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CONSTRUCTION DEFECT NEWS

Nevada’s Home Building Industry can Breathe Easier: No Action on SB250 Leaves Current Attorney’s Fees Provision Intact

Wednesday, June 21, 2017 — Aaron Lovaas – Newmeyer & Dillion LLP

Construction and design professionals in Nevada’s home building industry breathed a collective sigh of relief on June 5, 2017 when the 79th Session of the Nevada Legislature adjourned without entertaining Senate Bill 250, which sought to reinstate homeowner plaintiffs’ nearly automatic right to recover attorneys’ fees, expert costs, and costs of investigation when bringing suit for alleged constructional defects.

Until 2015, homeowners’ recovery of such damages was the reality of the construction defect landscape in Nevada. While Chapter 40 of the Nevada Revised Statutes specifically allowed for recovery of “reasonable” attorneys’ fees, expert costs, and costs of investigation, the trend in Nevada was that plaintiffs were all but guaranteed awards of all such sums. Of course, this environment incentivized plaintiffs’ lawyers to bring claims of questionable or little repair value in cases where the attorney’s fees and expert costs often far exceeded the costs of repair.

HOW AB125 CHANGED THE LANDSCAPE
Such was the reality in Nevada until 2015 and the passage of Assembly Bill 125, which eliminated the nearly automatic award of attorneys’ fees and expert costs and overhauled Chapter 40 in many other respects. AB125 made over portions of Chapter 40 by:

  • Placing awards of attorneys’ fees into the framework of offers of judgment, utilized extensively in other fields of civil litigation and available equally to homeowner plaintiffs as well as construction industry defendants; and
  • Reworking expert costs and costs of investigation to allow for the award of those items only in the case of proven defects and only as to those costs directly related to the investigation and proof of those defects.

INTRODUCING SB250
The 2017 Legislative Session saw efforts to return Chapter 40 to its pre-2015 version through the introduction of SB250. Fortunately for construction and design professionals in the home building industry in Nevada, the State Senate Judiciary Committee did not act upon the bill and the effort died having never made it to a floor vote. Considering that Nevada’s Legislature meets biannually, the current framework of Chapter 40 is intact until at least 2019. The 2017 Legislative Session, however, is an illustration to how quickly those of the construction defect plaintiffs’ bar can move to initiate efforts to turn back the clock to a much riskier time for construction and design professionals.

Those in the industry should remain vigilant and monitor future legislative efforts to reinstate such awards or other clearly anti-builder measures. Such measures simply drive-up the overall cost and expense of home construction and, in turn, home ownership, which it is often said, is one of the cornerstones of the American dream.

Aaron Lovaas is a partner in the Las Vegas office of Newmeyer & Dillion. As a transactional attorney and business litigator, Aaron has the ability to evaluate legal issues from both points of view and help his clients understand their best option. He can be reached at aaron.lovaas@ndlf.com.

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



Colorado Supreme Court Rules that Developers Retain Perpetual Control over Construction Defect Covenants

Wednesday, June 21, 2017 — Jesse Witt - The Witt Law Firm

The Colorado Supreme Court ruled today that developers can retain control over community covenants in perpetuity by recording a covenant that requires declarant consent to any amendments. Although the Colorado Common Interest Ownership Act (CCIOA) states that such controls should be void, the court nevertheless ruled that a declarant may veto amendments that alter the dispute resolution procedures for construction defect actions at any time.

The case of Vallagio at Inverness Residential Condominium Ass’n v. Metropolitan Homes, Inc., __ P.3d __, 15CO508, arose when the community’s members discovered widespread construction defects. When the declarant developed the project, it had recorded a declaration of covenants that purported to waive the homeowners’ right to a jury trial and instead require that any construction defect disputes be resolved by a private arbitration panel. The declaration also prohibited the homeowners from recovering attorney fees and costs, and it limited the declarant’s liability for damages. Consistent with CCIOA, the declaration allowed the homeowners to amend their covenants by a 67% vote, but it recited that the declarant could veto any such amendment prior to the sale of the last unit to a homeowner. The covenants further stated that the declarant must consent to any amendment that altered the construction defect restrictions.

