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CONSTRUCTION DEFECT NEWS

South Carolina Supreme Court Requires Transparency by Rejecting an Insurer’s “Cut-and-Paste” Reservation of Rights

Thursday, February 16, 2017 — Theresa A. Guertin & H. Scott Williams - Saxe Doernberger & Vita, P.C.

In a decision rendered on January 11, 2017, the Supreme Court of South Carolina reminded policyholders that they are entitled to an explanation of any and all grounds upon which their insurer may be contesting coverage in a reservation of rights letter. Specifically, in Harleysville Group Insurance v. Heritage Communities, Inc. et al., 1 the court found that an insurer’s reservation of rights, which included a verbatim recitation of numerous policy provisions that the court identified as the “cut-and-paste” method, was insufficient to reserve its rights to contest coverage.

In 2003, Heritage Communities, Inc. (“Heritage”), a parent company of several corporate entities engaged in developing and constructing condominium complexes from 1997 to 2000, was sued by multiple property owners’ associations. The lawsuits sought actual and punitive damages against Heritage as a result of alleged construction defects, including building code violations, structural deficiencies, and significant water intrusion. During the period of construction, Heritage was insured by Harleysville Group Insurance (“Harleysville”) under several primary and excess general liability insurance policies.

Reprinted courtesy of Theresa A. Guertin, Saxe Doernberger & Vita, P.C. and H. Scott Williams, Saxe Doernberger & Vita, P.C.
Ms. Guertin may be contacted at tag@sdvlaw.com
Mr. Williams may be contacted at hsw@sdvlaw.com


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Emotional Distress Damages Not Distinct from “Annoyance and Discomfort” Damages in Case Arising from 2007 California Wildfires

Thursday, February 16, 2017 — Kirsten Lee Price & Lawrence S. Zucker II - Haight Brown & Bonesteel LLP

In Hensley v. San Diego Gas & Elec. Co., (No. D070259, filed 1/31/17), the California Court of Appeal for the Fourth Appellate District held that emotional distress damages are available on claims for trespass and nuisance as part of “annoyance and discomfort” damages.

In Hensley, plaintiffs sustained fire damage to their home and property during the 2007 California wildfires. The Hensleys were forced to evacuate as the fires advanced. Although their home was not completely destroyed, it sustained significant damage and they were not able to return home permanently for nearly two months. Thereafter, the Hensleys filed suit against San Diego Gas and Electric Company (“SDG&E”) asserting causes of action for trespass and nuisance, among others. Mr. Hensley, who had suffered from Crohn’s disease since 1991, further claimed that as a result of the stress from the fire, he experienced a substantial increase in his symptoms and his treating physician opined that “beyond a measure of reasonable medical certainty... the stress created by the 2007 San Diego fires caused an increase of [Mr. Hensley’s] disease activity, necessitating frequent visits, numerous therapies, and at least two surgeries since the incident.” SDGE moved, in limine, to exclude evidence of Mr. Hensley’s asserted emotional distress damages arguing he was not legally entitled to recover them under theories of trespass and nuisance. The trial court agreed and excluded all evidence of such damages.

Reprinted courtesy of Kirsten Lee Price, Haight Brown & Bonesteel LLP and Lawrence S. Zucker II, Haight Brown & Bonesteel LLP
Ms. Price may be contacted at kprice@hbblaw.com
Mr. Zucker may be contacted at lzucker@hbblaw.com


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When Construction Contracts Go Sideways in Bankruptcy

Thursday, February 16, 2017 — Tracy Green - California Construction Law Blog

The contractor on a project files a bankruptcy case. How should the property owner and subcontractors proceed? When a party to a contract files bankruptcy, the other party’s actions are constrained by the bankruptcy code.

Types of Bankruptcies

The typical bankruptcy case involves a chapter 7 complete liquidation, chapter 13 reorganization for an individual, or a chapter 11 reorganization or liquidation. In a chapter 7 the business ceases to operate and a panel trustee is appointed immediately upon the filing of the case. The chapter 7 trustee’s duties are to liquidate assets for the benefit of creditors and to prosecute litigation that can result in assets for the creditors. In a chapter 13, the individual debtor continues to operate, and there is a trustee, but the trustee’s roll is limited to reviewing the chapter 13 plan and making sure that the plan is performed. In a chapter 11, the debtor retains control of its assets and continues to operate its business until a plan is confirmed. During the chapter 11 period before a plan is approved, the debtor will decide which contracts it wants to assume or reject, all while operating the company and preparing a plan.

