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CONSTRUCTION DEFECT NEWS
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Lesson: Properly Specifying Insureds Can Avoid Costly Disputes and Litigation

New Insurance Case: Owners'​ Insurance Barred in Reimbursement Action against Tenant

Wednesday, April 17, 2019 — Jason Adams - Gibbs Giden

The Western Heritage Ins. Co. v. Frances Todd, Inc. (2019 Cal.App. LEXIS 299 / 2019 WL 1450731) case has potential implications for insurance carriers, policyholders, condominium associations, unit owners, landlords and tenants.

The case involves a fire at a commercial condominium complex (the “Association”). The Association’s CC&Rs required the Association to purchase a master fire insurance policy for the benefit of the Association and owners, with a waiver of subrogation endorsement that stated the insurance company could not seek reimbursement from the Association, its officers, owners or occupants of the units in the event of a covered fire. The CC&Rs also prohibited individual owners from obtaining their own fire insurance. The Association purchased the required fire insurance policy from Western Heritage Insurance Company (“Western Heritage”).

One of the owner’s tenants, Frances Todd, Inc. (“Frances Todd”), allegedly caused a fire that damaged several units. Although the unit owner was covered as an additional named insured under the Western Heritage fire policy, the tenant, Frances Todd, was not. Western Heritage paid for the common area fire damage caused by Francis Todd, and then sued Frances Todd in a subrogation action to recover the amounts paid.

Reprinted courtesy of Jason M. Adams, Gibbs Giden

Mr. Adams may be contacted at jadams@gibbsgiden.com

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The California contractor’s license board is now implementing a public disclosure requirement for certain construction defect claims.

Important New Reporting Requirement for Some Construction Defect Settlements

Wednesday, April 17, 2019 — Ian Williamson - Gordon & Rees Construction Law Blog

In response to a tragic balcony collapse incident where the public later learned the contractor had paid millions to settlement defect cases in the preceding years, the California legislature passed, the state contractor’s license board is now implementing, a public disclosure requirement for certain construction defect claims. The disclosure requirement is triggered by a judgment (which is not a new requirement), an arbitration award, or a settlement of certain construction defect claims. These requirements are codified at California Business & Professions Code sections 7071.20-22.

What types of Projects: This requirement applies only if all of the following apply:

A) Residential
B) Multi-Family; and
C) Rental property

Limitations on Claims – The reporting requirement only applies if all of the following are true:

A) The claim is against a CSLB licensee (not a design professional) acting in the capacity of a contractor;
B) The claim is for a structural defect;
C) The total claim is valued at $1 million (not including investigation costs);
D) SB800 does not apply;
E) The action was filed after January 1, 2019; and
F) If a lawsuit, the case was designated complex by the courts (which may not apply if only contractor is sued).

Reprinted courtesy of Ian Williamson, Gordon & Rees

Mr. Williamson may be contacted at igwilliamson@grsm.com

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Law firms must employ comprehensive security measures to protect themselves from security breaches or risk being on the losing end of a costly malpractice claim, and suffer severe reputational harm.

The "Dark Overlord" Strikes The Practice Of Law: What Law Firms Can Do To Protect Themselves

Wednesday, April 17, 2019 — Ivo G. Danielle – Newmeyer & Dillion

Cybersecurity breaches involving law firms are on the rise with each passing year. Law firms are prime targets for cyber criminals seeking confidential and sensitive information because of the various types of legal work that law firms normally handle for their clients. Whether it be mergers and acquisitions, the use of intellectual property, purchase agreements, bankruptcy or even litigation involving divorce, law firms are a rich depository for highly confidential and sensitive information. As a result, law firms must employ comprehensive security measures to protect themselves from security breaches or risk being on the losing end of a costly malpractice claim, and suffer severe reputational harm.