Reprinted courtesy of Jesse Howard Witt, Acerbic Witt
Mr. Witt may be contacted at www.witt.law

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California Supreme Court Hands Victory to Private Property Owners Over Public Use

Wednesday, June 21, 2017 — Sean M. Sherlock - Snell & Wilmer Real Estate Litigation Blog

In 1970 the California Supreme Court held that, under certain circumstances, private property owners impliedly dedicate their property to the public if they permit the public to use it. Gion v. City of Santa Cruz (1970) 2 Cal.3d 29. This holding was controversial, and the next year the California Legislature enacted Civil Code section 1009 limiting the public’s ability to permanently use private property through an implied dedication.

In the 40-plus years since then, the lower courts have wrestled with the issue of whether the statute limiting implied dedication applies only to recreational uses by the public, or also to nonrecreational uses. On June 15, 2017, the California Supreme Court issued its unanimous opinion in Scher v. Burke (June 15, 2017, S230104) ___ Cal.4th ___, holding that the limitations on implied dedication apply to nonrecreational as well as recreational uses. The case is significant because it demonstrates that the Supreme Court will apply the plain language of the state’s statutes to uphold private property rights.

Reprinted courtesy of Sean M. Sherlock, Snell & Wilmer

Mr. Sherlock may be contacted at ssherlock@swlaw.com

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How to Add 39 Tons of Steel to the Top of the Empire State Building

June 21, 2017 — Tom Sawyer - Engineering News-Record

When engineers made plans to reinforce and upgrade the carrying capacity of the Empire State Building’s mast and tower by adding 39 tons of steel, they had to find a way to protect pedestrians from falling rivets, tools and materials. Roofing the observatory and building bridges over the sidewalks 1,250 ft below were lousy options. The top of the iconic New York City building has an open-air observatory at the 86th floor and premium viewing spaces at the 102nd and 103rd levels. Annually, these spaces host about 4.3 million visitors and generate about $85 million in revenue. Soaring above the busy streets, a 200-ft-tall steel broadcast tower bristles with antennas that generate about $20 million more. Together, the observatory, mast and tower are the crowning jewel of the 86-year-old icon, which is owned by the Empire State Realty Trust Inc.

Mr. Sawyer may be contacted at sawyert@enr.com

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How to Control Potential Construction Surety Claims

June 21, 2017 — Richard Korman - Engineering News-Record

The relationship between construction management and general contracting powerhouse Crossland Construction Co. and insurance broker and surety bond producer IMA Inc., both based in Kansas, goes back 30 years and involves many people. One of them is Columbus-based Maurice Harley, a senior financial analyst with Crossland, who has spent most of his career involved with risk, surety and construction. Monica Donatelli, who began her career in banking, is now a surety manager with IMA Inc. She is based in Overland Park, Ka.

Mr. Korman may be contacted at kormanr@enr.com

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Raintree Partners Announces Over $500 Million in California Mixed-Use Projects

June 21, 2017 — Greg Aragon - Engineering News-Record

Orange County, CA-based Raintree Partners is investing big time in California. The real estate investment company announced last week that it currently under construction on three mixed-use projects in California totaling more than $500 million in value.

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

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Peckar & Abramson’s Houston’s office will be hosting a Construction Counsel Roundtable

June 21, 2017 — Peckar & Abramson, P.C.

Peckar & Abramson's Houston's office will be hosting a Construction Counsel Roundtable on June 28, 2017 at the AGC Houston office in Houston, Texas. The Construction Counsel Roundtable is dedicated to enhancing the professional lives of senior in-house counsel in the construction industry. Participants will be share their concerns and challenges with their peers.

