The Evolution of Construction Defect Trends at West Coast Casualty Seminar
May 03, 2018 —
Don MacGregor - Bert L. Howe & Associates, Inc.Twenty-five years ago. 1993. On January 23rd, Bill Clinton was sworn in as the 42nd President of the United States. The average cost of a gallon of gasoline was $1.16, a movie ticket cost $4.00, and the average cost of a new home was $113,200.00.
1993 also marked the first of what would be a quarter century of annual seminars hosted by West Coast Casualty Service, and provided to the combined professionals within the construction defect community. As the seminar has grown both in attendance and prominence within this community under the watchful stewardship of David and Coral Stern, much has changed both with regard to the content of the seminar and the climate within which it was presented. A quick look at the topics addressed over the past 25 years of the Construction Defect Seminar provides one with a veritable history of construction defect litigation and insurance coverage trends across the United States and beyond.
While the first seminar was hosted in 1993, my first attendance didn’t occur until 1999, and the first time I was honored to be a panelist would have to wait until 2007. In the subsequent years, I’ve had the opportunity to sit on panels an additional three times, and each one I gained rare and valuable insights into the construction defect community, its willingness to challenge itself, and the amazing professionals we all have the distinct pleasure of working with every day (and whom we sometimes take too much for granted).
In the mid to late 90’s, topics at the seminar included such subjects as the Montrose Chemical Corp v. Superior Court decision (Montrose) regarding a carrier’s duty to defend and the subsequent Stonewall Insurance case that examined the duty to indemnify in the context of construction defect claims. The California Calderon Act of 1997, laying out the roadmap for HOA’s filing construction defect lawsuits was also a topic of discussion and debate within the West Coast “arena.”
The new millennium saw the landmark Aas v. William Lyon decision, which disallowed negligence claims for construction defects in the absence of actual resultant damage. This was followed by Presley Homes v. American States Insurance wherein the court ruled that a duty to defend applies where there is mere potential for coverage and the duty to defend applies to the entire action. Each of these bellwether decisions was addressed contemporaneously by panels at the West Coast seminar, contemporaneously bringing additional dialog to the CD community, from within the community.
2002 brought what has become the defining legislation in California regarding construction defect litigation and a builder’s right to repair. Senate Bill 800 (SB800), and its subsequent codification as Title 7, Part 2 of Division 2 of the California Civil Code, Sections 895 through 945.5 would become the defining framework for similar legislation across the United States. During the course of its drafting, movement through the legislature, and final adoption in January of 1993, many of the questions raised and debated in committees in Sacramento, had already been and were continuing to be addressed by panelists at the West Coast Seminar. How does SB800 work with Calderon? How does it affect the prior Aas decision? What now constitutes a defect, and what are timeframes established within the complex pre-litigation process? Open the pages of the 2002 – 2004 seminar invitations and you’ll see panels comprised of the finest members of the insurance law and coverage communities addressing those very questions (and more)!
As the first decade of the new century drew to a close, a brief review of the WCC invitations from that period suggests a trend towards programmatic analyses of key themes selected for the seminar. In 2008, my second opportunity as a guest speaker, topics included a review of the state of construction defect litigation in a post-SB 800 environment. Panelists offered retrospective insight into the state of right to repair statutes in multiple states, while others offered a glimpse at where the industry might be headed, as similar legislation was enacted across the country. As always, pertinent court decisions bearing on construction defect, both in California, and elsewhere were given unique perspective and additional clarity by multiple panels of gifted speakers. In 2009, claims and coverage were examined from multiple unique perspectives, including that of plaintiff, the policyholder, and the insurer. Wrap policies and the gaps in due to self-insured retention obligations were examined.
As we rapidly approach the end of the second decade of the 21st Century, West Coast Casualty’s Construction Defect Seminar continues to lead the construction defect community as the premier source for information and peer dialog on all matters relating to construction law, coverage, and emerging trends. In 2017, the Seminar tackled such broad subjects as the role of women in the construction industry, claims management, and risk management, challenges raised by wrap versus non-wrap litigation, and the emergent trend of apartment to condo conversions (and the attendant coverage challenges).
