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CONSTRUCTION DEFECT NEWS

OSHA Updates: You May Be Affected

Wednesday, July 19, 2017 — Louis “Dutch” Schotemeyer – Newmeyer & Dillion LLP

Governor Brown Signs Legislation Increasing Cal/OSHA Fines

Cal/OSHA has increased its maximum fines for the first time in more than twenty years pursuant to legislation recently signed into law by Governor Brown. The changes nearly double the maximum fines and have brought California in line with the Federal standard. The increase in fines will not be isolated to this year, as fines will now be automatically increased annually based on the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U). Additionally, any employer who repeatedly violates any occupational safety or health standard, order, or special order, or Section 25910 of the Health and Safety Code, can no longer receive any adjustment of a penalty assessed based on the good faith or the history of previous violations. Such adjustments were previously commonplace.

    Specific increases are listed below (all increases refer to maximum fines, Cal/OSHA has discretion as to the amount of the fine when issuing the citation):
  • Section 6427 of the Labor Code was amended to increase fines, not of a serious nature, from $7,000 for each violation to $12,471 for each violation.
  • Section 6429 of the Labor Code has increased fines for repeat violations; raising the maximum fine from $70,000 to $124,709 for each violation. Additionally, Section 6429 also raised the minimum fine for repeat violations from $5,000 to $8,908.
  • Section 6431 raised fines for posting or recordkeeping violations from $7,000 to $12,471 per violation.

Full text of the penalty section of the labor code may be found here

California OSHA Emergency Action Plan elements revised; California now more consistent with Federal Standards

Revisions to General Safety Orders section 3220(b) became effective on June 5, 2017 and contain two minor changes for California employers with regards to Emergency Action Plans (EAP).

The first change requires that an employer’s EAP be more detailed in describing the type of evacuation that is to be performed, not just the route for an evacuation. The previous element of the EAP simply required that the plan contain, “[e]mergency escape procedures and emergency escape route assignments.” The current element of the EAP requires that, “[p]rocedures for emergency evacuation, including type of evacuation and exit route assignments,” be identified.

The second change clarifies the language surrounding employees performing rescue or medical duties. Previously the only requirement in the EAP regarding rescue and medical duties was for employees that performed rescue and medical duties. The current version requires that the EAP contain, “[p]rocedures to be followed by employees performing rescue or medical duties. The use of the word and created potential gaps in plans as it is likely that employees may not be performing both rescue and medical duties, instead performing just rescue or medical duties. Plans must now include procedures to be followed by employees who perform either rescue or medical duties.

It is recommended that your EAP be in writing and updated to comply with the revised General Safety Orders section 3220. The full text of General Safety Orders section 3320 can be seen here. Please contact us if you would like further details regarding your Emergency Action Plan.

Deadline for Electronic Submission of OSHA 300 Log Records for Injuries and Illnesses Delayed

On May 12, 2016, the Federal Occupational Safety and Health Administration (OSHA) published a rule entitled “Improve Tracking of Workplace Injuries and Illnesses” which required certain employers subject to Federal OSHA regulations to submit the information from their completed 2016 Form 300A to OSHA via electronic submission no later than July 1, 2017. On June 28, 2017, OSHA, via a Notice of Proposed Rule Making, has proposed a December 1, 2017 deadline for the electronic reporting; the electronic reporting system is scheduled to be available on August 1, 2017.

Per the California Department of Industrial Relations, California employers are not required to follow the new requirements and will not be required to do so until "substantially similar" regulations go through formal rulemaking, which would culminate in adoption by the Director of the Department of Industrial Relations and approval by the Office of Administrative Law.

Cal/OSHA drafted a proposed rulemaking package to conform to the revised federal OSHA regulations by amending the California Code of Regulations, title 8, sections 14300.35, 14300.36, and 14300.41; these are currently under review with the State.

It is currently unclear what, if any, impact the delay by OSHA will have on the proposed amendments to the California Code.

We will keep you posted as to the changes in California recordkeeping requirements. Please contact Louis “Dutch” Schotemeyer with any questions regarding Cal OSHA or your safety program. Dutch is located at Newmeyer & Dillion’s Newport Beach office and can be reached at dutch.schotemeyer@ndlf.com or by calling 949.271.7208.

About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit www.ndlf.com.



