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A Special CDJ Thanksgiving Edition

Tuesday, November 21, 2017 — Beverley BevenFlorez-CDJ STAFF

Welcome to the Construction Defect Journal’s special Thanksgiving edition. The CDJ staff has compiled the most important and interesting stories so far from 2017. From Supreme Court decisions to state construction defect law shake ups, this week’s edition showcases significant construction defect industry changes. With a mug of hot spiced cider in hand, relax and reflect on what has happened in our industry so far in 2017.

CDJ wishes to give thanks to its amazing contributors and readers. It’s due to your efforts and support that CDJ is able to present a weekly summary of what is happening in the construction defect industry. We hope you enjoy this special edition, and wish you and your family a fun and festive Thanksgiving holiday.



Gillotti v. Stewart (2017) 2017 WL 1488711 Rejects Liberty Mutual, Holding Once Again that the Right to Repair Act is the Exclusive Remedy for Construction Defect Claims

Tuesday, November 21, 2017 — Richard H. Glucksman, Esq. & Chelsea L. Zwart, Esq. - Chapman Glucksman Dean Roeb & Barger Bulletin

Originally published by CDJ on June 5, 2017

Background
In Gillotti v. Stewart (April 26, 2017) 2017 WL 1488711, which was ordered to be published on May 18, 2017, the defendant grading subcontractor added soil over tree roots to level the driveway on the plaintiff homeowner’s sloped lot. The homeowner sued the grading subcontractor under the California Right to Repair Act (Civil Code §§ 895, et seq.) claiming that the subcontractor’s work damaged the trees.

After the jury found the subcontractor was not negligent, the trial court entered judgment in favor of the subcontractor. The homeowner appealed, arguing that the trial court improperly construed the Right to Repair Act as barring a common law negligence theory against the subcontractor and erred in failing to follow Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98. The Third District Court of Appeal disagreed and affirmed the trial court’s judgment in favor of the subcontractor.

Impact
This is the second time the Third District Court of Appeal has held that Liberty Mutual (discussed below) was wrongly decided and held that the Right to Repair Act is the exclusive remedy for construction defect claims. The decision follows its holding in Elliott Homes, Inc. v. Superior Court (Hicks) (2016) 6 Cal.App.5th 333, in which the Court of Appeal held that the Right to Repair Act’s pre-litigation procedures apply when homeowners plead construction defect claims based on common law causes of action, as opposed to violations of the building standards set forth in the Right to Repair Act. Elliott is currently on hold at the California Supreme Court, pending the decision in McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132, wherein Liberty Mutual was rejected for the first time by the Fifth District. CGDRB continues to follow developments regarding the much anticipated McMillin decision closely, as well as all related matters.

Reprinted courtesy of Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and Chelsea L. Zwart, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com


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The California Legislature Passes SB 496 Limiting Design Professional Defense and Indemnity Obligations

Tuesday, November 21, 2017 — Mark Himmelstein & Jenny Guzman – Newmeyer & Dillion LLP

Originally published by CDJ on June 15, 2017

Since 2008 when the California legislature limited subcontractor indemnity obligations, the design professional community has been shouting “what about us?” Well, the legislature finally responded and a new law that limits design professional’s defense and indemnity obligations to their percentage of fault goes into effect on January 1, 2018.

THE NEW LAW – SB 496
SB 496 amends California Civil Code section 2782.8 and states that indemnity agreements must be limited to the negligence, recklessness or willful misconduct of the indemnitee (i.e. no more Type I indemnity with design professionals). The amendment also provides that “in no event shall the cost to defend charged to the design professional exceed the design professional’s proportionate percentage of fault”, with a limited opportunity for reallocation in the event another defendant is judgment proof.
However, the duty to defend still remains and still arises at the time of the tender of the defense (both issues that were unsuccessfully targeted by the design professional lobbyists).

Reprinted courtesy of Mark Himmelstein, Newmeyer & Dillion LLP and Jenny Guzman, Newmeyer & Dillion LLP
Mr. Price may be contacted at mark.himmelstein@ndlf.com
Ms. Zucker may be contacted at jenny.guzman@ndlf.com


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Growth to Remain Modest in 2018

November 15, 2017 — Alisa Zevin & Tim Grogan – Engineering News-Record

A dip in public works combined with a substantial decrease in utility work, weak industrial markets and slower-than-anticipated growth in residential construction all put a damper on general construction growth in 2017. The consensus among economic forecasts analyzed by ENR indicates a very modest rebound in growth in 2018.

