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CONSTRUCTION DEFECT NEWS

NEW CALIFORNIA "CONSTRUCTION" LEGISLATION

Thursday, November 8, 2018 — RICHARD H. GLUCKSMAN, ESQ. CHELSEA L. ZWART, ESQ.

Governor Jerry Brown signed two potentially impactful Senate Bills relating to the construction of apartment buildings late last month. These Bills, discussed further below, were introduced, in part, in response to the Berkeley balcony collapse in June 2015, which was determined by the California Contractors State License Board to be caused by the failure of severely rotted structural support joists the repair of which were deferred by the property manager, despite indications of water damage.

SENATE BILL 721 ESTABLISHES HEIGHTENED “LOAD-BEARING” INSPECTION REQUIREMENTS

On August 21, 2018, the California State Senate passed SB 721, one of two bills by Senator Jerry Hill introduced this year seeking to address the safety of multifamily rental residences. Now that the Governor has signed the Bill, a new section will be added to the California Health and Safety Code, requiring that every 6 years, destructive testing be performed on at least 15% of each type of load-bearing, wood framed exterior elevated element (such as balconies, walkways, and stair landings) in apartment buildings with 3 or more units. Interestingly, prior to being passed by the State Senate, SB 721 was revised in June 2018, such that the inspection requirements do not apply to common interest developments (i.e., condominiums).

As set forth in the new Health and Safety Code Section 17973:

"the purpose of the inspection is to determine that exterior elevated elements and their associated waterproofing elements are in a generally safe condition, adequate working order, and free from any hazardous condition caused by fungus, deterioration, decay, or improper alteration to the extent that the life, limb, health, property, safety, or welfare of the public or the occupants is not endangered."

The inspection must be paid for by the building owner and performed by a licensed contractor, architect, or civil or structural engineer, or a certified building inspector or building official from a recognized state, national, or international association. Emergency repairs identified by the inspector must be made immediately. For non-emergency repairs, a permit must be applied for within 120 days and the repair completed within 120 days of the permit’s issuance. If repairs are not completed within 180 days, civil penalties of $100-$500 per day may be imposed.

The required inspection must be completed by January 1, 2025 and every 6 years thereafter, unless an equivalent inspection was performed during the 3 years prior to January 1, 2019, the effective date of the new law. For a building converted to condominiums that will be sold after January 1, 2019, the inspection required by Health and Safety Code Section 17973, must be performed prior to the first close of escrow.

SENATE BILL 1465 SETS CONTRACTOR REPORTING REQUIREMENTS

The Governor also signed SB 1465, adding Sections 7071.20, 7071.21, and 7071.22 to the California Business and Professions Code. The new law requires that a contractor licensed with the Contractors’ State License Board "report to the registrar in writing within 90 days after the licensee has knowledge of any civil action resulting in a final judgment, executed settlement agreement, or final arbitration award in which the licensee is named as a defendant or crossdefendant, filed on or after January 1, 2019," that meets certain and specific criteria, including that it is over $1 million and arises out of an action for damages to a property or person allegedly caused by specified construction activities of the contractor on a multifamily rental residential structure.

Where more than one contractor was named as a defendant or cross-defendant, each of the contractors apportioned more than $15,000 in liability must report the action. Importantly, the new statute also imposes similar reporting requirements on insurers of contractors. SB 1465 also addresses an impacted party’s failure to comply with the reporting requirements.

COMMENT

Both SB 721 and SB 1465 are potentially significant and seek “legislative reform” to address construction issues by placing a greater burden on apartment owners as well as builders and subcontractors. How pragmatic and what impact they will have on the industry is obviously developing. If you are interested in receiving further detail concerning the Bills, please contact us. We are analyzing the new legislation and its intent and will be providing our ongoing comments.

Reprinted courtesy of RICHARD H. GLUCKSMAN, ESQ. CHELSEA L. ZWART, ESQ.

Chelsea L. Zwart may be contacted at czwart@cgdrblaw.com


Woman lying next to clock staring at it

When it is coming close to the ten-year statute of repose deadline, the safer approach is to file the lawsuit and move to stay or abate the lawsuit pending compliance with the Florida Statues Chapter 558.

Serving the 558 Notice of Construction Defect Letter in Light of the Statute of Repose

Tuesday, November 6, 2018 — David Adelstein - Florida Construction Legal Updates

Florida Statutes Chapter 558 requires a Notice of Construction Defect letter (“558 Notice”) to be served before a construction defect lawsuit is commenced. This is a statutory requirement unless contractually waived for a completed project when latent defects or post-completion construction or design defects are pursued.

A recent Florida case held that this statutory requirement is NOT intended to bar a lawsuit based on Florida’s ten-year statute of repose for construction defects IF the 558 Notice is timely served within the statute of repose period. After the expiration of the statute of repose period, a construction defect lawsuit can no longer be commenced.

