FAIRFIELD CONNECTICUT BUILDING EXPERT
DIRECTORY AND CAPABILITIES

Court Provides Guidance on ‘Pay-When-Paid’ Provisions in Construction Subcontracts

July 13, 2020 — Ted R. Gropman & Cindy J. Lee - ConsensusDocs
On April 17, the California Court of Appeal decided Crosno Construction, Inc. v. Travelers Casualty & Surety Company of America,1 effectively narrowing the scope of enforceable “pay-when-paid” provisions in construction subcontracts to the extent the subcontractor seeks recovery against a general contractor’s payment bond surety. Although the Crosno case involved a public works project, the rationale and holding should apply with equal force to private works projects. Basing the bulk of its decision on the Wm. R. Clarke Corp. v. Safeco Insurance Co.2 case, the court found that an open-ended “pay-when-paid” provision in a subcontract is not enforceable against a subcontractor that seeks to recover on a public works payment bond claim. This article discusses the Crosno decision and the implications for contractors on both sides of the contract moving forward. Brief Case Summary In Crosno, general contractor Clark Bros., Inc. contracted with the North Edwards Water District (the District) to build an arsenic removal water treatment plant. Clark hired steel storage tank subcontractor Crosno Construction, Inc. to build and coat two steel reservoir tanks. Clark and Crosno’s subcontract included a “pay-when-paid” provision, which stated that Clark would pay Crosno within a “reasonable time” of receiving payments from the owner, but “in no event less than the time Contractor and Subcontractor require to pursue to conclusion their legal remedies against Owner or other responsible party to obtain payment.” After Crosno completed its work, a dispute arose between Clark and the District, and the District withheld payment from Clark (including the monies earmarked for Clark’s subcontractors). Clark sued the District for payment, and Crosno filed its own action against Travelers Casualty and Surety Company of America, the surety on Clark’s statutory public works payment bond, for recovery of the unpaid subcontract balance. Travelers rejected Crosno’s bond claim as premature, invoking the “pay-when-paid” subcontract language and pointing to Clark’s pending payment action against the District. The issue on appeal was whether the “pay-when-paid” provision in the subcontract blocked Crosno from recovering under the payment bond from Travelers while Clark’s lawsuit against the District was still pending. Reprinted courtesy of Ted R. Gropman, Pepper Hamilton LLP and Cindy J. Lee, Pepper Hamilton LLP Mr. Gropman may be contacted at ted.gropman@troutman.com Ms. Lee may be contacted at cindy.lee@troutman.com Read the court decision
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New American Home Construction Nears Completion Despite Obstacles

January 29, 2014 — Beverley BevenFlorez-CDJ STAFF
Construction of the New American Home in Las Vegas, Nevada, to be completed for the 2014 International Builders’ Show, has faced enormous challenges, according to Jennifer Goodman writing for Big Builder. Josh Anderson, owner of Element Building Co., told Goodman “he couldn’t have imagined what lay ahead when he signed on in fall 2012 to the project, which is co-sponsored by BUILDER and the NAHB.” Challenges began during the “design phase” when Anderson “was troubled by the sitting of the house on its lot in the tony Sky Terrace subdivision.” Furthermore, he “balked at the floor plan, which encompassed a traditional design aesthetic and opulent touches.” The project’s architect, Barry Berkus, passed away in late 2012, and his son, Jeffrey Berkus, took over for him. After the plans were “complete and approved by the city,” a labor shortage in Las Vegas made it “particularly difficult to find skilled framers.” The shortage also increased labor costs. Anderson also contended with weather anomalies: “Over the summer, the area set a record for the most consecutive wet days in 30 years. Winds blew sawdust and rain into the open structure, ruining 350 sheets of drywall and slowing down construction,” according to Big Builder. The “mammoth project” is close to completion. Anderson told Big Builder, “I’ve always been a sucker for a challenge.” Read the court decision
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SFAA Commends Congress for Maintaining Current Bonding Protection Levels in National Defense Authorization Act (NDAA)

December 20, 2021 — The Surety & Fidelity Association of America
December 15, 2021 (WASHINGTON, DC) – The Surety & Fidelity Association of America (SFAA), a nonprofit, nonpartisan trade association representing all segments of the surety and fidelity industry, commends the U.S. Senate and House for passing the National Defense Authorization Act (NDAA) for Fiscal Year 2022, and including Section 877, which exempts the Miller Act from periodic indexing for inflation. SFAA would like to thank Miller Act exemption bill sponsors, Representatives Nydia Velazquez (D-NY) and Byron Donalds (R-FL), as well as Senators Robert Portman (R-OH), Gary Peters (D-MI) and Mazie Hirono (D-HI), for their leadership and commitment on the passage of this bill. Exempting the Miller Act from periodic indexing for inflation ensures essential payment protections remain in place for subcontractors, suppliers, and workers on all federal construction contracts subject to the Miller Act. The exemption also ensures performance protections for taxpayers will remain in place on federal construction contracts of $150,000 and more. For over 80 years, the federal Miller Act has protected taxpayers against risk of loss by requiring payment and performance bonds on federal construction contracts. President Biden is expected to sign the NDAA into law in the coming days. The Surety & Fidelity Association of America (SFAA) is a nonprofit, nonpartisan trade association representing all segments of the surety and fidelity industry. Based in Washington, D.C., SFAA works to promote the value of surety and fidelity bonding by proactively advocating on behalf of its members and stakeholders. The association’s more than 450 member companies write 98 percent of surety and fidelity bonds in the U.S. For more information visit www.surety.org. Read the court decision
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SunEdison Gets Shinsei Bank Funding for Japan Solar Power Plant