This month, beginning on May 16th at the Disneyland Resort, in Anaheim California, America’s largest Construction Defect event kicks off its 25th Anniversary celebration. As has been every year since 1993, the seminar invitation promises insurance, legal, and industry professionals an exciting and informative array of salient and timely panel topics, as well as a stellar faculty of gifted panelists. If this year’s seminar is anything like the past 25 years, this edition of West Coast Casualty’s Construction Defect Seminar will not only be informative and educational, but also a promise for another 25 years of peerless service to the construction defect community.
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Insurer Must Indemnify Additional Insured After Settlement
October 21, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe court determined that Target was an additional insured under its supplier's policy and the insurer had a duty to indemnify Target after it settled the underlying suit. Selective Ins. Co. v. Target Corp., 2015 U.S. Dist. LEXIS 123230 (E.D. Ill. Sept. 15, 2015).
Angela Brown sued Target when she was allegedly injured by a door to a fitting room that came unhinged and fell on her head. Harbor Industries, Inc. supplied Target with its fitting rooms. Pursuant to the "Supplier Qualification Agreement" (SQA), Harbor named Target as an additional insured under its policy with Selective Insurance Company. The SQA became effective and was to remain in effect until terminated by either party. A second agreement, the "Program Agreement," set forth the terms under which Harbor sold the fitting rooms to Target. The Program Agreement went into effect on April 23, 2009, and expired on July 1, 2010. Brown's injury occurred on December 17, 2011, while the SQA and the policy were in effect, but after the Program Agreement expired.
After Brown's injury, Target tendered to Selective, who denied coverage, contending Target was not an additional insured. The policy's endorsement expanded insureds to any additional insured whom Harbor agreed in a written contract to add as an additional insured. Selective filed suit and the parties filed cross-motions for summary judgment.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Georgia Local Government Drainage Liability: Nuisance and Trespass
November 29, 2021 —
David R. Cook Jr. - Autry, Hall & Cook, LLPA long-running dispute between a landowner and a municipality has escalated to the Georgia Court of Appeals and in the federal court for the Northern District of Georgia.[1] The municipality maintained a stormwater system that discharged on property uphill from the landowner’s property. The uphill property was used as an illegal dump, and debris washed downhill from the dump to the landowner’s property. The debris clogged the landowner’s surface water drainage system, which caused flooding of the property and a building.
State Case
The landowner sued for trespass, nuisance, takings, and inverse condemnation. While the other claims were barred by the four-year statute of limitations, the court addressed the plaintiff-landowner’s claim for continuing nuisance.
Municipalities may be liable when they negligently construct or maintain a sewer or drainage system that causes repeated flooding of property, such that it results in a continuing, abatable nuisance.[2] For a municipality to be liable for maintenance of a nuisance:
the municipality must be chargeable with performing a continuous or regularly repetitious act, or creating a continuous or regularly repetitious condition, which causes the hurt, inconvenience or injury; the municipality must have knowledge or be chargeable with notice of the dangerous condition; and, if the municipality did not perform an act creating the dangerous condition, . . . the failure of the municipality to rectify the dangerous condition must be in violation of a duty to act.[3]
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David R. Cook Jr., Autry, Hall & Cook, LLPMr. Cook may be contacted at
cook@ahclaw.com
Flow-Down Clauses Can Drown Your Project
August 26, 2015 —
Craig Martin – Construction Contractor AdvisorFlow-Down or pass-through clauses obligate downstream contractors to certain provisions contained in the up up-stream contractor contracts, such as the contract between the general contractor and the owner. These clauses are contained in every major form subcontract and they can expand the scope of your potential liability. This blog will look at typical language of a flow-down clause, what it means and how you can deal with them.
Typical Flow-Down Clause
A simple flow down clause might provide:
“The Subcontractor agrees to be bound to the Contractor by the terms of the prime contract and to assume to the Contractor all the obligations and responsibilities that the Contractor by those documents assumes to the Owner, except to the extent that the provisions contained therein are by the terms or by law applicable only to the Contractor.”
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Craig Martin, Lamson, Dugan and Murray, LLPMr. Martin may be contacted at
cmartin@ldmlaw.com
Nevada Insureds Can Rely on Extrinsic Facts to Show that An Insurer Owes a Duty to Defend
November 15, 2021 —
Sarah J. Odia & Scott S. Thomas - Payne & FearsOn Oct. 28, 2021, the Nevada Supreme Court in Zurich American Insurance Company v.. Ironshore Specialty Insurance Company, 137 Nev. Adv. Op. 66, held that an insured can rely on extrinsic facts to show that an insurer has a duty to defend the insured, as long as the facts were available to the insurer at the time the insured tendered the claim. The court also held that an insured has the burden of proving that an exception to an exclusion in an insurance policy applies to create a duty to defend.
