Wisconsin Court Enforces Breach of Contract Exclusion in E&O Policy
July 21, 2018 —
TLSS Insurance Law BlogIn its recent decision in Crum & Forster Specialty Ins. Co. v. GHD Inc.,2018 U.S. Dist. LEXIS 111827 (E.D. Wisc. July 5, 2018), the United States District Court for the Eastern District of Wisconsin had occasion to consider the application of a breach of contract exclusion in a professional liability policy.
Crum’s insured, DVO, was sued in connection with its contract to construct a biogas converter mechanism. The underlying suit alleged a sole cause of action; namely, breach of contract based on DVO’s failure to have fulfilled its obligations to design the mechanism to specification.
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Traub Lieberman Straus & Shrewsberry LLP
Understanding the Details: Suing Architects and Engineers Can Get Technical
November 02, 2017 —
Steven M. Cvitanovic & Stephen M. Tye - Haight Brown & Bonesteel LLPBefore suing an architect or engineer for professional negligence, a plaintiff must obtain a “certificate of merit” (“Certificate”) under Code of Civil Procedure section 411.35. Boiled down to the basics, the Certificate declares that the attorney consulted with and received an opinion from an expert that a reasonable and meritorious case exists against said design professional. The Certificate must be filed before serving the complaint on any defendant, but can be filed within 60 days under certain circumstances. This rule was recently analyzed against another long-standing rule in California, known as the “relation-back doctrine.” Under the relation-back doctrine, a court will deem a later-filed pleading, such as an amended complaint, to be deemed filed at the time of an earlier complaint.
In Curtis Engineering Corp. v. Superior Court of San Diego County, No. D072046, (Cal. Ct. App. 10/23/17), the Fourth Appellate Court considered the interplay between section 411.35 and the relation-back doctrine, holding that a Certificate filed more than 60 days after filing the original pleading does not relate back to the filing of the original pleading.
Reprinted courtesy of
Steven Cvitanovic, Haight Brown & Bonesteel LLP and
Stephen Tye, Haight Brown & Bonesteel LLP
Mr. Cvitanovic may be contacted at scvitanovic@hbblaw.com
Mr. Tye may be contacted at stye@hbblaw.com
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Approaches to Managing Job Site Inventory
January 04, 2018 —
Jessica Stark - Construction InformerOriginally Published by CDJ on August 30, 2017
There is no question that organization on the job site can mean the difference between efficient performance and costly errors. A simple mistake can cost a company thousands, which is why details are carefully articulated and supervisors become better scrutinizers than magazine editors. But for some reason, many companies don’t consider managing job site inventory under this same attentive category, or perhaps they don’t know about the technology available to help them do it.
For contractors, keeping track of every piece of material and equipment lowers losses and keeps crews busy. This is especially true for contractors in the trades who often have specialized equipment in inventory such as power supplies, HVAC “smart energy” components or inspection equipment. Once everything is accounted for, the possibility of loss is decreased and there’s a chance to evaluate the use of all materials and equipment. This can show the efficiency of allotted resources. Is there enough equipment on the site to get tasks completed? Is there a need for more? Less? Having excess equipment can sometimes prepare a crew for problem scenarios. But it can also mean the construction company is overpaying for unneeded resources. However, the only way to know is by effectively managing job site inventory. That includes all equipment and materials
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Jessica Stark, Construction Informer
Were Condos a Bad Idea?
June 13, 2022 —
Tyler P. Berding - Berding & Weil LLPIntroduction
Condominiums are a nice idea, but their execution has been less than perfect. Long before the fatal Berkeley, California balcony failure in 2015 or the 2021 Champlain Towers South collapse that killed 98 people in Surfside, Florida, we suspected that all was not right with the basic condo concept. Years ago, there were already signs this "cooperative" housing model was anything but. Whether due to owner apathy, internal disputes, or failure to fund future repairs, sustaining these projects for the long-term has been difficult, leaving their future in doubt. Can this be fixed, or is the concept inherently flawed?
Every enterprise has an organizational "model" to run the business. For-profit corporations obtain revenue from the sale of products or services. The revenue of non-profit condominium corporations are the assessments paid by the owners of the individual units. While these assessments are “mandatory” in the sense they must be paid, they are also “voluntary” since the amount is left to the board of directors to determine. Condos are cheaper to buy, but the sales price may not reflect the real cost of ownership. They are "cooperative" because costs and space are shared, but internal disputes and funding shortfalls operate to shorten the life of these buildings in ways few owners understand.
Internal Disputes
Why is condominium life frequently not “cooperative?” Disputes. Disputes between condominium owners and their associations; among board members; and between individual owners and their neighbors. There are arguments over the right to put a flag on the balcony. There are arguments over swimming pool hours. The right to paint their front door some color other than everyone else's. The right to be free of noise, smoke, or view-blocking plants. And sometimes, the claimed right not to pay assessments needed to maintain the project—all notwithstanding the governing documents to the contrary. The right to use one's property as the owner sees fit is a concept imported from the single-family home experience but not replicated in condominiums where common ownership requires rules to avoid chaos.