Reprinted courtesy of David Adelstein, Kirwin Norris

Mr. Adelstein may be contacted at dma@kirwinnorris.com

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Tred R. Eyerly discusses Gemini Ins Co. v. Constrx Ltd.

Hawaii Federal District Court Rejects Insurer's Motion for Summary Judgment on Construction Defect Claims

Tuesday, November 6, 2018 — Tred R. Eyerly - Insurance Law Hawaii

Taking into consideration a "Revised Occurrence Endorsement," the federal district court determined the insurer had a duty to defend. Gemini Ins Co. v. Constrx Ltd., 2018 U.S. Dist. LEXIS 163453 (D. Haw. Sept. 24, 2018).

Constrx Ltd. (CRX) contracted with the AOAO to perform remedial construction repairs to condominium buildings and apartment units. CRX asserted that it completed all work, including charge orders and punch list items and it left the site. CRX was paid less that the contract amount and demanded arbitration against the AOAO. In the arbitration the AOAO relied upon a report by Posard Brock & Associates (PBA) Report which set forth the AOAO's claims against CRX, including corrective work, remaining punch list work, construction delay costs, cost overruns, and other items justifying its payment than less that the contract amount.

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

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

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Report Finds Construction Labor Shortage Impacts Jobsite Safety

November 6, 2018 — Donna Laquidara-Carr - Construction Executive

Safety has been a top concern in the construction industry for decades, but there are new challenges on jobsites whose safety implications need to be addressed. The most recent USG Corporation + U.S. Chamber of Commerce Commercial Construction Index, a quarterly report based on surveys of general and trade contractors conducted and analyzed by Dodge Data & Analytics, explores the degree to which several factors that now impact jobsites raise safety concerns among contractors. Findings show that factors such as skilled worker shortages, shorter construction schedules, greater project complexity, an aging workforce and the use of marijuana, alcohol and opioids all play a role.

Reprinted courtesy of Donna Laquidara-Carr, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

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Insurance Bad Faith And Consumer Protection Act Claims Against Individual Insurance Adjusters Deemed Valid

November 6, 2018 — Ceslie Blass - Ahlers Cressman & Sleight PLLC Blog

The Washington State Court of Appeals has further tipped the scales in favor of insureds in insurance bad faith and Consumer Protection Act (CPA) litigation. The Court of Appeals held in Keodalah v. Allstate Ins. Co.[1], that (1) RCW 48.01.030 imposes a duty of good faith on “all persons” engaged in the business of insurance, and (2) the CPA does not require a contractual relationship to exist between the parties in order for a claim to be valid. In other words, bad faith and CPA claims against an individual insurance adjuster will be viable.

Ms. Blass may be contacted at ceslie.blass@acslawyers.com

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U.S. Homebuilder Sentiment Unexpectedly Rises With Solid Demand

November 6, 2018 — Sarah Foster - Bloomberg

Confidence among U.S. homebuilders unexpectedly rose in October, registering the first gain in five months amid falling lumber prices and solid demand, according to a report Tuesday from the National Association of Home Builders/Wells Fargo.

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Negotiating Project Labor Agreements: Key Terms for Managing Costs, Limiting Risks

November 6, 2018 — Beverley BevenFlorez - CDJ STAFF

Attorney Wally Zimolong is the faculty for this one-day live, CLE webinar that provides construction practitioners with practical insight into drafting project labor agreements (PLAs). The panelist will discuss key contract provisions for owners, contractors and labor providers and best practices for avoiding pitfalls in their use in public and private construction projects, including what a municipality and a union can legally do through a PLA and what is not legal under a PLA.

Live Webinar
November 29th, 2018

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Postmodern art of clock in water

The amendment to the statute serves to lengthen the statute of repose to 11 years for certain cross-claims, compulsory counterclaims, and third-party claims, and in limited circumstances, potentially even longer.

Effects of Amendment to Florida's Statute of Repose on the Products Completed Operations Hazard

Tuesday, November 6, 2018 — Richard W. Brown & Grace V. Hebbel - Saxe Doernberger & Vita, P.C.

Recent amendments to Florida’s Statute of Repose have resulted in concerns as to the scope of risk Florida homebuilders face as a result, and the availability of insurance coverage for such exposures. Previously, the statute provided for a strict, yet straightforward 10-year limitation for latent construction defect claims. Under that language, issues arose when suits were filed near expiration of the statute, because parties seeking to defend claims were given little time to effectively assert related claims. The amendment to the statute serves to lengthen the statute of repose to 11 years for certain cross-claims, compulsory counterclaims, and third-party claims, and in limited circumstances, potentially even longer. Most policies in the Florida marketplace serve to limit coverage under the products-completed operations hazard (“PCO”) to 10 years, and thus, in very limited circumstances, an insured contractor may be exposed to third-party claims under the revised statute. It is important to note, however, that coverage under most CGL policies is occurrence-based, meaning that the policy is triggered by property damage that occurs during the policy period, and therefore, any subsequent claims permitted under the amended statute will necessarily relate to the original property damage that occurred during the 10-year period, and thus, would be covered under the standard 10-year PCO extension. This paper will analyze the anticipated effect of the amendments upon coverage under a 10-year PCO extension.

