Improperly Installed Flanges Are Impaired Property
February 16, 2016 —
Tred R. Eyerly – Insurance Law HawaiiAnswering certified questions from the Fifth Circuit, the Texas Supreme Court found there was no coverage for flanges that leaked after installation. U. S. Metals, Inc. v. Liberty Mutual Group, Inc., 2015 Texas LEXIS 1081 (Dec. 4, 2015).
U. S. Metals sold Exxon 350 custom-made, stainless steel, weld-neck flanges for use in refineries. Testing after installation showed the flanges leaked and did not meet industry standards. Exxon decided to replace the flanges to avoid risk of fire and explosion. For each flange, this involved stripping the temperature coating and insulation, cutting the flange out of the pipe, removing the gaskets, grinding the pipe surfaces smooth for re-welding, replacing the flange and gaskets, welding the new flange to the pipes, and replacing the temperature coating and insulation. The replacement process delayed operation of the diesel units for several weeks.
Exxon sued U.S. Metal for over $6 million as the cost of replacing the flanges and $16 million as damages for lost use of the diesel units during the process. U.S. Metals settled with Exxon for $2.2 million and then sought indemnification from its liability insurer, Liberty Mutual.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Federal Court Holds That Other Insurance Analysis Is Unnecessary If Policies Cover Different Risks
September 28, 2020 —
Craig Rokuson - Traub Lieberman Insurance Law BlogIn Greater Mutual Insurance Company v. Continental Casualty Company, 2020 WL 5370419 (S.D.N.Y. September 8, 2020), the United States District Court for the Southern District of New York had occasion to consider the “other insurance” provisions of a commercial general liability policy, issued by Greater Mutual Insurance Company (“GNY”), and a directors and officers (“D&O”) policy, issued by Continental, to the same insured. The GNY policy covered, inter alia, property damage caused by an occurrence, as well as “personal advertising injury,” defined to include “[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” The Continental D&O policy covered claims for wrongful acts, including “wrongful entry or eviction, or other invasion of the right to private occupancy. . . .” Unlike the GNY policy, however, the Continental policy expressly excluded coverage for damage to tangible property.
In the underlying action, the plaintiffs alleged that the insured engaged in construction work to fix a leak from a terrace on the seventeenth floor. In doing so, the insured accessed the plaintiffs’ roof terrace. The plaintiffs alleged that the construction workers installed and stored construction materials on the roof terrace, making the plaintiffs unable to access the terrace. Plaintiffs also alleged that their deck furniture may have suffered damage, and that the workers had a “direct line of sight” into their unit, resulting in the plaintiffs having to leave their unit frequently. Causes of action were for property damage, constructive eviction, partial constructive eviction, and invasion of privacy.
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Craig Rokuson, Traub LiebermanMr. Rokuson may be contacted at
crokuson@tlsslaw.com
Superintendent’s On-Site Supervision Compensable as Labor Under Miller Act
March 13, 2023 —
David Adelstein - Florida Construction Legal UpdatesA recent Miller Act payment bond decision out of the District of Columbia Circuit Court of Appeals, U.S. f/u/b/o Civil Construction, LLC v. Hirani Engineering & Land Surveying, PC, 58 F.4th 1250 (D.C. Circ. 2023), dealt with the issue of whether a subcontractor’s superintendent constitutes recoverable “labor” within the meaning of the Miller Act and compensable as a cost under the Miller Act that typically views labor as on-site physical labor.
The issue is that the Miller Act covers “[e]very person that has furnished labor or material in carrying out work provided for in a contract.” Civil Construction, supra, at 1253 quoting 40 U.S.C. s. 3133(b)(1). The Miller Act does not define labor. The subcontractor claimed labor includes actual superintending at the job site. The surety disagreed that a superintendent’s presence on a job site constitutes labor as the superintendent has to actually perform physical labor on the job site to constitute compensable labor under the Miller Act.
The subcontractor argued its subcontract and the government’s quality control standards required detailed daily reports that verified manpower, equipment, and work performed at the job site. It further claimed its superintendent had to continuously supervise and inspect construction activities on-site: “[the] superintendent had to be on-site to account for, among other things, hours worked by crew members, usage and standby hours for each piece of equipment, materials delivered, weather throughout the day, and all work performed. These on-site responsibilities reflected the government’s quality control standards, under which the superintendent as ‘the most senior site manager at the project, is responsible for the overall construction activities at the site…includ[ing] all quality, workmanship, and production of crews and equipment.” Civil Construction, supra, at 1253-54.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Pennsylvania Federal Court Finds No Coverage For Hacking Claim Under E&O Policy
July 25, 2022 —
Celestine Montague & Paul A. Briganti - White and Williams LLPOn June 9, 2022, the U.S. District Court for the Eastern District of Pennsylvania held, on summary judgment, that an insured was not entitled to coverage under a Professional Errors and Omissions (E&O) policy for loss allegedly resulting from a hacking incident. See Construction Fin. Admin. Servs., Inc. v. Federal Ins. Co., No. 19-0020, 2022 U.S. Dist. LEXIS 103042 (E.D. Pa. June 9, 2022). Applying North Carolina and Pennsylvania law, the court reasoned that: (1) coverage was barred by the policy’s unauthorized computer access, or “breach,” exclusions; and (2) the insured violated a condition in the policy that required the insurer’s consent to settlements and the violation prejudiced the insurer.
