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CONSTRUCTION DEFECT NEWS

Under Colorado House Bill 17-1279, HOA Boards Now Must Get Members’ Informed Consent Before Bringing A Construction Defect Action

Wednesday, April 11, 2018 — Luke Mecklenburg – Snell & Wilmer Real Estate Litigation Blog

Last year, I wrote a post calling attention to stalled efforts in the Colorado legislature to pass meaningful construction defect reform. Shortly thereafter, the legislature got it done in the form of House Bill 17-1279. This bill creates an important pre-litigation notice-and-approval process whenever an HOA initiates a construction defect action in its own name or on behalf of two or more of its members.

Before May 2017, the pre-litigation requirements that an HOA had to fulfill before bringing a construction defect claim under the Colorado Construction Defect Action Reform Act (“CDARA”) were generally minor. For example, while many declarations required majority approval from the community prior to initiation of claims, in practice, what the industry was seeing is that some HOAs were making it so that only a majority of the HOA Board had to approve bringing the claim, rather than the majority of interested unit owners. It was also common that, even where the majority of owners were involved, they were often voting in favor of filing a lawsuit or arbitration without fully understanding the risks and costs. This practice presented a risk to developers—it is easier to get approval from a small group than from a larger group, and it is easier to get approval when the voting owners do not fully appreciate the risks and costs inherent in filing a claim.

Colorado House Bill 17-1279, which was signed into law by Governor Hickenlooper in May 2017 and is codified at C.R.S. § 38-33.3-303.5, lessens these risks by amending the Colorado Common Interest Ownership Act (“CCIOA”) to add certain pre-litigation requirements. Section 38-33.3-303.5 applies any time an HOA institutes a construction defect action its own name on behalf of itself or two or more unit owners on matters affecting the common interest community. C.R.S. §§ 38-33.3-302(1)(d), -303.5(1)(a).

Reprinted courtesy of Luke Mecklenburg, Snell & Wilmer

Mr. Mecklenburg may be contacted at lmecklenburg@swlaw.com

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Edinburg School Inspections Uncovered Structural Construction Defects

Wednesday, April 11, 2018 — David Suggs – Bert L. Howe & Associates, Inc.

Yesterday, the Herald reported that six schools and a nursery have been affected by construction defects in Edinburg. For every eight properties inspected by council, one was found to share analogous issues which caused “a wall to collapse at a city primary school in 2016.” Furthermore, over the course of eighteen months, inspectors will observe more buildings across Edinburg in order to guarantee their “structural safety.”

At Oxgangs Primary School, during Storm Gertrude in January 2016, nine tons of masonry fell from the side of a building. The Herald reported 17 other schools across Edinburg closed due to safety concerns. All schools closed were part of the “same private finance initiative.” Moreover, there have been 20 other examples of defects found that are alike, in which checks were “carried out at public buildings.”

Christine Jardine, a Scottish Liberal democrat who represents Edinburg West, states that the findings were “scandalous,” and “simply not good enough.” In addition, Jardine points out that the council is responsible for buildings to meet the highest of standards, and proper checks are necessary, in order to ensure the safety of their children. Lastly, Jardine suggests that the Scottish government should no longer rely on the funding from local authority. Instead, she proposes that the government must be accountable for “improving council funding.”


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Triggering Duty to Advance Costs Same Standard as Duty to Defend

Wednesday, April 11, 2018 — Tred R. Eyerly - Insurance Law Hawaii

Interpreting Hawaii law, the federal district court held that the standard for triggering the duty to defend is the same as the standard for the duty to advance costs under a D&O policy. Maui Land & Pineapple Co. v. Liberty Ins. Underwriters, 2018 U.S. Dist. LEXIS 56949 (D. Haw. April 3, 2018).