Law Firms Continue To Be Targeted By Cybercriminals
According to the American Bar Association ("ABA") 2018 Legal Technology Survey Report, 23% of the law firms who participated in the survey reported that their law firm experienced a data breach. Although this may be just a 1% increase from the 22% who reported a breach in 2017, it is important to understand that this is an increase of 8% from the stable percentages reported from 2013 through 2016.1 The 2018 survey report also revealed that security breaches fluctuated with firm size – 14% for solo law firms, 24% for firms employing 2-9 attorneys, approximately 24% for firms with 10-49 attorneys, 42% for firms with 50-99 attorneys, and approximately 31% for those firms employing 100 or more attorneys.

Latest Law Firm Security Breaches
The notorious criminal group called "The Dark Overlord" has a history of committing data breaches of high profile companies such as Gorilla Glue, Netflix, Larson Studios, multiple healthcare companies, and Little Red Door Cancer Agency. Their goal is simple – steal sensitive information and then extort payment from the victims by threatening to release the sensitive information to the public.

On December 31, 2018, this cybercriminal group announced to the world that they had acquired 18,000 documents containing highly sensitive legal information related to insurance based litigation connected to the 9/11 tragedy. The stolen information was the attorney/client property of Lloyd's of London, Silverstein Properties, and Hiscox Syndicates, Ltd. In its announcement, The Dark Overlord boasted that they were in possession of client sensitive information, such as: "emails; retainer agreements; non-disclosure agreements; settlements, litigation strategies; liability analysis; defense formation; collection of expert witness testimonies; communication with government officials in countries all over the world; voice mails; dealings with the FBI, USDOJ, DOD, confidential communications, and so much more."
Subsequent to the data breach, The Dark Overlord announced to the public that they designed a compensation plan that would allow for public crowd-funding for its organization to permit the public to view the stolen information in exchange for bitcoin payment. The more public funding it receives, the more stolen sensitive information will be unlocked and released to the public. It is estimated that this cybercriminal group already distributed information to the public on two separate occasions during the month of January 2019.

High profile cybersecurity breaches of law firms is nothing new – for example, the infamous Panama Papers breach, where cybercriminals leaked 11.5 million documents exposing the shadowy business of setting up offshore corporations as tax shelters for businesses, celebrities, and politicians - and the infamous Petya Malware attack which resulted in a digital lockdown of one of the world's largest law firms, DLA Piper. However, despite the infrequency of publicized cyber-attacks of law firms by the media, the FBI has recently announced that law firms should expect an increase in security attacks by cybercriminals because law firms are now viewed as "one-stop shops" for cybercriminals. Therefore, in order to combat the inevitable increase in cyber-attacks, law firms must get prepared.

How Law Firms Can Protect Themselves
All law firms will agree that the most serious consequence of a security breach for their firm would be the unauthorized access to sensitive client data. The American Bar Association's Model Rules of Professional Conduct, specifically Rules 1.1 and 1.62 and related Comments, require an attorney to take competent and reasonable measures to safeguard information relating to their clients. This duty to "safeguard' information imposes a significant challenge to firms when using technology in connection with protecting client information because most law firms are not savvy with technology and lack proper cyber security training.

In order for a law firm to protect itself from security breaches and inadvertently violate its duty of safeguarding a client's sensitive information, it is important to take the following actions:

  • Start by taking an inventory and risk assessment of the firm to determine what needs to be protected – the inventory should include both technology and data;
  • Develop, implement and maintain an appropriate cybersecurity program that complies with applicable ethical and legal obligations;
  • Ensure the cybersecurity program addresses people, policies and procedures, and technology. The cybersecurity program must designate an individual or a group to be in charge and coordinate security;
  • Develop an incident response plan scaled to the size of the firm;
  • Continually train staff and attorneys to identify and understand potential cybersecurity threats;
  • Consider implementing a third-party assessment of firm's cybersecurity program and policies;
  • Purchase cyber liability for insurance which not only covers first party losses to law firms (like lost productivity, data restoration, and legal expenses) but also liability protection to third parties;
  • Implement authentication and access controls for network, computers and mobile devices used by the firm's staff and attorneys;
  • Consider the use of full-drive encryption for computers and mobile devices;
  • Have staff and attorneys avoid and/or limit the use of public WiFi when working remotely; and
  • Create a disaster recovery plan to backup all data in the event of a cyber-attack or natural catastrophe.

