Breach of Contract Exclusion Bars Coverage for Construction Defect Claim

Contract in hand

Attorney Tred R. Eyerly analyzes Mt. Hawley Ins. Co. v. McAtamncy.

March 19, 2024
Tred R. Eyerly - Insurance Law Hawaii

The court determined the policy's breach of contract exclusion precluded coverage for a claim against the general contractor insured for construction defects. Mt. Hawley Ins. Co. v. McAtamncy, 2024 U.S. Dist. LEXIS 497 (N. D. Cal. Jan. 2, 2024).

McAtamney, a general contractor dong business as Kilrea Construction, was hired by Jeffrey Horowitz for a home-renovation project. After completion of the project, Horowitz discovered defects in the work. He filed a complaint alleging that Kilrea breached obligations to construct and complete the work in an expeditious and workmanlike manner, free from any faults and defects. He brought claims for breach of contract, breach of implied warranty, negligence, neglignet supervision, and declaratory relief.

Kilrea's insurer, Mt. Hawley, agreed to defend, but reserved the right to later deny coverage for any uncovered claims. The breach of contract exclusion provided there was no duty to defend a claim for property damage arising from breach of an express or implied contract or warranty.

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


Co-Founding Partner Jason Feld Named Finalist for CLM’s Outside Defense Counsel Professional of the Year

Word success ladder

Mr. Feld embodies the core values of Kahana Feld, as he has proven throughout his entire career of being Upstanding, Outstanding, and Understanding.

March 19, 2024
Linda Carter - Kahana Feld

Kahana Feld congratulates Co-Founding Partner Jason Daniel Feld, Esq., for being named one of three finalists for Claims & Litigation Management Alliance (CLM) Outside Defense Counsel Professional of the Year.

Mr. Feld is a nationwide leader in construction claims and an active industry speaker, serving as panel counsel for many prominent insurance carriers, and personal counsel to multiple national and regional homebuilders, developers, and general contractors.

Co-Founding Partner, Amir Kahana, states, “Jason is incredibly deserving of this recognition. When he joined our firm, we were 3 lawyers in one city, and seven years later, we are a national firm with over 65 attorneys in 10 cities and 6 states. Jason is a natural leader who is highly respected. He has earned the trust of his carrier clients, as well as his colleagues in the industry. In addition to everything he does for Kahana Feld, he also works tirelessly on behalf of CLM and has been a great leader in the Orange County Chapter. I am thrilled to see Jason receive the recognition he richly deserves.”

Ms. Carter may be contacted at lcarter@kahanafeld.com


Recent Florida Legislative Changes Shorten Both Statute of Limitation ("SOL") and Statute of Repose ("SOR") for Construction Defect Claims

Businesswoman next to clock

The SOL and SOR periods will commence earlier and run earlier, which in effect shortens the time to bring a construction defect claim on both ends of the timeline.

March 19, 2024
Holly A. Rice - Saxe Doernberger & Vita, P.C.

The Florida Legislature and Governor DeSantis passed Senate Bill 360, effective April 13, 2023, which imposes significant changes to Florida’s statute of limitation (“SOL”) and statute of repose (“SOR”) periods prescribed in Florida Statute § 95.11. In short, the SOL and SOR periods will commence earlier and run earlier, which in effect shortens the time to bring a construction defect claim on both ends of the timeline.1

These changes will have positive impacts for general contractors who may save on insurance premiums with shorter completed operations tails. In other words, the timeframe within which contractors are at risk of being sued for construction-related errors is significantly reduced under the new version of the statute. Owners and developers, on the other hand, may feel that the increased pressure of uncovered construction defects necessitates the filing of lawsuits sooner than they might have otherwise filed. Collectively, all parties involved will certainly have to consider when and how to place their carriers on notice of claims or potential claims and, coupled with Florida’s sweeping changes to fee shifting statutes, insured parties may see more coverage denials which, in turn, could lead to more coverage actions.2

Ms. Rice may be contacted at HRice@sdvlaw.com


COVID-19 Claims Survives Motion to Dismiss

March 19, 2024
Tred R. Eyerly - Insurance Law Hawaii

The Superior Court for the State of Washington denied the insurer's motion to dismiss the University of Washington's claim for property damage due to COVID-19. The Board of Regents of the University of Washington v. Employers Ins. Co. of Wausau, No. 22-2-15472-1 SEA (Amended Order Denying Defendant's CR 12 (B) (6) Motion to Dismiss, Jan. 4, 2024).

