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Badly Constructed Masonry Walls Not an Occurrence in Arkansas Law

May 10, 2012 — CDJ STAFF

The US District Court for Maryland has granted a summary judgment in the case Konover Construction Corp. v. ATC Associates to Massachusetts Bay Insurance Company and denied a request for dismissal from ACT. Konover (KBE) was contracted by Wal-Mart to build a Wal-Mart store and a Sam’s Club in Port Covington, Maryland. Superus, Inc. was hired by KBE to build the masonry walls. Superus purchased a policy from Massachusetts Bay Insurance which named KBE as an additional insured. Wal-Mart hired ATC Associates to independently test and inspect the concrete structural steel, and masonry.

After the building was in use, a large crack appeared which was attributed a latent construction defect. Other cracks were discovered. Upon investigation, it was discovered that there were “voids or foam in the concrete block surrounding the reinforcing steel that should have been filled with grout,” and in some cases, “reinforcing steel was missing or not installed in accordance with the specifications.” KBE paid for the repair and remediation and Wal-Mart assigned all rights and interests against ATC to KBE.

KBE filed suit against ATC. ATC called for dismissal on the grounds that Wal-Mart had no claims as the problems had been remediated. Wal-Mart then provided KBE with additional agreements to give them enforceable rights against ATC and Superus. KBE filed a fourteen claims against ATC, Superus, and Massachusetts Bay. In the current case, Massachusetts Bay sought summary judgment and ATC sought dismissal of all claims against it.

Massachusetts Bay claims that they need not indemnify Superus, as “there is no evidence adequate to establish that Superus’ defective work caused any collateral and/or resulting damage that was not subject to an Impaired Property exclusion, and that, in any event, no damage occurred during the policy period.”

As Wal-Mart is headquarted in Arkansas, certain contracts were under Arkansas law. Under the Arkansas courts, “defective workmanship, standing alone and resulting in damages only to the work product itself, is not an ‘occurrence.’” The court determined that collateral or resultant damage would be covered. The court found that “it is clear under Arkansas law, and the parties appear to agree, that Massachusetts Bay is not obligated to indemnify KBE for any repairs to the masonry walls themselves, including any cracks or gaps in the walls.” The court also found that “there is no evidence adequate to prove that any allegedly resultant property damage was caused by Superus’ faulty construction of the walls.” The court also noted that “if the building code violation and structural integrity problem were ‘property damage,’ insurance coverage would be barred by the Impaired Property Exclusion.” Based on these findings, the court concluded that Massachusetts Bay is entitled to summary judgment.

While the court dismissed the case against Massachusetts Bay, the court declined ATC’s motion to dismiss. The court noted that ACT’s alleged negligence in conducting inspections “created only a risk of economic loss for KBE.” Although hired by Wal-Mart, ATC “transmitted its daily testing and inspection reports of the Wal-Mart and Sam’s Club projects directly to KBE.” The court found that “KBE has made a plausible claim.”

ATC also claimed that KBE contributed to the negligence due to the negligence of its subcontractor. The court concluded that it was plausible that “ATC will not be able to carry its burden of proving KBE was contributorily negligent.” The court was less sanguine about KBE’s fraud claim, but though it “may not now appear likely to have merit, it is above the ‘plausibility’ line.”

In conclusion, KBE may not continue its case against Massachusetts Bay. However, the judge allowed the other proceedings to continue.

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Louisiana Court Applies Manifestation Trigger to Affirm Denial of Coverage

June 10, 2015 — Tred R. Eyerly – Insurance Law Hawaii
Applying the manifestation trigger, the Louisiana Court of Appeal affirmed denial of coverage where the property damage manifested after the policy period expired. Landry v. Williamson, 2015 La. App. Unpub. LEXIS 213 (La. Ct. App. May 1, 2015). On August 28, 2002, the Burkarts purchased a home from the Williamsons. One month later, water started leaking into the home during periods of rainfall. Suit was filed against the contractor, who was insured by Scottsdale. Scottsdale, who was added as a defendant, filed a motion for summary judgment, asserting that it did not insure the developer at the time the alleged property damage occurred. Scottsdale's policy expired on August 1, 2002. The trial court granted Scottsdale's motion, finding coverage under its policy was not triggered because no property damage occurred during the policy period. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com

The Murky Waters Between "Good Faith" and "Bad Faith"

September 30, 2019 — Theresa A. Guertin - Saxe Doernberger & Vita
In honor of Shark Week, that annual television-event where we eagerly flip on the Discovery Channel to get our fix of these magnificent (and terrifying!) creatures, I was inspired to write about the “predatory” practices we’ve encountered recently in our construction insurance practice. The more sophisticated the business and risk management department is, the more likely they have a sophisticated insurer writing their coverage. Although peaceful coexistence is possible, that doesn’t mean that insurers won’t use every advantage available to them – compared to even large corporate insureds, insurance companies are the apex predators of the insurance industry. In order to safeguard policyholders’ interests, most states have developed a body of law (some statutory, some based on judicial decisions) requiring insurers to act in good faith when dealing with their insureds. This is typically embodied as a requirement that the insurer act “fairly and reasonably” in processing, investigating, and handling claims. If the insurer does not meet this standard, insureds may be entitled to damages above and beyond that which they could otherwise recover for breach of contract. Proving that an insurer acted in “bad faith,” however, can be like swimming against the riptide. Most states hold that bad faith requires more than just a difference of opinion between insured and insurer over the available coverage – the policyholder must show that the insurer acted “wantonly” or “maliciously,” or, in less stringent jurisdictions, that the insurer was “unreasonable.” Read the court decision
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Reprinted courtesy of Theresa A. Guertin, Saxe Doernberger & Vita
Ms. Guertin may be contacted at tag@sdvlaw.com

