Big Policyholder Win in Michigan
January 05, 2017 —
Jeremiah M. Welch – Saxe Doernberger & Vita, P.C.Jeremiah Welch and
Michael Barrese recently had a big win in front of the Michigan Court of Appeals.
The case (Skanska-Schweitzer v. Farm Bureau General Insurance Company of Michigan) involved Skanska’s claim for defense and indemnity from Farm Bureau Ins. Co. of Michigan for an injury to an elementary school student arising out of the removal of playground equipment by a landscaping company, Horrocks. Farm Bureau denied coverage because it claimed that the work was not part of Horrocks’ contract with the project owner and therefore Skanska, the construction manager, did not qualify as an additional insured on the policy.
SDV argued that the AI endorsement did not specify that Horrocks’ work be performed as part of its contract with the owner; it only required that the work be performed “for Skanska.”
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Jeremiah M. Welch, Saxe Doernberger & Vita, P.C.Mr. Welch may be contacted at
jmw@sdvlaw.com
Life After McMillin: Do Negligence and Strict Liability Causes of Action for Construction Defects Still Exist?
January 24, 2018 —
Thomas Balestreri and Amanda Crawley - Balestreri, Potocki, & HolmesThe ruling is in but the battle will likely continue over the practical application of SB 800. On January 18, 2018 the California Supreme Court issued its decision in
McMillin Albany, LLC v. Superior Court (Van Tassel) (January 18, 2018, S229762) __ Cal.4th __, holding that the statutory prelitigation scheme in The Right to Repair Act (“the Act”) that provides for notice and an opportunity for the Builder to repair defects applies to all claims for construction defects in residential construction sold on or after January 1, 2003, regardless whether the claim is founded on a violation of the Act’s performance standards or a common law claim for negligence or strict liability. (
McMillin Albany, LLC v. Superior Court (Van Tassel) (January 18, 2018, S229762) __ Cal.4th __.) With this holding, has the Court ruled that common law causes of action for construction defect still survive? If so, what will they look like and what standards will be applied?
The short answer is that it appears that common law causes of action still survive, at least for now, but it is not clear from this decision what they will look like and what standards will apply.
Portions of the decision seem to suggest that the Act is the sole and exclusive remedy for construction defect claims: “…even in some areas where the common law had supplied a remedy for construction defects resulting in property damage but not personal injury, the text and legislative history [of the statute] reflect a
clear and unequivocal intent to supplant common law negligence and strict product liability actions under the Act.” (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 6].) (Italics added for emphasis) However, at the end of the decision, the Court seems to be saying that there may still be a place for common law claims for negligence and strict liability alongside the Act but that these causes of action may be subject to the performance standards in the Act.
The
McMillin case went up to the Supreme Court on a procedural issue: whether a common law action alleging construction defects resulting in both economic loss and property damage is subject to the Act’s prelitigation notice and cure procedures. The Van Tassels had dismissed their claims under the Act opting to proceed solely on their common law claims including negligence and strict liability. McMillin sought a stay to force the Van Tassels to comply with the Act’s prelitigation procedures. The Supreme Court held that the Van Tassels must comply with the statutory procedures and affirmed the stay issued by the trial court. But the question remained: now that the Van Tassels were left only with common law claims, how would they proceed under the Act?
To understand how the Court dealt with this question, one must first understand how the Court dealt with the narrow procedural question presented by the case. The Court provides a very detailed, clear explanation of the reasons why it felt the Legislature intended for all construction defect claims involving residential construction must comply with the prelitigation requirements of the Act. In summing up its conclusions the Court makes three definitive holdings.
First, for claims involving economic loss only—the kind of claims involved in
Aas—the Court holds that the Legislature intended to supersede
Aas and provide a statutory basis for recovery. (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 10].) In other words, the Court clearly agrees that the Act was meant to allow recovery of damages based solely on economic damages. No surprise there. Second, the Court held for personal injuries, the Legislature made no changes to existing law that provides common law remedies for the injured party. (Id.) Nobody has ever contested that. Finally, the Court held that for construction defect claims involving property damage and not just economic loss “the Legislature replaced the common law
methods of recovery with the new statutory scheme.” (
Id.,) (Italics added for emphasis.)
In other words, the Court is not saying that negligence and strict liability are not permitted causes of action. The Court is merely stating that these causes of action must comply with the Act’s statutory scheme just as the same as a claim for economic loss. Here the Court is focusing on the procedure that must be followed. “The Act, in effect, provides that construction defect claims not involving personal injury will be treated the same procedurally going forward whether or not the underlying claims gave rise to any property damage.” (
Id.)
Having laid out its fundamental premise, the Court then deals with Plaintiff’s arguments regarding the intent of the Legislature and makes light work of them all. In the process, the Court disapproves
Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal. App. 4th 98, and
Burch v. Superior Court (2014) 223 Cal. App. 4th 1411, to the extent they are inconsistent with the views expressed in the
McMillin opinion.
