It’s Not What You Were Thinking!
December 10, 2024 —
Daniel Lund III - LexologyAt least it is not what the lower court was thinking… but the same result for a general contractor seeking to have its comprehensive general liability insurer pay the GC’s defense related to claims for physical damage on a construction project.
In reviewing the Massachusetts federal district court’s ruling in favor of the insurer, the United States First Circuit Court of Appeals posited: “The principal question is whether a general contractor’s CGL insurance policy covers damage to a non-defective part of the contractor’s project resulting from a subcontractor’s defective work on a different part of that project.”
The district court had held under Massachusetts law that the insurer had no duty to defend because the lawsuit “did not allege ‘property damage’ caused by an ‘ occurrence,’ as required for coverage” under the policy (a defense that was urged by the insurer). The Court of Appeals affirmed, “albeit for different reasons.”
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Daniel Lund III, PhelpsMr. Lund may be contacted at
daniel.lund@phelps.com
Before Celebrating the Market Rebound, Builders Need to Read the Fine Print: New Changes in Construction Law Coming Out of the Recession
November 26, 2014 —
Alan H. Packer - Newmeyer & Dillion, LLPAs the homebuilding market continues to improve, many builders find themselves maneuvering familiar roads. That said, important new realities have taken hold since the market collapse. Navigating these changes requires extra thought for practical and legal reasons.
Using Old Designs “Off the Shelf”?
The adoption of the California Building Standards Code in 2010, with an updated schedule to go into effect January 1, may complicate the use of older designs. In addition, some builders are contemplating building on pads constructed five or more years ago, temporarily shelved until market conditions improved. Because of changes in both the applicable Code and due to possible changes in the underlying soils and drainage, these projects require additional scrutiny before starting construction.
Mechanic’s Lien Law Changes
Not too long ago, the California Legislature recently overhauled the entire mechanic’s lien law system in California. New forms, new statutory references, new rules and deadlines are all applicable to projects under construction now. Make sure your documents are up to date, as the use of older forms (particularly for liens, progress payments, and final payments) could create legal problems in the future.
Indemnity Law Changes
Since 2006, California lawmakers have passed four rounds of legislation aimed at limiting indemnity provisions in construction contracts. The laws are aimed at two aspects of indemnity law: “Type 1” indemnity provisions, and liability for the costs of defending a claim.
Type 1 Indemnity. California law previously permitted a builder to obtain “Type 1” indemnity from its subcontractors for all claims. Under a Type 1 provision, if a claim arose out of the trade’s work, the trade was fully responsible to defend and indemnify the builder – even if other trades or the Builder were partially at fault. Some cases even allowed, typically in a commercial context, the builder to obtain Type 1 indemnity even if the trade was not negligent, as long as the claim involved its work.
Defense Obligation. In 2008, California’s highest court issued an opinion in Crawford v. Weather Shield, evaluating an indemnity provision requiring trade (a window supplier/manufacturer) to defend the builder in claims involving allegations of damages arising out of the trade’s work. Because the trade had contractually agreed to defend the builder, the Court held it responsible for the builder’s defense costs -- even though, ultimately, the trade was found
not liable for the actual damages claimed.
Recent legislation after Crawford has dramatically shifted how indemnity provisions will be enforced. Builders may no longer obtain Type 1 indemnity for residential construction defect claims covered by SB800; instead, indemnity is limited to the extent a claim arises out of the trade’s work. Even more recent legislation applied these changes to claims arising out of commercial construction projects. The recent legislation allows the trades “options” on how to defend the builder, with an eye toward requiring that they pay only a “reasonably allocated” portion for the builder’s defense costs.
Smart builders are refining their contract documents to take into account these new limitations on indemnity provisions.
Insurance Market Changes
Due to uncertainties in subcontractor insurance and other factors, many builders have also converted their liability insurance from a “bring your own” model to “wrap-up” insurance, where the builder’s policy also covers their trades. Builders should carefully examine their subcontracts in light of this change as well.
Trade Partner Changes
On a practical level, many trade partners, particularly in the residential sector, have gone out of business or moved on to greener pastures. Builders need to find and negotiate contracts with new trade partners on the fly, and educate them on the builders’ procedures for payment and construction.
SB800 documentation
A decade ago, most builders updated their purchase documents and subcontracts for California’s “Right to Repair Law” (also known as SB800), which set forth functionality standards for construction defects in residential housing, and procedures for resolving claims prior to litigation. Builders ramping up to meet market demand should examine how they implemented SB800 changes in contract documents. Issues to consider:
- Whether to opt out of -- or back into -- statutory procedures.
