Key Legal Considerations for Modular Construction Contracts
April 19, 2021 —
Frederick E. Hedberg - Construction ExecutiveModular construction is literally on the rise. It is rapidly displacing traditional stick-built construction for new commercial, industrial and residential buildings. Over the past decade, an increasing number of health care, education facilities and apartment buildings have been built using modular construction. As the need for housing, and especially affordable housing, has grown as a result of the COVID-19 pandemic, modular construction is becoming increasingly popular.
Recently, the Canadian government, through the Canadian Mortgage Housing Corporation, launched a “Rapid Housing Initiative,” a $1 billion program utilizing only modular construction to rapidly construct affordable housing for its citizens. Similarly, the city of Toronto (which last year approved a plan to build 250 modular homes in response to homelessness) plans to build 1,000 modular homes by 2030. The pandemic also has resulted in an urgent demand for modules for medical facilities and schools. Modular construction allows contractors to build “leaner” and “greener” buildings while increasing quality control and improving site safety and potentially saving valuable time and money.
Reprinted courtesy of
Frederick E. Hedberg, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Mr. Hedberg may be contacted at
fhedberg@rc.com
Nobody Knows What Lies Beneath New York City
August 10, 2017 —
Greg Milner - BloombergBefore a single raindrop fell, Alan Leidner knew the waters could rise and throw the city into darkness. On this point, the maps were as clear as a crystal ball. All you had to do was look.
It was 2010, and Leidner was consulting for the government services company Booz Allen Hamilton Inc., contracted by the U.S. Department of Homeland Security to identify potential threats and vulnerabilities in the nation’s critical infrastructure. Leidner was examining a region that included New York and New Jersey. One day he was thinking about the area’s electrical power grid. He consulted some flood projection maps the Federal Emergency Management Agency had prepared. Then he stared at a map of the grid maintained by Consolidated Edison Inc., the region’s power supplier. And it just jumped out at him: The substation at East 13th Street, on the banks of the East River, was smack in the middle of a flood zone.
Leidner voiced his concerns with utilities, hospitals, and other major facilities. “The reaction was mostly, ‘Eh,’ ” he recalls, as we sit in the Tribeca offices of the Fund for the City of New York, where he directs the nonprofit organization’s Center for Geospatial Innovation.
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Greg Milner, Bloomberg
DOD Contractors Receive Reprieve on Implementation of Chinese Telecommunications Ban
September 14, 2020 —
Lori Ann Lange & Sabah Petrov - Peckar & AbramsonIn our previous
alert, we discussed the expansion on the Section 889(a)(1)(B) ban on certain Chinese telecommunications equipment and services to contractors and subcontractors who use the equipment and services in their internal operations. Effective August 13, 2020, federal agencies were prohibited from procuring, obtaining, extending, or renewing a contract with a contractor that uses equipment, systems, or services that use covered telecommunications equipment or services as a substantial or essential component or as critical technology, unless an exception applies or a waiver is granted. Since then we have received feedback from contractors, complaining about the difficulties in determining whether their internal operations use covered telecommunications equipment and services and the need for additional time to become compliant or even obtain enough information to submit a waiver request.
Now it seems that Department of Defense (DoD) contractors and subcontractors may be getting a temporary reprieve. The DoD Under Secretary for Acquisition and Sustainment requested a waiver that would allow DoD to continue to execute procurement actions providing supplies, equipment, services, food, clothing, transportation, care, and support necessary to execute the DoD mission. The Director of National Intelligence granted the temporary waiver until September 30, 2020 pending a further review of waiver request. Depending upon the outcome of this additional review, the temporary waiver may be continued beyond September 30, 2020 if it is in the national security interests of the United States.
Reprinted courtesy of
Lori Ann Lange, Peckar & Abramson and
Sabah Petrov, Peckar & Abramson
Ms. Lange may be contacted at llange@pecklaw.com
Ms. Petrov may be contacted at spetrov@pecklaw.com
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California Court Broadly Interprets Insurance Policy’s “Liability Arising Out of” Language
December 20, 2017 —
Garret Murai - California Construction Law BlogIn McMillin Mgmt. Servs. v. Financial Pacific Ins. Co., Cal.Ct.App. (4th Dist.), Docket No. D069814 (filed 11/14/17), the California Court of Appeal held that the term “liability arising out of,” as used in an ongoing operations endorsement, does not require that the named insured’s liability arise while it is performing work on a construction project.
In the McMillin case, the general contractor and developer (McMillin) contracted with various subcontractors, including a concrete subcontractor and stucco subcontractor insured by Lexington Insurance Company. Both subcontractors performed their work at the project prior to the sale of the units.
The Lexington policies contained substantively identical additional insured endorsements that provided coverage to McMillin “for liability arising out of your [the named insured subcontractor’s] ongoing operations performed for [McMillin].” Several homeowners filed suit against McMillin, alleging that they had discovered various defective conditions arising out of the construction of their homes, including defects arising out of the work performed by Lexington’s insureds. Lexington argued that there was no potential for coverage in McMillin’s favor under the endorsements because there were no homeowners during the time that the subcontractors’ operations were performing work at the project (the homes closed escrow after the subcontractors had completed their work); thus, McMillin did not have any liability for property damage that took place while the subcontractors’ operations were ongoing.
