CONSTRUCTION DEFECT JOURNAL

"News and Information for Construction Defect and Claims Professionals"

CONSTRUCTION DEFECT JOURNAL - ISSUE 242749 - SATURDAY, DECEMBER 21, 2024

Lawyer using gavel on house

This case sheds light on the challenges that contractors, subcontractors, and insurers may face when disputes over liability and coverage occur.

Understanding Insurance Disputes in Construction Defect Litigation: A Review of Acuity v. Kinsale

December 17, 2024
David M. McLain – Colorado Construction Litigation Blog

Construction projects are inherently complex, and insurance coverage plays a crucial role in managing risks, especially when unforeseen issues arise. The case of Acuity v. Kinsale demonstrates the tangled web of insurance obligations, especially when multiple insurers provide coverage for a single event. This case, involving Monarch Stucco, Inc., Acuity, and Kinsale Insurance Company, sheds light on the challenges that contractors, subcontractors, and insurers may face when disputes over liability and coverage occur.

The Background of the Case
At the heart of this dispute lies a construction defect at a retirement community project in Lakewood, Colorado. Monarch Stucco, Inc. (“Monarch”), a subcontractor hired by GH Phipps Construction Company (“Phipps”), was responsible for stucco work on the project. Unfortunately, defects in the building’s envelope system, particularly Monarch’s stucco work, led to significant damage and costly repairs.

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

Reprinted courtesy of David M. McLain, Higgins, Hopkins, McLain & Roswell, LLC

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CDJ NEWS THIS WEEK



Water intrusion

Wood experienced leaks and significant water intrusion, as did other townhome owners in the same development.

Alleged Negligent Misrepresentation on Condition of Home is Not an Occurrence Causing Property Damage

December 17, 2024 — Tred R. Eyerly - Insurance Law Hawaii

The court found that even if the insured's negligent misrepresentations constituted an accident, the disclosures did not cause physical damage to the property. Wood v. USAA Cas. Ins. Co., 2024 U.S. Dist. LEXIS 180624 (D. S.C. Sept. 12, 2024).

The insured, Clinton Wood, purchased a townhome in January 2014. After the purchase, Wood experienced leaks and significant water intrusion, as did other townhome owners in the same development. Wood and the other owners retained an engineer to evaluate the cause of the water damage. The engineer determined that the water intrusion was caused by defects in the design and construction of the residence. The engineer told Wood that the proposed repairs would not adequately address and resolve the water intrusion and leaks, and that the problems would continue even if repairs were made.

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

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

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Construction worker

After almost two years' deliberation, the First Circuit last week issued its long-awaited decision in Admiral Ins. Co. v. Tocci Bldg. Corp.

First Circuit Finds No Coverage For Subcontracted Faulty Work

December 17, 2024 — Eric Hermanson & Austin Moody - White and Williams LLP

After almost two years' deliberation, the First Circuit last week issued its long-awaited decision in Admiral Ins. Co. v. Tocci Bldg. Corp.[1]: affirming on other grounds, and leaving in place a district court decision that found subcontracted faulty work was not an "occurrence" and did not lead to covered “property damage” under Massachusetts law.

The decision leaves Massachusetts among a number of states where general contractors should not expect coverage from their commercial general liability (CGL) insurers for damage falling within the contractor’s scope of work.

Since the "scope of work" – where general contractors are involved – often encompasses an entire project, contractors who want coverage in Massachusetts should take care to make alternative arrangements: transferring risk to subcontractors through indemnity provisions and additional-insured endorsements, or relying on other policy forms where available.

Reprinted courtesy of Eric Hermanson, White and Williams LLP and Austin Moody, White and Williams LLP

Mr. Hermanson may be contacted at hermansone@whiteandwilliams.com
Mr. Moody may be contacted at moodya@whiteandwilliams.com

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Homeowners Association

The dispute began when the HOA, as plaintiff, filed suit against the homeowners in Denton County District Court.

GRSM Team Wins Summary Judgment in Million-Dollar HOA Dispute

December 17, 2024 — Robert A. Bragalone & B. Ryan Fellman - Gordon Rees Scully Mansukhani

Gordon Rees Scully Mansukhani Partner Bob Bragalone and Senior Counsel Ryan Fellman won a complete summary judgment on behalf of five board members who had been added to an HOA dispute by the defendant homeowners. The GRSM team resolved the matter within just 60 days of taking over the case, bringing an end to a legal battle that had lasted more than four years.

The dispute began when the HOA, as plaintiff, filed suit against the homeowners in Denton County District Court. The HOA alleged that the homeowners had violated the HOA’s Covenants, Conditions, and Restrictions by constructing a non-conforming carport and sought a declaratory judgment to resolve the issue. In response, the homeowners filed a counterclaim and third-party petition, adding the individual HOA board members to the lawsuit. They accused the board members—who were serving in a voluntary capacity—of mishandling the dispute and filed claims against them for intentional infliction of emotional distress, negligence, and gross negligence.

Reprinted courtesy of Robert A. Bragalone, Gordon Rees Scully Mansukhani and B. Ryan Fellman, Gordon Rees Scully Mansukhani

Mr. Bragalone may be contacted at bbragalone@grsm.com
Mr. Fellman may be contacted at rfellman@grsm.com

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California city palm trees ocean view

The case arose when homeowner Cheryl Lynch experienced significant property damage after her home's foundation failed and the structure began subsiding into a slope.