- Whether to include arbitration or judicial reference provisions to control where claims are litigated after the SB800 process.
- Re-training personnel to preserve SB800 rights, including sign-offs on purchase documentation and recordation of key documents.
- Recent Court of Appeal decisions have complicated the SB800 landscape, potentially opening the door to “common law” tort claims in at least subrogation contexts. Strategic planning at the document stage may be a good way to mitigate this risk as the cases wind their way through the judicial process.
The continuing surge in building activity is a welcome sign for builders who have weathered the storm. Before taking too many steps, builders should consult with counsel, their designers, and their insurance advisors to take into account the new realities of this recovering housing market.
About the Author
Alan H. Packer is a partner in the expanding Walnut Creek, CA, office of the law firm of
Newmeyer & Dillion LLP whose specialties include real estate, insurance, and construction litigation. To reach Alan, call 925.988.3200 or email him at alan.packer@ndlf.com.
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A Changing Climate for State Policy-Making Regarding Climate Change
February 18, 2020 —
Sheila McCafferty Harvey - Gravel2Gavel Construction & Real Estate Law BlogIssued by 13 federal agencies, the 2018 Fourth National Climate Assessment presented a stark warning on the consequences of climate change for the United States. The report predicts that if significant steps are not taken to rein in global warming, the damage will reduce the U.S. economy by as much as 10 percent by the end of the century. The report, which was mandated by Congress and made public by the White House, is notable not only for the precision of its calculations and bluntness of its conclusions—the 1,656-page assessment lays out the devastating effects of a changing climate on the economy—but also in how it conflicts with President Donald Trump’s environmental deregulation plan. U.S. policy efforts at the state and local levels are ramping up to address this complex topic. These include:
Targeting Net-Zero Emissions. Hailed as the most aggressive climate law in the nation, New York State’s Climate Leadership and Community Protection Act are targeting 100 percent carbon-free electricity by 2040 and economy-wide, net-zero carbon emissions by 2050. California set a statewide target to reach carbon neutrality by 2045.
Reducing and Renewing. New Mexico established a statewide goal of reducing greenhouse gas emissions by 45 percent below 2005 levels by 2030. Nevada passed a bill to increase the amount of electricity it gets from renewable resources to 50 percent by 2030.
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Sheila McCafferty Harvey, PillsburyMs. Harvey may be contacted at
sheila.harvey@pillsburylaw.com
Virginia Allows Condominium Association’s Insurer to Subrogate Against a Condominium Tenant
August 10, 2020 —
Gus Sara - The Subrogation StrategistIn Erie Insurance Exchange v. Alba, Rec. No. 190389, 2020 Va. LEXIS 53, the Supreme Court of Virginia considered whether the trial court erred in finding that a condominium association’s property insurance provider waived its right of subrogation against a tenant of an individual unit owner. The Supreme Court reversed the lower court’s decision, holding that the insurance policy only named unit owners as additional insureds, not tenants, and thus the subrogation waiver in the insurance policy did not apply to tenants. The court also found that the condominium association’s governing documents provided no protections to the unit owner’s tenant because the tenant was not a party to those documents. This case establishes that, in Virginia, a condominium association’s insurance carrier can subrogate against a unit owner’s tenant where the tenant is not identified as an additional insured on the policy.
The Alba case involved a fire at a condominium building originating in a unit occupied by Naomi Alba (Alba), who leased the condominium under a rental agreement with the unit owner, John Sailsman (Sailsman). The agreement explicitly held Alba responsible for her conduct and the conduct of her guests. An addendum to the lease stated that Sailsman’s property insurance only applied to the “dwelling itself” and that Alba was required to purchase renters insurance to protect her personal property. Along with the rental agreement, Alba received the condominium association’s Rules & Regulations, Declarations and Bylaws.
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Gus Sara, White and WilliamsMr. Sara may be contacted at
sarag@whiteandwilliams.com
Sustainability Is an Ever-Increasing Issue in Development
November 21, 2022 —
Scott L. Baker - Los Angeles Litigation BlogBusinesses must be open to change. It is essential to survive in the business world, regardless of the industry. This goes hand-in-hand with the necessity to change along with consumer needs and values as well.
