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Mr. Porter is a principal in The Porter Law Group, Inc. in Sacramento, California.

Challenging and Defending a California Public Works Stop Payment Notice: Affidavit vs. Counter-Affidavit Process

Monday, October 21, 2019 — William L. Porter - Porter Law Group

One of the most effective collection procedures available to subcontractors and suppliers to California Construction projects is the “stop payment notice” procedure found under California Civil Code sections 9350 – 9364. Under this procedure, the unpaid subcontractor or supplier may serve the stop payment notice on the public entity and the direct or “prime” contractor and cause the public entity to withhold from the direct contractor 125% of the funds identified in the stop payment notice. Thereafter, funds will not generally be released unless the parties reach a settlement agreement or the issue is decided through litigation, arbitration or mediation. There is however an alternative procedure available to direct contractors to expedite the determination of whether a stop payment notice is valid and to possibly obtain an early release of the funds withheld by the public entity. This “summary proceeding” process could result in release of funds to the direct contractor in less than 30 days. The summary proceeding can also be challenged by the unpaid subcontractor or supplier. All public works contractors, subcontractors and suppliers should be aware of the process. The process for direct contractors to release a stop payment notice and for subcontractors and suppliers to challenge the process works as follows:

After a California stop payment notice has been served and the public entity has withheld funds accordingly, the direct contractor may challenge the stop payment notice by serving an “affidavit” (basically a sworn statement showing why the stop notice is not valid) on the public entity, demanding that the public entity release all funds withheld. Upon receipt of such an affidavit, the public entity will serve the subcontractor or supplier who served the stop payment notice with a copy of the affidavit, along with a “demand for release of funds”. If the stop payment notice claimant does not respond with a “counter-affidavit” by the date stated on the notice sent by the public entity (“not less than 10 days nor more than 20 days after service on the claimant of a copy of the affidavit”), then the public entity will be within its rights to release the withheld funds to the direct contractor, and the stop payment notice claimant will relinquish its stop payment notice rights.

Reprinted courtesy of William L. Porter, Porter Law Group

Mr. Porter may be contacted at bporter@porterlaw.com

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Martial artist kicking in air

Garret Murai covers the case Precision Framing Systems, Inc. v. Luzuriaga.

California Subcontractor Gets a Kick in the Rear (or Perhaps the Front) for Prematurely Recorded Mechanics Lien

Monday, October 21, 2019 — Garret Murai - California Construction Law Blog

California provides three statutorily recognized construction payment remedies: (1) mechanics liens; (2) stop payment notices; and (3) payment bond claims. Each is intended to provide payment protections for those who furnish labor, materials and services on a construction project. However, each is also different in important ways.

One of those differences has to do with timing. Specifically, when the statutory payment remedy may be used by a claimant. Stop payment notices can be served at any time during a project even before a claimant has completed its work. However, mechanics liens may only be recorded and payment bond claims may only be made after a claimant has completed or ceased performing its work.

In Precision Framing Systems, Inc. v. Luzuriaga, Case No. E069158 (August 29, 2019), the 4th District Court of Appeal examined whether a subcontractor had prematurely recorded a mechanics lien and, thereby, was prevented from filing a lawsuit to foreclose on its mechanics lien.

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

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

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Courthouse

Gus Sara analyzes the case Rural Mut. Ins. Co. v. Lester Bldgs., LLC.

Wisconsin Supreme Court Holds that Subrogation Waiver Does Not Violate Statute Prohibiting Limitation on Tort Liability in Construction Contracts

Monday, October 21, 2019 — Gus Sara - The Subrogation Strategist

In Rural Mut. Ins. Co. v. Lester Bldgs., LLC 2019 WI 70, 2019 Wisc. LEXIS 272, the Supreme Court of Wisconsin considered whether a subrogation waiver clause in a construction contract between the defendant and the plaintiff’s insured violated Wisconsin statute § 895.447, which prohibits limitations of tort liability in construction contracts. The Supreme Court affirmed the lower court’s decision that the waiver clause did not violate the statute because it merely shifted the responsibility for the payment of damages to the defendant’s insurance company. The waiver clause did not limit or eliminate the defendant’s tort liability. This case establishes that while
§ 895.447 prohibits construction contracts from limiting tort liability, a subrogation waiver clause that merely shifts responsibility for the payment of damages from a tortfeasor to an insurer does not violate the statute and, thus, is enforceable.