Continually reviewing, implementing, training and updating a firm's cybersecurity program and protocols will help safeguard sensitive and confidential client information and/or data. No law firm wants to be the next data breach headline – so take the necessary steps to avoid a potential disaster.

1 Past ABA Legal Technology Surveys reported 14% in 2016, 15% in 2015, 14% in 2014 and 15% in 2013.
2 On November 1, 2018, California adopted ethics rules patterned after the ABA Model Rules of Professional Conduct.

Ivo Daniele is a seasoned associate in Newmeyer & Dillion's Walnut Creek office. His practice includes representing private and public companies with both their transactional and litigation needs. You can reach Ivo at ivo.daniele@ndlf.com.

About Newmeyer & Dillion
For almost 35 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 law, privacy & data security, employment, real estate, construction, insurance law and trial work, 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.



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Four Trends to Watch for the Construction Industry in 2019

April 17, 2019 — Mike Sobolewski - Construction Executive

By most accounts, 2017 and 2018 were successful, but balanced, years for the industry. Many companies recognized the benefits of strong backlogs and growth in a number of the industry sectors, while also seeing challenges in cost containment, product availability, talent and preparing for an anticipated overall downturn.

Engineering and construction firms often are the hardest hit when economic conditions change. Some strategies that could help position construction firms for success include using technology to improve efficiencies, renegotiating contracts with clients and suppliers and using M&A to increase market share. Even with the best-laid plans, however, unanticipated political and economic events can require organizations to change course. Agile strategies are key to managing capital projects and infrastructure.

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

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Fire Safety and Restoration Essentials in Commercial Construction

April 17, 2019 — Tami Casey - Construction Executive

Although commercial contractors are usually aware of the dangers of fires at jobsites, that doesn’t mean they are prepared for one. For many, a big part of the problem is putting too much faith in their builder’s risk insurance policy without understanding the minutiae. For others an “it won’t happen to me” attitude is the culprit. Whatever the case, inadequate fire preparedness can lead to significant delays and exponential cost increases when the worst happens. When it comes to preparing for fire risk, having the right insurance is only the beginning of what’s important.

Establishing a Comprehensive Builder’s Risk Policy
Given a lack of functional fire protection systems, new construction and renovation projects are more susceptible to fires. Builder’s risk insurance provides vital protection during this vulnerable time; however, builders commonly make errors and oversights that cost them when putting together policies and fulfilling reporting requirements. For instance, builders who fail to properly report the actual percent complete in their evaluation could be underinsured if peril strikes.

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

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U.S. Homebuilder Sentiment Rises to Six-Month High as Sales Gain

April 17, 2019 — Katia Dmitrieva - Bloomberg

Sentiment among U.S. homebuilders climbed to a six-month high in April, another indication that the housing market is gathering momentum during the crucial spring season.

The National Association of Home Builders/Wells Fargo Housing Market Index rose 1 point to 63, matching the median estimate in Bloomberg’s survey of economists, on improvements in present sales and buyer traffic, data released Tuesday showed. Readings over 50 indicate more builders view conditions as good than poor.

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Construction Law Boot Camp

April 17, 2019 — Beverley BevenFlorez - CDJ STAFF

This two-day seminar will cover the initial steps of drafting and negotiating key contract provisions, determining insurance coverage, and taking care of defects, delays and change orders. Attendees will include Attorneys, Construction Professionals, and Paralegals.

June 5th-6th, 2019
Holiday Inn Hotel & Suites Overland Park Convention Center
10920 Nall Avenue
Overland Park, KS 66211

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Policyholders should note the outcome of this case as it demonstrates the significant impact that settlements can have on coverage.

Fifth Circuit Rules that Settlements in Underlying Action Constitute "Other Insurance"

Wednesday, April 17, 2019 — Tiffany Casanova - Saxe Doernberger & Vita, P.C.

