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CONSTRUCTION DEFECT NEWS
Construction workers drilling outside

When analyzing coverage for a construction defect claim, it is important to ascertain the date on which damage occurred. Of course, the plaintiffs’ bar crafts pleadings to be purposefully vague as to the date (or period) of damage to property.

Fifth Circuit Holds Insurer Owes Duty to Defend Latent Condition Claim That Caused Fire Damage to Property Years After Construction Work

Monday, September 21, 2020 — Jeremy S. Macklin - Traub Lieberman

Most general liability policies only provide coverage for “property damage” that occurs during the policy period. Thus, when analyzing coverage for a construction defect claim, it is important to ascertain the date on which damage occurred. Of course, the plaintiffs’ bar crafts pleadings to be purposefully vague as to the date (or period) of damage to property. A recent Fifth Circuit decision applying Texas law addresses this coverage issue in the context of allegations of a condition created by an insured during the policy period that caused damage after the policy expired.

In Gonzalez v. Mid-Continent Cas. Co., 969 F.3d 554 (5th Cir. 2020), Gilbert Gonzales (the insured) was a siding contractor. In 2013, the underlying plaintiff hired Gonzales to install new siding on his house. In 2016, the underlying plaintiff’s house was damaged in a fire. The underlying plaintiff sued Gilbert in Texas state court alleging that when Gonzalez installed the siding in 2013, he hammered nails through electrical wiring and created a dangerous condition that caused a fire three years later in 2016.

At the time Gilbert performed construction work, he was insured by Mid-Continent Casualty Company. Mid-Continent disclaimed coverage to Gonzales on the basis that the complaint unequivocally alleged that property was damaged in 2016 and there were no allegations that property damage occurred prior to 2016 or was continuing in nature.

Reprinted courtesy of Jeremy S. Macklin, Traub Lieberman

Mr. Macklin may be contacted at jmacklin@tlsslaw.com

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Fire and smoke burning on dry fields

The CA Court of Appeal reversed the entry of summary judgment in favor of State Farm in connection with a smoke and soot damage claim made by the Fadeeffs for damage sustained by their home due to the 2015 Valley Fire.

Leonard Fadeeff v. State Farm General Insurance Company

Monday, September 21, 2020 — Michael Velladao - Lewis Brisbois

In Fadeeff v. State Farm Gen. Ins. Co., 50 Cal.App.5th 94 (May 22, 2020), the California Court of Appeal reversed the entry of summary judgment in favor of State Farm General Insurance Company (“State Farm”) in connection with a smoke and soot damage claim made by Leonard and Patricia Fadeeff (the “Fadeeffs”) for damage sustained by their home due to the 2015 Valley Fire. The parties’ dispute arose out of the Valley Fire, which took place in Lake County, California. The Fadeeffs’ home was located in Hidden Valley Lake.

The Fadeeffs submitted a claim to State Farm under their homeowners policy. Initially, after an adjuster inspected the home and noted that it was “well maintained” with no apparent maintenance issues, State Farm made a series of payments and arranged for ServPro to clean the smoke and soot damage. Subsequently, the Fadeeffs retained an independent adjuster and submitted a supplemental claim in the amount of $75,000. State Farm retained a different unlicensed adjuster to investigate the claim and retained expert, Forensic Analytical Consulting Services (FACS) to inspect the Fadeeffs’ home, and another company referred to as HVACi, to inspect the Fadeeffs’ HVAC system.

The independent adjuster used to investigate the Fadeeffs’ supplemental claim failed to follow company guidelines in connection with using experts, which required specific questions to be addressed by the expert. In addition, FACS only took surface samples of the walls in the Fadeeffs’ home. Ultimately, the reports prepared by FACS and HVACi concluded that no additional work was required to remediate the damage sustained by the Fadeeffs’ home. Thereafter, State Farm denied the Fadeeffs’ supplemental claim.

