Construction Defect News You May Have Missed

Appellate Court Endorses Discretionary Test for Vicarious Disqualification of Law Firms Due To New Attorney’s Conflict

February 7, 2018
David W. Evans and Stephen M. Tye – Publications & Insights

In California Self-Insurer’s Security Fund et al. v. The Superior Court of Orange County (1/26/2018 – No. G054981), the Fourth Appellate District considered whether vicarious disqualification of a law firm is mandatory or discretionary where an attorney with a conflict joins a firm and the firm enacts an ethical screen to prevent transmission of confidential information between the new attorney and the rest of the firm.

This case arose from an effort by the California Self-Insurer’s Security Fund (the “Fund”) to be reimbursed for workers’ compensation benefits advanced on behalf of the Healthcare Industry Self-Insurance Program (the “Program”). The Fund hired Nixon Peabody LLP (“Nixon Peabody”) to represent it in connection with this matter. In November 2013, represented by members of Nixon Peabody’s San Francisco office, the Fund filed a lawsuit naming 304 members of the Program as defendants. Approximately 170 defendants have since settled.

Two of the non-settling defendants (“Moving Parties”), were represented by Michelman & Robinson, LLP (“M&R”). From approximately 2009 until February 1, 2017, attorney Andrew Selesnick served as Chair of M&R’s Health Care Department at the firm’s Los Angeles office, managing a team of attorneys who represented clients in the healthcare industry. Commencing in 2014, a team of four attorneys at M&R, including Selesnick, represented the Moving Parties and four other defendants, the latter of whom have since settled. Selesnick was actively involved, including participating in a confidential discussion pertaining to Moving Parties’ liability and damages and receiving many e-mails containing communications about the common defense of the remaining 170 defendants.

Reprinted courtesy of David W. Evans, Haight Brown Bonesteel and Stephen M. Tye, Haight Brown Bonesteel
Mr. Evans may be contacted at devans@hbblaw.com

Mr. Tye may be contacted at stye@hbblaw.com


The Indemnification Limitation in Section 725.06 does not apply to Utility Horizontal-Type Projects

February 7, 2018
David Adelstein - Florida Construction Legal Updates

One of the most important provisions in construction contracts is the indemnification provision. Appreciating contractual indemnification obligations are critical and certainly should not be overlooked. Ever!

Florida Statute s. 725.06 (written about here and here) contains a limitation on contractual indemnification provisions for personal injury or property damage in construction contracts. There should always be an indemnification provision in a construction contract that addresses property damage or personal injury. Always!

Section 725.06 pertains to agreements in connection with “any construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance, including moving and excavating associated therewith…” If the contract requires the indemnitor (party giving the indemnification) to indemnify the indemnitee (party receiving the indemnification) for the indemnitee’s own negligence, the indemnification provision is unenforceable unless it contains a “monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any.” It is important to read the statute when preparing and dealing with a contractual indemnification provision.

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


Lessons Learned from Implementing Infrastructure BIM in Helsinki

February 7, 2018
Aarni Heiskanen – AEC Business Blog

Finland’s capital is currently experiencing a construction boom. Old industrial citadels are turning into residential areas with new commercial centers. Consequently, Helsinki needs to build new infrastructure. To improve the efficiency and quality of infrastructure construction, the city has started using BIM, and is now learning how to get the most value from it.

Ville Alajoki, Team Leader in Helsinki’s Urban Development Division, is a keen proponent of BIM. “Infrastructure construction is still in its early stages when it comes to using BIM. For the most part, BIM implementation has not been systematic in our city yet. We tend to use it in our own structural design and often in building construction. However, in infrastructure project management, its active individuals who have set the pace,” Ville admits. He believes that the city’s strategy for 2017–2021 will spur the use of new technologies, including BIM. “Helsinki aims to be the city in the world that makes the best use of digitalization,” Mayor Jan Vapaavuori has declared.

A good start, but there’s room for improvement.

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


Productivity Gains Found in New BLS Data

February 7, 2018
Alisa Zevin – ENR

After decades of reports about stagnant or slipping construction productivity, a new U.S. Bureau of Labor Statistics study, “Measuring Productivity Growth in Construction,” shows gains in several construction sectors. Many economists say the study uses more reliable productivity measures than those used before.

Ms. Zevin may be contacted at zevina@enr.com


Don’t Get Caught Holding the Bag: Hold the State Liable When General Contractor Fails to Pay on a Public Project.