In Rural Mutual, the plaintiff’s insured, Jim Herman, Inc. (Herman), entered into a contract with Lester Buildings, LLC (Lester) to design and construct a barn on Herman’s property. The contract included a provision that stated the following:

Both parties waive all rights against each other and any of their respective contractors, subcontractors and suppliers of any tier and any design professional engaged with respect to the Project, for recovery of any damages caused by casualty of other perils to the extent covered by property insurance applicable to the Work or the Project, except such rights as they have to the proceeds of such property insurance and to the extent necessary to recover amounts relating to deductibles of self-insured retentions applicable to insured losses. . . . This waiver of subrogation shall be effective notwithstanding allegations of fault, negligence, or indemnity obligation of any party seeking the benefit or production [sic] of such waiver.

Reprinted courtesy of Gus Sara, White and Williams

Mr. Sara may be contacted at sarag@whiteandwilliams.com

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Attract More Women to Construction With a Female-Friendly Environment and Culture

October 21, 2019 — RubinBrown LLP - Construction Executive

Even with a lot of focus recently on diversity in the workplace, construction is still a male-dominated industry. According to recent surveys, women make up less than 10% of the construction workforce.

There is a higher percentage of women serving in Congress (currently 23.7%) and in the active duty military (14%). Women do, in fact, make up 47% of the total civilian workforce. So, as the construction industry looks for ways to hire and develop skilled labor, diversity has become more important than ever.

There are several challenges to increasing diversity, specifically among women in construction that need to be addressed. These include unwelcome worksites, sexual harassment issues, flexibility and the perception by others that women on the team are not as capable for projects that require manual labor. It’s not the women, it’s the environment and the culture.

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

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ISO Modifies Wrap-Up Exclusion

October 21, 2019 — Jeffrey J. Vita - Saxe Doernberger & Vita, P.C.

For those contractors and other parties enrolled in wrap-up insurance programs, one nagging issue frustrating risk transfer has been the Designated Operations Wrap-Up Exclusion found on many contractors' programs. See, for example, ISO CG 21 54 01 96, which provides in relevant parts as follows:

"This insurance does not apply to 'bodily injury' or 'property damage' arising out of either your ongoing operations or operations included within the 'products-completed operations hazard' at the location described in the Schedule of this endorsement, as a consolidated (wrap-up) insurance program has been provided by the prime contractor/project manager or owner of the construction project in which you are involved."

Mr. Vita may be contacted at jjv@sdvlaw.com

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ENR New York’s 2019 Best Projects: Woolworth Tower Residences

October 21, 2019 — Engineering News-Record

The Woolworth Building, an iconic tower that was the world’s tallest in 1913, has been transformed into a mixed-use skyscraper—though it still has its Cass Gilbert-designed neo-Gothic facade, soaring arches and gargoyles.

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

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Save the Date: ABA 2020 Forum on Construction Law Annual Meeting

October 21, 2019 — Beverley BevenFlorez – CDJ Staff

The American Bar Association’s annual Forum on Construction Law Meeting will be held in Seattle, Washington next April: “The Forum’s mission is to serve the construction industry through education and leadership while Building the Best Construction Lawyers.”

April 23rd-25th, 2020
Sheraton Grand Seattle
1400 6th Ave
Seattle, WA 98101-2318

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Red pencil on Construction Contract

Time to consider a third option to arbitration and jury trials.

Why Builders Should Reconsider Arbitration Clauses in Construction Contracts

Monday, October 21, 2019 — David M. McLain – Colorado Construction Litigation

My advice to home builders has long been to arbitrate construction defect claims instead of litigating them in front of juries. Based on my experience and watching others litigate claims, I have learned that home builders usually fare better in arbitration than in jury trials, both in terms of what they have to pay the homeowners or HOAs and also in what they recover from subcontractors and design professionals. Because of these dynamics, conventional wisdom has been that builders should arbitrate construction defect claims. For several reasons, I am now questioning whether the time is right to consider a third option.

First, plaintiffs’ attorneys dislike arbitration and will continue their attempts to do away with arbitration for construction defect claims. In 2018, the Colorado Legislature considered HB 18-1261 and HB 18-1262. While both bills were ultimately killed, they showed the plaintiffs’ attorneys disdain for arbitration, and serve as a warning that attempts to prevent arbitration legislatively will continue. If the legislature does away with the ability to arbitrate construction defect claims, and that is the only means of dispute resolution contained in a builder’s contracts, that builder may find itself in front of a jury.