Insurer’s Confession Of Judgment Through Post-Lawsuit Payment

June 25, 2019 — David Adelstein - Florida Construction Legal Updates
The recent opinion in the property insurance coverage dispute, Bryant v. Geovera Specialty Ins. Co., 44 Fla.L.Weekly D1232a (Fla. 4thDCA 2019), discusses the doctrine known as an insurer’s “confession of judgment.” In this case, an insured suffered water damage from a pipe leak. The insurer paid the insured $6,000 because of sublimits in the property insurance policy. There was a $5,000 sublimit for mold and a $1,000 sublimit for water leakage that occurs over a period of 14 days or more. The insured sued the insurer for covered water damage arguing that the sublimits did not apply. After the lawsuit was filed, an agreed order was entered that stayed the case pending an appraisal. The appraisal award did not apply the $1,000 sublimit to the water damage from the pipe leak and segregated out damage for mold. (The insurer already paid the mold sublimit). The insurer ended up paying the appraisal award for the water damage caused by the pipe leak after deducting its pre-lawsuit sublimit payment. The insurer paid the award and did NOT challenge the application of the $1,000 sublimit in court, although it could have since coverage issues are decided by courts. Read the court decision
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Reprinted courtesy of David Adelstein, Kirwin Norris, P.A.
Mr. Adelstein may be contacted at dma@kirwinnorris.com

Colorado homebuilders target low-income buyers with bogus "affordable housing" bill

March 05, 2015 — Jesse Howard Witt – Acerbic Witt
“Affordable housing” is the latest catchphrase for Colorado homebuilders seeking immunity from warranty claims and repair requests. In 2013, the homebuilders’ lobby said it was about public transportation. In 2014 they said it was about community building. Now it’s 2015, and the lobbyists are claiming that a lack of affordable housing is the reason why politicians should eliminate consumer protections for homebuyers. The Colorado Senate recently announced the introduction of SB 15-177. If passed, the bill will make it illegal for homeowner associations to hire construction experts or lawyers unless they can first satisfy a complicated disclosure and voting process. Although sponsors portray the bill as an innocuous measure that merely requires more community involvement, its provisions have actually been tailored to take advantage of recent court decisions that make it difficult for homeowner associations to vote on measures outside of a meeting or act quickly to resolve construction defect disputes. The intent is to make it nearly impossible for homeowners to retain construction experts or legal representation before the statute of limitations period expires, thereby making homebuilders immune from any potential claims. The bill will also eliminate the right to a jury trial in many cases, forcing any disputes that overcome the procedural hurdles into costly, private arbitration proceedings. The sponsors argue that these measures are necessary to encourage builders to erect more cheap condominiums. Read the court decision
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Reprinted courtesy of Jesse Howard Witt, The Witt Law Firm
Mr. Witt welcomes comments at www.acerbicwitt.com

What is the True Value of Rooftop Solar Panels?

April 15, 2014 — Beverley BevenFlorez-CDJ STAFF
In Colorado, regulators are questioning the true value of rooftop solar panels, reported the Denver Business Journal: “Minneapolis-based Xcel Energy Inc. (NYSE: XEL), the biggest utility in Colorado, has said it believes Colorado’s current ‘net metering’ policy means the utility is overpaying customers who have rooftop solar power systems.” Currently, “Xcel...credits customers at a rate of 10.5 cents per kilowatt hour of excess power produced.” However, the utility company believes that “the ‘true value’ of the rooftop solar electricity is about half what it’s paying—just 4.6 cents per kilowatt hour.” According to the Denver Business Journal, supporters argue that “Xcel has undervalued the electricity and hasn’t accounted for the systems’ environmental and economic attributes.” Read the court decision
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Ohio Supreme Court Holds No Occurence Arises from Subcontractor's Faulty Workmanship

January 09, 2019 — Tred R. Eyerly - Insurance Law Hawaii
The Ohio Supreme Court bucked the modern trend by finding that there was no coverage under CGL policy's the subcontractor's exception for faulty workmanship claimed against the insured. Ohio N. Univ. v. Charles Constr. Servs. 2018 Ohio LEXIS 2375 (Ohio Oct. 9, 2018). The University contracted with Charles Construction Services, Inc. to build a new luxury hotel and conference center on campus. After work was completed, the University discovered extensive water damage from hidden leaks that it believed were caused by the defective work of Charles Construction and its subcontractors. Repairs were made at the cost of $6 million. 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

Floating Cities May Be One Answer to Rising Sea Levels

August 07, 2022 — Adam Minter - Bloomberg
Thanks to climate change, sea levels are lapping up against coastal cities and communities. In an ideal world, efforts would have already been made to slow or stop the impact. The reality is that climate mitigation remains difficult, and the 40% of humanity living within 60 miles of a coast will eventually need to adapt. One option is to move inland. A less obvious option is to move offshore, onto a floating city. It sounds like a fantasy, but it could real, later if not sooner. Last year, Busan, South Korea's second-largest city, signed on to host a prototype for the world's first floating city. In April, Oceanix Inc., the company leading the project, unveiled a blueprint. Representatives of SAMOO Architects & Engineers Co., one of the floating city's designers and a subsidiary of the gigantic Samsung Electronics Co., estimate that construction could start in a "year or two," though they concede the schedule might be aggressive. “It's inevitable,” Itai Madamombe, co-founder of Oceanix, told me over tea in Busan. “We will get to a point one day where a lot of people are living on water.” Read the court decision
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Reprinted courtesy of Adam Minter, Bloomberg

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