Deadly Fire in Older Hawaii High-Rise Causes Sprinkler Law Discussion

Wednesday, July 19, 2017 — David Suggs – Bert L. Howe & Associates, Inc.

Last Friday, at least three people died and twelve were injured during a fire at a Honolulu high-rise that did not have sprinklers, according to CBS News. The fire began on the 26th floor and spread to at least the 28th floor and several units, the Honolulu Fire Department spokesman, Captain David Jenkins, stated.

“Without a doubt if there were sprinklers in this apartment, the fire would be contained to the unit of origin,” Captain Jenkins concluded, as reported by CBS News.

The Marco Polo development “was built four years before Honolulu required fire sprinkler systems in new residential high-rises,” the LA Times reported. “In 2005, the Honolulu City Council created a task force to estimate the cost of retrofitting and installing fire sprinkler systems in about 300 residential condominium buildings. A report estimated that retrofitting the Marco Polo would cost $4,305.55 for each unit.” A separate report estimated the cost would be $4.5 million to retrofit the entire building.

According to Samuel Dannway, chief fire protection engineer for Coffman Engineers in Honoloulu, stated that the owners “lobbied strongly against any retrofitting” due to cost.

Retrofitting sprinklers is more challenging in residential high-rises than office buildings, Glenn Corbett, associate professor of fire science at John Jay College of Criminal Justice in New York told the LA Times. “Wall after wall, you have to penetrate with piping, and that means moving people around in apartments,” Corbett said. “They can’t live there while workers are drilling holes in their walls.”

Mayor Kirk Caldwell stated that Honolulu “needs to look at passing a new law requiring sprinklers in older high-rises.”

Read the full story, CBS News...
Read the full story, LA Times...



Scary Movie: Theatre Developer Axed By Court of Appeal In Prevailing Wage Determination Challenge

Wednesday, July 19, 2017 — Steven M. Cvitanovic & Omar Parra - Haight Brown & Bonesteel LLP

The First Appellate District of the California Court of Appeal recently held that the construction of a movie theater, which was performed in furtherance of a city’s redevelopment agenda, constitutes a “public work” within the meaning of California’s prevailing wage law. Cinema West, LLC v. Christine Baker, No. A144265, (Cal. Ct. App. June 30, 2017).

Like many California cities, the City of Hesperia (the “City”) endeavored to revitalize its downtown. In furtherance of this goal, the City acquired vacant property in its downtown with the hope of turning it into a new city hall, a public library, and “complimentary retail, restaurant, and entertainment establishments.” After completing construction of the civic buildings, the City entered into discussions with Cinema West, LLC (“Cinema West”) for the construction of a “state-of-the-art cinema experience.”

Under the agreement with the City, Cinema West agreed to purchase the property from the City at fair market value, obtain financing for the construction costs, and build and maintain the movie theater. The City, on the other hand, agreed to provide Cinema West with an interest-bearing loan forgivable over ten years, and to construct an adjacent parking lot “for use by Cinema West... as a parking lot for the movie theater.” The City, moreover, agreed to issue Cinema West a one-time payment as consideration for the operating covenant.

Reprinted courtesy of Steven M. Cvitanovic, Haight Brown & Bonesteel LLP and Omar Parra, Haight Brown & Bonesteel LLP
Mr. Cvitanovic may be contacted at scvitanovic@hbblaw.com
Mr. Parra may be contacted at oparra@hbblaw.com


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Veteran Contractor Is A City Change Agent

July 19, 2017 — Jim Parsons - Engineering News-Record

Complex projects that require a healthy measure of innovation and problem-solving skills are the norm for New York City’s construction management firms. But applying an entrepreneurial approach to tackle those challenges is what Ken Colao, founding principal and president of CNY Group, believes sets his firm apart.

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

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Additional Insured Not Covered When Injury Not Proximately Caused by Insured

July 19, 2017 — Tred R. Eyerly - Insurance Law Hawaii

The New York Court of Appeals construed an additional insured endorsement as applying only to injury proximately caused by the named insured. Burlington Ins. Co. v. NYC Transit Auth., 2017 N.Y. LEXIS 1404 (N.Y. Ct. App. June 6, 2017).

Breaking Solutions, Inc. (BSI) contracted with the New York City Transit Authority (NYCTA) to provide equipment and personnel for BSI's tunnel excavation on a New York City subway construction project. BSI purchased commercial general liability insurance from Burlington with an endorsement that listed NYCTA and New York City as additional insureds.

