Recent Opinions Clarify Enforceability of Pay-if-Paid Provisions in Construction Contracts
May 29, 2023 —
Patrick McKnight - The Dispute ResolverSeveral recent opinions and legislative actions have brought the controversial nature of pay-if-paid provisions into focus in early 2023. Pay-if-paid provisions are contractual mechanisms designed to shift the risk of non-payment from General Contractors to lower-tier subcontractors. In other words, pay-if-paid provisions generally do not require payment to downstream subs until after the GC or Prime are themselves paid in-full by the owner. Recent developments reflect the differing approaches taken by courts when addressing pay-if-paid provisions, ranging broadly from prohibition to full enforceability. Other jurisdictions fall somewhere in the middle, viewing such provisions with varying amounts of skepticism on the grounds heir impact on smaller downstream subs is disproportionate and unfair.
Pay-if-paid provisions are often contrasted against “pay-when-paid” provisions. Pay-when-paid provisions may require payment within a specified duration but remove the upstream contractor’s payment in-full as a condition precedent. The brief discussion below will not explore pay-when-paid, no damage for delay provisions, or statutory prompt payment acts. Instead, this article serves as a primer on recent legal developments related to pay-if-paid provisions exclusively.
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Patrick McKnight, Fox Rothschild LLPMr. McKnight may be contacted at
pmcknight@foxrothschild.com
Musk’s Cousins Battle Utilities to Make Solar Rooftops Cheap
April 15, 2015 —
John Lippert and Christopher Martin – BloombergIn September 2013, Hawaiian Electric Co. told thousands of customers they couldn’t connect their new solar panels to its distribution grid. In some neighborhoods, HECO said, its system couldn’t absorb any more unused energy from home solar arrays. The moratorium, which lasted 13 months, made Hawaii a central battleground in the effort by utilities to control the rapid growth of independent solar companies across the U.S. And it was a big deal to people such as Robert Gould, a retired Northwest Airlines pilot living near Honolulu. He’d just paid $53,000 to have solar panels installed.
Gould and other customers protested loudly to state officials. They finally got help from Lyndon Rive, the CEO of SolarCity. The San Mateo, California, company is the biggest installer of rooftop solar panels in the U.S. and has 10,000 Hawaiian customers, Bloomberg Markets magazine reports in its May issue. Rive studied the situation and zeroed in on a key fact: HECO had never directly measured how much solar its grid could handle, relying on computer simulations instead. “Because the technology is brand-new, no one had ever done this in the field before,” says Colton Ching, HECO’s vice president for energy delivery.
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John Lippert, Bloomberg and
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New York Signs Biggest Offshore Wind Project Deal in the Nation
August 06, 2019 —
Will Wade, Chris Martin, & Millicent Dent - BloombergNew York has signed the biggest-ever deals for offshore wind power in U.S. history, a key part of the state’s plan to get all of its power from emissions-free sources by 2040.
On Thursday, Governor Andrew Cuomo awarded contracts for two projects off Long Island that will total 1,700 megawatts in capacity. Equinor ASA and a joint venture between Denmark’s Orsted A/S and Massachusetts-based Eversource Energy were chosen to build the farms, which will supply enough power to light up a million homes.
Cuomo is counting on the wind projects to achieve the most aggressive clean energy goal in the U.S., and signed the state’s 100% renewable energy target into law right after announcing the wind contracts. New York’s ultimate plan is to get enough turbines erected off its shores to generate 9,000 megawatts by 2035.
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Will Wade, Chris Martin, & Millicent Dent, Bloomberg
English v. RKK. . . The Saga Continues
December 16, 2019 —
Christopher G. Hill - Construction Law MusingsRemember back in 2018 when I thought I’d told you the end of the English Construction story regarding its various consultants, etc.? I was wrong. The matter went up on appeal to the 4th Circuit Court of Appeals where the Appeals Court considered the summary judgment granted to the defendant Rummel, Klepper & Kahl (“RKK”) based upon what came down to a contributory negligence reading of the indemnity clause that was allowed to survive in the first district court opinion relating to these ambiguous contracts finding that English was negligent so couldn’t recover. The 4th Circuit also considered the finding that defendant CDM Smith did not breach its contract as a matter of law and that English’s negligence was the cause of the damages.
The Court of Appeals reversed both of the holdings by the Western District of Virginia court, essentially stating that there was enough of a factual dispute to render any summary judgment to be premature.
As to English’s arguments regarding the indemnity scheme in the contracts, the court found that the interpretation was at least ambiguous enough that summary judgment was inappropriate, stating:
While we are not prepared to settle conclusively these interpretation disputes at the summary judgment stage, English’s proffered interpretation is, at the very least. reasonable. Indeed, of the two interpretations, English’s seems to be more closely aligned with the actual language in the contract. The district court thus erred in rejecting English’s interpretation and adopting RK&K’s interpretation as a matter of law.
[A]t bottom, while the district court was authorized to construe unambiguous language as a matter of law, it could not resolve genuine disputes regarding the meaning of ambiguous contractual language against the nonmoving party on summary judgment. We therefore vacate the court’s grant of summary judgment to RK&K and remand for further proceedings.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
The Future Has Arrived: New Technologies in Construction
October 17, 2022 —
Sarah Biser - ConsensusDocsThe construction industry has traditionally been slow to adapt to new technologies, but things are changing.