Reprinted courtesy of David McLain, Higgins, Hopkins, McLain & Roswell

Mr. McLain may be contacted at mclain@hhmrlaw.com

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Gavel

David R. Cook discusses the case Milliken & Co. v. Georgia Power Co.

Georgia Supreme Court Addresses Anti-Indemnity Statute

Monday, October 21, 2019 — David R. Cook - AHC Construction and Procurement Blog

In prior blog posts, we addressed Georgia’s anti-indemnity statute. One of the posts addressed the statute in the context of an electric utility easement near an airport. That case made its way to the Supreme Court Georgia, which provided some additional clarity to the statute. Milliken & Co. v. Georgia Power Co., — Ga. –, 829 S.E.2d 111 (2019).

When a plane crashed and several passengers and crew died or were injured, their representatives sued several defendants, including a nearby plant owner, Milliken & Company (“Milliken”), based on claims that transmission lines on Milliken’s property were too close to the runways, were too high, and encroached on the airport easements. Milliken cross claimed against Georgia Power Company (“GPC”). Milliken’s claim was based on an easement it granted to GPC, which required GPC to indemnify it for any claims arising out of GPC’s construction or maintenance of the transmission lines.

On appeal, the Supreme Court considered whether the clause was unenforceable under O.C.G.A. § 13-8-2(b). In general, “a party may contract away liability to the other party for the consequences of his own negligence without contravening public policy, except when such agreement it prohibited by statute.” Id. at 113 citing Lanier at McEver v. Planners & Eng’rs Collaborative, 284 Ga. 204, 205 (2008). As one such statute, O.C.G.A. § 13-8-2(b) applies when an indemnification provision (i) “relates in some way to a contract for construction, alteration, repair, or maintenance of certain property” and (ii) “promises to indemnify a party for damages arising from that own party’s sole negligence.” Id. at 114 (internal punctuation omitted).

Reprinted courtesy of David R. Cook, Autry, Hall & Cook, LLP

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

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Construction worker in funny pose

The insurer’s interpretation of a pollution exclusion would lead to “absurd results.”

Louisiana Court Holds That Application of Pollution Exclusion Would Lead to Absurd Results

Monday, October 21, 2019 — Sergio F. Oehninger & Daniel Hentschel - Hunton Insurance Recovery Blog

A Louisiana court recently denied an excess insurer’s bid for summary judgment, finding that the insurer’s interpretation of a pollution exclusion would lead to “absurd results.”

Central Crude, Inc., a crude oil transporter company, experienced an oil pipeline leak, allegedly causing damage to property belonging to Columbia Gas Transmission Company. Columbia Gas sued Central Crude seeking compensatory damages and injunctive relief to compel remediation of the site. Central Crude sought coverage under a CGL primary insurance policy issued by Liberty Mutual. The insurer initially agreed to cover Central Crude’s “reasonable and necessary costs” relating to the incident, but later refused to defend or indemnify Central Crude for any costs incurred from the incident. As a result, Central Crude brought suit against Liberty Mutual and its excess insurer, Great American, to enforce coverage.

Great American moved for summary judgment arguing coverage was excluded by the excess policy’s pollution exclusion, which precludes coverage for injury “arising out of a discharge of pollutants.” Central Crude responded arguing that the exclusion’s applicability was invalidated or at least rendered ambiguous by the Following Form Endorsements, which reflect an intent to mirror the coverage afforded under the primary Liberty Mutual policy, and because coverage appears to be specifically authorized through the Premises Operations Liability Endorsement.

Reprinted courtesy of Sergio F. Oehninger, Hunton Andrews Kurth and Daniel Hentschel, Hunton Andrews Kurth
Mr. Oehninger may be contacted at soehninger@HuntonAK.com
Mr. Hentschel may be contacted at dhentschel@HuntonAK.com


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Refinery showing pollution and toxic environment

Philadelphia City Council unanimously voted to approve the C-PACE program.

Philadelphia Enacts Commercial Property Assessed Clean Energy (C-PACE) Program

Monday, October 21, 2019 — Timothy Davis & Willliam Johnston - White and Williams LLP

On August 14, 2019, Mayor Jim Kenney signed a bill authorizing, through C-PACE loans, the financing of clean energy, alternative energy and water conservation projects for eligible commercial properties in Philadelphia. Philadelphia City Council unanimously voted to approve the C-PACE program on June 20, 2019. The program will be administered by the Philadelphia Energy Authority. Third-party capital providers (not the Philadelphia Energy Authority) will originate C-PACE financings for qualified projects.