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

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U.S. Housing Starts at Four-Month High Give Boost at Quarter-End

July 19, 2017 — Michelle Jamrisko - Bloomberg

Residential construction ended the second quarter on a stronger note as groundbreaking on new homes rebounded in June to the fastest annualized pace in four months, Commerce Department data showed Wednesday.

    Highlights from Housing Starts (June)
  • Residential starts increased 8.3 percent to a 1.22 million annualized rate (est. 1.16 million)
  • Starts for May were revised to 1.12 million from 1.09 million
  • Permits, a proxy for future construction, climbed 7.4 percent to a 1.25 million annualized rate
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Perrin: National Construction Defect Conference

July 19, 2017 — Beverley BevenFlorez-CDJ STAFF

Perrin Conferences presents a National Construction Defect Conference in Fort Lauderdale this November. The conference will open with a Networking Cocktail Reception on Wednesday, November 15th, followed by a full conference day (including a Networking Cocktail Reception) on Thursday, November 16th. The last day of the conference, Friday, November 17th, will be a half day.

November 15-17, 2017
The Ritz-Carlton, Fort Lauderdale
One North Fort Lauderdale Beach Boulevard
Fort Lauderdale, FL 33304

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Pennsylvania Supreme Court Rules that Insurance Salesman had No Fiduciary Duty to Policyholders

Wednesday, July 19, 2017 — Austin D. Moody - Saxe Doernberger & Vita, P.C.

On June 20, 2017, the Pennsylvania Supreme Court ruled that a life insurance salesman had no fiduciary duty to his customers where the customers retained decision-making authority regarding which policies to purchase. In Yenchi v. Ameriprise Fin., Inc., the Court returned a 4-2 verdict, overturning the lower court’s finding that it was possible that a fiduciary relationship existed between the parties.

The suit arose from a series of transactions between Eugene and Ruth Yenchi and Bryan Holland, a financial advisor for IDS Life Insurance Corporation.

The relationship began when Holland cold-called the Yenchis and asked to meet with them regarding their “financial stuff.” For a fee of $350, Holland met with the Yenchis on several occasions and counseled them regarding their insurance needs. On Holland’s advice, the Yenchis cashed out several existing polices and purchased a whole-life policy for Mr. Yenchi and a deferred variable annuity in Mrs. Yenchi’s name.

Reprinted courtesy of Austin D. Moody, Saxe Doernberger & Vita, P.C.

Mr. Moody may be contacted at adm@sdvlaw.com

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Loss Ensuing from Alleged Faulty Workmanship is Covered

Wednesday, July 19, 2017 — Tred R. Eyerly - Insurance Law Hawaii

The federal district court found that under Montana law, water damage resulting from alleged faulty workmanship in repairing the insured's roof was covered. Leep v. Trinity Universal Ins Co., 2017 U.S. Dist. LEXIS 86759 (D. Mont. June 6, 2017).

The insured's property was damaged in a hail storm. The insured contracted with Sprauge to repair the hail damage. Sprauge tore off and replaced roof lining and shingles. Sprague replaced a vent cap and tubes, but did not replace any vent piping or vents. The contract between the insured and Sprauge provided it was the owners' responsibility to check the exhaust vents for all furnaces and water heaters after the roofing project was completed.

Subsequent to the repairs, water was found dripping from a bathroom fan. Moisture was also found on the second story emanating from the ceiling. Finally, in the attic, the furnace vent piping was disconnected and the furnace exhaust was venting into the attic.

Reprinted courtesy of Tred R. Eyerly - Insurance Law Hawaii

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

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Ambiguity in Insurance Policy will be Interpreted in Favor of Insurance Coverage

Wednesday, July 19, 2017 — David Adelstein - Florida Construction Legal Updates

An ambiguity in an insurance policy–after reading and interpreting the policy as a whole–will be construed against an insurer. This means an ambiguity will be construed in favor of insurance coverage (for the benefit of the insured) as opposed to against insurance coverage. This does not mean that every insurance policy contains an ambiguity. This also does not mean a court will interpret plain and ordinary words contrary to their conventional meaning or definition. But, as we all know, insurance policies are not the easiest of documents to decipher and ambiguities do exist relating to a particular issue or circumstance to the benefit of an insured. An insured that is dealing with specific insurance coverage issues should make sure they are working with counsel that looks to maximize insurance coverage, even if that means exploring ambiguities that will benefit an insured based on a particular issue or circumstance.