January 31, 2018
Sean Minahan – Construction Contract Advisor

According to a quick Google search the term “holding the bag” comes from the mid eighteenth century and means be left with the onus of what was originally another’s responsibility. Nobody wants to be left holding the bag. But that is the situation our client (subcontractor) found themselves in when upon completion of a public project the general contractor went out of business before paying the remaining amount due and owing to our client.

Under Nebraska law, liens are not allowed against public projects. Instead the subcontractor is to make a claim on the payment and performance bond secured by the general contractor at the start of the project. In our case, the general contractor never secured a bond on which to make a claim; consequently, leaving our client holding the bag.

Mr. Minahan may be contacted at sminahan@ldmlaw.com


You Are Your Brother’s Keeper. Direct Contractors in California Now Responsible for Wage Obligations of Subcontractors

January 31, 2018
Garret Murai – California Construction Law Blog

If there’s one law from the 2017 Legislative Session that’s garnered a lot of attention in the construction press, it’s AB 1701. Under AB 1701, beginning January 1, 2018, for contracts entered into on or after January 1, 2018, direct contractors may be found liable for unpaid wages, fringe or other benefit payments or contributions, including interest, but excluding penalties or liquidated damages, owed by a subcontractor of any tier to their workers. Here’s what you need to know about AB 1701.

What code section did AB 1701 amend?

AB 1701 added a a new section 218.7 to the Labor Code.

To whom does AB 1701 apply?

AB 1701 applies to direct contractors only. A direct contractor is defined as a “contractor that has a direct contractual relationship with an owner.”

On what types of projects does AB 1701 apply?

AB 1701 applies to private works projects only.

When does AB 1701 take effect?

AB 1701 took effect on January 1, 2018 and applies to all contracts entered into on or after January 1, 2018.

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


Contractor Faces Charges in 2016 Trench-Collapse Death

January 31, 2018
Tim Newcomb - ENR

For the first time in Washington state history, an employer faces felony charges for a workplace fatality.

Harold Felton, 36, died in a January 2016 trench collapse at a West Seattle residential sewer-line project. Phillip Numrich, 40, then-owner of Alki Construction, now faces second-degree manslaughter charges, filed on Jan. 5 by the King County Prosecuting Attorney’s Office.


Beware of Personal-Liability Clauses – Even When Signing in Your Representative Capacity

January 31, 2018
David R. Cook Jr. – Autry, Hall & Cook, LLP

When a contract is drafted by a party, the other party expects some level of one-sidedness in favor of the drafter. But there are times when a contract goes too far. There are certain provisions that most persons in the construction industry would find unacceptable, unfair, and beyond the pale – even for a one-sided contract. Such a provision was arguably found in an electrical subcontract at issue in a 2014 opinion by a three-judge panel of the Georgia Court of Appeals. Unfortunately, due to long-standing Georgia law, the panel was forced to apply the provision as written.

In the case, a contractor hired a subcontractor to perform the electrical scope of work. When the subcontractor failed to pay a sub-subcontractor, the sub-subcontractor filed suit against the subcontractor, contractor, and the payment-bond surety. The contractor asserted a claim of indemnity against the subcontractor based on the sub-subcontractor’s claim.

Mr. Cook may be contacted at cook@ahclaw.com


Disputed Facts on Cause of Collapse Results in Denied Cross-Motions for Summary Judgment

January 31, 2018
Tred R. Eyerly – Insurance Law Hawaii

Although the court concluded that the policy covered a loss caused by the weight of snow, disputed facts as to the cause of the collapse led to the denial of cross-motions for summary judgment. Freeway Drive Inv., LLC v Employers Mut. Cas. Co., 2017 U.S Dist. LEXIS 207165 (E.D Mich. Dec. 18, 2017).

Freeway Drive owned a single story commercial building insured by Employers Mutual Casualty Company (EMCC). The building sustained damage when trusses within the roof shifted and dropped, causing visible sagging. EMCC denied Freeway Drive's claim.

Freeway Drive hired structural engineer Abdul Brinjikji to inspect the damage. He visited the building three times. On the first visit, he saw snow on the roof but could not estimate how much. Nevertheless, he opined that the collapse was caused by an overload of snow. He developed a plan to shore up the roof and repairs commenced.

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


This Rare Bear Who Called the Crash Warns Housing Is Too Hot Again

January 31, 2018
Prashant Gopal – Bloomberg

When real estate investors get this confident, money manager James Stack gets nervous.

U.S. home prices are surging to new records. Homebuilder stocks last year outperformed all other groups. And bears? They’re now an endangered species.