Reprinted courtesy of Richard W. Brown, Saxe Doernberger & Vita P.C. and Grace V. Hebbel, Saxe Doernberger & Vita P.C.
Mr. Brown may be contacted at rwb@sdvlaw.com
Ms. Hebbel may be contacted at gvh@sdvlaw.com


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Businessman and businesswoman back to back

Based on this ruling, an insurer is not necessarily required to defend a Florida contractor that received a Chapter 558 notice.

Insurers May Not Be Required to Defend Contractors In a Florida §558 Proceeding

Tuesday, November 6, 2018 — Erik Simpson - Gordon & Rees Construction Law Blog

In recent holding, the Florida Supreme Court held that an insurer may not have a duty to defend a contractor in a Florida §558 proceeding.

Chapter 558 of the Florida Statutes sets forth procedural requirements which must be met before a claimant may file a construction defect action. These requirements include serving a contractor, subcontractor or supplier with written notice of the claim. The contractor, in turn, must serve a written response to the notice of claim in which the contractor provides either an offer to repair the alleged construction defect at no cost to the claimant, resolution of the claim through a monetary payment, a statement disputing the claim, or a statement that any monetary payment will be determined by the recipient’s insurer. The claimant may file suit if the contractor disputes the claim and refuses to remedy the alleged defect or provide monetary compensation.

Reprinted courtesy of Erik Simpson, Gordon & Rees

Mr. Simpson may be contacted at esimpson@grsm.com

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Judge at court illustration

Christopher Kendrick and Valerie A. Moore analyze the case Thee Sombrero, Inc. v. Scottsdale Ins. Co.

Court Finds That Limitation on Conditional Use Permit Results in Covered Property Damage Due to Loss of Use

Tuesday, November 6, 2018 — Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLP

In Thee Sombrero, Inc. v. Scottsdale Ins. Co. (No. E067505, filed 10/25/18), a California appeals court held that a property owner’s loss of the ability to use his property as a nightclub, based on revocation of a city’s conditional use permit (“CUP”), constituted covered property damage.

In Sombrero, lessees operated a nightclub under the property owner’s conditional use permit from the City of Colton. A company hired to provide security negligently allowed admission to an armed patron, who shot and killed another patron. The City revoked the owner’s permit, and the owner was only able to negotiate the reinstatement of a limited permit, for use as a banquet hall only.

Reprinted courtesy of 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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Concerned coworkers discussing issue

For decades, the bad faith standard in Florida, known as the “totality of the circumstances” standard, was set forth in Boston Old Colonial Insurance Company v. Gutierrez.

Recent Bad Faith Decisions in Florida Raise Concerns

Tuesday, November 6, 2018 — Michael Kiernan, Lauren Curtis & Ashley Kellgren - TLSS Insurance Law Blog

The State of Florida has long been known as one of the most challenging jurisdictions for insurance carriers in the context of bad faith – to say the least. Two recent appellate decisions have taken an already difficult environment and seemingly “upped the ante” in what constitutes good faith claims handling in the context of third-party liability claims. Set forth below is an analysis of the Bannon v. Geico Gen. Ins. Co. and Harvey v. Geico Gen. Ins. Co. decisions.

Reprinted courtesy of Traub Lieberman Straus & Shrewsberry LLP attorneys Michael Kiernan, Lauren Curtis and Ashley Kellgren
Mr. Kiernan may be contacted at mkiernan@tlsslaw.com
Ms. Curtis may be contacted at lcurtis@tlsslaw.com
Ms. Kellgren may be contacted at akellgren@tlsslaw.com


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Eco house

The Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions report will highlight some of the environmental actions, to be proposed or finalized soon by these agencies.

Selected Environmental Actions Posted on the Fall 2018 Unified Agenda of Regulatory and Deregulator Actions

Tuesday, November 6, 2018 — Anthony B. Cavender - Gravel2Gavel

The Office of Information and Regulatory Affairs, housed in the Office of Management and Budget, has issued the Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions to be taken over the next several months by federal executive departments and agencies. This report will highlight some of the environmental actions, to be proposed or finalized soon by these agencies. Eventually, the Agenda will be published in the Federal Register.