Reprinted courtesy of Michael Velladao, Lewis Brisbois

Mr. Velladao may be contacted at Michael.Velladao@lewisbrisbois.com

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Smoke on black background

This case establishes that a defendant can be held liable for a careless smoking fire even if the defendant does not have a duty to control the actions of third parties and is not vicariously liable for the third party’s actions.

Update – Property Owner’s Defense Goes up in Smoke in Careless Smoking Case

Monday, September 21, 2020 — Michael J. Ciamaichelo - The Subrogation Strategist

Property owners owe a duty of reasonable care to avoid causing harm to neighboring properties. In Steamfitters Local Union No. 602 v. Erie Ins. Exch., 2020 Md. LEXIS 347 (July 27, 2020) (Steamfitters Local), a matter originally discussed in a June 2019 blog post, the Court of Appeals of Maryland affirmed that, where the property owner knows or should have known that people are habitually discarding hundreds of cigarette butts into a mulch bed along the boundary of the neighboring property, the property owner owes a duty to its neighbors to prevent the risk of fire.

As discussed in Steamfitters Local, a fire originated in a strip of mulch at property owned by the Steamfitters Local Union No. 602 (Union) and caused damage to neighboring properties. The fire occurred when an unknown person discarded a cigarette butt into the mulch. Following the fire, investigators found hundreds of cigarette butts in the mulch where the fire originated. A representative for the Union acknowledged that there were more butts in the mulch “than there should have been” and that, “[i]n the right situation,” a carelessly discarded cigarette could cause a fire. The Union, however, had no rules or signs to prohibit or regulate smoking at the property, where apprentices would often gather prior to class. The insurance companies for the damaged neighbors filed subrogation actions alleging that the Union, as the property owner, failed to use reasonable care to prevent a foreseeable fire. A jury found in favor of the subrogating insurers and the defendants appealed.

Reprinted courtesy of Michael J. Ciamaichelo, White and Williams LLP

Mr. Ciamaichelo may be contacted at ciamaichelom@whiteandwilliams.com

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COVID-19: The Catalyst to Permanently Transform Construction Safety With Live Field Data

September 21, 2020 — Mike Merrill - Construction Executive

Construction is considered an essential service, which is why many projects have continued to hum along even as large portions of the economy have shut down. And while some projects may slow or experience delays from budgetary constraints, experts forecast that the construction industry could soon be busier than ever. Still, amidst the uncertainty of COVID-19 is a silver lining: construction companies now have the opportunity to examine safety processes and update their technology and operations in ways that will positively affect their businesses for years to come.

The 2020 FMI Industry Report shows 66% of firms believe that maintaining a safe worksite is the number one concern for their future success. Now, since the advent of COVID-19, safety managers must do everything they can to protect their workforces, which is where technology comes in.

Reprinted courtesy of Mike Merrill, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

Mr. Merrill may be contacted at Mike@abouttimetech.com

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Remand Denied for COVID-19 Business Interruption Claim

September 21, 2020 — Tred R. Eyerly - Insurance Law Hawaii

The district court refused to remand plaintiff's claim for business losses due to COVID-19 shut down orders. Mark's Engine Co. No. 28 Restaurant, LLC v. Traveler's Indem. Co. of Conn., 2020 US. District. LEXIS 132841 (C.D. Calif. July 27, 2020).

Plaintiff restaurant sued Traveler's in state court. Los Angele Mayor Eric Garcetti was also named as a defendant for his part in issuing the shut down orders. An Executive Order issued on March 15, 2020 directed all non-essential businesses to close. Plaintiff argued that this triggered its coverage because plaintiff was forced to close by order of Civil Authority. Further, the denial of coverage would not have occurred absent the mayor's order, the propriety of which was an significant issue that allegedly had to be resolved.

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

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Ex-Colony Executive Seeks $1.2 Billion for Single-Family Rentals

September 21, 2020 — Patrick Clark - Bloomberg

ResiBuilt Homes was supposed to raise $250 million to develop single-family rental communities, but the deal was scuttled in March after the Covid-19 pandemic brought the U.S. economy to a halt.

