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CONSTRUCTION DEFECT NEWS

Assembly Bill 1701 Contemplates Broader Duty to Subcontractor’s Employees by General Contractor

Thursday, August 17, 2017 — Richard H. Glucksman, Esq. & Chelsea L. Zwart, Esq. – Chapman Glucksman Dean Roeb & Barger

AB 1701 recently passed the Assembly and is pending in the Senate’s Labor and
Industrial Relations and Judiciary Committees. The Bill, if signed by the Governor, would
create a new section in the California Labor Code (Section 218.7) making “direct contractors” –
defined as a contractor “making or taking a contract in the state for the erection, construction,
alteration, or repair of a building, structure, or other private work” – liable for wages a
subcontractor or sub-subcontractor fails to pay to its employee for work included in the general
contractor’s contract with the project owner.

Under the new law, direct contractors would be liable for up to one year from the date of
completion of the work for unpaid wages, fringe benefits, health and welfare benefits, and
pension fund contributions, including interest and state tax payments owed to a subcontractor’s
employee. The employee, however, would not be able to recover penalties or liquidated
damages from the general contractor.

AB 1701 would give the employee, Labor Commissioner, or a joint labor-management
cooperation committee the right to enforce the direct contractor’s liability through a civil action.
It would also extend to third parties who are owed fringe or other benefit payments or
contributions on the employee’s behalf. Pursuant to the proposed language of the new statute, a
prevailing plaintiff in such an action would be entitled to their reasonable attorneys’ fees and
costs, including expert witness fees.

Although Labor Code § 218.7 would impose certain obligations on the subcontractor to
provide the direct contractor with relevant project and payroll records, the subcontractor’s failure
to comply with those obligations does not relieve the direct contractor from liability.

Impact

AB 1701’s apparent purpose is to protect employees, an undeniably important legislative
goal. However, if passed, the bill could greatly increase general contractors’ exposure when
subcontracting work and their cost of doing business. Especially because the new law would not
impact existing laws requiring a direct contractor to timely pay a subcontractor.

As a result, many coalitions against AB 1701 stress the halting effect this could have on
the construction industry as a whole, particularly private construction, which is not as heavily
regulated as public works.

CGDRB will continue to monitor this Bill and provide updates as developments occur.

Reprinted courtesy of Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and Chelsea L. Zwart, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com



Supreme Court Grants Petition for Review Regarding Necessary Parties in Lien Foreclosure Actions

Thursday, August 17, 2017 — Lindsay K. Taft - Ahlers & Cressman PLLC

For several years, the requirements for which parties must be named in a lien foreclosure action when a release of lien bond is in place have been cloudy. RCW 60.04 et seq., the “mechanics’ lien” or “construction lien” statute, provides protection for a party or person who provides labor, materials, or equipment to a construction project. That person or party, if not paid, can file a lien against the construction project property to secure recovery. As the lien impacts the property by “clouding title” and could potentially result in foreclosure of the property, the statute sets forth strict requirements with respect to timing, notice, and parties. For example, the lien must be recorded within 90 days of the person or party’s last day of work or materials or equipment supplied, and the lien claimant must then give a copy of the claim of lien to the owner or reputed owner within 14 days of the lien recording. RCW 60.04.081.

The statute also allows a property owner or other party to “free” the property from the lien prior to the claim being resolved by issuing a release of lien bond. While the claim is still in dispute, the lien then attaches to the bond and not the property. The same rules about foreclosure, however, still apply but not without some confusion.

Reprinted courtesy of Lindsay K. Taft, Ahlers & Cressman PLLC

Ms. Taft may be contacted at ltaft@ac-lawyers.com

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Collapse of Improperly Built Deck Not An Occurrence

Thursday, August 17, 2017 — Tred R. Eyerly - Insurance Law Hawaii

The court found that the insured's faulty construction of an outside deck did not arise from an occurrence. Employers Mut. Cas. Co. v. West, 2017 U.S. Dist. LEXIS 113951 (N.D. Miss. July 21, 2017).

