144 (S.D.Fla. 2016). Here, a general contractor sued a subcontractor’s performance bond surety for an approximate $1M cost overrun associated with the performance of the subcontractor’s subcontract (the contract made part of the subcontractor’s performance bond). The surety moved for summary judgment arguing that the general contractor failed to property trigger the performance bond and, therefore, materially breached the bond. The trial court granted the summary judgment in favor of the performance bond surety. Why? Read the court decision
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Reprinted courtesy of David Adelstein, Florida Construction Legal Updates
Mr. Adelstein may be contacted at dma@katzbarron.com

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Just Because You Label It A “Trade Secret” Does Not Make It A “Trade Secret”

January 31, 2018 — David Adelstein - Florida Construction Legal Updates

Everything is a “trade secret,” right? Nope. What if I mark it as a “trade secret” Still nope. But, you already knew those answers.

This is an especially important issue when dealing with public entities, as demonstrated by the recent opinion in Raiser-DC, LLC v. B&L Service, Inc., 43 Fla. L. Weekly D145a (Fla. 4th DCA 2018). In this case, Uber and Broward County entered into an agreement regarding Uber’s services at Fort Lauderdale airport and Port Everglades. Per the agreement, Uber furnished monthly reports relating to the number of pickups and drop-offs, as well as information relating to the fee associated with the pickups and drop-offs. Uber marked these reports as constituting trade secrets. It did so to preclude this information from being disclosed to the public.

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Reprinted courtesy of David Adelstein, Florida Construction Legal Updates
Mr. Adelstein may be contacted at dadelstein@gmail.com

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Construction Defects Checklist

July 18, 2018 — Bremer Whyte Brown & O’Meara
Construction defects have existed since humans first began building structures, and will continue to be an occurrence into the future. For builder developers, contractors, and subcontractors, the specter of construction defects is a constant worry. Construction defect litigation is commonplace and can occur years after the construction project has been completed. This opens up an ongoing channel of risk and liability for construction contractors and project managers that are at risk of litigation far after they have completed a project. In this article, we’ll provide a helpful construction defects checklist that outlines the key avenues of risk and areas where construction defects litigation is most often focused. This checklist can help project managers, contractors, and subcontractors anticipate areas of their projects that may need extra attention or focus in order to ensure that they adhere to relevant local and state construction ordinances. Gaining a greater understanding of what construction defects are can provide insight into how construction litigation can prove beneficial for structure owners or contractors who received substandard work. Many clients may not understand that they have an avenue to seek redress in cases where faulty workmanship may have resulted in economic damages or safety concerns in their home, building, or another construction project. Understanding the scope of what a construction defect is, and the areas that are most commonly litigated is helpful to understand when construction defect litigation is a viable option to pursue redress. Read the court decision
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Reprinted courtesy of Bremer Whyte Brown & O’Meara

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The Year 2010 In Review: Design And Construction Defects Litigation

February 25, 2011 — Candace Matson, Harold Hamersmith, and Helen Lauderdale

This article is the first in a series summarizing construction law developments for 2010



1. Centex Homes v. Financial Pacific Life Insurance Co., 2010 U.S. Dist. LEXIS 1995 (E.D. Cal. 2010)



After settling numerous homeowners’ construction defect claims — and more than ten years after the homes were substantially completed — a home developer brought suit against one of the concrete fabrication subcontractors for the development seeking indemnity for amounts paid to the homeowners, as well as for damages for breach of the subcontractor’s duties to procure specific insurance and to defend the developer against the homeowners’ claims. The subcontractor brought a motion for summary adjudication on the ground the developer’s claims were barred by the ten year statute of repose contained in Code of Civil Procedure Section 337.15.

The District Court agreed the developer’s claim for indemnity was barred by Section 337.15. And it held that because the damages recoverable for breach of the subcontractor’s duty to purchase insurance are identical to the damages recoverable through the developer’s indemnity claim, the breach of duty to procure insurance claim also was time-barred. The District Court, however, allowed the claim for breach of the duty to defend to proceed. The categories of losses associated with such a claim (attorneys’ fees and other defense costs) are distinct from the damages recoverable through claims governed by Section 337.15 (latent deficiency in the design and construction of the homes and injury to property arising out of the latent deficiencies).

 

2. UDC — Universal Development v. CH2M Hill, 181 Cal. App. 4th 10 (6th Dist. Jan. 2010)



Indemnification clauses in construction agreements often state that one party to the agreement — the “indemnitor” — will defend and indemnify the other party from particular types of claims. Of course, having a contract right to a defense is not the same as actually receiving a defense. Any indemnitor attempting to avoid paying for defense costs can simply deny the tender of defense with the hope that when the underlying claim is resolved the defense obligations will be forgotten. In the past, when parties entitled to a defense — the “indemnitees” — had long memories and pressed to recover defense costs, indemnitors attempted to justify denying the tender by claiming their defense obligations coincided with their indemnity obligations and neither arose until a final determination was made that the underlying claim was one for which indemnity was owed.



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Reprinted courtesy of Candace Matson, Harold Hamersmith, and Helen Lauderdale, Sheppard Mullin Richter & Hampton LLP. Ms. Matson can be contacted at cmatson@sheppardmullin.com, Mr. Hamersmith can be contacted at hhamersmith@sheppardmullin.com, and Ms. Lauderdale can be contacted at hlauderdale@sheppardmullin.com.

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Insurance Client Alert: Mere Mailing of Policy and Renewals Into California is Not Sufficient Basis for Jurisdiction Over Bad Faith Lawsuit

January 28, 2015 — Valerie A. Moore and Christopher Kendrick – Haight Brown & Bonesteel LLP
In Greenwell v. Auto-Owners Ins. Co. (No. C074546, filed 1/27/15), a California appeals court held that the use of a mailing address to send policies and renewals into California did not support jurisdiction for a California resident's bad faith lawsuit against a Michigan insurer over property coverage for a fire loss to a building in Arkansas. In Greenwell, the insured was a California resident engaged in real estate investment. He purchased an apartment building in Little Rock, Arkansas. Using the services of an insurance broker in Little Rock, he purchased a package of general liability and commercial property insurance for the building from Auto-Owners Insurance Company, a Michigan insurer not licensed in California. The policy listed the insured's business address in California, the policy was mailed there, and renewed three times via the insured's California address. Reprinted courtesy of Valerie A. Moore, Haight Brown & Bonesteel LLP and Christopher Kendrick, Haight Brown & Bonesteel LLP Ms. Moore may be contacted at vmoore@hbblaw.com, Mr. Kendrick may be contacted at ckendrick@hbblaw.com Read the court decision
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Construction Delays for China’s Bahamas Resort Project

October 01, 2014 — Beverley BevenFlorez-CDJ STAFF
The Wall Street Journal reported that the $3.5 billion resort and casino China’s building in the Bahamas is being undermined by delays and labor crashes, which is “dulling the buzz surrounding the venture and threaten to undermine China's future business.” Once finished, the project “will include 2,200 new hotel rooms, luxury condominiums priced as high as $12 million, a 100,000-square-foot casino and an 18-hole golf course. Singer Lenny Kravitz is designing the nightclub.” Baha Mar, the developers, told the Wall Street Journal that they will not be meeting their December 2014 deadline, and instead are “focused on late spring 2015.” Read the court decision
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