This is where the decision gets interesting. The Court reminds us that the Van Tassels had dismissed their statutory causes of action for violation of the performance standards under Section 896. One would think at that point that Plaintiffs had to be wondering if they had any claims left given that the Court had ruled that the Act was the sole means of recovery for construction defects. Not so fast. The Court points out that the complaint still rests on allegations of defective construction and that the suit remains an “ ‘action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction’ of the plaintiffs’ homes (§896)
and McMillin’s liability under the Van Tassels’ negligence and strict liability claims depends on the extent to which it [McMillin] violated the standards of sections 896 and 897.” (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 19].) (Emphasis added.) WHAT DID THE COURT JUST SAY? Did the Court just say that a plaintiff could bring a common law cause of action for negligence or strict liability based on a violation of the performance standards under Section 896? What exactly would that claim look like? What would be the elements of such a cause of action?
To answer these questions, the Court states in the very next paragraph, which also happens to be the last paragraph in the decision: “In holding that claims seeking recovery for construction defect damages are subject to the Act’s prelitigation procedures regardless of how they are pleaded,
we have no occasion to address the extent to which a party might rely upon common law principles in pursuing liability under the Act.” (
McMillin (January 18, 2018, S229762) __Cal.4th.__ [p. 19].) (Italics added for emphasis) Is the Court answering “No” to the questions posed above? Probably not. It is simply following the age old rule that an appellate court will
not rule on an issue that is not specifically presented by an appeal, leaving that question for another day.
All we know for sure from
McMillin is that every claim for construction defects falling within the scope of the Act must follow the prelitigation procedure. There are no hall passes for negligence and strict liability. The larger question posed by the last two paragraphs in the decision, is whether the law recognizes a cause of action for negligence and strict liability for construction defects based on the standards in Section 896. The answer will have to be worked out by judges and trial attorneys in courtrooms across the State! The parameters of this hybrid cause of action that the Court seems to have posited will need more careful consideration than can be offered on first reading of
McMillin v. Superior Court.
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Balestreri, Potocki, & Holmes
Comparative Breach of Contract – The New Benefit of the Bargain in Construction?
October 26, 2020 —
Steven Hoffman - Florida Construction Law NewsAsk most Florida Construction Law practitioners, and you will likely hear that liability may not be apportioned in “pure” breach of contract cases via the Comparative Fault Act, section 768.81, Florida Statutes (the “Act”). If a material breach is a “substantial factor” in causing damages, the breaching party must answer for all damages that were reasonably contemplated by the parties when they formed the contract. Claimants argue that matters of contract should be governed strictly by the agreement, and risk can be controlled by negotiated terms, including waivers and limitations. Defendants complain that construction projects are collaborative, multi-party affairs, and strict application of contract principles leads to harsh results for relatively minor comparative fault for the same or overlapping damages.
The notion of apportioning purely economic loss contract damages based on comparative fault is not new. Since April 2006, Florida has been a “pure” comparative fault jurisdiction with limited exceptions. Prior to the amendment, tort liability for non-economic damages was purely comparative, but liability for economic damages was typically a combination of joint and several liability with an additional exposure based on comparative fault.
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Steven Hoffman, Cole, Scott & KissaneMr. Hoffman may be contacted at
Steven.Hoffman@csklegal.com
Georgia Court of Appeals Holds That Insurer Must Defend Oil Company Against Entire Lawsuit
October 07, 2019 —
Lawrence J. Bracken II, Michael S. Levine & Alexander D. Russo - Hunton Andrews KurthThe Georgia Court of Appeals recently affirmed a grant of summary judgment in favor of Mountain Express Oil Company on its breach of contract claim against liability insurer, Southern Trust Insurance Company. Empire Petroleum brought claims against Mountain Express for breach of contract, injunctive relief, and libel or slander, among others. Mountain Express sought a defense to that lawsuit under its insurance policy with Southern Trust. Southern Trust contended that the insurance policy did not cover Empire’s non-libel/slander claims, and therefore reimbursed Mountain Express for only a portion of its attorneys’ fees. After the Empire lawsuit settled, Mountain Express sued Southern Trust for breach of contract and bad faith for failing to pay the remaining defense costs, contending that Southern Trust had a duty to defend the entire lawsuit.
The Georgia Court of Appeals affirmed the trial court’s grant of summary judgment to Mountain Express on its breach of contract claim. Citing policy language stating that “[the insurer] will have the right and duty to defend the insured against any ‘suit’ seeking those damages,” the court held that Southern Trust was obligated to defend the entire lawsuit. Specifically, in reaching that conclusion, the court noted that by agreeing to defend any “suit,” not any “claim,” Southern Trust obligated itself to defend the entire lawsuit if any claim could be covered under the policy. Accordingly, Southern Trust breached the policy when it only agreed to defend some of the claims against its insured.
Reprinted courtesy of
Lawrence J. Bracken II, Hunton Andrews Kurth,
Michael S. Levine, Hunton Andrews Kurth and Alexander D. Russo, Hunton Andrews Kurth
Mr. Bracken may be contacted at lbracken@HuntonAK.com
Mr. Levine may be contacted at mlevine@HuntonAK.com
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Connecticut Gets Medieval All Over Construction Defects
February 10, 2012 —
CDJ STAFFThe Hartford Courant reports that Connecticut is trying a very old tactic in a construction defect suit. The law library building at the University of Connecticut suffered from leaks which have now been repaired. The state waited twelve years after was complete to file lawsuit, despite that Connecticut has a six-year statute of limitations on construction defect claims. Connecticut claims that the statute of limitations does apply to the state.