Stack, 66, who manages $1.3 billion for people with a high net worth, predicted the housing crash in 2005, just before prices reached their peak. Now, from his perch in Whitefish, Montana, he says his “Housing Bubble Bellwether Barometer” of homebuilder and mortgage company stocks, which jumped 80 percent in the past year, once again is flashing red.


Quick Note: Notice of Contest of Claim Against Payment Bond

January 31, 2018
David Adelstein - Florida Construction Legal Updates

On private jobs where the general contractor has an unconditional payment bond, subcontractors, sub-subcontractors and suppliers need to serve a notice of nonpayment to preserve payment bond rights.

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


Insurer Must Pay To Defend Product Defect Claims From Date Of Product Installation

January 31, 2018
Michael S. Levine & Brittany M. Davidson - Insurance Recovery Blog

An Iowa federal court recently ruled that an insurer must pay its policyholder’s defense costs from the date of installation of the allegedly faulty product, even though the underlying suits failed to allege when damage purportedly occurred. The ruling opens the door under each of the policyholder’s successive liability policies from 2000 to 2008, allowing the policyholder to recover millions of dollars in defense costs.

The policyholder sought summary judgment concerning the date(s) on which the insurer’s defense obligation was triggered by fourteen of the fifteen claims asserted against it. The policyholder argued that the duty attached from the moment property damage potentially occurred, meaning the time when the underlying claimant installed or potentially could have installed the windows at issue in the underlying claims. The policyholder cited to the following evidence to support its claim: actual dates of installation (where available), dates of delivery, purchase or manufacture of the windows; and policy period referenced in the insurer’s claims notes as being potentially implicated by the claim.

Reprinted courtesy of Michael S. Levine, Hunton & Williams and Brittany M. Davidson, Hunton & Williams

Mr. Levine may be contacted at mlevine@hunton.com

Ms. Davidson may be contacted at davidsonb@hunton.com


Keith Bremer will be speaking at the Association of Southern California Defense Counsel, 57th Annual Seminar

January 31, 2018
Bremer Whyte Brown & O’Meara LLP

“Keith G. Bremer will be attending the 57th annual Association of Southern California Defense Counsel Conference/Seminar. This year’s event is set to take place on February 8-9, 2018, at the Los Angeles Convention Center.

Keith G. Bremer will be a featured speaker on February 8, addressing the issue of “How to Win at Mediation”. Keith will be joined on the dais by panel members: Eric Traut (Plaintiff's counsel perspective); Peter Searle (renowned mediator); as well as Honorable Teresa Sanchez Gordon, Retired; and the Honorable Helen Bendix.”

Thursday, February 8th, 2018
1:30pm - 3:00pm
JW Marriott LA Live
Los Angeles, California
900 W Olympic Blvd, Los Angeles, CA 90015


Retainage on Pennsylvania Public Contracts

January 31, 2018
Wally Zimolong - Supplemental Conditions

Ah yes, retainage, what could represent your profit on a project and something frequently abused by owners on private and public projects alike. Fortunately, Pennsylvania law offers public works contractors some protection from retainage abuse. The Public Prompt Payment Act dictates when retainage can be withheld and when it must be released. Agencies that fail to follow the Prompt Payment Act’s retainage rules can end up owing you interest, penalty, and attorney’s fees.


Just Because You Label It A “Trade Secret” Does Not Make It A “Trade Secret”

January 31, 2018
David Adelstein - Florida Construction Legal Updates

Everything is a “trade secret,” right? Nope. What if I mark it as a “trade secret” Still nope. But, you already knew those answers.

This is an especially important issue when dealing with public entities, as demonstrated by the recent opinion in Raiser-DC, LLC v. B&L Service, Inc., 43 Fla. L. Weekly D145a (Fla. 4th DCA 2018). In this case, Uber and Broward County entered into an agreement regarding Uber’s services at Fort Lauderdale airport and Port Everglades. Per the agreement, Uber furnished monthly reports relating to the number of pickups and drop-offs, as well as information relating to the fee associated with the pickups and drop-offs. Uber marked these reports as constituting trade secrets. It did so to preclude this information from being disclosed to the public.

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


Insureds Survive Broker's Motion to Dismiss

January 31, 2018
Tred R. Eyerly – Insurance Law Hawaii

The insureds survived their broker's motion to dismiss their claims for negligent procurement of insurance. Thanoukos v. Kita, 2017 Ill. App. Unpub. LEXIS 2684 (Ill Ct. App. Dec. 19, 2017).