1. Environmental Protection Agency (EPA)

EPA, of course, has listed by far the largest number of actions. For instance, EPA’s agenda lists 92 separate actions to be taken under its Clean Air Act (CAA) authority. As an example, EPA reports that it will issue a Notice of Proposed Rulemaking (NPRM) in May 2019 of its proposals to increase consistency and true transparency in considering the cost benefit of its proposed rules, and review the standards of performance for new, modified, and reconstructed sources of greenhouse gas emissions by means of an NPRM to be issued in November 2018.

Reprinted courtesy of Anthony B. Cavender, Pillsbury

Mr. Cavender may be contacted at anthony.cavender@pillsburylaw.com

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Costs and Benefits buttons figure scratching head

Value is typically determined by appraisals, but if the parties cannot agree, a judge or jury will determine the amount in a condemnation lawsuit.

Condemnation Actions: How Valuable Is Your Evidence of Property Value?

Tuesday, November 6, 2018 — Erica Stutman - Snell & Wilmer Real Estate Litigation Blog

When a government condemns (takes) private property for a public use, the property owner is entitled to receive “just compensation” equal to the property’s market value. Value is typically determined by appraisals, but if the parties cannot agree, a judge or jury will determine the amount in a condemnation lawsuit. The parties may seek to present various forms of evidence of value, though it will be admissible only if the evidence is relevant and its value is not substantially outweighed by the risk of causing unfair prejudice, confusion, undue delay or waste of time, does not mislead the jury, and is not needlessly cumulative. See, e.g., Fed. R. Evid. 403.

Reprinted courtesy of Erica Stutman, Snell & Wilmer

Ms. Stutman may be contacted at estutman@swlaw.com

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Legislature Capitol Building

Measure, approved 99-1, next goes to Trump for signature

Senate Overwhelmingly Passes Water Infrastructure Bill

Tuesday, November 6, 2018 — Tom Ichniowski – Engineering News-Record

Congress has approved major water infrastructure legislation that authorizes $3.7 billion for new Army Corps of Engineers civil-works projects and $4.4 billion for the Environmental Protection Agency drinking-water program.

Reprinted courtesy of Tom Ichniowski, ENR

Mr. Ichniowski may be contacted at ichniowskit@enr.com

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Post it notes on bulletin board

The issue, here, became more than just the unenforceable language but whether the entire arbitration clause should be deemed unenforceable.

Quick Note: Unenforceable Language in Arbitration Provision

Tuesday, November 6, 2018 — David Adelstein - Florida Construction Legal Updates

Although arbitration is a dispute resolution provision provided for in a contract, the scope of judicial review of an arbitrator’s award is still governed by law. There are limited circumstances in which an arbitrator’s award can be challenged under the law. One of those circumstances is not because a party believes that an arbitrator applied the incorrect law.

Reprinted courtesy of David Adelstein, Kirwin Norris

Mr. Adelstein may be contacted at dma@kirwinnorris.com

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Senior couple at hurricane site

Moody’s Analytics estimates total property damage from Florence at $17 billion to $22 billion, factoring in losses from homes, roads, crops, livestock, coal ash ponds and more.

Schools Remain Top Priority in Carolinas as Cleanup From Storms Continues

Tuesday, November 6, 2018 — Joanna Masterson - Construction Executive

A month after Hurricane Florence dumped more than 30 inches of rain on the Carolinas, Hurricane Michael delivered additional flash flooding, power outages and wind damage.

While the construction-related impact of Hurricane Michael is still being assessed (stay tuned for more on that front in the coming weeks), Moody’s Analytics estimates total property damage from Florence at $17 billion to $22 billion, factoring in losses from homes, roads, crops, livestock, coal ash ponds and more.

While it’s difficult to pinpoint which counties were hit the hardest, the majority of the damage was in the eastern coastal areas of North Carolina. According to Rob Beale, a vice president in W.M. Jordan’s Wilmington, North Carolina, office, Carteret and Onslow counties took the brunt of the storm, while Columbus and Brunswick counties experienced the biggest flooding impact.

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



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Construction worker on site

Unions handbill for any number of reasons, allegedly unfair wages. Frequently, handbilling occurs when a non-union construction company is working on a project.

Union Handbilling: When, Where, and Why it is Legal

Tuesday, November 6, 2018 — Wally Zimolong - Supplemental Conditions

A few days ago, IBEW Local 98 began began protesting a restaurant owned by professional football player Jahri Evans. The organizers are accusing Evans of violating local construction wage standards and are advertising their dispute with “handbills.”

What are handbills?

Walking down Fremont Street in Las Vegas is impossible without one or several characters putting a small business card with “questionable” adult entertainment advertisements in your hand. Some will slap papers to your chest, leaving you no choice but to grab the flyers.

On a different level, this action occurs on a regular basis by union member. But instead of shady characters pushing questionable entertainment, it is union representatives pushing a dispute with a local employer over working conditions. However, in either case the practice is known as i as handbilling.

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

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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