Reprinted courtesy of Alisa Zevin, ENR and Tim Grogan, ENR
Ms. Zevin may be contacted at zevina@enr.com

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House Passes Bill to Renew Flood Insurance Program

November 15, 2017 — Associated Press – Engineering News-Record

WASHINGTON (AP) — The House on Tuesday backed legislation that will increase flood insurance premiums for many property owners to help firm up a program under stress from ever-more frequent and powerful storms.

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

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Home Depot Says Slashing Tax Deductions Won't Hurt Housing Boom

November 15, 2017 — Matthew Townsend - Bloomberg

Home Depot Inc. isn’t buying the real estate industry’s claims that a provision in the House Republicans’ tax plan to reduce the mortgage-interest deduction would cause U.S. home prices to plummet.

“We don’t see much of an impact,” Home Depot Chief Financial Officer Carol Tome said in an interview Tuesday after the retailer reported third-quarter results. “There is no real empirical evidence that suggests mortgage-interest deductibility is at all correlated to home ownership.”

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HalfMoon Seminar: 2015 International Residential Code

November 15, 2017 — Beverley BevenFlorez – CDJ Staff

This one-day seminar presented by HalfMoon Education Services, will cover the following topics: Developing and Enforecement of Internation Residential Code, Building Planning and Shell Construction (Chapters 2-10), Energy Efficiency (Chapter 11), and Mechanical, Fuel, Plumbing and Electrical Systems. The seminar will be taught by Jared Agee, MCP, CBO, Director of Building and Code Enforcement for St. Charles County, Missouri.

December 20th, 2017
Holiday Inn Forest Park
5915 Wilson Avenue
St Louis, MO 63110

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Colorado’s New Construction Defect Law Takes Effect in September: What You Need to Know

Tuesday, November 21, 2017 — Jesse Witt - The Witt Law Firm

Originally published by CDJ on September 7, 2017

Colorado’s new construction defect law officially takes effect this month. Although HB 17-1279 was passed in May, the statutory text provides that it only applies “with respect to events and circumstances occurring on or after September 1, 2017.” With that date now upon us, practitioners should be mindful of the law’s new requirements.

The law applies to any lawsuit wherein a homeowner association files a construction defect action on behalf of two or more of its members. “Construction defect action” is defined broadly to include any claims against construction professionals relating to deficiencies in design or construction of real property. Before an association may commence such an action, its board must follow several steps.

First, the board must deliver notice of the potential construction defect action to all homeowners and the affected construction professionals at their last known addresses. This requirement does not apply to construction professionals identified after the notice has been mailed, or to construction professionals joined in a previously-approved lawsuit. The notice must include a description of the alleged construction defects with reasonable specificity, the relief sought, a good-faith estimate of the benefits and risks involved, and a list of mandatory disclosures concerning assessments, attorney fees, and the marketability of units affected by construction defects. The notice must also call a meeting of all homeowners. The notice should be sent to the construction professionals at least five days before the homeowners.

Reprinted courtesy of Jesse Howard Witt, Acerbic Witt
Mr. Witt may be contacted at www.witt.law

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Property Damage, Occurrences, Delays, Offsets and Fees. California Decision is a Smorgasbord of Construction Insurance Issues

Tuesday, November 21, 2017 — Garret Murai - California Construction Law Blog

Originally published by CDJ on November 15, 2017

I read once that 97 percent of cases never go to trial. However, there are still the ones that do. And, then, there are the ones that do both. The following case, Global Modular, Inc. v. Kadena Pacific, Inc., California Court of Appeals for the Fourth District, Case No. E063551 (September 8, 2017), highlights some of the issues that can arise when portions of cases settle and other portions go to trial, the recovery of delay damages on a construction project through insurance, and the recovery of attorneys’ fees.

Global Modular, Inc. v. Kadena Pacific, Inc.

The U.S. Department of Veterans Affairs contracted with general contractor Kadena Pacific, Inc. (Kadena) to oversee construction of its Center for Blind Rehabilitation in Menlo Park, California. Kadena, in turn, contracted with subcontractor Global Modular, Inc. (Global) to construct, deliver and install 53 modular units totaling more than 37,000 square feet for a contract price of approximately $3.5 million.