An example of an ambiguity in an insurance policy relating to a particular issue that benefitted an insured can be found in the Florida Supreme Court decision of Government Employees Insurance Co. v. Macedo, 42 Fla. L. Weekly S731a (Fla. 2017). This case involved an automobile accident and the interpretation of an automobile liability policy.

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

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

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The A, B and C’s of Contracting and Self-Performing Work Under California’s Contractor’s License Law

Wednesday, July 19, 2017 — Garret Murai - California Construction Law Blog
    The California Contractors State License Board issues licenses in three general classifications:
  1. Class A – General Engineering Contractors;
  2. Class B – General Building Contractors; and
  3. Class C – Specialty Contractors of which there are currently 42 different Class C specialty contractors license types.

Each of these license classifications has separate contracting rules, and rules regarding when work can be self-performed, which for many can be confusing.

Minor Work Exception

One important (albeit “minor”) exception is that no contractor’s license is required no matter what type of work is being performed if the project has a value of less than $500. Known as the “minor work exception,” the exception is a project-based, not work-based, exception. Thus, for example, if a project owner is remodeling their kitchen at a cost of $6,000 and the cost of doing the flooring is only $300, the person doing the flooring would need to have a contractor’s license in the appropriate classification since the aggregate cost of the work is $500 or more.

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

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

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Texas Legislative Update

Wednesday, July 19, 2017 — Matthew S.C. Moore & Justin (JD) D. Holzeauser – Peckar & Abramson, P.C.

The marquee fight between Lt. Governor Patrick and Speaker Straus, otherwise known as the 85th Regular Legislative Session, concluded on May 29, 2017. While the political clash over the controversial “bathroom bill” will continue during the special legislative session, this article is intended to provide a brief summary of the construction-related bills that passed during the regular session and a few notable ones that did not pass. A special session has been called by Governor Abbott, but no construction-related bills were included on the agenda.

What Passed?

HB 2121 – Attorney’s fees for state breach of contract claims. A contractor who prevails on a state breach of contract claim pursuant to Chapter 2260 of the Government Code, that is also valued at less than $250,000.00, may recover attorney’s fees. By using the word “may”, the bill implies that the award of attorney’s fees will be at the discretion of the administrative law judge. This bill became law on June 15, 2017.

HB 1463 – Right to cure ADA violations. A person with a disability may assert a claim for discrimination based on a violation of the building and architectural standards established in Chapter 469 of the Government Code. However, this bill requires the claimant to provide the respondent written notice at least sixty (60) days before filing an action for the violation and further gives the respondent an opportunity to cure the alleged violation within the sixty (60) day period. The obvious benefit of this bill is that it allows the respondent, e.g., the owner or potentially the contractor, an opportunity to remediate the violation without incurring litigation costs. This bill becomes effective law on September 1, 2017.

Reprinted courtesy of Matthew S.C. Moore, Peckar & Abramson, P.C. and Justin (JD) D. Holzeauser, Peckar & Abramson, P.C.
Mr. Moore may be contacted at mmoore@pecklaw.com
Mr. Holzheauser may be contacted at jdholzheauser@pecklaw.com


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Affirmed: Nationwide Acted in Bad Faith by Failing to Settle Within Limits

Wednesday, July 19, 2017 — Bethany Barrese – Saxe Doernberger & Vita, P.C.

The Eleventh Circuit recently affirmed that Nationwide acted in bad faith by refusing to settle a claim against its insured for the policy limits, exposing the policyholder to an excess verdict.1

The case arose out of a 2005 automobile accident where Seung Park, who was insured by Nationwide, struck and killed another driver, Stacey Camacho. Shortly after the accident, Ms. Camacho’s estate issued a time-limited demand for the full limits of the policy Nationwide issued to Mr. Park, $100,000, to settle the case. After the deadline to respond to the demand expired, Nationwide rejected the demand and made a counteroffer. A settlement could not be reached and a wrongful death suit was filed against Mr. Park, resulting in a massive jury verdict of $5.83 million.

Following the jury verdict, Mr. Park assigned his rights against Nationwide to Ms. Camacho’s estate, which then filed claims for negligence and bad faith failure to settle against Nationwide. The case was tried to a jury, which found in favor of the estate.