The Fifth Circuit ruled that settlements between an insured and its subcontractors qualified as “other insurance” to the extent those settlements were used to pay for damages covered by an excess insurance policy. Policyholders should note the outcome of this case as it demonstrates the significant impact that settlements can have on coverage.

Satterfield & Pontikes Construction, Inc. v. Amerisure Mutual Ins. Co.1 was the result of a construction project gone wrong. Zapata County, Texas hired Satterfield & Pontikes (“S&P”) as a general contractor for the construction of a courthouse building. When the project did not go as planned, Zapata County terminated S&P, hired new subcontractors to complete the project, and sued S&P.

S&P, in turn, sought indemnification from its subcontractors, who were contractually obligated to indemnify S&P and procure insurance for any damage the subcontractors caused at the project. S&P also sought coverage from its own primary insurers, American Guarantee and Liability Insurance Company (“AGLIC”) and Amerisure Mutual Insurance Company (“Amerisure”), and its excess insurer, U.S. Fire Insurance Company (“U.S. Fire”) who provided liability coverage for S&P’s potential liabilities at the project. The policies contained exclusions for losses arising from mold and did not provide coverage for attorney’s fees or similar legal costs.

Reprinted courtesy of Tiffany Casanova, Saxe Doernberger & Vita, P.C.

Ms. Casanova may be contacted at tlc@sdvlaw.com

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Focus on grasses by sandy beach

The last arguments to be heard this term will take place on April 24, 2019.

SCOTUS, Having Received Views of Solicitor General, Will Decide Whether CWA Regulates Indirect Discharge of Pollutants Into Navigable Water Via Groundwater

Wednesday, April 17, 2019 — Anthony B. Cavender - Gravel2Gavel

Prior to deciding whether to review an important February 1, 2018, U.S. Court of Appeals for the Ninth Circuit decision involving the jurisdictional reach of the Clean Water Act (CWA), Hawai’i Wildlife Fund, et al., v. County of Maui, the Supreme Court asked the Solicitor General for the views of the U.S. on the holdings of this case and the April 12, 2018 U.S. Court of Appeals for the Fourth Circuit decision, Upstate Forever, et al., v. Kinder Morgan Energy Partners, L.P., et al.

On February 19, the Supreme Court confirmed that certiorari was granted to Question 1 presented by the Petition,

Whether the CWA requires a permit when pollutants originate from a point source but are conveyed to navigable waters by a nonpoint source, such as groundwater. (33 U.S.C. § 1362 (12)

In County of Maui , the Ninth Circuit held that indirect discharges to navigable waters through groundwater may be subject to the Environmental Protection Agency’s (EPA) CWA the National Pollutant Discharge Elimination System (NPDES) permitting authority, and in Kinder Morgan, the Fourth Circuit held that such an indirect discharge may be subject to regulation under the CWA when there is a direct hydrological connection between the discharge into groundwater and the direct discharge into navigable, surface waters.

Reprinted courtesy of Anthony B. Cavender, Pillsbury

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

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Claims Arising Out of a Deficiency or Negligence in the Design, Planning, Construction and General Administration of Improvements to Real Property Among Those Affected

Massachusetts Court Holds Statute of Repose Bars Certain Asbestos-Related Construction Claims

Wednesday, April 17, 2019 — Timothy J. Keough & Rochelle Gumapac - White and Williams LLP

In Stearns v. Metropolitan Life Insurance Company, the Massachusetts Supreme Judicial Court (SJC) addressed whether the six-year statute of repose for improvements to real property applies to long-tail tort claims, such as those caused by exposure to asbestos. Reasoning that the language of § 2B is clear, unambiguous and unequivocal, the SJC held that Mass. Gen. Laws. c. 260 § 2B does in fact bar all tort claims arising out of a deficiency or neglect in the design, planning, construction or general administration of an improvement to real property filed after the expiration of the six-year repose period. Additionally, the court affirmed that the time limitations imposed by the statute of repose may not be tolled for any reason six years after either the opening of the improvement for use or the owner taking possession of the improvement for occupation upon substantial completion, whichever may occur first.

