The Increasing Trend of Caps in Construction Contracts and Negotiating Them
November 27, 2023 —
Jarred Trauth - ConsensusDocsRisks are inherent in every construction project and all parties involved face them: owners, designers, general contractors/builders, subcontractors, suppliers…. Equitably allocating such risks is one of the most important and most negotiated areas of any construction related contract. Limitations of liability provisions are key to risk allocation. These provisions include no damage for delay provisions and caps on delay damages, warranty limitations and exclusions, indemnity limitations, and consequential damage waivers. Another, and the focus of this article, is a liability cap fixing the total amount of damages for which a party may be liable under the contract (the “Liability Cap”). Liability Caps have become more and more common in construction and construction related contracts, including major component supply agreements and design agreements.
This article will discuss Liability Caps generally and considerations of an owner or contractor negotiating them, including carve-outs (i.e. exceptions) to them.
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Jarred Trauth, Jones Walker LLPMr. Trauth may be contacted at
jtrauth@joneswalker.com
Appreciate The Risks You Are Assuming In Your Contract
February 10, 2020 —
David Adelstein - Florida Construction Legal UpdatesAPPRECIATE THE RISKS YOU ARE ASSUMING IN YOUR CONTRACT. Otherwise, those risks will come back and bite you in the butt. This language is not capitalized for naught. Regardless of the type of contract you are entering into, there are risks you will be assuming. You need to appreciate those risks because there may be insurance you can obtain to cover that risk.
For instance, exculpatory provisions (or get-out-of-jail provisions) in contracts are enforceable if they are unambiguous. “Such provisions are deemed to be unambiguous and enforceable when the language unequivocally demonstrates a clear and understandable intention for the defendant to be relieved from liability such that an ordinary and knowledgeable person will know what he or she is contracting away.” Pillay v. Public Storage, Inc., 44 Fla.L.Weekly D2744c (Fla. 4th DCA 2019).
An example of an exculpatory provision can be found in the public storage rental contract found in Pillay that read:
(1) ALL PERSONAL PROPERTY IS STORED BY OCCUPANT AT OCCUPANT’S SOLE RISK.
(2) Owner and Owner’s agents . . . will not be responsible for, and Tenant releases Owner and Owner’s agents from any responsibility for, any loss, liability, claim, expense, damage to property . . . including without limitation any Loss arising from the active or passive acts, omission or negligence of Owner or Owner’s agents.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Suppliers of Inherently Dangerous Raw Materials Remain Excluded from the Protections of the Component Parts Doctrine
December 02, 2015 —
Leah B. Mason & Michael J. Worth – Haight Brown & Bonesteel, LLPIn Brady v. Calsol, Inc. 2015 No. B262028, the California Court of Appeal, Second District, reversed summary judgment for a raw materials supplier where there was a triable issue of fact as to whether the benzene levels contained in the supplier’s mineral spirits could have caused plaintiffs’ leukemia.
Plaintiffs were mechanics Ernest Brady and David Gibbs, who used Safety-Kleen solvent to degrease automotive parts. Brady and Gibbs were diagnosed with leukemia allegedly caused by exposure to Safety-Kleen solvent during the course of their employment. In 2008, Plaintiffs sued Calsol, Inc., a distributor of mineral spirits for the ultimate manufacturer, Safety-Kleen Systems, Inc. Plaintiffs asserted negligence and strict products liability claims. Specifically, plaintiffs alleged that benzene, a carcinogen found in mineral spirits, caused their leukemia. Benzene is only carcinogenic to humans at certain levels. The parties dispute the levels of benzene found in the mineral spirits supplied to Safety-Kleen. Calsol contended the benzene levels were present only in low concentrations. Plaintiffs alleged the benzene levels were capable of causing injury.
