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
Navigating Complex Preliminary Notice Requirements
March 30, 2016 —
Christopher G. Hill – Construction Law MusingsFor this week’s Guest Post Friday here at Musings, we welcome back a good friend, Scott Wolfe. Scott is the founder of zlien, a cloud-based platform that gives construction industry participants control over their financial risk and payment processes. The zlien platform manages the mechanics lien compliance process for all parties in the contracting chain, automating and optimizing the exchange of preliminary notices, monitoring lien rights and exposure, and exchanging lien waivers. zlien empowers over 10,000 companies to optimize their credit and financial risk management, and works to promote a fair and transparent construction payment process, improve B2B relationships, facilitate faster payments, and reduce legal and financial risk.
Sending preliminary notice is the most important step in mechanics lien compliance. A majority of states require preliminary notice (sometimes called a pre-lien notice or notice to owner) from contractors, material suppliers, and other construction parties. Even if preliminary notice is not required, however, it is best practice to send this document on all projects for a variety of reasons.
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Christopher G. Hill, Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
Virginia General Assembly Helps Construction Contractors
June 10, 2015 —
Christopher G. Hill – Construction Law MusingsAs reported last week at the Virginia Real Estate, Land Use and Construction Law Blog (authored by my good friend Tim Hughes (@timrhughes)), the Virginia General Assembly has passed an amendment to the jurisdictional limitations of Virginia General District Courts. The new statute, going into effect July 1, 2011, increases the jurisdiction of these courts to $25,000 from the present level of $15,000.
Why is this a big deal? As a solo practitioner who represents contractors and subcontractors in cases big and small, this increase is a boon to my practice and the collect-ability of some debts. I think back to the numerous conversations I have had with clients who had bona fide claims for around $20,000. These conversations inevitably turned toward the cost of Circuit Court versus General District Court and whether it would be better to leave money out of the claim to avoid the ramped up attorney fee and filing costs (not to mention the time from filing to judgment). This conversation was especially relevant in the instance where the contracts did not contain an attorney fees provision.
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Christopher G. Hill, Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
Montana Federal District Court Finds for Insurer in Pollution Coverage Dispute
October 24, 2021 —
Melanie A. McDonald - Saxe Doernberger & VitaApplying Louisiana law, a recent federal court decision exemplifies why policyholders should thoroughly read claims-made policies to understand when notice is due to insurers and truthfully complete policy applications. In Admiral Insurance Company v. Dual Trucking, Inc.,1 the Court determined the insurer, Admiral Insurance Company (“AIC”), owed no duty to defend or indemnify Dual Trucking and Transport, LLC (“DTT”), Dual Trucking of Montana, LLC (“DTM”), and Dual Trucking, Inc. (“DTI”) (collectively, the “Dual Entities”) under two Environmental Impairment Liability Policies (“EIL Policies”) and four Contractor Pollution Liability Policies (“CPL Policies”). The Court justified its decision because the Dual Entities: 1) did not give notice during the 2012-2013 EIL Policy period; 2) had discovered or knew of, but did not disclose, potential pollution conditions before the inception of the 2013-2014 EIL Policy and before the expiration of the extended reporting period of the 2012-2013 EIL Policy; 3) failed to provide AIC with notice during the extended reporting period of the 2013-2014 EIL Policy of claims for which the Dual Entities were seeking coverage; and 4) materially misrepresented known facts on the CPL Policy applications.
I. Factual Background.
The Dual Entities were Louisiana-based companies that provided oilfield equipment rental services. In 2011, the Dual Entities leased land in Montana under three leases, collectively referred to as “the Bainville site.” Shortly afterward, the Dual Entities applied for, and AIC issued, an EIL Policy and two CPL Policies with a policy period of October 1, 2012, to October 1, 2013. AIC renewed all three policies for the October 1, 2013, to October 1, 2014, policy period.
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Melanie A. McDonald, Saxe Doernberger & VitaMs. McDonald may be contacted at
MMcDonald@sdvlaw.com
ASCE Statement on Senate Passage Of Infrastructure Investment and Jobs Act
August 16, 2021 —
Jean-Louis Briaud, President, American Society of Civil Engineers (ASCE)WASHINGTON, DC. –
The American Society of Civil Engineers (ASCE) applauds the U.S. Senate for passing the bipartisan Infrastructure Investment and Jobs Act (IIJA), proving once again that the strength and reliability of our nation's infrastructure systems is an issue that unites us all.
With this legislation, the federal government will restore their critical partnership with cities and states to modernize our nation's infrastructure, including transit systems, drinking water pipes, school facilities, broadband, ports, airports and more.
We commend the Senate for prioritizing American communities by passing this bipartisan infrastructure legislation and urge the U.S. House of Representatives to do the same.