Now, the Atlanta-based builder is out raising money again, and it’s seeking nearly five times the original amount. ResiBuilt is working with New York investment bank Whelan Advisory to raise $400 million in equity and $800 million in debt to build and manage rental houses as it looks to capitalize on demand for larger living spaces and investor appetite for ways to bet on the suburbs.

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AGC WebEd: Keep Your Team Connected: Sharing Virtual RFIs and Construction Documents with Everyone

September 21, 2020 — Beverley BevenFlorez – CDJ Staff

The Associated General Contractors of America (AGC) will host a one-hour, online seminar that “will focus on how construction firms can share construction documents, RFI/RFP, etc. in the cloud for all project stakeholders to access.” It’s presented by James Coppinger of ZenTek Consultants: “Mr. Coppinger has over 30 years' experience in the design/build industry, working in estimating, project management, and both architectural/civil design.”

October 7th, 2020
Virtual Seminar (WebEd)

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Dollar sign over dark sky

The change adds a possible civil cause of action for downstream and unpaid subcontractors and suppliers.

Accounting for Payments on Projects Became Even More Crucial This Year

Monday, September 21, 2020 — Christopher G. Hill - Construction Law Musings

I discussed several of the statutory changes affecting the construction industry here at Construction Law Musings in the run-up to July 1, 2020. One of those changes, an amendment to Virginia Code Section 43-13, may add another arrow to the collection quiver of subcontractors and suppliers. As part of the previously-linked rundown, I highlighted one of the big additions in 2020, namely the amendment making those pesky clauses that let those up the payment chain from you hold money on “this or any other project” void as against public policy.

The other big addition to 43-13 is the change that adds a possible civil cause of action for downstream and unpaid subcontractors and suppliers in the event that funds paid to a general contractor or subcontractor are not first used to pay their downstream contractors and suppliers. Prior to July 1, 2020, this statute provided criminal penalties for such behavior but did not contain the possibility of a civil penalty. The operative language for the change is as follows:

The use by any such contractor or subcontractor or any officer, director, or employee of such contractor or subcontractor of any moneys paid under the contract before paying all amounts due or to become due for labor performed or material furnished for such building or structure for any other purpose than paying such amounts due on the project shall be prima facie evidence of intent to defraud. Any breach or violation of this section may give rise to a civil cause of action for a party in contract with the general contractor or subcontractor, as appropriate; however, this right does not affect a contractor’s or subcontractor’s right to withhold payment for failure to properly perform labor or furnish materials on the project.

Reprinted courtesy of The Law Office of Christopher G. Hill

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

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Illustration of three judges sitting behind bench

New York courts have become a battleground for challenges to foreclosure sales under the Uniform Commercial Code (UCC) amidst the COVID-19 pandemic.

New York Court Temporarily Enjoins UCC Foreclosure Sale

Monday, September 21, 2020 — Steven E. Ostrow, Timothy E. Davis, Steven E. Coury & Kristen E. Andreoli - White and Williams

New York courts have become a battleground for challenges to foreclosure sales under the Uniform Commercial Code (UCC) amidst the COVID-19 pandemic. Another trial court of the New York State Supreme Court (New York County) issued a preliminary injunction in Shelbourne BRF LLC v. SR 677 Bway LLC, halting a mezzanine lender’s August 19, 2020 UCC foreclosure sale. The decision confirms that the impact of the pandemic on the value of commercial real estate, and upon traditional steps taken to conduct a foreclosure auction, are both key factors that courts will continue to consider in determining whether a UCC foreclosure sale scheduled during the pandemic can be conducted in a commercially reasonable manner as required by the UCC.