Reprinted courtesy of
Leah B. Mason, Haight Brown & Bonesteel LLP and
Michael J. Worth, Haight Brown & Bonesteel LLP
Ms. Mason may be contacted at lmason@hbblaw.com
Mr. Worth may be contacted at mworth@hbblaw.com
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Construction Manager’s Win in Michigan after Michigan Supreme Court Finds a Subcontractor’s Unintended Faulty Work is an ‘Occurrence’ Under CGL
August 03, 2020 —
Gabrielle Szlachta-McGinn - Newmeyer DillionOn June 29, 2020, the Michigan Supreme Court overturned a longstanding precedent that commercial general liability (“CGL”) insurers have historically relied upon to deny insurance coverage for claims involving pre-1986 CGL policies. See Hawkeye-Security Ins. Co. v. Vector Const. Co., 185 Mich. App. 369, 372, 460 N.W.2d 329, 331 (1990). In its recent ruling, the state Supreme Court unanimously agreed that an Insurance Services Office, Inc. (“ISO”) 1986 standard CGL policy, which is sold to construction contractors across the United States, provides coverage for property damage to a policyholder’s work product that resulted from a subcontractor’s unintended faulty workmanship. Skanska USA Bldg. Inc. v. M.A.P. Mech. Contractors, Inc., No. 159510, 2020 WL 3527909 (Mich. June 29, 2020).
In 2008, Skanska USA Building, Inc., the construction manager on a renovation project for Mid-Michigan Medical Center, signed a subcontract with defendant M.A.P. Mechanical Contractors (“MAP”) to install a new heating and cooling (“HVAC”) system. Id. During the renovation, MAP installed some of the expansion joints in the new HVAC system backwards. Id. The defective installation caused approximately $1.4 million in property damage to concrete, steel and the heating system, which Skanska discovered nearly two years after MAP completed the project. Id. After performing the repairs and replacing the damaged property, Skanska sought repayment for the repair costs from MAP and also submitted a claim to Amerisure seeking coverage as an insured under the CGL policy. Id. When Amerisure rejected Skanska’s claim, Skanska sued both parties. Id. Amerisure relied on the holding in Hawkeye and argued that MAP’s defective workmanship was not a covered “occurrence” under the CGL policy, which the policy defined as an accident. Id. at *4.
The Michigan Court of Appeals ignored the express language contained in the CGL policy and applied a prior appellate court precedent from Hawkeye, finding that MAP’s faulty work was not an “occurrence” and thus, did not trigger CGL coverage. Id. at *4. The Court of Appeals further reasoned that Skanska was an Amerisure policyholder and that the only property damage was to Skanska’s own work, which was not covered under the CGL policy. Id. at *5.
In a landmark decision, the Michigan Supreme Court reversed, holding unanimously that the Court of Appeals incorrectly applied the holding of Hawkeye because it failed to consider the impact of the 1986 revisions to standard CGL insurance policies. Id. at *10. Chief Justice Bridget M. McCormack explained that the Hawkeye decision rested on the 1973 version of the ISO form insurance policy, which specifically excluded certain business risks from coverage such as property damage to a policyholder’s own work. Id. The Supreme Court agreed that while Hawkeye was correctly decided, it did not apply here because the 1986 revised ISO policy includes an exception for property damage caused by a subcontractor’s unintentional faulty work. Id.
The Supreme Court said that under the plain reading of the current CGL policy language, an “accident” could include a subcontractor’s unintentional defective work that damaged a policyholder’s work product and thus, may qualify as an “occurrence” covered under the policy. Id. at *9. The Supreme Court defined an “accident” (which was not defined in the Amerisure policy) as “an undefined contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.” Id. at *5; see Allstate Ins. Co. v. McCarn, 466 Mich. 277, 281, 645 N.W.2d 20, 23 (2002). The Supreme Court noted that there was no evidence suggesting that MAP purposefully installed the expansion joints backwards, nor was there evidence indicating that the parties affected by MAP’s negligence anticipated, foresaw, or expected MAP’s defective installation or property damage. Skanska, 2020 WL 3527909, at *4. Therefore, the Supreme Court concluded that an “occurrence” may have happened, which would trigger coverage under the CGL policy. Id. at *10.
