Construction Case Alert: Appellate Court Confirms Engineer’s Duty to Defend Developer Arises Upon Tender of Indemnity Claim
January 27, 2010 —
Steven M. CvitanovicIn the recent case of UDC-Universal Development, L.P. v. CH2M Hill, 2010 Cal.App.LEXIS 47 (filed January 15, 2010), the Sixth District Court of Appeal provided a stunning illustration of the far-reaching effects of the California Supreme Court’s holding in Crawford v. Weather Shield Manufacturing Inc. (2008) 44 Cal.4th 541. In Crawford, the Court held the duty to defend under an indemnity agreement arose upon the mere tender of defense of a claim covered by the indemnity.
In the UDC case, CH2M Hill provided engineering and environmental planning services to developer UDC on a project that ultimately wound up in a construction defect lawsuit by the homeowners association ( HOA ). UDC tendered its defense to CH2M Hill, the tender was rejected, and UDC filed a cross-complaint for negligence, breach of contract and indemnity against CH2M Hill and others. After the HOA’s construction defect claims were settled, UDC proceeded to trial against CH2M Hill. The jury found in favor of CH2M Hill on the claims for negligence and breach of contract. At the request of the parties prior to trial, the trial court ruled on the application of the indemnity agreement in light of Crawford and, in so doing, found that the defense obligation arose upon the tender and that CH2M Hill breached that duty despite the jury finding in favor of CH2M Hill.
The Court of Appeal affirmed, noting that the defense obligation arose as soon as the defense was tendered and did not depend on the outcome of the litigation, and that the HOA’s general description of the defects along with an allegation that Doe engineers were negligent triggered the duty to defend.
Although this case did not expand the crushing impact of Crawford’s holding, it is
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Avoid the Headache – Submit the Sworn Proof of Loss to Property Insurer
September 28, 2020 —
David Adelstein - Florida Construction Legal UpdatesProperty insurance policies (first party insurance policies) contain post-loss obligations that an insured must (and should) comply with otherwise they risk forfeiting insurance coverage. One post-loss obligation is the insurer’s right to request the insured to submit a sworn proof of loss. Not complying with a post-loss obligation such as submitting a sworn proof of loss can lead to unnecessary headaches for the insured. Most of the times the headache can be avoided. Even with a sworn proof of loss, there is a way to disclaim the finality of damages and amounts included by couching information as estimates or by affirming that the final and complete loss is still unknown while you work with an adjuster to quantify the loss. The point is, ignoring the obligation altogether will result in a headache that you will have to deal with down the road because the property insurer will use it against you and is a headache that is easily avoidable. And, it will result in an added burden to you, as the insured, to demonstrate the failure to comply did not actually cause any prejudice to the insurer.
By way of example, in Prem v. Universal Property & Casualty Ins. Co., 45 Fla. L. Weekly D2044a (Fla. 3d DCA 2020), the insured notified their property insurer of a plumbing leak in the bathroom. The insurer requested for the insured to submit a sworn proof of loss per the terms of the insured’s property insurance policy. The insurer follow-up with its request for a sworn proof of loss on a few occasions. None was provided and the insured filed a lawsuit without ever furnishing a sworn proof of loss. The insurer moved for summary judgment due the insured’s failure to comply with the post-loss obligations, specifically by not submitting a sworn proof of loss, and the trial court granted the insurer’s motion. Even at the time of the summary judgment hearing, the insured still did not submit a sworn proof of loss.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Hirer Liable for Injury to Subcontractor’s Employee Due to Failure to Act, Not Just Affirmative Acts, Holds Court of Appeal
December 11, 2018 —
Garret Murai - California Construction Law BlogThe Privette doctrine, named after the court case Privette v. Superior Court (1993) 5 Cal.4th 689, provides that a higher-tiered party such as an owner or general contractor is not liable for injuries sustained by employees of a lower-tiered party such as a subcontractor on a construction project. There are, however, exceptions to the Privette doctrine. One of these exceptions is known as the “retained control doctrine.”
Under the retained control doctrine, a higher-tiered party cannot avoid liability under the Privette doctrine if the higher-tiered party: (1) retains control over the conditions of the work; (2) negligently exercises control over such conditions; and (3) its negligent exercise of control contributes to the injuries sustained by the employee of the lower-tiered party.
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Garret Murai, Wendel, Rosen, Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
COVID-19 Is Not Direct Physical Loss Or Damage
April 13, 2020 —
Joseph Blyskal, Dennis Brown & Michelle Bernard - Gordon & Rees Insurance Coverage Law BlogIs a cash register that is not being used damaged property? When you need to wash a table, a chair, or a section of flooring with readily available cleaning products to make them safe and useable, are you repairing damaged property? Is a spilled cup of coffee waiting to be wiped up actual damage to the premises? If your customers stay home to help stop the spread of a virus, has there been a physical loss inside your shuttered store or restaurant?