The parties disputed whether policies issued to University of Washington (UW) covered losses when the COVID-19 pandemic caused UW to close or limit access to its healthcare facilities and athletic facilities in 2020 and thereafter. The insurer argued that Washington courts and other state and federal courts rejected such claims because litigants such as UW could not demonstrate any "direct and physical loss or damage" to property. UW countered that its First Amended Complaint (FAC) alleged direct and physical loss and damage to property, with extensive citations to scientific studies to support its allegations.

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


Is Golf’s Next Paradise in the Middle of a Florida Swamp?

March 11, 2024
Michael Croley - Bloomberg

Florida is often considered an underwhelming place to play golf. Sure, it’s fun to wear shorts in February, but good golf terrain has movement, and bland, flat marsh doesn’t have the same cachet as wind-swept cliffs overlooking the Pacific. The Sunshine State stereotype is a course surrounded by retirement homes that looks as if it just rolled off the production line. The state has more than 1,200 courses, the most in the US, but just three on Golf Digest’s 100 Greatest Golf Courses list.

That’s a lot of mediocre links—and yet it isn’t enough. More courses opened in the US last year than any time in over a decade, according to the National Golf Foundation, and almost a third of them were in Florida. NGF says the state has 16 new course projects under construction or in planning, twice as many as any other state.


Is Modular Construction Destined to Fail?

Failure in ripped paper

The bankruptcy highlights the importance of strategic growth, deep knowledge of one’s core competencies, and the careful assessment of expansion into new areas.

March 11, 2024
Aarni Heiskanen - AEC Business

The construction sector is a harsh environment for innovation. I’ve been following the story of one Finnish innovative contractor, Lehto Group, over the years with enthusiasm. I was saddened to hear that the group’s three significant subsidiaries joined the ranks of many Finnish contractors who have filed for bankruptcy over the last six months.

Lehto developed industrialized building concepts and had its own production facilities. The company had a promising start but eventually ran into problems. Was the industrial approach a mistake, or were other factors contributing to the firm’s fall?

Three Contributing Factors
Lehto Group’s collapse was not a surprise to its competitors, who had observed warning signs years prior. The company’s order book plummeted in 2024 despite still employing around 500 workers. Rakennuslehti, the leading construction magazine in Finland, asked three experienced industry professionals to give their views on Lehto’s failure. The interviewees spoke anonymously due to the small size of the Finnish market and the sensitive nature of commenting on a competitor’s matters.

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


Recent Statutory Changes Cap Retainage on Applicable Construction Projects

Construction site

Understanding the current retainage laws in a client’s jurisdiction is critical to help prevent disputes before they begin.

March 11, 2024
Patrick McKnight - The Dispute Resolver

Recent reforms to certain state retainage laws have reduced the lawful amount of withholding permitted on construction projects. In theory, retainage allows an owner to mitigate the risk of incomplete or defective work by withholding a certain portion of payment until the construction project is substantially complete. Recent statutory developments in Washington, New York, and Georgia represent significant changes in how much an owner may retain on applicable construction projects in those jurisdictions. The details of each state’s retainage laws vary in many important respects. Most states set caps at 5% or 10%, with important variations depending on the type of project and the amount of progress completed. Some states require retainage to be held in an escrow account, but most do not. Many federal construction projects allow up to 10% retainage, while other federal agencies do not require any retention. See 48 CFR § 52.232-5(e) - Payments Under Fixed-Price Construction Contracts.

The ongoing motivation for retainage reform is typically framed in terms of reducing delays in getting payment to subcontractors who complete their scope of work on time and free from defects.

Mr. McKnight may be contacted at pmcknight@foxrothschild.com


Experts: Best Bet in $300M Osage Nation Wind Farm Dispute Is Negotiation

Construction cone bent in the wind

After federal judge ordered 84-turbine Oklahoma wind project's removal in mineral rights dispute with Osage Nation, attorneys said Enel Green Power North America must negotiate with tribe to avoid costly project outcome.