Reprinted courtesy of Timothy J. Keough, White and Williams LLP and Rochelle Gumapac, White and Williams LLP
Mr. Keough may be contacted at keought@whiteandwilliams.com
Ms. Gumapac may be contacted at gumapacr@whiteandwilliams.com


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CONSTRUCTION DEFECT NEWS
Yaquina bridge

Design and maintenance were not factors in the collapse, TDOT Chief Engineer Paul Degges said.

Chattanooga Bridge Collapse Likely Resulted From Impact

Wednesday, April 17, 2019 — Jim Parsons - Engineering News-Record

Tennessee highway officials believe an impact from a vehicle’s oversized load is likely to blame for the April 1 partial collapse of a ramp structure at the I-75/I-24 interchange in Chattanooga. The impact caused the outer box beam and railing of the 148-ft-long bridge’s nearly 51-ft main span to fall onto an access ramp, injuring a motorist whose vehicle collided with the debris.

Reprinted courtesy of Jim Parsons, ENR

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

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Businessman beating fists against wall

Except in very limited circumstances, a contractor’s actions will be considered “willful” under the enforcement statutes of the CSLB irrespective of whether the contractor intended the result or not.

When is a “Willful” Violation Willful (or Not) Under California’s Contractor Enforcement Statutes?

Wednesday, April 17, 2019 — Garret Murai - California Construction Law Blog

The enforcement statutes applicable to the California Contractors’ State License Board aren’t exactly models in clarity. A few examples:

1. Business and Professions Code Section 7107: Abandonment without legal excuse of any construction project or operation engaged in or undertaken by the license as a contractor constitutes a cause for disciplinary action.

2. Business and Professions Code Section 7109: A willful departure in any material respect from accepted trade standards for good and workmanlike construction constitutes a cause for disciplinary action, unless the departure was in accordance with plans and specifications prepared by or under the direct supervision of an architect.

3. Business and Professions Code Section 7110: Willful or deliberate disregard and violation of the building laws of the state, or any political subdivision thereof, . . . or of the safety or labor laws or compensation insurance laws or Unemployment Insurance Code of the State, or of the Subletting and Subcontracting Fair Practice Act, or violation by any licensee of any provision of the Health and Safety Code or Water Code, relating to the digging, boring, or drilling of water wells, constitutes a cause for disciplinary action.

Reprinted courtesy of Garret Murai, Wendel Rosen

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

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Three ducklings walking on grass

Sometimes an act or omission is such that anyone can see it using simple common sense.

“If It Walks Like A Duck . . .” – Expert Testimony Not Always Required In Realtor Malpractice Cases Where Alleged Breach Of Duty Can Be Easily Understood By Lay Persons

Wednesday, April 17, 2019 — David W. Evans & Renata L. Hoddinott - Haight Brown & Bonesteel LLP

In Ryan v. Real Estate of the Pacific, Inc., et al. (No. D072724, filed 2/26/19), the Fourth Appellate District reversed a trial court’s granting of summary judgment and finding that expert testimony is not required in a professional negligence action where the claimed acts or omissions are within the understanding of a lay person.

Daniel and Patricia Ryan hired Defendants David Schroedl, David Schroedl & Associates, and Real Estate of the Pacific, Inc., doing business as Pacific Sotheby’s International Realty to list, market, and sell their property. During an open house, the Ryans’ neighbor informed Defendant David Schroedl that he planned significant construction on his own property which would impact the Ryans’ property including, but not limited to, building a large addition that would obstruct the property’s westerly ocean view. Schroedl never disclosed this information to the Ryans or to the subsequent purchasers of the Ryans’ property. The day after escrow closed, the new owners’ interior decorator spoke with that neighbor who again explained his extensive remodeling plans.