With the increasing emphasis on sustainability across industries, many businesses have had to make their processes and products more environmentally friendly. However, in terms of real estate construction, there are some challenges.
SUSTAINABILITY IN NEW CONSTRUCTION IS NOW A MATTER OF LAW – NOT JUST A PREFERENCE
The push to become greener comes from many fronts. Property owners, potential buyers and even lawmakers all expect the real estate industry to go greener. For example, homeowners and businesses often want their properties to meet their personal values of sustainability.
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Scott L. Baker, Baker & AssociatesMr. Baker may be contacted at
slb@bakerslaw.com
Crime Policy Insurance Quotes Falsely Represented the Scope of its Coverage
July 13, 2020 —
Brian J Clifford - Saxe Doernberger & VitaAn Indiana businessman found out the hard way how far his insurance company was willing to go to avoid paying a claim after it misrepresented the coverage of a crime policy it sold to him. The quote for the policy indicated that it included coverage for losses resulting from computer hacking. Despite this representation, when the policyholder’s bank accounts were hacked, the insurer denied coverage on the ground that there was no provision for hacking coverage in the policy. Fortunately, the Indiana Court of Appeals recognized the insured’s right to argue before a jury that the insurer’s quotes falsely represented the scope of its coverage.
In Metal Pro Roofing, LLC v. Cincinnati Ins. Co., Richard Cornett, principal of Metal Pro Roofing, LLC and Cornett Restoration, LLC (the “LLCs”), purchased a Cincinnati Insurance Company CinciPlus Crime XC+ Policy (the “Policy”). At the time Mr. Cornett purchased this coverage, and during all subsequent renewals, Cincinnati issued insurance quotes that stated:
Cincinnati can insure your money and securities while at your premises, inside your bank and even off site in the custody of a courier. While you’ve taken precautions to protect your money and securities, you run the risk of loss from employees, robbers, burglars, computer hackers and even physical perils such as fire.
Give yourself peace of mind with Cincinnati’s crime coverage to insure the money and securities you worked so hard to earn.
Crime Expanded Coverage (XC®)Plus Endorsement $125.00.
(Emphasis added.)
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Brian J Clifford, Saxe Doernberger & VitaMr. Clifford may be contacted at
bjc@sdvlaw.com
Short on Labor, Israeli Builders Seek to Vaccinate Palestinians
February 01, 2021 —
Ivan Levingston & Fadwa Hodali - BloombergIsraeli builders want the government to vaccinate Palestinian construction workers to help rally a battered housing industry.
While Israel is racing to inoculate its citizens, the West Bank-based Palestinian Authority has no vaccination program in place. Beyond being a critical health issue, the gap is also an economic problem because the Israeli construction sector relies heavily on Palestinian workers who’ve been cut off repeatedly from building sites due to lockdowns.
Before the pandemic, about 65,000 Palestinians worked for Israeli contractors inside Israel, accounting for a third of their workforce. Closures and restrictions on both sides led to a 30% drop in housing starts despite rising demand.
Reprinted courtesy of
Ivan Levingston, Bloomberg and
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White and Williams Defeats Policyholder’s Attempt to Invalidate Asbestos Exclusions
January 28, 2014 —
White and Williams LLPWhite and Williams attorneys scored a significant victory for the insurance industry on January 15, 2014, when a federal jury of four men and four women rejected a policyholder’s novel efforts to invalidate asbestos exclusions contained in insurance policies issued between February 1, 1979 and August 1, 1985.
In General Refractories Co. v. First State Ins. Co., Civil Action No. 04-CV-3509 (E.D. Pa.), General Refractories Company contended that asbestos exclusions in insurance policies issued by various insurance companies in the late 1970s and 1980s had not been submitted to the Pennsylvania Department of Insurance for approval prior to use and, therefore, were unenforceable. Holding a failure to obtain approval, by itself, would not be sufficient to render the exclusions unenforceable, the Honorable Edmund Ludwig sent the matter to trial to determine whether the Pennsylvania Insurance Commissioner implemented a policy that was uniformly executed by the Insurance Department to disapprove all asbestos exclusions between February 1, 1979 and August 1, 1985, such that the exclusions violated a “dominant public policy.”
Reprinted courtesy of Gregory LoCasale, White and Williams LLP
and
Patricia Santelle , White and Williams LLP
Ms. Santelle may be contacted at santellep@whiteandwilliams.com and Mr. LoCasale may be contacted at locasaleg@whiteandwilliams.com.
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