Reprinted courtesy of Garret Murai, Wendel Rosen Black & Dean LLP

Mr. Murai may be contacted at gmurai@wendel.com

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The 2017 ASCDC and CDCMA Construction Defect Seminar and Holiday Reception

Tuesday, November 21, 2017 — Beverley BevenFlorez-CDJ STAFF

The annual Construction Defect Seminar and Holiday Reception presented jointly by the Association of Southern California Defense Counsel (ASCDC) and the Construction Defect Claims Managers Association (CDCMA) takes place this November 30th at the Hilton Costa Mesa. This one-day seminar includes two sessions: Session 1, Recent developments in Insurance Coverage and Related Impacts on Case Resolution; Session 2, Impact of Design Claims in Construction Defect Actions. A holiday reception will immediately follow the seminar.

The keynote speaker this year is Hon. Charles Margines, Presiding Judge of the Orange Superior Court. Other speakers include David Napper, Esq., of Chapman Glucksman Dean Roeb & Barger, Adrienne Cohen, Esq., Law Offices of Adrienne D. Cohen, Blenda Eyvazzadeh, Chub North American Claims, and many others. This activity has been approved for Minimum Continuing Legal Education Credit by the State Bar of California in the amount of 3.0 hours.

November 30th, 2017
Hilton Costa Mesa
3050 Bristol Street
Costa Mesa, California 92626
United States

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

Tuesday, November 21, 2017 — Kirsten Lee Price & Lawrence S. Zucker II - Haight Brown & Bonesteel LLP

Originally published by CDJ on February 16, 2017

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, 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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Arizona Supreme Court Confirms a Prevailing Homeowner Can Recover Fees on Implied Warranty Claims

Tuesday, November 21, 2017 — Rick Erickson - Snell & Wilmer Real Estate Litigation Blog

Originally published by CDJ on August 30, 2017

On August 9th, in Sirrah Enterprises, L.L.C. v. Wunderlich, the Arizona Supreme Court settled the question about recovery of attorneys’ fees after prevailing on implied warranty claims against a residential contractor. The simple answer is, yes, a homeowner who prevails on the merits can recover the fees they spent to prove that shoddy construction breached the implied warranty of workmanship and habitability. Why? Because, as Justice Timmer articulated, “[t]he implied warranty is a contract term.” Although implied, the warranty is legally part of the written agreement in which “a residential builder warrants that its work is performed in a workmanlike manner and that the structure is habitable.”

In other words, a claim based on the implied warranty not only arises out of the contract, the claim is actually based on a contract term. Since, in A.R.S. § 12-341.01, Arizona law provides for prevailing parties to recover their fees on claims “arising out of contract” and because the implied warranty is now viewed by the courts as a contract term, homeowners can recover their fees after successfully proving breach of the implied warranty.

Reprinted courtesy of Rick Erickson, Snell & Wilmer

Mr Erickson may be contacted at rerickson@swlaw.com

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$24 Million Verdict Against Material Supplier Overturned Where Plaintiff Failed to Prove Supplier’s Negligence or Breach of Contract Caused an SB800 Violation

Tuesday, November 21, 2017 — Jon A. Turigliatto, Esq. & Chelsea L. Zwart, Esq. – Chapman Glucksman Dean Roeb & Barger Bulletin

Originally published by CDJ on March 16, 2017

Acqua Vista Homeowners Assoc. v. MWL Inc. (2017) 2017 WL 371379
COURT OF APPEAL EXTENDS GREYSTONE HOMES, INC. v. MIDTEC, INC., HOLDING THAT CIVIL CODE §936 CREATES A NEGLIGENCE STANDARD FOR CLAIMS AGAINST MATERIAL SUPPLIERS BROUGHT UNDER SB800.

The Fourth District California Court of Appeal recently published its decision Acqua Vista Homeowners Assoc. v. MWI, Inc. (2017) 2017 WL 371379, holding that claims against a material supplier under SB800 (Civil Code §895 and §936) require proof that the SB800 violation was caused by the supplier's negligence or breach of contract.

Civil Code §936 states in relevant part, that it applies "to general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract .... [T]he negligence standard in this section does not apply to any general contractor, subcontractor, material supplier, individual product manufacturer, or design professional with respect to claims for which strict liability would apply."

Reprinted courtesy of Jon A. Turigliatto, Esq., Chapman Glucksman Dean Roeb & Barger and Chelsea L. Zwart, Esq., Chapman Glucksman Dean Roeb & Barger
Mr. Turigliatto may be contacted at jturigliatto@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com


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Northern California Wildfires: Interview with Santa Rosa Fire Chief and Captains

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Travelers’ 3rd Circ. Win Curbs Insurers’ Asbestos Exposure

Tuesday, November 21, 2017 — Gregory D. Podolak - Saxe Doernberger & Vita, P.C.