In Zurich, Ironshore refused to defend to its insured against multiple property damage claims arising out of construction defects, claiming that its policies’ continuing and progressive damage exclusions barred coverage. The underlying lawsuits made no specific allegations describing when or how the property damage occurred. Ironshore claimed that the property damage had occurred due to faulty work that predated the commencement of its policies. Two different federal trial courts came to conflicting conclusions in the underlying cases. One held that Ironshore had a duty to defend because Ironshore failed to show that an exception to the exclusion did not apply. The second granted summary judgment in favor of Ironshore holding that the insured failed to meet its burden of proving that an exception to the exclusion applied.
Reprinted courtesy of
Sarah J. Odia, Payne & Fears and
Scott S. Thomas, Payne & Fears
Ms. Odia may be contacted at sjo@paynefears.com
Mr. Thomas may be contacted at sst@paynefears.com
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More thoughts on Virginia Mechanic’s Liens
January 28, 2019 —
Christopher G. Hill - Construction Law MusingsAs we settled yet another construction case on the courthouse steps today, I began to think about what I should post to begin 2009. Of course, given the construction industry slowdown that is predicted, and the trend at construction projects around the Commonwealth of Virginia that looks to me as if payments will be harder to come by from Owners less willing, for financial reasons, to work with contractors, mechanic’s liens will be more useful, and necessary, now than ever.
Virginia mechanic’s liens are unusually strong because your memorandum of lien takes priority over all prior liens on the property that you have improved (including from the bank that is financing the project) except in very limited circumstances. What this means is that, should you properly file and sue to enforce your lien, you get to foreclose and have first crack at any money. By contrast, a judgment lien takes priority only over liens filed after the lien is recorded.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
United States Supreme Court Upholds Class Action Waivers in Arbitration Agreements
May 24, 2018 —
Amy R. Patton, Jason I. Bluver, & Jeffrey K. Brown - Payne & Fears LLPOn May 21, 2018, the United States Supreme Court held, in a 5-4 decision, that arbitration agreements which mandate individualized resolution of claims (as opposed to class or collective resolution) are enforceable under the Federal Arbitration Act ("FAA"). In doing so, the Court rejected the argument that such "class action waivers" violate Section 7 of the National Labor Relations Act ("NLRA"), which generally protects employees' rights to act "in concert" with one another.
The Court addressed a split created by decisions from three Federal Circuit Courts of Appeal: Epic Systems Corp v. Lewis (7th Circuit), Ernst & Young v. Morris (9th Circuit) and National Labor Relations Board v. Murphy Oil USA (5th Circuit). All three cases involved employees who sought to bring collective or class actions under the Fair Labor Standards Act (the "FLSA"), and their respective employers who sought to enforce pre-dispute arbitration agreements which waived such collective actions and mandated "one-on-one" arbitration of wage disputes. In support of their position, the employees argued that the class and collective action waivers were illegal because they violated the NLRA's prohibition on barring employees from engaging in "concerted activities."
Reprinted courtesy of Payne & Fears LLP attorneys
Amy R. Patton,
Jason I. Bluver and
Jeffrey K. Brown
Ms. Patton may be contacted at arp@paynefears.com
Mr. Bluver may be contacted at jib@paynefears.com
Mr. Brown may be contacted at jkb@paynefears.com
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Insurer's Motion in Limine to Dismiss Case for Lack of Expert Denied
June 26, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe court denied the insurer's motion in limine seeking to dismiss the insureds' complaint due to the absence of expert testimony. Fabozzi v. Lexington Ins. Co., 2014 U.S. Dist. LEXIS 74069 (E.D. N.Y. May 30, 2014).
During the policy period, the insureds noticed their house had serious structural problems, including cracks in the walls and floors that were pitched toward the rear of the house. The insureds had to move from their house. When they submitted a claim, it was denied by Lexington because the losses were caused by "wear and tear, deterioration, earth movement, settlement, shrinking, bulging or expansion of the property leading to cracking of structural components."
The insureds sued. Lexington filed a motion in limine to preclude the testimony of the insureds' expert and to dismiss the complaint for inability to offer prima facie proof of a covered loss absent such expert testimony.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