Reprinted courtesy of Tracy Green, Wendel Rosen Black & Dean LLP

Ms. Green may be contacted at tgreen@wendel.com

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Senate Bill Would Bar Davis-Bacon on Highway Construction Projects

February 16, 2017 — John Guzzon - Engineering News-Record

Sen. Jeff Flake (R-Ariz.) is pushing legislation that would suspend the Davis-Bacon Act’s prevailing-wage provisions on federal highway construction contracts. Supporters of Flake’s bill include the Associated Builders and Contractors. But leaders of the building-trade unions blasted the proposal.

Mr. Guzzon may be contacted at ENRSouthWestEditor@enr.com

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Insurer Cannot Escape Indemnity Obligations Through Cut-And-Paste Reservation of Rights

February 16, 2017 — Tred R. Eyerly – Insurance Law Hawaii

The South Carolina Supreme Court found that the Special Referee correctly determined that the insurer failed to reserve the right to contest coverage of actual damages and punitive damages under the CGL policies. Harleysville Group Ins. v. Heritage Communities, Inc., 2017 S.C. LEXIS 8 (S.C. Jan. 11, 2017).

Two developments, the Riverwalk and Magnolia North, were constructed between 1997 and 2000 by Heritage. After construction and sale of the units, the purchasers became aware of construction problems, including building code violations, structural deficiencies, and significant water-intrusion problems. In 2003, the property owners' associations (POAs) filed suit to recover damages for repairs to their homes.

Mr. Eyerly may be contacted at te@hawaiilawyer.com

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U.S. Housing Starts Exceed Estimates After a Stronger December

February 16, 2017 — Sho Chandra - Bloomberg

Builders started work on more U.S. homes than forecast in January after an upward revision to starts in the prior month, a sign construction was on a steady path entering 2017.

Residential starts totaled an annualized 1.25 million, easing from a 1.28 million pace in the prior month, a Commerce Department report showed Thursday. The median forecast of economists surveyed by Bloomberg was 1.23 million. Permits, a proxy for future construction, increased at the fastest pace since November 2015 on a pickup in applications for apartment building.

Ms. Chandra may be followed on Twitter @ShoChandra

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Lorman Webinar: Fundamentals of California Construction Contracts

February 16, 2017 — Beverley BevenFlorez-CDJ STAFF

This live webinar will focus on identifying “which contract clauses you need to focus on and negotiate.” By the end of the seminar, you “will understand the risks of signing contracts with one sided clauses, particularly scope, indemnity, insurance and payment clauses.” Larry P. Lubka is the faculty member presenting the webinar.

March 15th, 2017
Live Webinar

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Judge Nixes SC's $100M Claim Over MOX Construction Delays

Thursday, February 16, 2017 — Engineering News-Record

A federal judge on Feb. 8 dismissed a claim by the state of South Carolina against the U.S. Dept. of Energy over delayed construction of the Mixed-Oxide Fuel Fabrication Facility, near Aiken, S.C. The claim for financial compensation was part of a lawsuit the state filed in February 2016 seeking payment of $1 million per day—or an annual maximum of $100 million—for the MOX facility not producing fuel by Jan. 1, 2016.

Reprinted courtesy of Engineering News-Record

ENR may be contacted at ENR.com@bnpmedia.com

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Duty to Defend Requires Payments Under Policy's Supplemental Payments Provision

Thursday, February 16, 2017 — Tred R. Eyerly – Insurance Law Hawaii

The California Court of Appeal determined there was no duty to indemnify and the insured had to reimburse the insurer's contribution to a settlement. Nevertheless, there was a duty to defend, meaning the insured did not have to reimburse amounts it was entitled to under the supplemental payments provision. Navigators Specialty Ins. Co. v. Moorefield Constr., 2016 Cal. App. LEXIS 1132 (Cal. Ct. App. Dec. 27, 2016).

Moorefield was the general contractor for a shopping center project to be developed by DBO Development No. 28 (DBO). The project included the construction of a 30,055-square-foot building to by used as a Best Buy store. In January 2002, DBO entered a 15-year lease with Best Buy.

Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii

Mr. Eyerly may be contacted at te@hawaiilawyer.com

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General Contractors: Consider Importance of "Primary Noncontributory" Language

Thursday, February 16, 2017 — David Adelstein – Florida Construction Legal Updates

In prior articles, I reinforced the importance of general contractors including “primary and noncontributory” language in subcontracts and requiring the subcontractor to provide an analogous “primary and noncontributory” endorsement. As a general contractor this is important, particularly since you are going to require the subcontractor to (i) indemnify you for claims relating to personal injury, property damage, or death, and (ii) identify you as an additional insured under its commercial general liability (CGL) policy for claims arising out of the subcontractor’s scope of work. The “primary and noncontributory” language in your subcontracts allows you to maximize the value of your additional insured status.

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

Mr. Adelstein may be contacted at dadelstein@gmail.com

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CONSTRUCTION DEFECT NEWS

Whitney Stefko Named to ENR’s Top Young Professionals, formerly ENR’s Top 20 Under 40, in California

Thursday, February 16, 2017 — Haight Brown & Bonesteel LLP

Every year, Engineering News-Record (ENR) honors young professionals who are making a big splash in the construction industry. This year, ENR named Whitney Stefko to its list of individuals who represent the best of the best in the construction industry. In its feature article, “Top Young Professionals Make a Big Impact in Construction Industry,” Stefko is recognized for her expertise in professional liability and construction defense law, and her success in representing hundreds of cases on behalf of developers, general contractors, subcontractors and design professionals.

Reprinted courtesy of Whitney L. Stefko, Haight Brown & Bonesteel LLP

Ms. Stefko may be contacted at wstefko@hbblaw.com

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Suing a Local Government in Land Use Cases – Part 2 – Procedural Due Process

Thursday, February 16, 2017 — Wally Zimolong – Supplemental Conditions

n my last post I discussed suing a local government for a substantive due process violation. In this post, I discuss a the right to procedural due process.

The Fourteenth Amendment of the United States Constitution protects prohibits the government from depriving an individual or business of life (in the case of an individual), liberty, or property without due process of law. Unlike the somewhat abstract and subjective concept of substantive due process, procedural due process is direct and objective. Generally, if an individual or business maintains a property or liberty interest, a local government must afford that individual or business notice that the government intends to deprive them of a liberty or property interest and a reasonable opportunity to be heard to contest the proposed deprivation. Unless there is an emergency, the notice and opportunity to be heard must be given before the government deprives an individual or business of a liberty of property interest. This is known as a pre-deprivation hearing. Because of the clear contours of the right, procedural due process violations are typically easier to prove than substantive due process violations.

Reprinted courtesy of Wally Zimolong, Zimolong LLC

Mr. Zimolong may be contacted at wally@zimolonglaw.com

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Water Backup Payment Satisfies Insurer's Obligation to Cover for Rain Damage

Thursday, February 16, 2017 — Tred R. Eyerly – Insurance Law Hawaii

The insured's attempt to secure additional coverage beyond a $10,000 payment for water damage after a rain storm damaged the interior of its building failed. Bible World Christian Ctr. v. Colony Insurance Co, 2016 U.S. Dist. LEXIS 175766 (M.D La. Dec. 20, 2016).

The interior of Bible World's building was damaged by water that leaked in from the roof after a heavy rain storm. Bible World's officials met with Robert Chandler, an employee of Omni Insurance Group, the day after the rain event. Chandler had assisted Bible World in procuring its commercial property policy with Colony Insurance Company. Chandler told Bible World to fix the property and that its costs would be covered under the policy. Bible World spent $79,876.81 in repairs.

Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii

Mr. Eyerly may be contacted at te@hawaiilawyer.com

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CONSTRUCTION DEFECT NEWS

Reminder: The Devil is in the Mechanic’s Lien Details

Thursday, February 16, 2017 — Christopher G. Hill – Construction Law Musings

As readers of Construction Law Musings are well aware, mechanic’s liens and their picky and at times overly form oriented nature are near and dear to my heart as a construction attorney here in Virginia. I recently had the opportunity to meet this head on in Hanover County, Virginia Circuit Court. I was defending a suit to enforce a mechanic’s lien in the context of a lien that had been released pursuant to a bond deposited with the court under Va. Code 43-71 on behalf of my client, the defendant in that suit.