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Garret Murai, Wendel Rose Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
Performance Bond Surety Takeover – Using Terminated Contractor To Complete The Work
January 06, 2020 —
David Adelstein - Florida Construction Legal UpdatesWhen a contractor is defaulted under a performance bond, can its surety hire the same defaulted contractor to complete the work? Stated differently, can the performance bond surety engage its defaulted bond-principal in taking over and completing the same work the contractor was defaulted under? The answer is “yes” if you are dealing with a standard form AIA A312 performance bond (and other bond forms that contain analogous language), as demonstrated by the recent decision in Seawatch at Marathon Condominium Association, Inc. v. The Guarantee Company of North America, 2019 WL 4850194 (Fla. 3d DCA 2019).
In this case, a condominium association hired a contractor in a multi-million dollar contract to renovate condominium buildings. The contractor provided the association, as the obligee, a performance bond written on an AIA A312 performance bond form. During construction, the association declared the contractor in default and terminated the contractor. In doing so, the association demanded that the performance bond surety make an election under paragraph 4 of the AIA A312 bond form that gave the surety the following options:
4.1 Arrange for the CONTRACTOR, with consent of the OWNER, to perform and complete the Contract; or
4.2 Undertake to perform and complete the Contract itself, through its agents or through independent contractors; or
4.3 Obtain bids or negotiated proposals from qualified contractors acceptable to the OWNER for a contract for performance and completion of the Contract, arrange for a contract to be prepared for execution by the OWNER and the contractor selected with the OWNER’S concurrence, to be secured with performance and payment bonds executed by a qualified surety equivalent to the Bonds Issued on the Contract, and pay to the OWNER the amount of damages as described in paragraph 6 in excess of the Balance of the Contract Price incurred by the OWNER resulting from the CONTRACTOR Default; or
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Construction Termination Part 2: How to Handle Construction Administration When the Contractor Is Getting Fired
August 01, 2023 —
Melissa Dewey Brumback - Construction Law in North CarolinaIf you’ve been working as a design professional for any length of time, you know that you must be a chameleon on the construction project. You need to “step into the skin” of both the Owner and the Contractor to determine who is at fault, and who should pay.
You are usually the Initial Decision Maker (IDM), and so you have a duty under the AIA documents to act fairly and impartially in making those decisions. See AIA B101§3.6.2.4.
Even if you are not under an AIA contract, you still have that duty if you are the IDM or handling construction administration for the project. More often than not, however, it will be the owner asking you to support its termination of the contractor “for cause.”
Should you do so?
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Melissa Dewey Brumback, Ragsdale LiggettMs. Brumback may be contacted at
mbrumback@rl-law.com
Illinois Court Determines Insurer Must Defend Property Damage Caused by Faulty Workmanship
July 11, 2011 —
Tred R. Eyerly - Insurance Law HawaiiThe Illinois Court of Appeals determined the insurer must defend allegations of property damage arising from faulty workmanship. Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 Ill. App. Unpub. LEXIS 1443 (Ill. Ct. App. June, 20, 2011).
Larsen was a subcontractor for Weather-Tite in a condominium building. Weather-Tite installed windows on the project and hired Larsen to apply sealant to the windows. The windows subsequently leaked and caused water damage within the complex.
The homeowner’s association sued Weather-Tite for breach of express and implied warranties. Weather-Tite filed a third-party complaint against Larsen, seeking contribution and alleging that Larsen was in breach of contract by failing to add Weather-Tite as an additional insured under Larsen’s CGL policy.
Both Weather-Tite and Larsen tendered to Larsen’s insurer. Both tenders were denied because the insurer contended the complaints alleged only construction defects, and not “property damage” or an “occurrence” within the terms of the policy.
The insurer filed suit for a declaratory judgment. The trial court granted the insurer’s motion as to Weather-Tite, but granted Larsen’s cross-motion for summary judgment.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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Changes and Extra Work – Is There a Limit?
October 09, 2018 —
Joseph R. Young - Smith CurrieDesign and construction changes can be a challenge for everyone involved in a construction project. Designers and contractors endeavor to deliver a project that meets the owner’s needs, budget, and aesthetic considerations. As a project comes to fruition, the project frequently changes, and the parties must address and resolve the financial considerations of those changes and implement the changes at the project level. Often times the most critical aspect of a contractor’s financial success or failure of a construction project is its ability to manage changes. Contractors are sometimes faced with changes that are beyond the reasonable expectation of the original undertaking and have significant planning, scheduling, and cost implications that may not be considered or addressed in the contract’s changes clause. Changes of this magnitude may be considered “cardinal changes” and provide the contractor with recourse beyond restrictions imposed by the contract’s changes clause. But cardinal change is a risky basis for a contractor to refuse to perform additional or changed work. Even major changes can probably be more safely handled within the terms of the contract’s changes clause.
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Joseph R. Young, Smith CurrieMr. Young may be contacted at
jryoung@smithcurrie.com