June 28, 2017
Associated General Contractors
3825 Dacoma St
Houston, TX 77092

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State Supreme Court Cases Highlight Importance of Wording in Earth Movement Exclusions

Wednesday, June 21, 2017 — Hannah E. Austin - Saxe Doernberger & Vita, P.C.

In Erie Insurance Property and Casualty Company v. Chaber, the West Virginia Supreme Court recently
held that an insurance policy’s earth movement exclusion was unambiguous and applied to both manmade
and natural earth movement. The Court also found that a narrow “ensuing loss” exception to the exclusion
that provided coverage for glass breakage resulting from earth movement could not be extended to cover the
entire loss.

The Erie Insurance Property and Casualty Company (Erie) insured five commercial buildings owned by
Dmitri and Mary Chaber. One of the properties was damaged by a landslide, and the Chabers filed a claim
with Erie. Erie asserted that the loss was excluded from coverage because the policy excluded coverage for
losses caused by earth movement, which was defined to include earthquakes, landslides, subsidence of
manmade mines, and earth sinking (aside from sinkhole collapse), rising or shifting. The exclusion stated
that it applied “regardless of whether any of the above . . . is caused by an act of nature or is otherwise
caused,” and also contained an anti-concurrent causation clause. However, there was an exception for glass
breakage caused by earth movement.

Reprinted courtesy of Hannah E. Austin, Saxe Doernberger & Vita, P.C.

Ms. Austin may be contacted at hea@sdvlaw.com

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Buyer's Demolishing of Insured's Home Not Barred by Faulty Construction Exclusion

Wednesday, June 21, 2017 — Tred R. Eyerly - Insurance Law Hawaii

Loss of the insured's home caused by a renter who demolished the home was covered under the homeowner's policy. Fisher v. Garrison Prop. & Cas. Ins. Co., 2017 Idaho LEXIS 143 (Idaho May 26, 2017).

The insured, Shammie L. Fisher, entered a Purchase Agreement to sell her home to Ron Reynoso. The purchase of the property was contingent upon Reynoso obtaining financing. Before completing the purchase, he would lease the property. The Agreement stated, "Buyer intends to make certain improvements to the property upon possession, with the intent to sell the property for a profit."

Within two months of renting the property to Reynoso, Fisher learned that he had demolished the entire house down to the foundation. He then ceased work and left. Fisher made a claim under her policy, but Garrison Property and Casualty Insurance Company denied coverage based upon the exclusion for faulty, inadequate or defective work. When Fisher sued, the trial court granted summary judgment to Garrison.

Reprinted courtesy of Tred R. Eyerly - Insurance Law Hawaii

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

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US Secretary of Labor Withdraws Guidance Regarding Independent Contractors

Wednesday, June 21, 2017 — Tanya Salgado - White and Williams LLP

The United States Secretary of Labor has withdrawn an informal guidance regarding independent contractors issued in 2015. We reported on the 2015 Administrator’s Interpretation here. The 2015 Interpretation provided a detailed explanation of the economic realities test, which is used to determine whether a worker is to be classified as an independent contractor or an employee under the Fair Labor Standards Act (FLSA).

While the 2015 Interpretation did not change existing case law on independent contractor status, it was seen as sending a signal from the Department of Labor (DOL) regarding the agency’s focus. The DOL concluded the 2015 Interpretation with the statement, “most workers are employees under the FLSA’s broad definitions…” Just as the DOL’s 2015 Interpretation did not change existing case law, the DOL’s withdrawal of the Interpretation does not change the law in any way. The economic realities test remains the legal standard for determining independent contractor status under the FLSA.