March 11, 2024
Daniel Tyson - Engineering News-Record

Nearly two months after a federal judge ruled that renewables developer Enel Green Power North America must deconstruct 84 land-based wind turbines because it did not secure mineral rights on Osage Nation land in northern Oklahoma, two energy sector attorneys say the unit of an Italy-based company must negotiate with the tribe.

Reprinted courtesy of Daniel Tyson, Engineering News-Record

Mr. Tyson may be contacted at tysond@enr.com

Read the full story...


Groundbreaking Women in Construction (GWIC) Seminar

March 11, 2024
Beverley BevenFlorez – CDJ Staff

The 21st annual GWIC conference “continues to foster knowledge, networking, and invaluable connections, showing the strong commitment to industry diversity and inclusion—and proudly maintaining its position as the premier conference for women in construction.” The event is comprised of keynotes, plenary sessions, breakout sessions, and networking opportunities. Attendees include professionals in AEC Leadership, Construction Management, Trades People, Construction Apprentices, Legal, and Financial Services.

May 5th-7th, 2024
Town & Country San Diego
500 Hotel Cir N
San Diego, CA 92108


Are Construction Contract Limitation of Liability Clauses on the Way Out in Virginia?

Question mark in maze

The Court held that the LOD provision was illegal under Virginia law and unenforceable.

March 11, 2024
Christopher G. Hill - Construction Law Musings

Remember BAE Systems and Fluor? This post is the third here at Construction Law Musings relating to this case which is a seemingly never-ending source for content. In the prior post discussing this case, the Court found that Va. Code 1-4.1:1 which bars waiver of a right to payment before work is performed did not apply because Fluor had provided work before execution of the contract or any change orders.

In the most recent opinion in this long-running litigation, and after a motion to reconsider by Fluor that was granted, the Court re-examined this finding along with the contractual language found in the Limitation of Damages (LOD) clause and came to the opposite conclusion regarding certain change orders that remained unpaid by BAE.

The Court first looked to the language of the contract itself and specifically the language in the LOD provision that states “Except as otherwise provided in this Subcontract.” The Court then looked at the change order provision and its typical equitable adjustment language and the mandatory nature of the equitable adjustment language. The Court found that the LOD provisions did not apply to change orders both because price increases due to change orders are not “damages” and because of the exception language in the LOD provision itself.

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


Navigating the New Landscape: How AB 12 and SB 567 Impact Landlords and Tenants in California

California flag on globe

The law won’t take effect until July 1, 2024, providing landlords time to make the necessary adjustments.

March 11, 2024
Sharon Oh-Kubisch - Kahana Feld

There are various changes in the Landlord-Tenant laws in CA that became effective in 2024.

For the purposes of this article, I wanted to focus on Assembly Bill (AB) 12 and Senate Bill (SB) 567 only.

Governor Gavin Newsom recently signed AB 12 into law, a legislation that limits the amount landlords can charge for security deposits to just one month’s rent for unfurnished apartments. While the law aims to make housing more accessible, it raises several concerns for landlords and tenants alike. AB 12, was authored by Assemblyman Matt Haney, D-San Francisco; it passed both the Senate and the Assembly houses in September. The legislation introduces a notable shift from existing law, under which landlords can charge up to two months’ rent for an unfurnished unit and three months’ rent for a furnished one. This exception does not apply when the prospective tenant is a military service member, however.

Ms. Oh-Kubisch may be contacted at sokubisch@kahanafeld.com


It Pays to Review the ‘Review the Contract Documents’ Clause Before You Sign the Contract

Businessman signing document

A ‘review the contract documents’ provision can take different forms, with different implications.

March 11, 2024
Alan Winkler - ConsensusDocs

It is fairly common for a construction contract to include a provision requiring the contractor to perform some level of review of the plans and specifications and perhaps other contract documents as part of their responsibilities. Typically, this provision is found in a section of the contract on the contractor’s responsibilities, although it can be anywhere. Owners and contractors are, with reason, focused on three main issues in reviewing contracts: (1) price, costs, and payments, (2) time and scheduling, and (3) scope of the work. Eyes may glaze over the contractor’s responsibilities section. Not only does it seem to be boilerplate, but industry professionals know what a contractor is supposed to do; in a nutshell, build the project.