Construction companies are keen to control costs (including increased costs due to supply chain issues), improve efficiency, maintain productivity while dealing with labor shortages, and enhance safety, and protect data bases from cyberattacks. New technologies, including robotics, 3D printing, cloud and mobile computing, augmented reality, blockchain, and cybersecurity, are helping construction companies achieve those goals.
Here are some key takeaways.
Augmented Reality (AR) vs. Virtual Reality
Augmented Reality is a technology that superimposes a computer generated image upon a user’s view of the real work. Virtual Reality, on the other hand, creates a virtual environment to replace the real one.
AR has uses in many industries. For example, shoppers using AR can see what furniture or appliances will look like in their own homes and offices. Medical professionals can also use the technology to visualize organs and simulate procedures prior to operations.
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Sarah B. Biser, Fox Rothschild LLP (ConsensusDocs)Ms. Biser may be contacted at
sbiser@foxrothschild.com
The Dog Ate My Exclusion! – Georgia Federal Court: No Reformation to Add Pollution Exclusion
September 28, 2017 —
Philip M. Brown-Wilusz - Saxe Doernberger & Vita, P.C.While schoolchildren know that the classic “the dog ate my homework” excuse doesn’t work, insurance companies are willing to try a variation of that excuse. Ace American Insurance Company (Ace), sold a property policy (the Policy) to Exide Technologies, Inc. (Exide). Exide sought coverage under the Policy for acid damage at its former battery factory. Ace denied coverage, citing to the pollution exclusion. The only problem? The Policy contained no pollution exclusion!
Exide had procured policies from other insurers for several years prior to the inception of the Policy, all of which contained pollution exclusions. Exide instructed Marsh USA Inc. (Marsh), its broker, to procure insurance “on the same or better terms and conditions.” The resulting policy contained no pollution exclusion, and Exide sought coverage under the Policy for pollution-related losses.
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Philip M. Brown-Wilusz, Saxe Doernberger & Vita, P.C.Mr. Brown-Wilusz may be contacted at
pbw@sdvlaw.com
Key Takeaways For Employers in the Aftermath of the Supreme Court’s Halt to OSHA’s Vax/Testing Mandate
January 24, 2022 —
Laura H. Corvo - White and Williams LLPPolitical pundits and legal scholars have been engaged in frenzied debate trying to decipher the fallout of the United States Supreme Court’s decision that stopped stopped the Occupational Safety and Hazard Administration (OSHA) from enforcing its Emergency Temporary Standard (ETS) which mandated that employers with 100 or more employees require workers to show proof of vaccination against COVID-19 or submit to weekly testing. The Court’s decision prevents OSHA from enforcing its ETS until all legal challenges have been heard. Because the Court concluded that those legal challenges are “likely to succeed on the merits” of their argument that OSHA does not have the statutory authority to issue its vaccine and testing mandates, there is significant doubt that they will ever come to fruition.
While the pundits and scholars have now had their say, employers, who are struggling to manage a highly contagious variant, a tight labor market, and employees with divergent and staunch views on vaccination, are also left wondering what the Court’s decision means for them and what they should be doing. Here are some key takeaways for employers in the aftermath of the Court’s decision.
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Laura H. Corvo, White and Williams LLPMs. Corvo may be contacted at
corvol@whiteandwilliams.com
Duty to Defend Broadly Applies to Entire Action; Insured Need Not Apportion Defense Costs, Says Maryland Appeals Court
January 27, 2020 —
Michael S. Levine & Kevin V. Small - Hunton Insurance Recovery BlogIn a recent decision, the Maryland Court of Special Appeals reiterated that the duty to defend broadly requires a liability insurer to defend an entire lawsuit against its insured, even where only some of the allegations are potentially covered. The court further held that the insured has no obligation to apportion defense costs among multiple implicated policies. The decision, Selective Way Insurance Company v. Nationwide Property and Casualty Insurance Company, et al., can be found here.
The coverage litigation arose out of a construction defect case against a general contractor. The general contractor tendered the action to its insurer, Nationwide, which, in turn, filed a declaratory judgment action against the various insurers of construction project subcontractors that had named the general contractor as an additional insured. Ultimately, the court granted a summary judgment motion declaring that all of the subcontractors’ insurers had a duty to defend the general contractor “because the allegations in the underlying lawsuit raised claims that potentially arose from the [s]ubcontractors’ work at the [construction site].” All of the subcontractors’ insurers settled with Nationwide except for one, Selective Way; and the parties proceeded to a jury trial on various issues. The jury found for Nationwide on all issues. Selective Way appealed.
Selective Way argued on appeal that even if some of the allegations were covered under its policy, it had no obligation to defend the general contractor because its insureds, the subcontractors, could not have been responsible for all of the losses given the nature of their work. Further, Selective Way contended that if it was responsible for defending the general contractor, it was not responsible for the entire defense, and the general contractor was responsible for apportioning the costs among the various subcontractors. The panel disagreed on both points.
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Michael S. Levine, Hunton Andrews Kurth and
Kevin V. Small, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Mr. Small may be contacted at ksmall@HuntonAK.com
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