The insured, Construction Financial Administration Services, Inc. (CFAS), was a third-party fund administrator for construction contractors. In April 2018, the CFAS received email requests from what it believed to be one of its clients, SWF Constructors (SWF), to disburse $1.3 million from an SWF account to a foreign company. CFAS authorized the payments, despite not having received a copy of any executed agreement between SWF and the foreign company. After the funds were disbursed, SWF advised that it had not authorized or requested the payments to the foreign company. In response, CFAS placed approximately $1.2 million of recovered and borrowed funds into the SWF disbursement account. SWF then sent a letter advising CFAS that the requests from the foreign company did not include documentation required under the contract between SWF and CFAS. It was later determined that the emails had been initiated by a fraudster who had gained unauthorized access to the sender’s email account.
Reprinted courtesy of
Celestine Montague, White and Williams LLP and
Paul A. Briganti, White and Williams LLP
Ms. Montague may be contacted at montaguec@whiteandwilliams.com
Mr. Briganti may be contacted at brigantip@whiteandwilliams.com
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Differing Site Conditions: What to Expect from the Court When You Encounter the Unexpected
September 05, 2022 —
Margarita Kutsin - Ahlers Cressman & Sleight[
1]Seattle Tunnel Partners (“STP”), a joint venture of Dragados USA and Tutor Perini, entered into a $1.4 billion contract with the Washington State Department of Transportation (“WSDOT”) to replace the Highway 99 viaduct. In December 2013, a tunnel boring machine (“TBM”) bearing the moniker “Bertha,” then the largest TBM ever built, measuring 425 feet long and 57 feet in diameter, struck an underground pipe. Shortly after the impact, Bertha overheated and eventually could no longer make forward progress. A massive repair effort ensued causing a 2.5-year delay in reaching substantial completion.
WSDOT sued STP for the delay, seeking liquidated damages of $57 million. In response, STP argued its delay was excusable because it was caused by Bertha’s impact with the pipe, and the steel well casing was a Differing Site Condition (DSC) undisclosed in the contract documents. STP asserted counterclaims against WSDOT, alleging breach of contract and seeking $300 million in damages. Ultimately, a jury found that the steel well casing on the pipe was not a DSC, foreclosing STP’s excusable delay defense and counterclaims, and resulting in a $57 million verdict, plus interest, in favor of WSDOT.
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Margarita Kutsin, Ahlers Cressman & SleightMs. Kutsin may be contacted at
margarita.kutsin@acslawyers.com
The New Jersey Theme Park Where Kids’ Backhoe Dreams Come True
April 13, 2017 —
Patrick Clark - BloombergThere is probably only one place in America where an eight-year-old can ride a carousel whose seats look like excavator buckets, then swipe at bowling pins with a mini-digger—where, for a ticket price of less than $40, he or she can operate a backhoe, drive a drum-roller, and ride the telescoping arm of a construction lift 50 feet into the air to admire the Philadelphia skyline.
That place is a small theme park in West Berlin, N.J., called Diggerland USA.
Diggerland opened for the season in March, but even on a recent visit when the park was closed, its discordant appeal was obvious: Small children get to climb into the cabs of heavy-duty construction equipment.
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Patrick Clark, BloombergMr. Clark may be followed on Twitter @pat_clark
Bank Sues over Defective Windows
July 31, 2013 —
CDJ STAFFThe Federal Reserve Bank of St. Louis replaced 498 windows in its building in 2008. According to a consultant, they all have to be replaced again. The bank estimates that the damages will exceed $1.5 million, and they are suing the contractor who installed them, the window manufacturer, and others.
The windows were replaced to provide greater blast protection. But in 2011, the bank found that the special glass used was beginning to delaminate. The Federal Reserve is seeking to have all of the windows replaced “with windows that meet the specifications of the contract.”
McCarthy Building Construction says that it is attempting to resolve things. The contractor noted that it is “continuing to work with the Federal Reserve and other parties and hope we can resolve this matter in a timely manner.”
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The Creation of San Fransokyo
June 17, 2015 —
Garret Murai – California Construction Law BlogSome of the most awe inspiring buildings and urban environments started off on paper and, these days, on computer screens. Think Babylon or even Pierre Charles L’Enfant’s Washington, D.C..
Most of those structures and cityscapes were designed for human habitation, but not all. Some were designed purely for our imaginations, like Minecraft, which those of you with young ones might be familiar with.
Another more recent example though is Big Hero 6, about a science-whiz named Hiro (pronounced “hero,” get it) who journeys from boyhood to manhood and saves the world along the way with his robot pal Baymax. The movie is set in foreign-yet-familiar “San Fransokyo.”
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Garret Murai, Wendel Rosen Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com