Reprinted courtesy of Tanya Salgado, White and Williams LLP

Ms. Salgado may be contacted at salgadot@whiteandwilliams.com

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CONSTRUCTION DEFECT NEWS

A License to Sue: Appellate Court Upholds Condition of Statute that a Contracting Party Must Hold a Valid Contractor’s License to Pursue Action for Recovery of Payment for Contracting Services

Wednesday, June 21, 2017 — Omar Parra & Jesse M. Sullivan - Haight Brown & Bonesteel LLP

California Business & Professions Code section 7031(a) requires a party to have contractor’s license in order to maintain an action for compensation for services performed for which a contractor’s license is needed. In Phoenix Mechanical Pipeline, Inc. v. Space Exploration Technologies Corp., No. B269186 (2017 WL 2544856) (Cal. Ct. App. June 13, 2017), the Court of Appeal for the Second Appellate District considered the scope of this statute in denying, in part, Phoenix Mechanical Pipeline, Inc.’s (“Phoenix Pipeline”) appeal of a trial court ruling granting Space Exploration Technologies Corporation’s (“SpaceX”) demurrer to Phoenix Pipeline’s second amended complaint, without leave to amend.

Phoenix Pipeline filed the underlying lawsuit for, among other claims, breach of contract and breach of the duty of good faith and fair dealing arising from an agreement with SpaceX for Phoenix Pipeline to perform various plumbing, concrete removal and electrical services. Phoenix Pipeline alleged SpaceX paid for such services from 2010 to October 2013, but failed to pay Phoenix for services performed from October 2013 to August 2014, totaling just over $1,000,000. According to Phoenix Pipeline, this work was performed pursuant to a series of invoices, which constituted individual agreements between SpaceX and Phoenix Pipeline.

Reprinted courtesy of Omar Parra, Haight Brown & Bonesteel LLP and Jesse M. Sullivan, Haight Brown & Bonesteel LLP
Mr. Parra may be contacted at oparra@hbblaw.com
Mr. Sullivan may be contacted at jsullivan@hbblaw.com


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Developer Transition - Maryland Condominiums

Wednesday, June 21, 2017 — Nicholas D. Cowie - Maryland Condo Construction Defect Law Blog

INTRODUCTION
“Developer transition” is the process by which the governance of a condominium association is transferred from developer to unit owner control. This article provides a brief overview of the legal requirements that govern the developer transition process for Maryland condominiums. This article also as well as a “transition checklist” for transitioning unit owner-controlled boards of directors.

PERIOD OF DEVELOPER CONTROL
A developer initially controls an association because it owns all unsold units in the newly created condominium community. As such, the developer has the controlling votes associated with majority ownership and can appoint its own employees as the initial members of the board of directors and thereby control how the condominium association conducts its affairs. This is referred to as the “period of developer control,” during which the developer makes all decisions on behalf of the association.

The developer also creates an association’s governing documents, allowing it to dictate, subject to applicable law, the procedures and time periods under which control over the association’s board of directors will eventually be transferred to the homeowners.

Reprinted courtesy of Nicholas D. Cowie, Cowie & Mott, P.A.

Mr. Cowie may be contacted at ndc@cowiemott.com

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Insurer Must Defend Claims of Alleged Willful Coal Removal

Wednesday, June 21, 2017 — Tred R. Eyerly - Insurance Law Hawaii

The court found that the insured was entitled to a defense against claims for its alleged willful removal of coal from third parties' land. Liberty Mut. Fire Ins. Co. v. Bizzack Constr, 2017 U.S. Dist. LEXIS 70285 (W.D. Va. April 27, 2017).

The Virginia Department of Transportation (VDOT) contracted with Bizzack to perform work in widening U.S. Route 460. VDOT notified coal owners that it had been "necessary to remove certain coal" from their land during the construction of Route 460. Some of the coal owners sued Bizzack, seeking compensation for lost coal. They alleged Bizzack had illegally removed and sold their coal, and "damaged the remaining coal in place on the property."

Bizzack sought coverage from Liberty Mutual. Liberty Mutual filed suit seeking a declaration that it had no duty to defend or indemnify Bizzack. Cross-motions for summary judgment were filed. Liberty Mutual argued: (1) there was no "occurrence"; (2) exclusion j (5) applied; and (3) the "expected or intended injury" exclusion applied.