D.L. Action Construction Company (DLA) constructed multifamily dwellings. They were sued by the homeowners after a deck collapsed at one of the dwellings. Also sued was the subcontractor, Littrell Construction, who installed the deck. The homeowners alleged that Littrell knew that college students would be residing in the units and that the decks would be heavily used. The decks were attached to the building structure using only nails instead of bolts.

Reprinted courtesy of Tred R. Eyerly - Insurance Law Hawaii

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

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Congress Faces 'Packed' Agenda After Aug. Break

August 17, 2017 — Tom Ichniowski - Engineering News-Record

When Congress returns after Labor Day from its break, lawmakers will be staring at deadlines just weeks ahead for at least three must-pass, construction-related measures. The list includes legislation to fund federal agencies for at least part of fiscal year 2018 and a measure to reauthorize Federal Aviation Administration programs, including airport construction grants. The deadline for both bills is Sept. 30. Congress has made headway on the measures but almost certainly won’t have final votes by the deadline. That means lawmakers will turn to stopgap extensions.

Mr. Ichniowski may be contacted at ichniowskit@enr.com

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Will AIA's Revised Contract Options Prompt More Insurance Coverage?

August 17, 2017 — Scott Van Voorhis & Richard Korman - Engineering News-Record

Builders risk insurance policies pack together different property insurance coverages for construction projects. They also often contain coverage for “civil authority” or “expediting cost” and “ingress/egress” insurance.

Reprinted courtesy of Scott Van Voorhis, ENR and Richard Korman, ENR

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

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Texas Is a Homebuilding Machine. And the Rest of the U.S.?

August 17, 2017 — Patrick Clark - Bloomberg

In the market for a new home? You’ll fare better if you’re house-hunting in Texas.

Dallas, Houston, and Austin are on pace to build a total of nearly 130,000 new homes in 2017, based on a Trulia analysis of building permits. That’s more than 10 percent of all new construction expected in the U.S. this year, and enough to put all three metropolitan areas in the top five for permitting activity. New York and Phoenix round out the group.

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2017 ABA Forum on Construction Law

August 17, 2017 — Beverley BevenFlorez-CDJ STAFF

The American Bar Association (ABA) only holds this meeting every ten years. Co-sponsored by the American Institute of Architects (AIA), this year’s seminar will focus on AIA contract documents, which were updated in 2017. In addition, the forum will also cover Design-Build, EPC & International, and Collaborative Design and Construction issues.

October 4th-6th, 2017
Westin Copley Place,
10 Huntington Ave,
Boston, MA

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Lease-Leaseback Battle Continues as First District Court of Appeals Sides with Contractor and School District

Thursday, August 17, 2017 — Garret Murai - California Construction Law Blog

Earlier, we wrote about Davis v. Fresno United School District (2015) 237 Cal.App.4th 261, a Fifth District California Court of Appeals decision that sent shock waves through the school construction industry and raised questions regarding the use of California’s lease-leaseback method of project delivery (Education Code sections 17400 et seq.).

California’s lease-leaseback method of project delivery provides an alternative project delivery method for public school districts than the usual design-bid-build method of project delivery. Under the lease-leaseback method of project delivery, a school district leases its property to a developer, who in turn builds a school facility on the property and leases it back to the school district. One of the benefits of the lease-leaseback method of project delivery is that school districts do not need to come up with construction funds to build school facilities since they pay for the construction over time through their lease payments to the developer. Critics, however, argue that because lease-leaseback projects do not need to be competitively bid, they are ripe for cronyism between developers and school districts.

In Davis, a taxpayer successfully brought suit against the Fresno Unified School District challenging the propriety of a lease-leaseback project because the entirety of the District’s “lease payments” occurred while the project was being constructed and thus, successfully argued the taxpayer, there was no “true” lease of a facility since it was under construction.