Reprinted courtesy of David W. Evans, Haight Brown & Bonesteel LLP and Renata L. Hoddinott, Haight Brown & Bonesteel LLP
Mr. Evans may be contacted at devans@hbblaw.com
Ms. Hoddinott may be contacted at rhoddinott@hbblaw.com


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Rams Chargers LA Stadium | An Inside Look Construction Tour

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CONSTRUCTION DEFECT NEWS
Report on paper in typewriter

The survey determined small companies lag behind large and midsize ones in the use of hearing protection.

Report: Construction Firms Could Better Protect Workers From Noise Hazards

Wednesday, April 17, 2019 — Joanna Masterson - Construction Executive

Given that about three-quarters of construction workers are exposed to noise levels above the recommended limit, 83 percent of the 237 contractors surveyed for a new Dodge Data & Analytics SmartMarket Brief say they’ve purchased quieter equipment, yet well over half of those firms report their company could do better.

Additionally, 85 percent of contractors report using hearing protection onsite more than 50 percent of the time, yet less than half say they always use it, suggesting a significant opportunity for improvement in the industry. Digging deeper, the survey determined small companies lag behind large and midsize ones in the use of hearing protection. Also, half of general contractors report always using hearing protection, compared to about one-third of trade contractors.

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



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The firm Haight Brown & Bonesteel have been an integral part of California since 1937.

Haight’s Sacramento Office Has Moved

Wednesday, April 17, 2019 — Haight Brown & Bonesteel LLP

Haight Brown & Bonesteel LLP has moved its Sacramento office to a new location.

Effective March 18, 2019, Haight’s new Sacramento office address is:

500 Capitol Mall
Suite 2150
Sacramento, CA 95814
916.702.3200 F: 916.570.1947

Reprinted courtesy of Haight Brown & Bonesteel LLP
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Red pencil leaning on construction contract

If the other party to the contract simply decides not to perform it will be an expensive proposition to force compliance or be compensated for the monetary damage caused by such actions.

You’re Only as Good as Those with Whom You Contract

Wednesday, April 17, 2019 — Christopher G. Hill - Construction Law Musings

I have been beating the drum of the need to have a solid construction contract as the basis for your construction project and contractor/subcontractor/supplier relationships. I have also emphasized that communication early and often is one of the best ways to assure a smooth project. However, the sad truth is that even with the best contract drafted with the assistance of an experienced construction attorney, if the other party to the contract simply decides not to perform, whether that is through unjustified non-payment or simple refusal to complete a scope of work without reason, it will be an expensive proposition to force compliance or be compensated for the monetary damage caused by such actions.

It is this often unmentioned truth relating to any contract, including those that construction professionals in Virginia deal with on a daily basis, that makes having a good knowledge of those with whom you plan to contract is key to a successful (read profitable) construction project. Of course be sure that any contractor or subcontractor you contract with has the basics of propoer insurance, the right experience and of course a contractor’s license with the proper specialty or specialties. These basics will get you most of the way to assuring that those that contract with you at least are responsible in business. Another key component, if you can find this information out, is the financial wherwithall of the other party. For a General Contractor, this means both sides of the equation: Owner and Subcontractors. For a Subcontractor, the key is the Contractor, but any other information you can get on the Owner is helpful (though this can be difficult) particularly in the face of a “pay if paid” clause.

Reprinted courtesy of The Law Office of Christopher G. Hill

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

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The nine impoundments are located at Allen, Blews Creek, Cliffside/Rogers, Marshall, Mayo and Roxboro coal-fired plants.

Duke Energy Appeals N.C. Order to Excavate Nine Coal Ash Pits

Wednesday, April 17, 2019 — Mary B. Powers - Engineering News-Record

Duke Energy Progress said April 11 it will appeal the North Carolina Dept. of Environmental Quality’s order issued earlier this month to excavate nine remaining large coal ash pits at six power plants in the state and move ash to lined landfills; the firm claims the new mandate at sites previously deemed low-risk will cost up to $5 billion to implement.

Reprinted courtesy of Mary B. Powers, ENR

ENR may be contacted at ENR.com@bnpmedia.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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