The underlying plaintiffs sued 22 defendants, including Maui Land Pineapple (MLP) and Ryan L. Churchill, concerning a residential development project known as The Ritz-Carlton Club & Residences. The underlying complaint alleged that MLP "directly or indirectly through wholly owned subsidiaries exerts control" over Kapalua Bay, LLC, the defendant in the underlying lawsuit. Kapalua Bay, LLC was created as a joint venture of which MLP held 51%. Churchill was a senior executive officer of MLP, President of Kapalua Bay, and an executive officer of Kapalua Realty, which participated in all aspects of the Project, such as financing, development, and construction.

In their second amended complaint, the underlying plaintiffs alleged nine Counts against the defendants, including breach of fiduciary duty. It was alleged that defendants were not transparent and kept owners in the dark regarding the status of the project. Several allegations named Churchill individually and described his alleged material misrepresentations to the underlying plaintiffs regarding the project's financing.

Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii

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

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Mock-Up Work Raises Confidence in Radical Steel Structure

April 11, 2018 — Engineering News-Record

The steel sector is so excited about structural engineer Ron Klemencic’s composite steel superstructure, expected to speed office tower construction, that at least three steel fabricators are studying it, many months before erection is set to begin on Seattle’s 850-ft-tall “proof of concept.”

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

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Construction Management Fee Exclusion Bars Coverage

April 11, 2018 — Tred R. Eyerly - Insurance Law Hawaii

The general contractor was not entitled to a defense based upon an exclusion for construction management fees. Houston Cas. Co. v. Cavan Corp. of NY, Inc., 2018 N.Y. App. Div. LEXIS 1138 (N.Y. App. Div. Feb. 20, 2018).

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

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Solus Says It May Buy Hovnanian Bonds to Cut Loss From CDS

April 11, 2018 — Erik Schatzker and Sridhar Natarajan – Bloomberg

Hedge fund Solus Alternative Asset Management is considering an escalation in its battle with Blackstone Group LP over a homebuilder’s controversial debt refinancing.

After suing Blackstone’s GSO credit unit and Hovnanian Enterprises Inc. for engineering a credit-default swaps payout that’s leaving Solus with steep losses, the hedge fund’s CEO, Chris Pucillo, said in a Bloomberg Television interview that he may just buy the builder’s bonds to limit his losses and cut Blackstone’s profit.

Reprinted courtesy of Erik Schatzker , Bloomberg and Sridhar Natarajan, Bloomberg

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Lorman Live Webinar: California Contractor License Law Update

April 11, 2018 — Laura Parsons - CDJ STAFF

Earn AIA, CLE, or ICC credit while attending this live Webinar led by attorney Paul W. Berning. Topics include Harsh Penalties, Big Areas of Risk, Obligations Imposed on Contractors by Statute, Special Requirements for Home Improvement Contracts, and Dispute Resolution.

Live Webinar
April 20, 1:00pm – 2:30pm EST

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Repairing One’s Own Work and the one Year Statute of Limitations to Sue a Miller Act Payment Bond

Wednesday, April 11, 2018 — David Adelstein - Florida Construction Legal Updates

When it comes to Miller Act payment bond claims, repairing one’s own work does NOT extend the one year statute of limitations to file suit on a Miler Act payment bond. Belonger Corp., Inc. v. BW Contracting Services, Inc., 2018 WL 704379, *3 (E.D. Wisconsin 2018) (“The courts that have considered this question tend to agree that, once a subcontractor completes its work under the subcontract, repairs or corrections to that work do not fall within the meaning of ‘labor’ or ‘materials’ and, as such, do not extend the Miller Act’s one-year statute of limitations.”).

Well, what if the subcontractor was repairing its own work due to an issue caused by another subcontractor?