THE CASE

In Shelbourne, the mezzanine borrowers owned the membership or equity interests in the companies (collectively, the “Property Owner”) that held title to a 12-story office building in Albany, New York. As security for the $3.35 million mezzanine loan, the mezzanine borrowers pledged their equity interests to the mezzanine lender. In May 2020, the mezzanine lender declared a default under the mezzanine loan as a result of the Property Owner’s default under the $28.5 million senior loan secured by a mortgage against the office building. The mezzanine lender then scheduled a public UCC foreclosure sale of the equity interests in the Property Owner for August 19, 2020. If the sale had been held, the equity interests in the Property Owner (and right to control the Property Owner and office building) would have been transferred to the successful bidder, either the mezzanine lender or a third party purchaser.

Reprinted courtesy of White and Williams attorneys Steven E. Ostrow, Timothy E. Davis, Steven E. Coury and Kristen E. Andreoli
Mr. Ostrow may be contacted at ostrows@whiteandwilliams.com
Mr. Davis may be contacted at davist@whiteandwilliams.com
Mr. Coury may be contacted at courys@whiteandwilliams.com
Ms. Andreoli may be contacted at andreolik@whiteandwilliams.com


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Question mark in maze

The AZ Court of Appeals addressed the question whether a landlord’s violation of the Arizona Landlord-Tenant Act constituted negligence per se.

Does a Landlord’s Violation of the Arizona Residential Landlord-Tenant Act Constitute Negligence Per Se?

Monday, September 21, 2020 — Kevin J. Parker - Snell & Wilmer Real Estate Litigation Blog

In a recent Arizona Court of Appeals case, Ibarra v. Gastelum, 2020 WL 4218020 (7/23/20), the Court of Appeals addressed the question whether – in a tenant’s personal injury claim against the landlord – a landlord’s violation of the Arizona Landlord-Tenant Act constituted negligence per se. The tenant alleged he was injured by stubbing his toe on a crack in the floor. The tenant alleged that he had made repeated demands that the landlord repair the crack. The statute required the landlord to make all repairs and do whatever is necessary to put and keep the premises in a fit and habitable condition. The tenant argued that a violation of the statute constituted negligence per se, meaning that the violation of the statute satisfied (as a matter of law) the first two elements of a negligence claim – duty and breach of duty. The tenant requested a negligence per se jury instruction. The trial court declined that request and refused to give the requested instruction. The tenant lost the jury trial and appealed.

Reprinted courtesy of Kevin J. Parker, Snell & Wilmer

Mr. Parker may be contacted at kparker@swlaw.com

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CONSTRUCTION DEFECT NEWS
Outside restaurant

Businesses must now shift to outdoor dining with adequate space and airflow between parties.

Of Pavement and Pandemic: Liability and Regulatory Hurdles for Taking It Outside

Monday, September 21, 2020 — Jeff Clare - Gravel2Gavel Construction & Real Estate Law Blog

As the COVID-19 pandemic continues to ravage the U.S. economy, restaurateurs and bar owners are feeling the brunt of business closures and adaptations necessary to combat the disease. Where cozy and intimate dining was once de rigueur for the restaurant industry, these businesses must now shift to outdoor dining with adequate space and airflow between parties. In response to these concerns, many cities across the country who once fought against the loss of any parking have turned to a post-automobile tactic: outdoor dining in thoroughfares and parking lots. While at first glance it might seem a simple enough prospect—throw some chairs and a table out front, and voilà—property owners and restaurateurs must remain cognizant of various liability and regulatory hurdles for operating outside.

With Great Space Comes Great … Potential Liability.

One of the largest concerns for landowners in operating in a new space for business is liability. Who is on the hook if someone gets hurt dining in an impromptu dining space in a parking lot? Prior to beginning new outdoor dining operations, landowners and restaurateurs should contact their insurance providers to ensure that the new space is included in their insurance coverage. This is a particular concern for larger commercial landowners who may have various businesses vying to use their parking lot for business. Many leases have carefully crafted clauses limiting where a business may operate and where their liability ceases. Landowners and business owners should review their leases for any such clauses and negotiate with one another to ensure that liability in these new spaces is clearly defined.