C-PACE “assessments” will encumber the applicable property in a first lien position akin to a real estate tax. Documentation among the property owner, the City of Philadelphia, and the third party capital provider (identified in the ordinance as the “financial institution”) will provide, among other things, that the assessments will be payable and fully amortize over the term of the financing (i.e., 30 years) and will not be accelerated during its term. Importantly, before a C-PACE financing can be originated and the underlying property assessed, notice of the property owner’s desire to secure C-PACE financing under the program must be provided to the holder of a mortgage on the subject property and the holder of the mortgage must provide the property owner and the City of Philadelphia with its written consent. Without the mortgage lender’s consent, the C-PACE financing cannot be consummated.

Reprinted courtesy of Timothy Davis, White and Williams LLP and William Johnston, White and Williams LLP
Mr. Davis may be contacted at davist@whiteandwilliams.com
Mr. Johnston may be contacted at johnstonw@whiteandwilliams.com


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words on blue sky bills finance receipt past final legal

Tred Eyerly analyzes the case Wallace v. Nautilus Ins. Co.

Insurer Must Pay Portions of Arbitration Award Related to Faulty Workmanship

Monday, October 21, 2019 — Tred R. Eyerly - Insurance Law Hawaii

The court determined that portions of an arbitration award against the insured contractor based upon faulty workmanship were covered by the policy. Wallace v. Nautilus Ins. Co., 2019 U.S. Dist. LEXIS 122219 (D. N. H. July 23, 2010).

Plaintiffs, owners of adjoining homes, hired McPhail Roofing, LLC to replace the roofs of their houses. After installation, the plaintiffs found several problems with their roofs and withheld roughly a third of the agreed-upon contract price from final payments due to McPhail. A roofing consultant found evidence of water leaking through both roofs during rainstorms. Improper installation of the shakes on the roofs allowed rain to seep through to the roof decks (the plywood underneath the roofs) and eventually into the houses. The only way to cure the installation defects was to remove and replace the roofs entirely.

Plaintiffs and McPhail went to arbitration. Plaintiffs sought compensation for the damage caused by the leaking and for the replacement costs of the roofs. McPhail sought the remaining payment under the contracts. Nautilus defended McPhail under this CGL policy.

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

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

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Engineer checking for pipe leaks

Lawrence, Mass. experiences another leak.

'Major' Mass. Gas Leak Follows Feds Call For Regulation Changes One Year After Deadly Gas Explosions

Monday, October 21, 2019 — Johanna Knapschaefer - Engineering News-Record

A natural gas leak in explosive range forced Lawrence, Mass. residents to evacuate their homes early on Sept. 27, according to electric utility National Grid, which cut power to more than 1,300 customers to avoid another disaster like last year's natural gas explosions and fires in Lawrence and two other towns north of Boston. The leak came just days after federal officials called for changes to national pipeline regulations as they released a final report on the causes of the Sept. 13, 2018, disaster.

Reprinted courtesy of Johanna Knapschaefer, ENR

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

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Extreme Engineering Machines Building The Most Amazing Megastructures

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Sandals stuck in the sand at beach

You make that assumption when you do projects for clients without a formal letter or contract outlining your scope of work.

Never, Ever, Ever Assume! (Or, How a Stuck Shoe is Like a Construction Project Assumption)

Monday, October 21, 2019 — Melissa Dewey Brumback - Construction Law in North Carolina

This summer, I had the fortune of taking a trip to Europe. The first place I visited was Amsterdam. A lovely town with a lot of culture and more canals than you can shake a stick at. I was meeting family there, but had hours to kill ahead of time. So, I decided to take the train from the airport into the City Centre, leave my bags at the train station luggage locker, and begin exploring.

My plan took its first misstep when I attempted to board the train. Not being in a hurry, I let the other passengers get on first. Sure, I noticed the train conductor blowing his whistle while I stepped onto the train, but figured I was fine since I was already on the steps up. Until, that is, the door began to close, with me in the doorway, suitcase in the train, one foot inside, and one foot mid step up to the cabin. The door closed on my backpack (which was still on my back), but I managed to force it into the train compartment. My shoe, however, was not quite as lucky. Part of my shoe made it inside, and part was outside the door.