The state is arguing that a legal principle from the thirteenth century allows it to go along with its suit. As befits a medieval part of common law, the principle is called “nullum tempus occurrit regi,” or “time does not run against the king.” In 1874, the American Law Register said that nullum tempus occurrit reipublicae “has been adopted in every one of the United States” and “is now firmly established law.”
In the case of Connecticut, Connecticut Solicitor General Gregory D’Auria said that “the statute of limitations does not apply to the state.” He also noted that “the state did not ‘wait’ to file the lawsuit. The lawsuit was filed only after all other options and remedies were exhausted.”
Connecticut also argued that “nullus tempus occurrit regi” applied in another construction defect case at the York Correctional Institution. The judge in that case ruled in December 2008 to let the case proceed. But in the library case, Judge William T. Cremins ruled in February 2009 that the statute of limitations should apply to the state as well. Both cases have been appealed, with the library case moving more quickly toward the Connecticut Supreme Court.
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Best Practices After Receiving Notice of a Construction Claim
July 18, 2022 —
Lauren Meadows - Construction ExecutiveBeing served with a lawsuit is typically not a welcomed experience. However, a construction professional that has been proactive in an early investigation of the claim will be better equipped to defend the case. The following best practices should be used by construction professionals as soon as a potential claim becomes evident.
Notify
Immediately after the receipt of a claim or notice of an incident, efforts should be made to notify all essential parties. This includes any potential insurers that may provide coverage for the claim as well as any parties to whom notice may be required or warranted under the project contract and/or scope of work. Some construction contracts contain an insurance clause that requires one party to provide additional insured coverage under its liability policy to another party. Notice should be given to any insurer that potentially provides additional insured coverage as soon as possible. The failure to provide an insurance company with prompt notice of a potential claim could result in the denial of the claim.
Reprinted courtesy of
Lauren Meadows, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Faulty Workmanship may be an Occurrence in Indiana CGL Policies
April 07, 2011 —
Beverley BevenFlorez CDJ STAFFThe question of whether construction defects can be an occurrence in Commercial General Liabilities (CGL) policies continues to find mixed answers. The United States District Court in Indiana denied the Plaintiff’s Motion for Summary Judgment in the case of General Casualty Insurance v. Compton Construction Co., Inc. and Mary Ann Zubak stating that faulty workmanship can be an occurrence in CGL policies.
Judge Theresa L. Springmann cited Sheehan Construction Co., et al. v. Continental Casualty Co., et al. for her decision, ”The Indiana Supreme Court reversed summary judgment, which had been granted in favor of the insurer in Sheehan, holding that faulty workmanship can constitute an ‘accident’ under a CGL policy, which means any damage would have been caused by an ‘occurrence’ triggering the insurance policy’s coverage provisions. The Indiana Supreme Court also held that, under identically-worded policy exclusion terms that are at issue in this case, defective subcontractor work could provide the basis for a claim under a CGL policy.”
As we reported on April 1st, South Carolina’s legislature is currently working on bill S-431 that would change the wording of CGL policies in their state to include construction defects. Ray Farmer, Southwest region vice president of the American Insurance Association spoke out against the bill. “CGL policies were never meant to cover faulty workmanship by the contractor,” he said. “The bill’s supplementary and erroneous liability provisions will only serve to unnecessarily impact construction costs in South Carolina.”
Read the Opinion and order...
Read the court’s ruling...
Read the American Insurance Association statement...
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Contractor Walks Off Job. What are the Owner’s Damages?
September 25, 2018 —
David Adelstein - Florida Construction Legal UpdatesWhat are your damages as the result of a breach of the construction contract? This is an important question, right? It is probably the most important part of your case. If you didn’t have damages, you wouldn’t be in a dispute. So, I repeat, what are your damages as the result of a breach of the construction contract? The below case explains dealing with a contractor that elected to walk off the job mid-construction.
In Forbes v. Prime General Contractors, Inc., 43 Fla.L.Weekly D20194a (Fla. 2d DCA 2018), owners hired a contractor to perform a residential renovation job for $276,000. The owners were to pay the contractor in five draw payments (common for residential jobs) where the third draw payment was due upon the contractor’s completion of the dry-in (as defined in the contract). After the contractor received the first two draw payments totaling $138,000 plus an additional $6,000 for updated architectural plans, the contractor claimed the job doubled in price and demanded that the owners pay the contractor the third draw payment immediately (before it was due) plus an additional $31,450. The contractor refused to continue unless the owners agreed to its terms, and then walked off the job when the owners would not agree to these terms (nor should the owners agree to those terms). At the time the contractor walked off the job, the owners’ home was not habitable due to the construction.
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David Adelstein, Kirwin NorrisMr. Adelstein may be contacted at
dma@kirwinnorris.com