Reprinted courtesy of Jeff Clare, Pillsbury

Mr. Clare may be contacted at jeff.clare@pillsburylaw.com

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Woman lying next to clock

The action in Pigment Inc. v. Hartford Fin. Servs. Group stayed pending the JPML's decision on consolidation.

Hundreds of Coronavirus Coverage Cases Await Determination on Consolidation

Monday, September 21, 2020 — Tred R. Eyerly - Insurance Law Hawaii

On July 30, 2020, the Judicial Panel on Multi-District Litigation (JPML) heard oral argument on the potential consolidation of all federal cases involving business interruption coverage relating to coronavirus and shut-down orders. A decision will be rendered in the near future.

Meanwhile, many cases are on hold, waiting for a determination on consolidation. One such case is Pigment Inc. v. Hartford Fin. Servs. Group, 2020 U.S. Dist. LEXIS 133230 (S.D. Cal. July 27, 2020), where the court granted a stay pending a decision by the JPML. The case is a class action based on denial of coverage under business interruption insurance. Plaintiff's case alleged a bad faith denial that risked the permanent closure of its business due to unexpected temporary shutdowns from the COVID-19 pandemic. Plaintiff sought a stay pending the decision of the JPML.

The court considered the possible damage which could result from granting a stay, the hardship which a party could suffer in being required to go forward, and the orderly course of justice measured by the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.

Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert

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

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Communication bubbles

The Federal Government’s Ban on certain Chinese covered telecommunications and video surveillance equipment and services in federal government contracts.

Chinese Telecommunications Ban to Expand to Federally Funded Contracts Effective November 12, 2020

Monday, September 21, 2020 — Lori Ann Lange & Sabah Petrov - Peckar & Abramson

In our previous alert, we discussed the Federal Government’s Ban (the “Ban”) on certain Chinese covered telecommunications and video surveillance equipment and services in federal government contracts. The ban prohibits government contractors and subcontractors from supplying to the Federal Government or using in their own internal operations certain telecommunications or video surveillance equipment or services produced by Huawei Technologies Company, ZTE Corporation, Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, and Dahua Technology Company, as well as their subsidiaries and affiliates. The Ban currently applies to companies contracting directly with the Federal Government. Soon, however, the Ban – at least in part – will expand to contractors and subcontractors who are awarded certain federally assisted contracts and subcontracts.

On August 13, 2020, the Office of Management and Budget (“OMB”) published Final Guidance revising its grants and agreements regulations (2 CFR Part 200) to prohibit recipients and subrecipients from using loan or grant funds to purchase or obtain covered telecommunications and video surveillance equipment or services. Effective November 12, 2020, recipients and subrecipients are prohibited from obligating or expending loan or grant funds to:

  1. Procure or obtain;
  2. Extend or renew a contract to procure or obtain; or
  3. Enter into a contract (or extend or renew a contract) to procure or obtain equipment, services, or systems that use covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.

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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How to Navigate Construction Liens On Residential Property In Texas | Levelset

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CONSTRUCTION DEFECT NEWS
Businessman with his arms folded

It's the contractors responsibility to stick with the guidelines related to the line of credit and debt agreements which in most cases are covenant ratios.

Potential Construction Liabilities Contractors Need to Know

Monday, September 21, 2020 — Manipal Dhariwal - Construction Executive

The outbreak of COVID-19 started in early December 2019, gradually expanding to the other countries of the world. The spread of the pandemic did not just affect the world in terms of health, but also made industries suffer across all verticals—leading to a few unique challenges for construction contractors.

From financial imbalance to trouble retaining cash flow, the circumstances have turned to be completely unfavorable for the contractors that rely on banks for essential surety credits to sustain. To prevent loss of liquidity, the contractors are leaning toward construction accounting software and other technology to keep their accounting data in place and avoid risks with project deliveries.