ABOUT THE AMERICAN SOCIETY OF CIVIL ENGINEERS
Founded in 1852, the American Society of Civil Engineers represents more than 150,000 civil engineers worldwide and is America's oldest national engineering society. ASCE works to raise awareness of the need to maintain and modernize the nation's infrastructure using sustainable and resilient practices, advocates for increasing and optimizing investment in infrastructure, and improve engineering knowledge and competency. For more information, visit www.asce.org or www.infrastructurereportcard.org and follow us on Twitter, @ASCETweets and @ASCEGovRel.
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Greystone on Remand Denies Insurer's Motion for Summary Judgment To Bar Coverage For Construction Defects
June 28, 2013 —
Tred EyerlyA prior post here discussed the Tenth Circuit's decision in Greystone Constr., Inc. v. National Union Fire & Marine Ins. Co., 661 F. 3d 1272 (10th Cir. 2011). The court found a duty to defend construction defect claims where damage caused by the faulty workmanship was unintentional. The Tenth Circuit remanded for a determination on whether any policy exclusions precluded a defense or indemnity for damage arising from faulty workmanship. On remand, the district court denied National Union's Motion for Summary Judgment, seeking to establish the policy exclusions precluded its duty to defend and to indemnify. See Greystone Constr., Inc. v. v. National Union Fire & Marine ins. Co., 2013 U. S. LEXIS 46707 (D. Colo. March 31, 2013).
Greystone was sued for construction defects in homes it built. The suit alleged that Greystone failed to recognize defects in the soil where the house was built. National Union refused to defend. The district court initially granted summary judgment to National Union because claims arising from construction defects were not covered. As noted above, the Tenth Circuit vacated because the damage in the underlying suit did not categorically fall outside coverage under the policy.
On remand, National Union first argued there was no duty to defend based upon an exclusion precluding coverage for damage arising out of work done by subcontractors unless the subcontractors agreed in writing to defend and indemnify the insured and carried insurance with coverage limits equal to or greater than that carried by the insured. The Tenth Circuit rejected this argument because National Union had to rely on facts outside of the underlying complaint.
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Tred EyerlyTred Eyerly can be contacted at
te@hawaiilawyer.com
Development in CBF Green Building Case in Maryland
August 19, 2015 —
Christopher G. Hill – Construction Law MusingsRemember that case I discussed a while back relating to the Chesapeake Bay Foundation (CBF) building in Annapolis, Maryland? Remember how it was a lawsuit over parallams and failure of those parallams? Do you even remember what a parallam is?
Well, that case was initially dismissed upon the Defendant’s Motion for Summary Judgment because the trial court determined that CBF did not file its lawsuit within the proper time frame after notice of the potential failure of the building materials. Of course, CBF appealed to the Fourth Circuit Court of Appeals under the caption The Chesapeake Bay Foundation, Inc., et. al. v. Weyerhaeuser Company (4th Circuit).
After a great review of the facts of the case, the engineering inspections and reports at issue and the trial court’s ruling, the Fourth Circuit vacated the dismissal and remanded the case for further proceedings. The Court of Appeals reasoned that the district court jumped the gun in dismissing the lawsuit so early in the process because:
a genuine dispute exists as to whether knowledge of the water infiltration problem would have put a reasonable person on notice that the Parallams were susceptible to premature deterioration and that their PolyClear 2000 treatment would not preserve them.
In short, the court ruled that the engineering reports relating to moisture issues would have put CBF on notice of the particular issue of deterioration that was at issue in the litigation.
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Christopher G. Hill, Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
John Boyden, Alison Kertis Named “Top Rank Attorneys” by Nevada Business Magazine
July 25, 2022 —
John Boyden & Alison Kertis - Lewis BrisboisReno, Nev. (June 16, 2022) – Reno Partner John Boyden and Associate Alison Kertis were recently named to Nevada Business Magazine's 2022 list of "Top Rank Attorneys." Formerly known as "Legal Elite," this annual list represents the top talent in the legal industry across the State of Nevada.
According to Nevada Business Magazine, thousands of attorneys are nominated for the list and then scored based on the number and type of votes they receive, with votes from outside an attorney's firm receiving more weight. Finally, before being added to the list, the attorneys, and the votes they receive, go through several levels of verification and scrutiny, with each ballot individually reviewed for eligibility and every voting attorney verified with the State Bar of Nevada. The magazine has published this list for the past 15 years.
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John Boyden, Lewis Brisbois and
Alison Kertis, Lewis Brisbois
Mr. Boyden may be contacted at John.Boyden@lewisbrisbois.com
Ms. Kertis may be contacted at Alison.Kertis@lewisbrisbois.com
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