The case, G.H. Watts Construction, Inc. v. Cornerstone Builders, LLC, involved a memorandum of lien recorded by G. H. Watts without the assistance of an attorney in which the claimant was identified as “G. H. Watts Construction, Inc.” while the signatory on the memorandum of lien and the claimant identified in the notary block were identified as “Gary H. Watts” and “Gary Watts” respectively. Nowhere on the memorandum was Gary Watts’ capacity as it related to the company, nor did it state that Gary Watts was an agent for claimant.

Reprinted courtesy of Christopher G. Hill, The Law Office of Christopher G. Hill

Mr. Hill may be contacted at chrisghill@constructionlawva.com

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Quick Note: Subcontractor Payment Bond = Common Law Payment Bond

Thursday, February 16, 2017 — David Adelstein – Florida Construction Legal Updates

What is a common law payment bond? A common law payment bond is a bond not required or governed by a statute. For example, if a prime contractor provides the owner a payment bond, that bond will be a statutory payment bond. On the other hand, if a subcontractor provides the general contractor with a payment bond, that bond will be a common law payment bond. Why? Because there is not a statute that specifically governs the requirements of a subcontractor’s payment bond given to a general contractor. The subcontractor’s payment bond is aimed at protecting the general contractor (and the general contractor’s payment bond) in the event the subcontractor fails to pay its own subcontractors and suppliers. The subcontractor’s payment bond will generally identify that claimants, as defined by the bond, are those subcontractors and suppliers the subcontractor has failed to pay. This common law payment bond is not recorded in the public records so sometimes it can be challenging for a claimant (anyone unpaid working under the subcontractor that furnished the bond) to obtain a copy of the bond. With that said, an unpaid claimant should consider pursuing a copy of this bond in certain situations, particularly if it may not have preserved a claim against the general contractor’s statutory payment bond.

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

Mr. Adelstein may be contacted at dadelstein@gmail.com

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The Conscious Builder – Interview with Casey Grey

Thursday, February 16, 2017 — Aarni Heiskanen – AEC Business

In this podcast interview, Casey Grey talks about Conscious Building, passive houses, and and how we can make our homes healthier.

About Casey Grey
Casey Grey is the founder and CEO of The Conscious Builder Inc., an Ontario company.

Casey is one of those very few people who knew what he wanted from a very young age. Although his goals have changed over the years, they have always revolved around building homes. From Lego, to tree houses to custom homes, he is constantly looking for ways to build better homes.

Reprinted courtesy of Aarni Heiskanen, AEC Business

Mr. Heiskanen may be contacted at aarni@aepartners.fi

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Suing a Local Government in Land Use Cases – Part 1 – Substantive Due Process

Thursday, February 16, 2017 — Wally Zimolong – Supplemental Conditions

Because of my personal political persuasions (pro-freedom) and success in litigating cases against the government and other media about those cases businesses frequently approach me about bringing claims against local governments and agencies for interfering with their Constitutional rights. Actions by local government agencies that could give rise to a Constitutional violation include: treating a developer’s project differently than a similar project, revoking a previously issued zoning or building permit, disqualifying a contractor from bidding on a government contract, retaliating against a business owner for speaking out against the local agency or one of its members, or unnecessarily delaying the issuance of a permit. The Constitutional rights most typically implicated in these cases are those guaranteed by the 5th and 14th Amendments to the United States Constitution. However, the 1st Amendment is also frequently implicated.

Suing a local government agency for violating your Constitutional rights is not easy. However, the federal statute under which the cases are brought, 42 U.S.C. Section 1983, provides for the award of a successful plaintiff’s attorneys fees. This is true even if the Judge or jury awards a mere $1 is damages. Moreover, sometimes there can be a strategic value in the litigation.

This is the first in a series of blog posts exploring claims available to businesses harassed by local government agencies and officials and the challenges inherent in successfully bringing those claims. We will start with a claim for a substantive due process violation.

Reprinted courtesy of Wally Zimolong, Zimolong LLC

Mr. Zimolong may be contacted at wally@zimolonglaw.com

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Builders Standard of Care Expert Witness and Consulting General Contractor area area area

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