But still, there are many other factors that must be considered to maintain cash flow for potential credit availability such as debt agreements and lines of credit, which involve financing of equipment and vehicles.

Nevertheless, it is completely the responsibility of the contractors to stick with the guidelines related to the line of credit and debt agreements which in most cases are covenant ratios.

Reprinted courtesy of Manipal Dhariwal, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.



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Flooded plains

The latest forecasts predict this will be one of the most active seasons in history.

The Peak of Hurricane Season Is Here: How to Manage Risks Before They Manage You

Monday, September 21, 2020 — Vincent E. Morgan - Construction Executive

The Atlantic hurricane season runs from June 1 to Nov. 30, but it peaks sharply during August, September and October. The latest forecasts predict this will be one of the most active seasons in history, in terms of frequency and severity, though it is always important to remember that even a single hurricane or tropical storm making landfall can still be a devastating event.

Hurricanes pose unique risks to the construction industry ranging from project and labor force disruptions to concerns about the availability and price of construction materials. This is even more true this year, which requires merging hurricane preparedness and response plans with the realities of COVID-19. Because hurricanes cannot be avoided, preparing for them is the only way to manage these risks. Ensuring the personal safety and wellbeing of affected individuals is the first priority. After that, here are some key issues, and suggestions for handling them, that may help guide construction companies through the storm.

SITE PROTECTION

Construction contracts often place responsibility for site protection on contractors. Where those duties exist, failing to properly carry them out can lead to enormous losses that then turn into liability claims. This could be anything from removing materials that can become projectiles, covering exposed ventilation shafts, and sealing electrical conduits to ensuring that key equipment such as generators and pumps can remain functional in a storm. One way to approach it is to imagine sustained 100-mph winds and relentless water, and then make sure preparedness efforts are likely to survive that kind of test. This is not the time for guessing. It is far better to go through a rigorous analytical process now than in a courtroom years later.

Reprinted courtesy of Vincent E. Morgan, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.



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San Francisco bay

One of the most significant moves yet by a big tech company to scale back real estate plans in the city amid the Covid-19 pandemic.

Pinterest Nixes Big San Francisco Lease Deal in Covid Scaleback

Monday, September 21, 2020 — Sophie Alexander - Bloomberg

Pinterest Inc. canceled a large office lease at a building to be constructed near its San Francisco headquarters, marking one of the most significant moves yet by a big tech company to scale back real estate plans in the city amid the Covid-19 pandemic.

“As we analyze how our workplace will change in a post-Covid world, we are specifically rethinking where future employees could be based,” Todd Morgenfeld, Pinterest’s chief financial officer and head of business operations, said in a statement Friday.

The social-sharing service is paying an $89.5 million termination fee to terminate its lease for 490,000 square feet (45,500 square meters) of space. It will keep its existing offices in the city.

Reprinted courtesy of Sophie Alexander, Bloomberg
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Robot holding screwdriver

Digital and technical innovation plays an essential role in optimizing the modern built environment.

Architecture, Robotics, and the Importance of Human Interaction – An Interview with Prof. Kathrin Dörfler

Monday, September 21, 2020 — Aarni Heiskanen - AEC Business

We sat down with Professor Kathrin Dörfler of the Technical University of Munich (TUM) in advance of WDBE 2020. We discussed the importance of innovation and how her research focuses on the need for practical and productive solutions when it comes to on-site support.

Digital and technical innovation plays an essential role in optimizing the modern built environment. Now leading the Augmented Fabrication Lab (AFAB) in TUM, Professor Kathrin Dörfler quickly saw the need for practical solutions early in her career.

The Importance of ‘Need’

“I’m originally an architect,” she says. “I studied digital art and architecture and my tendency to go toward digital fabrication came from this proximity to computational design and the need to use robots for fabrication. There was no other way to build the things you created in your virtual space without using machinery.”

Reprinted courtesy of Aarni Heiskanen, AEC Business

Mr. Heiskanen may be contacted at aec-business@aepartners.fi

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

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

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

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