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

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

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Newmeyer & Dillion Attorneys Selected to Best Lawyers in America© Orange County and as Attorneys of the Year 2018

Thursday, August 17, 2017 — Newmeyer & Dillion LLP

NEWPORT BEACH, Calif. – AUGUST 17, 2017 – Prominent business and real estate law firm Newmeyer & Dillion LLP is pleased to announce that nine of the firm’s attorneys were recently recognized in their respective areas in The Best Lawyers in America© 2018. Two attorneys, Gregory Dillion and Thomas Newmeyer, also have been selected as an Orange County "Lawyer of the Year." Attorneys named to The Best Lawyers in America, include:

Jason M. Caruso Personal Injury Litigation, Product Liability Litigation
Michael S. Cucchissi Real Estate Law
Gregory L. Dillion Commercial Litigation, Construction Law, Insurance Law, Litigation – Construction, Litigation – Real Estate
Jeffrey M. Dennis Insurance Law
Joseph A. Ferrentino Litigation – Construction, Litigation – Real Estate
Thomas F. Newmeyer Commercial Litigation, Construction Law, Litigation – Real Estate
John A. O'Hara Litigation – Construction
Bonnie T. Roadarmel Insurance Law
Carol Sherman Zaist Commercial Litigation

Additionally, Gregory Dillion was selected as the Orange County Construction Litigation "Lawyer of the Year" and Thomas Newmeyer was selected as the Orange County Construction Law "Lawyer of the Year."

Best Lawyers is the oldest peer-review publication within the legal profession with a history of over 30 years. Attorneys are selected through intensive peer-review surveys in which leading lawyers evaluate their professional peers. Their listings are published in 75 countries worldwide and are recognized for their reliable and unbiased selections. Newmeyer & Dillion is immensely proud of these lawyers and looks forward to their future endeavors.

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.



Professional Services Exclusion Bars Coverage Where Ordinary Negligence is Inseparably Intertwined With Professional Service

Thursday, August 17, 2017 — Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLP

In Energy Ins. Mutual Ltd. v. Ace American Ins. Co. (No. A140656, filed 7/11/17, ord. Pub. 8/10/17), a California appeals court found that a professional services exclusion barred coverage for wrongful death and other claims blamed on pipeline inspectors’ failure to identify and properly mark a gas pipeline that was ruptured during construction of another pipeline, resulting in an explosion and fire.

In Energy Ins. Mutual, a pipeline owner hired two temporary construction inspectors through a staffing company. The inspectors had to ensure compliance with engineering and safety standards, practices and procedures for pipeline construction, and understand construction drawings and blueprints. They worked together with one of the owner’s employees to perform daily surveillance to ensure the integrity of the pipeline and avoid third party damage.

Reprinted courtesy of Christopher Kendrick, Haight Brown & Bonesteel LLP and Valerie A. Moore, Haight Brown & Bonesteel LLP
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com


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CONSTRUCTION DEFECT NEWS

The Relevance and Reasonableness of Destructive Testing

Thursday, August 17, 2017 — David Adelstein - Florida Construction Legal Updates

Destructive testing is a routine investigatory procedure in construction defect disputes. The destructive testing is necessary to determine liability (causation), the extent of damage, and the repair protocol. Destructive testing is designed to answer numerous questions: Why did the building component fail? Was the building component constructed incorrectly? What is the magnitude of the damage caused by the failure? What specifically caused the damage? What is the most effective way to fix the failure and damage? There are different iterations to the same questions, but in many instances, destructive testing is necessary to answer these questions.

Claimants sometimes prohibit destructive testing. Of course, destructive testing is intrusive. In many instances, it is very intrusive. But, this testing is a necessary evil. Without this testing, how can a defendant truly analyze their potential exposure and culpability? They need to be in a position to prepare a defense and figure out their liability. This does not mean destructive testing is warranted in every single construction defect dispute. That is not the case. However, to say it is never warranted is irrational.