An old school type of contractor may regard this role as strictly following the plans and specifications, no matter what they provide. That could lead to a situation where construction comes to a complete stop because, for example, two elements are totally incompatible with each other. If that happens, the contractor would then turn to the owner and architect to ask for a corrective plan and instructions on how to proceed. That may also be accompanied by a request for more time and money while the problem is resolved. The ‘review the contract documents’ clause is designed to avoid this. It is intended to address an understanding that everyone makes mistakes, even architects and engineers whose job it is to design a buildable, functional project. The clause also addresses the understanding that a contractor is more than a rote implementer of plans and specifications because its expertise in building necessarily means the contractor has expertise in understanding the documents that define the construction and how things are put together.

Mr. Winkler may be contacted at awinkler@pecklaw.com


Partner John Toohey is Nominated for West Coast Casualty’s Jerrold S. Oliver Award of Excellence!

Gold star on sand

Every year, West Coast Casualty recognizes an individual who is committed, trustworthy, and has contributed years to the betterment of the construction defect community.

March 11, 2024
Dolores Montoya - Bremer Whyte Brown & O'Meara LLP

Bremer Whyte Brown & O’Meara, LLP is honored to share that Newport Beach Partner John Toohey is nominated for West Coast Casualty’s 2024 Jerrold S. Oliver Award of Excellence!

Every year, West Coast Casualty recognizes an individual who is committed, trustworthy, and has contributed years to the betterment of the construction defect community. The award is named after the late Judge Jerrold S. Oliver who is considered a “founding father” in the alternate resolution process in construction claims and litigation. Each year, members of the construction community are asked to nominate individuals who invoke the same spirit as Judge Oliver.


Challenging Enforceability of Liquidated Damages (In Federal Construction Context)

Gavel illustration

A discussion regarding a contractor’s challenge to the government’s assessment of liquidated damages, specifically the enforceability of the liquidated damages rate.

March 11, 2024
David Adelstein - Florida Construction Legal Updates

A recent summary judgment opinion from the Armed Services Board of Contract Appeals (ASBCA), Appeals Of – BCI Construction USA, Inc.,ASBCA No. 6257, 2024 WL 773324 (2024), contains a worthy discussion regarding a contractor’s challenge to the government’s assessment of liquidated damages, specifically the enforceability of the liquidated damages rate. Although this challenge is in the federal context, this discussion would be more expansive and apply outside of the federal context.

When dealing with the enforceability of a liquidated damages, the ASBCA “examines whether the liquidated damages amount ‘is extravagant, or disproportionate to the amount of property loss, as to show that compensation was not the object aimed at or as to imply fraud, mistake, circumvention or oppression.” Appeals of – BCI Construction USA, Inc. (citation omitted).

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


Can a National Zoning Atlas Chart a Way Out of the US Housing Crisis?

March 11, 2024
Kriston Capps - Bloomberg

Two years ago, a Montana think tank called the Frontier Institute released a new tool to help push the group’s advocacy for pro-housing reforms: a zoning atlas, one of the first of its kind. The atlas used parcel-level data to analyze local regulations that restrict how and where homes can be built, an issue for a state with skyrocketing housing costs. The study revealed that more than 70% of residential areas in Montana’s most in-demand communities prohibited the construction of even modest duplex homes, much less apartment buildings.


Construction Litigation Roundup: “Ursinus is Cleared!”

Credit loan mortgage signpost

In ruling in favor of the University and against the union, the Pennsylvania high court refused to rule on purely policy grounds and endeavored to fairly strictly construe the statute.

March 11, 2024
Daniel Lund III - Lexology

Ursinus University in Pennsylvania – a “private, nonprofit liberal arts college” – funded a construction project for a new building utilizing monies loaned by the Montgomery County Health and Higher Education Authority, a public economic development authority “formed by the Board of County Commissioners… authorized to issue bonds relative to projects for eligible educational institution such as Ursinus.”

Loans up to the amount of $23,000,000 became available to the University, and construction proceeded using the loans as construction funds. At issue: whether a project was to be considered publicly funded project such that prevailing wage rates were required to be paid. IBEW filed a related grievance with the Pennsylvania Department of Labor and Industry’s Bureau of Labor Law Compliance, which was refused by the Bureau, on the basis that because work was “financed completely by loans from the Authority, which Ursinus was required to repay in their entirety, the Project was ultimately funded through private sources and exempt from coverage under the [Pennsylvania Prevailing Wage Act].” A grievance to the Prevailing Wage Appeals Board ensued, and the Board took a different position.