The insuring agreements typically found in commercial property insurance policies require “direct physical loss of or damage to” covered property as the triggering event. Without establishing direct physical loss or damage a policyholder cannot meet its burden to trigger coverage for a purely economic loss of business income resulting from shuttering its business due to concerns over exposure to—or even the actual presence of—COVID-19. Despite this well-understood policy language, it is already beyond question that insurers will confront creative—albeit strained—arguments from policyholder firms attempting to trigger coverage for pure economic loss. The scope of the human and economic tragedy we all face will be matched by the scope of the effort to force the financial harm onto insurance companies.
The plaintiffs in what appears to be the first-filed case seeking a declaratory judgment in the context of first-party insurance coverage rely on the assertion that “contamination of the insured premises by the Coronavirus would be a direct physical loss needing remediation to clean the surfaces” of its establishment, a New Orleans restaurant, to trigger coverage for business interruption.[1] See Cajun Conti, LLC, et. al. v. Certain Underwriters at Lloyd’s, London, et. al. Civil District Court for the Parish of Orleans, State of Louisiana. The complaint alleges that the property is insured under an “all risk policy” defining “covered causes of loss” as “direct physical loss.” The plaintiffs rely on the alleged presence of the virus on “the surface of objects” in certain conditions and the need to clean those surfaces. They go so far as to claim that “[a]ny effort by [the insurer] to deny the reality that the virus causes physical damage and loss would constitute a false and potentially fraudulent misrepresentation. . . .”
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Joseph Blyskal,
Dennis Brown and
Michelle Bernard
Mr. Blyskal may be contacted at tblatchley@grsm.com
Mr. Brown may be contacted at dbrown@grsm.com
Ms. Bernard may be contacted at mbernard@grsm.com
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Professional Services Exclusion Bars Coverage Where Ordinary Negligence is Inseparably Intertwined With Professional Service
August 17, 2017 —
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLPIn Energy Ins. Mutual Ltd. v. Ace American Ins. Co. (No. A140656, filed 7/11/17, ord. Pub. 8/10/17), a California appeals court found that a professional services exclusion barred coverage for wrongful death and other claims blamed on pipeline inspectors’ failure to identify and properly mark a gas pipeline that was ruptured during construction of another pipeline, resulting in an explosion and fire.
In Energy Ins. Mutual, a pipeline owner hired two temporary construction inspectors through a staffing company. The inspectors had to ensure compliance with engineering and safety standards, practices and procedures for pipeline construction, and understand construction drawings and blueprints. They worked together with one of the owner’s employees to perform daily surveillance to ensure the integrity of the pipeline and avoid third party damage.
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Christopher Kendrick, Haight Brown & Bonesteel LLP and
Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com
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Five Construction Payment Issues—and Solutions
October 03, 2022 —
Michael Bignold - Construction ExecutiveSales are important for construction companies that want to succeed. However, while companies certainly need to spend time on sales and marketing, having a full order book is only part of the equation. They still need to do the work and, even more importantly, they need to be able to collect payment from customers.
Here are common payment issues in the construction industry and what leaders can do to prevent or mitigate them.
1. Change Order Disputes
If a project goes exactly as planned and quoted, billing the customer is a fairly simple matter. However, it’s very rare that any job goes exactly according to the quote in the construction business. Change orders, omissions and additions are typical on jobs of any size across the industry. If contractors are not handling those changes properly by getting everything in writing, they could be in trouble when the time comes to send invoices.
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Michael Bignold, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Performance Bonds: Follow the Letter of the Bond and Keep The Surety Informed
December 06, 2021 —
Bill Shaughnessy, Jones Walker, LLP - ConsensusDocsConstruction surety bonds are risk management tools utilized by parties on large construction projects. However, bonds are not insurance, and a surety is not an “insurer” of the project. Different from insurance, a surety’s obligation to act typically arises if the principal fails to perform in accordance with the construction contract, and if the claimant satisfies the conditions precedent to enforcing the bond.[1]
This article focuses exclusively on performance bonds on private projects,[2] and highlights practical considerations and surety defenses to enforcement of the performance bond.[3] Spoiler alert – the party making a claim on the bond must strictly adhere to the conditions precedent set forth in the bond throughout the construction project and when calling upon the surety to take action, otherwise the performance bond may be rendered void and unenforceable.
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Bill Shaughnessy, Jones Walker, LLPMr. Shaughnessy may be contacted at
bshaughnessy@joneswalker.com
Houses Can Still Make Cents: Illinois’ Implied Warranty of Habitability
March 01, 2011 —
Marisa L. SaberIn a report published earlier this week Marisa L. Saber writes about the implied warranty of habitability in the context of construction defect litigation. The piece speaks of the difficulties in alleging tort theories against builders and vendors in light of Illinois’ expansion of the economic loss doctrine, and how the implied warranty of habitability may provide another avenue for recovery.
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