No worry– just look for the door release mechanism, right? Wrong! There was none. The train started up, with my shoe still halfway in and halfway out of the train. (Luckily my foot itself made it inside all in one piece). The conductor came along to scold me, and told me that he could *probably* rescue my shoe once we got to Central Station. In the meantime, I sat on a nearby jump seat, keeping tabs on my shoe and fuming that this was *not* the way I planned to start my vacation. Long story short– the train conductor was able to salvage my shoe, but not without a lot of commentary on how I should never have boarded the train after the whistle blew. Lesson learned.

Reprinted courtesy of Melissa Dewey Brumback, Ragsdale Liggett PLLC

Ms. Brumback may be contacted at mbrumback@rl-law.com

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Two businessmen on table with contract and coffee cups

GIA’s are the agreements that allow a bonding provider to recoup any money paid out pursuant to either a payment or performance bond.

General Indemnity Agreement Can Come Back to Bite You

Monday, October 21, 2019 — Christopher G. Hill - Construction Law Musings

I talk about payment bonds often here at Construction Law Musings. I talk a bit less about performance bonds and even less about the General Indemnity Agreements (GIA) that are signed by companies and their principals as part of the agreement between a construction company and its bonding company for the provision of these bonds. However, this does not mean that these GIA’s are not important. In fact, these are the agreements that allow a bonding provider to recoup any money paid out pursuant to either a payment or performance bond.

A 2018 case illustrates their importance. In Allegheny Cas. Co. v. River City Roofing, LLC, the Court considered a claim by Allegheny seeking both specific performance of the collateral agreement and reimbursement of certain expenses and investigative costs expended by Allegheny pursuant to its performance bond. Allegheny sought to be reimbursed for certain payments for siding work, investigative costs, and costs spent enforcing the GIA. Allegheny further sought to force the defendants to post sufficient collateral. To do so, Allegheny sued in the Eastern District of Virginia and then moved for summary judgment stating that the GAI uneuivocally required such a result due to the good faith payment for the siding work and the plain language of the GIA.

In response, the Defendants, River City Roofing and its principals that had personally guaranteed the indemnity, argued that the GIA did not apply to the siding work because only the roofing contract was subject to the performance bond and that any bond claims for which collateral was demanded were inchoate and therefore not proper for specific performance.

Reprinted courtesy of The Law Office of Christopher G. Hill

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

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Alpine mountain village with lake view

The Brenner Base Tunnel will pass just a few meters beneath the Isarco River.

Brenner Base Tunnelers Conquer Peaks and Valleys in the Alps

Monday, October 21, 2019 — Scott Blair - Engineering News-Record

A logistics tangle decades in the unraveling, the Brenner Base Tunnel project is having a banner year. Twin tunnel boring machines in May were released on their relentless journey to mine the main tunnels underneath the Alps between Austria and Italy, while a multinational crew of 2,400 workers armed with a toolkit of just about every mining technique is swarming four major worksites, including a particularly challenging area where workers must undercut a river and pass through the fast-flowing aquifer below it.

Reprinted courtesy of Scott Blair, ENR

Mr. Blair may be contacted at blairs@enr.com

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Angry senior couple having argument

“You can’t go to a negotiating table pointing a gun, but you’ve got to keep it over your shoulder.” Joe Slovo

When Do Hard-Nosed Negotiations Become Coercion? Or, When Should You Feel Unlucky?

Monday, October 21, 2019 — Stan Millan, Jones Walker, LLP - ConsensusDocs

Conflict in a negotiation is to be expected and is arguably healthy for the process. Owners and contractors are constantly engaged in negotiations; whether it be negotiating changes to the work, changes to the schedule, or changes to the contractual terms. But at what point does taking a strong position in a negotiation cross the line and become coercion or bad faith?

A recent decision from the Armed Services Board of Contract Appeals touched on this very issue. While this is a government contract case, the issues discussed in this case (namely negotiating a change) are routinely encountered in just about every construction project. This decision is instructive because it adds to a trending line of cases that limit an owner’s and contractor’s negotiation tactics.

On August 5, 2019, the board issued an opinion in the appeal of Sand Point Services, LLC vs. NASA, ASBCA Nos. 6189. In Sand Point Services, the contractor was hired by the owner to repair the Wallops Flight Facility’s aircraft parking apron. During its work, the contractor hit a differing site condition, namely unsuitable soils. The contractor sought additional time and money for this differing site condition. The owner ultimately responded with a show cause letter to the contractor claiming, among other breaches, that the contractor was significantly behind schedule. This was generally viewed by all parties as the start of default proceedings against the contractor.

Reprinted courtesy of Stan Millan, Jones Walker, LLP

Mr. Millan may be contacted at smillan@joneswalker.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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