Although this landmark decision changes Michigan law, the decision is limited to cases involving the 1986 ISO policy language revisions to CGL insurance policies. Id. The Supreme Court's decision does not overturn Hawkeye, but rather limits Hawkeye’s authority to cases involving the 1973 ISO form. Id.
Gabrielle Szlachta-McGinn was a summer associate at Newmeyer Dillion as part of the firm's 2020 summer class. You may learn more about Newmeyer Dillion's construction litigation services and find the group's key contacts at https://www.newmeyerdillion.com/construction-litigation/.
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Sometimes You Get Away with Unwritten Contracts. . .
January 20, 2020 —
Christopher G. Hill - Construction Law MusingsI have spoken often regarding the need for a well written construction contract that sets out the “terms of engagement” for your construction project. A written construction contract sets expectations and allows the parties to the contract to determine the “law” of their project. An unwritten “gentleman’s agreement” can lead to confusion, faulty memories, and more money paid to construction counsel than you would like as we lawyers play around in the grey areas.
One other area where the written versus unwritten distinction makes a difference is in the calculation of the statute of limitations. In Virginia, a 5 year statute of limitations applies to written contracts while a 3 year statute of limitations applies to unwritten contracts. This distinction came into stark relief in the case of M&C Hauling & Constr. Inc. v. Wilbur Hale in the Fairfax, Virginia Circuit Court. In M&C Hauling, M&C provided hauling services to the defendant through a subcontract with Hauling Unlimited in 2014, the last of which was in July. M&C provided over 2000 hours of hauling and provided time tickets (that were passed to Mr. Hale on Hauling Unlimited letterhead and signed by Mr. Hale or his agent) and an invoice stating the price term of $75.00 per hour. No separate written contract between M&C and Hauling Unlimited or Mr. Hale existed.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
KB to Spend $43.2 Million on Florida Construction Defects
August 27, 2013 —
CDJ STAFFIn their second quarter filing with the SEC, KB Homes estimates that repairing damage caused by defects in framing, stucco, roofs, and sealant will cost it $43.2 million. That estimate includes homes that are yet to be identified. KB had estimated lower costs earlier, but subsequently determined it was necessary to increase the funds by $15.9. As a result, the firm showed a loss in the second quarter. The company hopes to recover some funds in insurance settlements.
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Trends: “Nearshoring” Opportunities for the Construction Industry
July 22, 2024 —
Jerry P. Brodsky & Roberto Hernandez - Peckar & Abramson, P.C.“Nearshoring” is a hot topic throughout Latin America and is receiving increasing attention in the United States. We offer this introduction to “Nearshoring” and the opportunities it presents for your reference.
“Nearshoring” has become increasingly relevant in the context of the globalized economy. This phenomenon describes relocating production and service operations to countries geographically close to consumer markets, instead of opting for more distant locations as in traditional “offshoring”, considering, as dominant criteria, production conditions and costs.
Mexico, for example, given its strategic geographic closeness to the United States and its highly skilled labor force, is an attractive location for companies in a wide range of industries which are considering relocation or construction of new facilities and seeking to optimize costs, maintain efficiency and mitigate supply chain risks.
Reprinted courtesy of
Jerry P. Brodsky, Peckar & Abramson, P.C. and
Roberto Hernandez, Peckar & Abramson, P.C.
Mr. Brodsky may be contacted at jbrodsky@pecklaw.com
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Shutdowns? What A Covid-19-Safe Construction Site Looks Like
April 20, 2020 —
ENR Editors - Engineering News-RecordThere’s no end to published opinions about construction project shutdowns where the widely different types of jobsites are reduced to a single Dickensian nightmare crying out to be closed during this COVID-19 pandemic.
ENR Editors
ENR may be contacted at ENR.com@bnpmedia.com
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