But a condominium association's most important concern should not be the color of someone's front door or when they can swim but sustaining the building and keeping owners safe. Maybe we care someone has painted their front door bright green, but should that concern have priority over finding rot that may cause a balcony to collapse with someone on it? Resolving conflicts and enforcing the governing documents have a reasonable success rate. Still, the effort required to do that often distracts the board from more critical issues—damage that can sink the ship. Directors can waste a lot of time re-arranging the deck chairs on the Titanic when, if they look closely, the iceberg is coming.
Maintenance Lacks Priority
Why can't we enforce the rules and do what’s necessary to sustain the building and keep occupants safe? Unfortunately, juggling both behavioral and sustainability issues has proven difficult for many volunteer boards of directors. Rule disputes are always in their face, crowding their agenda, while the damage that could lead to structural failure often remains unknown. Also, enforcing—or resisting—rules can involve a clash of egos that keep those matters front and center. Or, and I suspect this is a primary culprit, the cost of adequate inspections, maintenance, and repair is so high that boards cannot overcome owner resistance to that expense.
While boards and management must sustain the project and protect people, raising the funds to do that is another matter. Directors must leap hurdles to increase regular assessments. Imposing large, unexpected, special assessments for major repairs can be political suicide. Unfortunately, few owners realize how deadly serious proper maintenance is until there is a Berkeley or a Surfside, and everyone is stunned by the loss of life and property. While those are extreme cases of faulty construction, inadequate maintenance, natural causes, or all the above, they will not be the last. We know that because experts have seen precursors to those same conditions in other projects.
Our concern for sustainability arises from examining newer projects during construction defect litigation when forensic experts open walls to inspect waterproofing and structural components. It also comes from helping our clients with the re-construction of older buildings and dealing with many years or decades of neglect for which little or no reserves have been allocated.
The economic impact of repairing long-term damage is huge. Rot lying hidden within walls slowly damages the structural framing. Moisture seeping into balcony supports weakens them sometimes to the point of collapse. The cost to repair this damage is frequently out of reach of most condominium associations. In newer projects, when experts find problems early, claims are possible. The Berkeley balcony failure occurred in an eight-year-old building[1], and there was recourse available from the builder. But with older projects, it is often difficult to hold anyone responsible other than the owners themselves.
Is The Condo Model Flawed?
Suppose this is true—and our experience representing condominium projects for over forty years tells us it is—then we are not dealing only with the inexperience of some volunteer directors but rather with a flawed organization model. Board members want to succeed but are constrained by an income stream that depends almost entirely on the will of the individual owners—essentially voluntary funding.
Under most state laws, funding for condominium operations and maintenance is not mandatory[2], and relies instead on the willingness of the directors to assess owners for whatever is needed, and on the willingness of owners to accept the board’s decisions. When a board of directors can set assessments at whatever level is politically comfortable, without adequate consideration, or even knowledge, of long-term maintenance needs, systemic underfunding can result[3]. What the members want are the lowest assessments possible, and directors often accede to those demands. When these factors conspire to underfund maintenance, they will drastically shorten the service life of a building. They also make it potentially unsafe.
Commercial buildings incentivize their owners for good maintenance with increased rents and market value. That incentive is not relevant to a condominium owner because the accumulating deficit is rarely understood at the time of sale and not reflected in the unit’s sales price. With a single-family home, deferred maintenance is more easily identified and is reflected in the purchase price. But condo home inspections are usually confined to the interior of a unit, and do not assess the overall condition of the entire building or project or review any deficit in the funding needed to attend to deficiencies. Thus, market value is not affected by reality.
In most states that require that reserves be maintained for future maintenance and repairs, the statutes require nothing other than cursory surface inspections. Damage beneath the skin of a building is not investigated, and no reserves are recommended for what is not known. California recently enacted legislation that will require condominium associations inspect specific elevated structures for safety, including intrusive testing where indicated. But no other state requires this level of inspection, and few even require a reserve study to determine how much money to save for the obvious problems, never mind those no one knows about[4].
This situation leads to unfair consequences for those owners who find themselves unlucky enough to own a unit when the damage and deficits are finally realized. Damage discovered, say, in year 35 didn’t just happen in year 35. That deterioration likely began earlier in the building's life and lay hidden for decades. It is costly to repair when it finally becomes obvious or dangerous. No prior owner, those who owned and sold their units years ago, will pay any part of the cost of the eventual rehabilitation of that building due to past lack of adequate inspections and years of artificially low assessments. Instead, the present owners will be handed the entire tab for the shortfall from several decades of deferred maintenance or hidden damage—the last people standing when the music stops.
Can this trend be reversed? As condominium buildings age and deterioration continues, the funding deficit increases dramatically. But to reverse that trend and reduce the deficit, someone must know it exists and be willing to address it. That requires more robust inspections early in the building's life and potentially higher assessments to stay even with any decay.