Originally published by CDJ on May 3, 2017

In breaking news this week, LAW360.com posted that the Third Circuit ruled Friday that “a common exclusion found in a Travelers policy bars coverage for claims arising out of asbestos in any form, limiting insurers’ potential exposure to asbestos injury claims by precluding policyholders from arguing that the exclusionary language is ambiguous and doesn’t extend to products containing the carcinogen.”

In its detailed analysis of the decision, LAW360 turned to Greg Podolak for his analysis.

Gregory D. Podolak, managing partner of Saxe Doernberger & Vita PC’s Southeast office, said the ruling is a cautionary tale that should galvanize policyholders and their insurance brokers to take a closer look at policies to delete or curtail broad “arising out of” language in exclusions. Otherwise, insureds could find themselves without any coverage for claims even remotely related to a certain product, he said.

Reprinted courtesy of Gregory D. Podolak, Saxe Doernberger & Vita, P.C.

Mr. Podolak may be contacted at gdp@sdvlaw.com

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2017 Legislative Changes Affecting the Construction Industry

Tuesday, November 21, 2017 — Melinda S. Gentile – Peckar & Abramson, P.C.

Originally published by CDJ on July 13, 2017

The 2017 Florida Legislative Session recently concluded, and a number of important construction-related House Bills (HB) and Senate Bills (SB) were presented during the Session, most notably SB 204/HB 377. These Bills may impact General Contractors and Construction Managers in a number of ways, not the least of which is the period of time that a cause of action may be initiated for the design, planning or construction of an improvement.

The following construction-related Bills passed in both the House and Senate and will become law if approved by the Governor.

Senate Bill (SB) 204/House Bill (HB) 377: Relating to the Statute of Repose for causes of action based on design, planning or construction of an improvement to real property. This bill passed both the House and the Senate and was approved by the Governor on June 14, 2017. This bill becomes effective on July 1, 2017.

Reprinted courtesy of Melinda S. Gentile, Peckar & Abramson, P.C.

Ms. Gentile may be contacted at mgentile@pecklaw.com

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California Supreme Court Finds that When it Comes to Intentional Interference Claims, Public Works Projects are Just Different, Special Even

Tuesday, November 21, 2017 — Garret Murai - California Construction Law Blog

Originally published by CDJ on April 20, 2017

Earlier, we reported on a California Court of Appeals decision – Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. – which held for the first time that a second-place bidder on a public works contract could sue a winning bidder who failed to pay its workers prevailing wages, under the business tort of intentional interference with prospective economic advantage.

Fast forward nearly two years, several amicus briefs, and “one doghouse”* later and the California Supreme Court has . . . reversed.

The Roy Allan Slurry Seal Case

To catch you up, or rather, refresh your recollection . . .

Between 2009 and 2012, American Asphalt South, Inc. was awarded 23 public works contracts totaling more than $14.6 million throughout Los Angeles, Orange, San Bernardino and San Diego counties. Two of the losing bidders on those projects – Roy Allan Slurry Seal, Inc. and Doug Martin Contracting, Inc. – sued American in each of these counties for intentional interference with prospective economic advantage as well as under the Unfair Practices Act (“UPA”) (Bus. & Prof. Code §§ 17000 et seq.) and the Unfair Competition Law (“UCL”) (Bus. & Prof. Code §17200).

Reprinted courtesy of Garret Murai, Wendel Rosen Black & Dean LLP

Mr. Murai may be contacted at gmurai@wendel.com

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Oregon Supreme Court Confirms Broad Duty to Defend

Tuesday, November 21, 2017 — Theresa A. Guertin - Saxe Doernberger & Vita, P.C. Blog

Originally published by CDJ on January 13, 2017

The Supreme Court of Oregon issued a decision at the end of last year which perfectly illustrates the lengths to which a court may go to grant a contractor’s claim for defense from its insurer in a construction defect suit. In West Hills Development Co. v. Chartis Claims, Inc.,1 the Court held that a subcontractor’s insurer had a duty to defend a general contractor as an additional insured because the allegations of a homeowner’s association’s complaint could be interpreted to fall within the ambit of coverage provided under the policy—despite the fact that the policy only provided ongoing operations coverage, and despite the fact that the subcontractor was never mentioned in the complaint. The decision is favorable to policyholders but also provides an important lesson: that contractors may avoid additional insured disputes if those contractors have solid contractual insurance requirements for both ongoing and completed operations risks.

Reprinted courtesy of Theresa A. Guertin, Saxe Doernberger & Vita, P.C.

Ms. Guertin may be contacted at tag@sdvlaw.com

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