Mr. Lund may be contacted at daniel.lund@phelps.com


Surfside Condo Collapse Investigators Have Nearly Finished Technical Work

Three businessmembers looking at plans

The team from the U.S. Dept. of Commerce’s NIST investigating the collapse shared an update on their progress during a National Construction Safety Team Advisory Committee meeting March 7.

March 11, 2024
James Leggate - Engineering News-Record

Newly analyzed evidence in the investigation into the June 2021 partial collapse of Champlain Towers South that killed 98 people in Surfside, Fla., shows that the pool deck collapsed more than four minutes before the tower itself. But investigators are still working to determine the initiating event, and aim to finish their technical work this summer.

Reprinted courtesy of James Leggate, Engineering News-Record

Mr. Leggate may be contacted at leggatej@enr.com

Read the full story...


Insurer's Declaratory Relief Action on Duty to Indemnify Dismissed

March 11, 2024
Tred R. Eyerly - Insurance Law Hawaii

The court granted the insured's motion to dismiss the insurer's action for a declaratory judgment on the issue of indemnity when the underlying action was still ongoing. Utica Mut. Ins. Co. v. Crystal Curtain Wall Sys. Corp., NYLJ LEXIS 3255 (N.Y. Sup. Ct. Dec. 1, 2023).

Crystal was a subcontractor to design and install window and curtain systems as well as terrace doors and a glass parapet in the construction of two mixed use residential and commercial buildings. After unit owners took possession, a significant rainstorm allowed water infiltration, causing property damage in the building including moldy conditions. The owners sued, asserting claims against Crystal for the cost of repair or replacement of the allegedly defective curtain wall, damage to personal property, diminution in value of the units, and delay damages consisting of increasing interest and carrying costs that allegedly resulted from delays in completion of the construction work.

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


Former NYC Condo Empire Executive Arrested for Larceny, Tax Fraud

Person in handcuffs

Nir Meir was managing director of New York condo developer HFZ.

March 11, 2024
Ava Benny-Morrison - Bloomberg

A former New York executive facing lawsuits over the collapse of real estate empire HFZ Capital Group has been arrested in Miami, charged with grand larceny and tax fraud.

Nir Meir, 48, was arrested Monday, a spokesperson for the Miami-Dade Police Department confirmed. Meir was detained on an out-of-state warrant, suggesting his arrest may be the result of an investigation by law enforcement in New York.

A spokesperson for the Manhattan District Attorney’s Office didn’t immediately respond to a request for comment. Meir’s attorney also didn’t immediately respond to an email.

Meir, the former managing principal of HFZ Capital Group, has been battling multiple lawsuits in New York over his involvement in the once-prominent real estate firm. He’s denied wrongdoing.


New Jersey Strengthens the Structural Integrity of Its Residential Builds

Businesswoman showing arm strength

The legislation requires structural engineering inspections of any primary load-bearing system.

March 11, 2024
Matthew D. Stockwell - Gravel2Gavel Construction & Real Estate Law Blog

In response to the June 2021 Champlain Towers collapse in Florida, New Jersey supplemented its State Uniform Construction Code Act by enacting legislation (effective January 8, 2024) to strengthen laws related to the structural integrity of certain residential structures in the State. The legislation applies to condominiums and cooperatives (but not single-family dwellings or primarily rental buildings) with structural components made of steel, reinforced concrete, heavy timber or a combination of such materials. The legislation also supplements the Planned Real Estate Development Full Disclosure Act to ensure that associations created under the Act maintain adequate reserve funds for certain repairs.

The legislation requires structural engineering inspections of any primary load-bearing system (structural components applying force to the building which deliver force to the ground including any connected balconies). Buildings that are constructed after the date the legislation was signed must have their first inspection within 15 years after receiving a Certificate of Occupancy. Buildings that are 15 years or older must be inspected within two years of the legislation. Thereafter, the structural inspector will determine when the next inspection should take place, which will be no more than 10 years after the preceding inspection, except for buildings more than 20 years old which must be inspected every five years. Also, if damage to the primary load-bearing system is otherwise observable, an inspection must be performed within 60 days.

Mr. Stockwell may be contacted at matthew.stockwell@pillsburylaw.com



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