Conclusion
It would not be wrong to blame this on the failure of the basic condominium model. Volunteers rarely have sufficient training or expertise to oversee complex infrastructure maintenance, especially without mandatory funding to pay for it. The model also does not insist that board members have a talent for resolving conflicts. While condominium boards can leverage fines or legal action to enforce the rules, that lacks finesse and can create greater antagonism—a distraction from the more critical job of raising funds to inspect and maintain the building.
Unit owner-managed, voluntarily funded, multi-million-dollar condominium projects were probably a bad idea from the beginning. But sadly, it is way too late to reverse course on the millions of such projects built in the past sixty years. Many are already reaching the end of their service lives, with no plan to deal with that. Robust inspection standards on new and existing projects and enforceable minimum funding for maintenance and repairs should be considered by state legislatures. But whatever the approach, the present system is not staying even with the deterioration of many buildings, and that is just not safe anymore.
- The collapse of the balcony in Berkeley occurred on an apartment building. But the construction of that building is similar or identical to the construction of most multi-story wood-frame condominiums.
- Boards of directors are empowered by statute or contract to assess members for operation and maintenance costs. However, there are few statutes that set minimum funding or otherwise require boards to exercise that authority.
- Even in states that require reserve studies, the physical inspections are inadequate to uncover some of the costliest damage. California’s reserve study statute—Civil Code Section 5550—only requires inspection of those components that are visible and accessible, leaving damage within walls and other structural components undiscovered and funding for the eventual repairs, unaddressed.
- In May 2022, in response to the Champlain Towers South collapse, Florida enacted mandatory structural inspections for buildings 30 years and older, repeating every 10 years thereafter. The law also includes mandatory reserve funding for structural components.
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Tyler P. Berding, Berding & Weil LLPMr. Berding may be contacted at
tberding@berdingweil.com
Maui Wildfire Cleanup Could Cost $1B and Take One Year
September 18, 2023 —
James Leggate - Engineering News-RecordHawaii Gov. Josh Green and Sen. Brian Schatz (D-Hawaii) have estimated at $1 billion the cost of cleanup after the Maui wildfires—which started Aug. 8 and killed at least 115 people and destroyed more than 2,200 structures. Officials planning the rebuilding of the parts of West Maui
devastated by the wildfires are emphasizing safety and residents’ wishes over speed.
Reprinted courtesy of
James Leggate, Engineering News-Record
Mr. Leggate may be contacted at leggatej@enr.com
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Stucco Contractor Trying to Limit Communication in Construction Defect Case
November 13, 2013 —
CDJ STAFFSouth Carolina State Plastering claimed in the South Carolina Court of Appeals that communication between attorneys and residents of a retirement community could undermine the judgment in the case. Residents of Sun City had filed a class action lawsuit over problems with stucco in the community.
Phillip Segul, the plaintiffs’ attorney, noted that plasterer was “directly communicating with the class members and getting them to sign opt-outs and releases of their claims,” although this was something that Everett Kendall, the plasterer’s attorney denied.
The lawsuit has been grinding along for six years. Some residents fear they won’t outlive the construction defect lawsuit.
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Peru’s Former President and His Wife to Stay in Jail After Losing Appeal
August 10, 2017 —
John Quigley - BloombergFormer President Ollanta Humala and his wife Nadine Heredia will remain in jail while they are investigated for campaign donations involving Brazilian construction companies and the Venezuelan government, a Peruvian court said Friday.
The couple, who were given pre-trial detention three weeks ago, had asked the appeal court judges to change the order for one requiring them not to leave the country and to appear regularly before the authorities.
The couple turned themselves in on July 13 after Judge Richard Concepcion ordered 18 months of preventive detention for suspected money laundering. Concepcion had said there was sufficient evidence of wrongdoing and grounds to believe Humala and his wife would seek to obstruct the ongoing investigation by the Attorney General’s office.
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John Quigley, Bloomberg
The Future of Construction Defects in Utah Unclear
December 11, 2013 —
CDJ STAFFIn recent years, more courts have started to view construction defects as accidents, covered under insurance policies. In a post on the Parr Brown Gee & Loveless web site, Jeffrey D. Stevens writes that “the number of courts siding with insurance companies to deny contractors and subcontractors insurance coverage in construction defect lawsuits has been shrinking.” Recently, the Supreme Court of West Virginia “switched sides on this issue completely.”
The Utah Supreme Court has not made a ruling on this, but the Federal District Court for the District of Utah and the Tenth Circuit have looked at Utah law and concluded that “under Utah law damage caused by construction defects is not accidental.” But in another case, “the district court determined that property damage allegedly caused by defective or defectively installed windows was caused by an accident.”
Mr. Stevens thinks that “it is likely” that the Utah Supreme Court “will follow the increasing number of courts that have held that damage caused by construction defects is an accident for insurance purposes.
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