The insureds purchased homeowners insurance through their broker. When they sustained water back-up damage in their home due to a sump pump failure after an electrical outage, their insurer, Allstate denied the claim. The policy excluded damage for floods and back up water due to sump pump failure.

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


Broker Not Negligent When Insured Rejects Additional Coverage

January 31, 2018
Tred R. Eyerly – Insurance Law Hawaii

The broker was not negligent when it proposed additional coverage that was rejected by the insured. Cromer v. Rosenzweig Ins. Agency Inc., 2017 N.Y. App Div. LEXIS 8969 (N.Y. App. Div. Dec. 21, 2017).

Plaintiff was injured while employed as a painter at property owned by Allen Skriloff. Coverage was denied because injuries to employees, contractors and employees of contractors were excluded. Plaintiff sued Skriloff and obtained a jury verdict of $6.1 million. Skirloff assigned to plaintiff all rights and claims held against the insurer and insurance brokers.


CA Supreme Court: Right to Repair Act (SB 800) is the Exclusive Remedy for Residential Construction Defect Claims – So Now What?

January 31, 2018
Steven M. Cvitanovic & Omar Parra - Publications & Insights

A torrent of alerts have been flooding e-mail inboxes regarding the California Supreme Court’s decision in McMillin v. Superior Court, to reverse the Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (2013) case, but with little discussion about the practical effects of the ruling. This alert will discuss how this ruling affects litigation of SB 800 Claims and Builders.

Background on Liberty Mutual Case

In 2002, the California Legislature enacted comprehensive construction defect litigation reform referred to as the Right to Repair Act (the “Act”). Among other things, the Act establishes standards for residential dwellings, and creates a prelitigation process that allows builders an opportunity to cure the construction defects before being sued. Since its enactment, however, the Act’s application has been up for debate. Most notably, in Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (2013), the California Court of Appeal for the Fourth District held the Act was the exclusive remedy only in instances where the defects caused only economic loss, and that homeowners could pursue other remedies in situations where the defects caused actual property damage or personal injuries.

Reprinted courtesy of Steve 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


Big Bertha Lawsuits—Hitachi Zosen Weighs In

January 31, 2018
John P. Ahlers – Ahlers Cressman & Sleight PLLC

In a recent article published by Seattle Business Magazine, the Japanese manufacturer of the much-maligned tunnel machine (nicknamed “Bertha”) provided its version of events and its position to the public. The interview took place after executives from Hitachi Zosen were not invited to the ceremony celebrating Bertha’s breakthrough at the end of its two-mile journey underground Seattle. Ultimately, apparently, Seattle Tunnel Partners (“STP”), the general contractor for the project, and Washington State Department of Transportation (“WSDOT”) agreed that Hitachi Zosen executives could attend the event, but they were not allowed to stand with other dignitaries on a specially-built viewing platform. The $3.2 billion Alaska Way Viaduct replacement project is embroiled in a number of legal controversies. Now that the tunnel is finished, Hitachi Zosen has finally decided to tell its side of the story.

Hitachi’s problems started on December 5, 2013, three days after the tunnel-boring machine (“TBM”) hit a 120-foot long, eight-inch diameter steel well casing (the project DRB has determined that the pipe was a differing site condition), the TBM overheated and ground to a halt. The project was shut down almost two years while the TBM was being repaired. According to Hitachi Zosen, it always worked hard to get the job done. “We wanted to finish the tunnel and make Seattle happy with the results,” said Hidetoshi Hirata, the general manager for Hitachi Zosen.

Mr. Ahlers may be contacted at john.ahlers@acslawyers.com


Burden of Proof Under All-Risk Property Insurance Policy

January 31, 2018
David Adelstein - Florida Construction Legal Updates

A recent Florida case, Jones v. Federated National Ins. Co., 43 Fla. L. Weekly D164a (Fla. 4th DCA 2018) discusses the burden of proof of an insured in establishing coverage under an all-risk property insurance policy. Getting right to this critical point, the court explained the burden of proof as follows:

1. The insured has the initial burden of proof to establish that the damage at issue occurred during a period in which the damaged property had insurance coverage. If the insured fails to meet this burden, judgment shall be entered in favor of the insurer.

2. If the insured’s initial burden is met, the burden of proof shifts to the insurer to establish that (a) there was a sole cause of the loss, or (b) in cases where there was more than one cause, there was an “efficient proximate cause” of the loss.

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



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