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

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

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Eighth Circuit Considers Judicial Estoppel in Hazardous Substance Release-Related Personal Injury Case

Wednesday, April 11, 2018 — Anthony B. Cavender - Gravel2Gavel Construction & Real Estate Law Blog

On April 5, the U.S. Court of Appeals for the Eighth Circuit decided the case of Kirk v. Schaeffler Group USA, Inc., et al., a personal injury action commenced in the U.S. District Court for the Western District of Missouri alleging injury resulting from the release of thousands of gallons of trichloroethylene (TCE) at the FAG Bearings Corporation’s (FAG Bearings) facility in Joplin, MO. The Court of Appeals reversed the District Court’s judicial estoppel ruling on the successor liability issue and concluded that the jury’s verdict on compensatory damages stands but their general verdict requires a new trial on Plaintiff’s punitive damages claim against FAG Bearings.

Reprinted courtesy of Anthony B. Cavender, Pillsbury Winthrop Shaw Pittman LLP

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

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Are Proprietary Specifications Illegal?

Wednesday, April 11, 2018 — Wally Zimolong – Supplemental Conditions

A friend came to me with a question regarding a case he was working: “can a public owner require that bidders use a specific brand name product?” “Of course not,” I said “proprietary specifications are illegal.” Or, at least that’s what I assumed. To my surprise, the law in the Commonwealth of Pennsylvania is not as clear as it is in other jurisdictions.

What is a proprietary specification?

A proprietary specification lists a product by brand name, make, model and/model that a contractor must (shall) utilize in construction. A basic example of a proprietary specification would state:

“Air Handlers shall be “Turbo Max” as manufactured by Chiller Corp.”

There are two problems with a proprietary specification (other than potentially being illegal): (a) they limit competition, and (b) invite steered contract awards. They limit competition because it limits the type of material that can be used on the project. In the example above, there could be equivalent air handlers available at a better price but the contractor could not use that lower priced product in its bid. Thus, the taxpayers end up paying more for tile. Also, contractors may not be able to secure a certain brand name product because of exclusive distribution agreements. Again, using the example above, contractor A’s competitor may have the exclusive distribution agreement with Chiller Corp.

Reprinted courtesy of Wally Zimolong, Zimolong LLC

Mr. Zimolong may be contacted at wally@zimolonglaw.com

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CONSTRUCTION DEFECT NEWS

Ninth Circuit Upholds Corps’ Issuance of CWA Section 404 Permit for Newhall Ranch Project Near Santa Clarita, CA

Wednesday, April 11, 2018 — Anthony B. Cavender - Gravel2Gavel Construction & Real Estate Law Blog

On April 9, the U.S. Court of Appeals for the Ninth Circuit, in a unanimous opinion, rejected the challenges to the U.S. Army Corps of Engineers’ (Corps) decision to issue a Clean Water Act (CWA) Section 404 permit to the Newhall Land and Farming Company (Newhall), which is planning a large residential and commercial project in Los Angeles County near Santa Clarita, CA (the Newhall Ranch project). The Newhall Ranch project, which involves the discharge of dredge and fill materials into the Santa Clara River, has been scaled back and modified, and the Ninth Circuit held that it is consistent with the CWA, the Corps’ regulations and procedures, as well as the National Environmental Policy Act (NEPA) and Endangered Species Act (ESA). The Ninth Circuit provides an excellent primer on the Section 404 permitting process. The case is Friends of the Santa Clara River v. U.S. Army Corps of Engineers.

Reprinted courtesy of Anthony B. Cavender, Pillsbury Winthrop Shaw Pittman LLP

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

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Suit Against Broker for Securing Inadequate Coverage Dismissed on Statute of Limitations Grounds

Wednesday, April 11, 2018 — Tred R. Eyerly - Insurance Law Hawaii

The insured's suit against his broker for securing a policy with insufficient policy limits was dismissed when filed more than two years after the alleged professional negligence occurred. Pritchard v. Andy Houghton Ins. Agency, 2018 Cal. App. Unpub. LEXIS 1160 (Cal. Ct. App. Feb. 20, 2018).

Pritchard requested coverage for replacement of his property in the event of a total loss by fire. He obtained a policy from Houghton.

Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii

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

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2018 Spending Plan Boosts Funding for Affordable Housing

Wednesday, April 11, 2018 — Emily Bias – Gravel2Gavel Construction & Real Estate Law Blog

On March 23, President Trump signed into law the Consolidated Appropriations Act, 2018, a $1.3 trillion spending package that includes a 12.5% increase in low-income housing tax credit allocations over the next four years, along with funding increases for several affordable housing programs. This is welcome news to affordable housing developers who have been facing funding gaps as a result of reductions in the corporate tax rate under the Tax Cuts and Jobs Act enacted in late 2017, which led to reduced pricing from equity investors.

Reprinted courtesy of Emily Bias, Pillsbury Winthrop Shaw Pittman LLP

Ms. Bias may be contacted at emily.bias@pillsburylaw.com

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CONSTRUCTION DEFECT NEWS

What is Toxic Mold Litigation?

Wednesday, April 11, 2018 — Vik Nagpal – Bremer Whyte Blog

To understand what Toxic Mold Litigation is, it is important to first identify and understand what toxic mold is. Mold is a fungus which is essentially everywhere, and certain types of mold, known as toxic mold, may cause severe personal injuries and/or property damage. Toxic mold refers to those molds capable of producing mycotoxins which are organic compounds capable of initiating a toxic response in vertebrates. Toxic mold generally occurs because of water intrusion, from sources such as plumbing problems, floods, or roof leaks.

It is this ageless life form that has spawned a new species of toxic tort claims and has had legal and medical experts debating the complex health implications that follow. Here is some information as to what toxic mold litigation is and when you should hire a lawyer for toxic mold.

Reprinted courtesy of Vik Nagpal

Mr. Nagpal may be contacted at vnagpal@bremerwhyte.com

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Contract Change #1- Insurance in the A201 (law note)

Wednesday, April 11, 2018 — Melissa Dewey Brumback – Construction Law in North Carolina

Insurance– everyone needs it; everyone would just as soon not have to deal with it. I get it, I do. Attorneys, Insurance Agents– no one likes spending time with those folk! Good news though. The changes to the A201 mean that you may end up spending less time with both!

The most important change to the Insurance requirements of the AIA contract is that most of it has moved to a new Exhibit. Why is this important? Instead of having to send the entire contract to your agent or broker, you can now send them only the section that they really need to review for compliance. This also means that if insurance policies change (as they surely will), the entire contract document does not need to be re-written– the Exhibit can be updated accordingly, leaving the rest of the A201 alone. Nice, right? This change was made to streamline insurance review and provide for that flexibility of the changing insurance market.

Reprinted courtesy of Melissa Dewey Brumback, Ragsdale Liggett PLLC

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

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Statutory Bad Faith and an Insured’s 60 Day Notice to Cure

Wednesday, April 11, 2018 — David Adelstein - Florida Construction Legal Updates

A recent case came out in favor of an insured and against a first-party property insurer in the triggering of a statutory bad faith action. Florida’s Fifth District Court of Appeal in Demase v. State Farm Florida Insurance Company, 43 Fla. L. Weekly D679a (Fla. 5th DCA 2018) held that if an insurer pays a claim after the 60-day notice to cure period provided by Florida Statute s. 624.155(3), this “constitutes a determination of an insurer’s liability for coverage and extent of damages under section 624.155(1)(b) even when there is no underlying action.

Reprinted courtesy of David Adelstein, Florida Construction Legal Updates

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

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Water Leak Covered for First Thirteen Days

Wednesday, April 11, 2018 — Tred R. Eyerly - Insurance Law Hawaii

The Florida Court of Appeals recently held the policy's exclusion for repeated water seepage over a period of fourteen days or more does not exclude loss caused by the seepage for the first thirteen days. Hicks v. Am. Integrity Ins. Co. of Florida, 2018 Fla. App. LEXIS 2616 (Fla. Ct. App. Feb. 23, 2018).

Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii

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

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