Reprinted courtesy of Tred R. Eyerly - Insurance Law Hawaii

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

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Lightning Damaged Home and How to Prevent It

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CONSTRUCTION DEFECT NEWS

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

Wednesday, June 21, 2017 — Sean Minahan - Construction Contractor 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.

Fortunately, we were able to hand the bag back to the State and obtain full payment for the services and materials provided.

Reprinted courtesy of Sean Minahan, Lamson, Dugan and Murray, LLP

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

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Trump’s Infrastructure Weak

Wednesday, June 21, 2017 — Garret Murai - California Construction Law Blog

This past week was President Trump’s “Infrastructure Week.” A week dedicated, according to the White House’s official blog, “to addressing America’s crumbling infrastructure” and to try to build support for the President’s campaign promise to invest “at least” $1 trillion on improving the nation’s infrastructure.

For the construction industry it was going to be an exciting week. Not only because it could mean new opportunities for the industry but from a policy perspective our nation’s infrastructure, which recently received a grade of D+ from the American Society of Engineers, is in dire need of investment.

But Infrastructure Week ended up being more like Infrastructure Weak. No infrastructure bills were signed or introduced, no executive orders were issued, and no new departments or commissions were created, although at the end of the week President Trump promised to form a “council” and “office” to review the environmental permitting process.

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

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

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Timely Written Notice to Insurer and Cooperating with Insurer

Wednesday, June 21, 2017 — David Adelstein - Florida Construction Legal Updates

I harp on notifying a liability insurer in writing once a claim is asserted against you. As soon as possible. I harp on this because as an insured you want to remove any doubt or argument that the insurer was prejudiced due to a lack of timely notice.

In a recent opinion, Zurich American Insurance Co. v. European Tile and Floors, Inc., 2017 WL 2427172 (M.D.Fla. 2017), the insurer moved for summary judgment in a coverage action arguing that its insured failed to provide it timely written notice. Specifically, the insurer argued that the insured violated the clause in the liability policy that states:

2. Duties in the Event of Occurrence, Offense, Claim or Suit

    b. If a claim is made or “suit” is brought against any insured, you must:
  1. Immediately record the specifics of the claim or “suit” and the date received; and
  2. Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or “suit” as soon as practicable.

    c. You and any other insured must:
  1. Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit”;
  2. Authorize us to obtain records and other information;
  3. Cooperate with us in the investigation, settlement or defense of the claim or “suit”; and
  4. Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.
Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

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

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Orchestrating Bias: Arbitrator’s Undisclosed Membership in Philharmonic Group with Pauly Shore’s Attorney Not Grounds to Reverse Award in Real Estate Dispute

Wednesday, June 21, 2017 — Lyndsey Torp - Snell & Wilmer Real Estate Litigation Blog

The California court of appeal recently issued an unpublished decision in Knispel v. Shore, 2017 WL 2492535, affirming a judgment confirming an arbitration award in a real estate dispute involving Pauly Shore. The court of appeal held that the arbitrator’s failure to disclose her membership in the Los Angeles Lawyers Philharmonic Group with the attorney representing Pauly was not grounds to overturn the judgment.

The underlying arbitration involved a dispute between Michael Scott Shore, on the one hand, and his brother, Pauly, among others, on the other hand, regarding certain residential property located on Sunset Boulevard near The Comedy Store in West Hollywood (owned and operated by their mother, Mitzi Shore). The parties agreed to arbitrate their dispute before Judge Aviva K. Bobb (Ret.) of the Alternative Resolution Center. Judge Bobb issued an award in favor of Pauly, and he petitioned the trial court to affirm the award. Michael opposed, contending the arbitrator failed to disclose that she and Pauly’s attorney had both been members of the Lawyers Philharmonic, for which they had been practicing and performing together since November 2010.

Reprinted courtesy of Lyndsey Torp, Snell & Wilmer

Ms. Torp may be contacted at ltorp@swlaw.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

Builders Standard of Care Expert Witness and Consulting General Contractor area area area

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