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

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

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Best Lawyers Recognizes Fifteen White and Williams Lawyers

Thursday, August 17, 2017 — White and Williams LLP

Fifteen White and Williams lawyers were recognized on the 2018 Best Lawyers in America list. Inclusion in Best Lawyers is based entirely on peer-review. The methodology is designed to capture, as accurately as possible, the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. Best Lawyers employs a sophisticated, conscientious, rational, and transparent survey process designed to elicit meaningful and substantive evaluations of quality legal services.


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New Orleans Reviews System After Storm Swamps Pumps

Thursday, August 17, 2017 — Pam Radtke Russell - Engineering News-Record

The city of New Orleans will hire an independent team of engineers to evaluate the problems that led to severe flooding following an Aug. 5 rainfall of up to 10 in. The decision followed the revelation that 16 of the city’s pumps were not working, despite claims the system was at capacity. Further, the power system that operates those pumps was severely crippled.

Reprinted courtesy of Pam Radtke Russell, ENR

Ms. Russell may be contacted at Russellp@bnpmedia.com

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Robotic Suits Gives Superhuman Power for Construction Workers

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CONSTRUCTION DEFECT NEWS

Court of Appeals Discusses Implied Duty of Good Faith and Fair Dealing in Public Works Contracting

Thursday, August 17, 2017 — Lindsay K. Taft - Ahlers & Cressman PLLC

The implied duty of good faith and fair dealing is implied in every contract, including construction contracts. Generally speaking, this implied duty requires parties cooperate with one another so that they each obtain the full benefit of their contracted bargain. Recently, the Court of Appeals (Division II) in Nova Contracting, Inc. v. City of Olympia discussed this duty’s application to a public works contract.

Reprinted courtesy of Lindsay K. Taft, Ahlers & Cressman PLLC

Ms. Taft may be contacted at ltaft@ac-lawyers.com

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Rescission of Policy for Misrepresentation in Application Reversed

Thursday, August 17, 2017 — Tred R. Eyerly - Insurance Law Hawaii

The California Court of Appeal reversed the trial court's issuance of summary judgment to the insurer, finding that the insured did not make misrepresentations when applying for a policy to cover rental property. Duarte v. Pacific Spec. Ins. Co., 13 Cal. App. 5th 45 (2017).

Duarte rented his house to Jennifer Pleasants. Duarte gave her a 45-day notice to quit in February 2012, but she did not leave. Two months later, Duarte applied for landlord-tenant coverage with Pacific. The application was submitted electronically and Pacific issued a policy to Durate the same day.

In June 2012, Pleasants filed a lawsuit against Duarte, alleging ten causes of action arising from habitability defects which began in 2009. The suit claimed Pleasants had notified Duarte about the defects, she had suffered emotional distress and physical injury, and over paid rent, and had out-of-pocket expenses.

Reprinted courtesy of Tred R. Eyerly - Insurance Law Hawaii

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

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Engineer TRC Fends Off Lawsuits After Merger

Thursday, August 17, 2017 — Scott Van Voorhis - Engineering News-Record

In the wake of its merger with an investment fund, TRC Cos. has been busy swatting away pesky shareholder lawsuits driven by law firms who specialize in such litigation.

Reprinted courtesy of Scott Van Voorhis, ENR

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

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Trump Abandons Plan for Council on Infrastructure

Thursday, August 17, 2017 — Mark Niquette - Bloomberg

President Donald Trump will not move forward with a planned Advisory Council on Infrastructure, a person familiar with the matter said Thursday.

The infrastructure council, which was still being formed, would have advised Trump on his plan to spend as much as $1 trillion upgrading roads, bridges and other public works. Its cancellation follows Trump’s announcement Wednesday that he was disbanding two other business advisory panels.

Reprinted courtesy of Mark Niquette, Bloomberg
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