Reprinted courtesy of Bethany Barrese, Saxe Doernberger & Vita, P.C.

Ms. Barrese may be contacted at blb@sdvlaw.com

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Flash Flood in AZ Storm Causes Nine Deaths, One Missing

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Ambiguous Application Questions Preclude Summary Judgment on Rescission Claim

Wednesday, July 19, 2017 — Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLP

In Duarte v. Pacific Specialty Ins. (No. A143828; filed 6/12/17, ord. pub. 6/29/17) a California appeals court held that an insurer was not entitled to summary judgment on its rescission claim because the disputed questions in the insurance application were ambiguous.

In Duarte, the insured/owner purchased a tenant-occupied property in Oakland. Several years later the tenant’s daughter moved in, and continued living there after the tenant died. The insured/owner served the daughter with an eviction notice and shortly thereafter applied for Owners, Landlords & Tenants (“OLT”) liability coverage. The tenant/daughter responded to the eviction notice by filing a habitability lawsuit, claiming emotional distress and physical injury, among other things.

The insurer denied coverage and a defense, drawing a bad faith lawsuit for failure to defend and “wrongful cancellation” of the policy. The insurer answered and raised rescission as an affirmative defense, based on alleged fraud and misrepresentation in the OLT policy application.

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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Home Buyer May Be Third Party Beneficiary of Property Policy

Wednesday, July 19, 2017 — Tred R. Eyerly - Insurance Law Hawaii

The Oklahoma Supreme Court reversed the trial court's grant of summary judgment to the insurer, finding that the purchaser may have third party beneficiary rights under the seller's property policy. Hensley v. State Farm Fire & Cas. Co., 2017 Okla. LEXIS 59 (June 20, 2017).

In May 2000, Hensley sold his property and a mobile home located thereon to Douglas using a contract for deed. The contract for deed required Douglas to keep the premises insured, and the monthly payments made by Douglas to Hensley included the premiums. Hensley had a policy with State Farm on the property. Hensley continued to make the premium payments and the policy continued to be renewed. Further, State Farm was informed of the change in the property's status.

Reprinted courtesy of Tred R. Eyerly - Insurance Law Hawaii

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

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Terminating the Notice of Commencement (with a Notice of Termination)

Wednesday, July 19, 2017 — David Adelstein - Florida Construction Legal Updates

The notice of commencement is important for purposes of construction lien priority. Stock Bldg. Supply of Florida, Inc. v. Soares Da Costa Const. Services, LLC, 76 So.3d 313, 317 (Fla. 3d DCA 2011) (“[A] notice of commencement serves to determine the priority of liens under the Construction Lien Law.”). A lien relates back in time to the date the notice of commencement was recorded assuming the notice of commencement is still in effect when the lien is recorded (or an amended noticed of commencement is recorded). Lien priority is very important and the reason why a contractor should always want to ensure there is an effective notice of commencement in place rather than an expired notice of commencement.

For the same reasons why a contractor wants to ensure there is an effective notice of commencement, there are times an owner wants to terminate a notice of commencement. An owner may want to terminate the potential priority of a construction lien. For instance, say the owner is refinancing or obtaining a construction loan in the midst of construction. A lender will want to ensure its mortgage maintains first priority and certainly priority over a potential construction lien. Otherwise, why would a lender finance the construction if it does not maintain first priority. It generally will not. Thus, an owner needs to terminate the notice of commencement so that the closing occurs on the loan and the mortgage recorded before a new notice of commencement is recorded and construction continues.

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

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

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Augmenting BIM Classifications – Interview with Eveliina Vesalainen of Granlund

Wednesday, July 19, 2017 — Aarni Heiskanen - AEC Business

BuildingSMART Finland is supplementing building information modeling (BIM) guidelines in a national standardization project, as a part of the KIRA-digi program. In her Master’s thesis, Eveliina Vesalainen, of Granlund, has compared European BIM classifications for mechanical, electrical, and plumbing (MEP) design. Her study is the groundwork for the upcoming Finnish norms.

“I’m a 26-year-old, soon to be Master of Science, and I come from Mäntsälä. I live in Helsinki and work at Granlund, a leading Finnish MEP consultancy,” Eveliina explains. She has a bachelor’s degree in environmental engineering, but became interested in MEP by chance.

Reprinted courtesy of Aarni Heiskanen, AEC Business

Mr. Heiskanen may be contacted at info@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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