March 12, 2015 — Ehren Goossens – Bloomberg
(Bloomberg) -- SunEdison Inc., a U.S. solar developer, got financing from Tokyo-based Shinsei Bank Ltd. for a large-scale project in the country. The 9.6-megawatt Tarumizu project on the southern Japanese island of Kyushu will power about 3,000 homes, Maryland Heights, Missouri-based SunEdison said Wednesday in a statement. The project is under construction and expected to be completed in September. Financial details weren’t disclosed. Read the court decision
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Reprinted courtesy of Ehren Goossens, Bloomberg
Mr. Goossens may be contacted at egoossens1@bloomberg.net

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NY Supreme Court Rules City Not Liable for Defective Sidewalk

February 12, 2014 — Beverley BevenFlorez-CDJ STAFF
Eileen N. Fanning sued the city of Watertown, New York after incurring injuries from a fall on a sidewalk on Court Street, according to the Watertown Daily Times. A state Supreme Court judge dismissed the lawsuit. According to Fanning as reported by the Watertown Daily Times, the plaintiff “fell on an uneven section of sidewalk” and “suffered multiple broken bones in her hand, as well as neurological damage to her arm, among other injuries.” She claimed that the damage is permanent. The lawsuit involved Purcell Construction (the landscape pavers), Neighbors of Watertown (a renovation project), and the city of Watertown. The judge ruled that “Neighbors of Watertown was not liable for her injuries because the agency neither owned nor controlled the property where the injuries occurred and therefore ‘did not owe a duty of care’ to users of the walk as it was not responsible for the sidewalk’s maintenance.” The city was not held liable “because it had received no prior written notice about the alleged defective condition of the property.” Furthermore, the judge “agreed with Purcell Construction’s claim that the area claimed to be defective is ‘one little section’ of sidewalk ‘over which the public walked’ for nearly 20 years.” Read the court decision
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City Development with Interactive 3D Models

October 23, 2018 — Aarni Heiskanen - AEC Business
The Finnish city of Hyvinkää has developed a unique internet service for collaborative 3D city planning. It gives real estate owners, investors, developers, designers, authorities, and citizens easy-to-use tools to publish their 3D plans and ideas for the built city environment. Participants can comment on the 3D plans directly in the city model. The 3D app is integrated with Facebook, which enables further conversation. Building the 3D City Model Päivi Tiihonen is the manager of the information services unit of the city’s technical and environmental sector. The city started building a browser-based 3D city model when Tiihonen assumed her position in 2014. Read the court decision
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Reprinted courtesy of Aarni Heiskanen, AEC Business
Mr. Heiskanen may be contacted at aec-business@aepartners.fi

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No Coverage for Defects in Subcontrator's Own Work

February 11, 2019 — Tred R. Eyerly - Insurance Law Hawaii
Damage to the concrete floor installed by the insured subcontractor was not property damage and thus not covered under the insured's CGL policy. Kalman Floor Co. v. Old Republic Gen. Ins. Corp., 2019 U.S. Dist. LEXIS 3319 (D. Colo Jan. 8, 2019). In 2007, Kalman Floor Co. was subcontracted to construct over 158,000 square feet of concrete flooring for a cold storage facility. The concrete floor was completed in late 2008. In late 2009, the contractor notified Kalman that pockmarks, or "pop-outs," were visible on the concrete flooring. The only damage to tangible property in the facility caused by the pop-outs was the concrete flooring itself. On January 31, 2009, Old Republic issued a general liability policy to Kalman for one year. The policy excluded for damage to "your work," defined as "work or operations performed by you or on your behalf." Old Republic denied coverage for damage to the concrete floor. Kalman sued, seeking a declaration that the exclusions did not bar coverage. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

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Counsel Investigating Coverage Can be Sued for Invasion of Privacy

January 28, 2019 — Christopher Kendrick & Valerie A. Moore - Haight Brown & Bonesteel LLP
In Strawn v. Morris, Polich & Purdy (No. A150562, filed 1/4/19), a California appeals court held that policyholders could state a claim for invasion of privacy against an insurer’s coverage counsel and law firm, where the counsel had disseminated inadvertently produced tax returns to forensic accountants while evaluating coverage. In Strawn, a couple’s home was destroyed by fire and the husband was prosecuted for arson, but the criminal case was dropped. Notwithstanding, their insurance claim was denied on the ground that the husband intentionally set the fire and fraudulently concealed his actions. In addition to the insurance company, the insureds also named the carrier’s coverage counsel and his firm in the ensuing bad faith lawsuit, alleging causes of action for elder financial abuse and invasion of privacy. Reprinted courtesy of Christopher Kendrick, Haight Brown & Bonesteel LLP and Valerie A. Moore, Haight Brown & Bonesteel LLP Mr. Kendrick may be contacted at ckendrick@hbblaw.com Ms. Moore may be contacted at vmoore@hbblaw.com Read the court decision
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