Construction Professionals Could Face More Liability Exposure Following California Appellate Ruling

December 17, 2024 — Jamison Rayfield & Brian Slome - Lewis Brisbois

San Diego/San Francisco, Calif. - The California Court of Appeal recently reversed a summary judgment ruling in favor of a geotechnical engineering firm that had conducted a brief inspection of a residential construction project's footing trench for $360. The case arose when homeowner Cheryl Lynch experienced significant property damage after her home's foundation failed and the structure began subsiding into a slope. Lynch sued Peter & Associates for professional negligence and nuisance, despite having no direct contractual relationship with the firm, which had been hired by her contractor to perform the geotechnical inspection.

The court distinguished this case from Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, which had limited auditors' professional duty to third parties, noting that Bily dealt with purely economic damages, whereas Lynch involved physical property damage, making Bily's policy concerns about unlimited liability inapplicable. The court emphasized that construction professional negligence cases, particularly those involving residential property damage, warrant a different analysis than cases involving economic loss.

Reprinted courtesy of Jamison Rayfield, Lewis Brisbois and Brian Slome, Lewis Brisbois

Mr. Rayfield may be contacted at Jamison.Rayfield@lewisbrisbois.com
Mr. Slome may be contacted at Brian.Slome@lewisbrisbois.com

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PFAs

These are likely the first in a line of many PFAS regulations that will emerge as the harmful effects of PFAS are further understood.

Sources of Insurance Recovery for Emerging PFAS Claims

December 17, 2024 — Jasjeet K. Sahani - Saxe Doernberger & Vita, P.C.

This year, the Environmental Protection Agency (“EPA”) issued its first-ever national, legally enforceable drinking water standard to protect communities from exposure to harmful per-and polyfluoroalkyl substances (“PFAS”), also known as “forever chemicals.”[1] In addition, the Food and Drug Administration announced that grease-proofing materials containing PFAS are no longer being sold for use in food packaging in the United States.[2] These are likely the first in a line of many PFAS regulations that will emerge as the harmful effects of PFAS are further understood. With this increasing regulatory focus on PFAS and their harmful effects, companies whose operations might involve these substances should be aware of what they are and potential sources of recovery for claims that arise from their omnipresence.
PFAS Background

According to the EPA, PFAS are widely used, long-lasting chemicals which break down slowly over time.[3] PFAS can be found in thousands of items, including, but not limited to: pots and pans, cleaning products, fabric and leather coatings, firefighting foam, carpeting, roofing materials, paints, sealants, caulks, and adhesives.[4] Additionally, manufacturing processes, waste storage, and treatment sites commonly release PFAS into the air, soil, and water.[5]

Ms. Sahani may be contacted at JSahani@sdvlaw.com

Reprinted courtesy of Jasjeet K. Sahani, Saxe Doernberger & Vita, P.C.

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Licenses label on file folder

The court rejected arguments from the vendor that "it did not need a contractor’s license because it ‘acted at the continuous direction’” of its client, and did not provide “services related to a construction project."

Deferred Maintenance?

December 17, 2024 — Daniel Lund III - Lexology

A Tennessee-based “outsourced maintenance vendor” to an engine company filed suit in Louisiana state court seeking to recover nearly $150,000 on “open account,” for work previously performed. The engine company removed the case to the Federal District Court in New Orleans and asserted as a defense that the vendor lacked a proper Louisiana construction contractor’s license. The engine company filed a motion for summary judgment based on the defense.

Under Louisiana law, a contract between parties is “absolutely null”--considered to have never existed--where one of the parties performed services without a required Louisiana contractor’s license, and the combined work reaches a $50,000 threshold. The engine company asserted that the vendor performed typical construction contractor work, including plywood flooring, applied epoxy to concrete flooring, erected part of a commercial carport, undertook certain heavy demolition, and installed fences, guardrails, and wire racks.

Mr. Lund may be contacted at daniel.lund@phelps.com

Reprinted courtesy of Daniel Lund III, Phelps

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Person signing contract

When you are entering a construction contract, whether as an owner, general contractor, or subcontractor, be sure to use your instincts.

Another Reminder that Your Construction Contract is Only as Good as Those Signing It

December 17, 2024 — Christopher G. Hill - Construction Law Musings

Here at Construction Law Musings, we beat the constant drum that “the contract is king” and “draft a good and well-worded construction contract” consistently. As a Virginia construction attorney, I stand by these statements and fully endorse a well-written construction contract. Such a contract will set expectations and provide the rules for your deal (particularly in the commercial context). Without this solid foundation (yes, I see the potential construction pun), when there are issues on the job site, there will be no baseline for how to resolve those issues.

That said, I am also reminded on an almost daily basis that humans interact with these contracts. People negotiate the contracts and are the main forces that drive the success (or failure) of the construction project. Money is involved (often a lot of it) and there can at times be temptations to try and squeeze one last dollar out of the job despite what the contract says. Even the strongest contract cannot act as real-time protection against one party that refuses to comply with the contract and its performance or payment terms.

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

Reprinted courtesy of The Law Office of Christopher G. Hill

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Pen lying on Contract

Attorney Ken Rubinstein says contractors should anticipate possible material prices spikes again.

With Trump's Tariff Talk, Time to Negotiate for Escalation Clauses in Construction Contracts

December 17, 2024 — Richard Korman - Engineering News-Record

Remember 2019? That’s when contractors faced sudden material price surges from tariffs during then-President Donald Trump’s first term in office. How about 2021? That's when contractors saw new price surges and long delivery delays because of Covid-19.

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

Reprinted courtesy of Richard Korman, ENR

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Solar energy panels

Shellka Arora-Cox and Laura Pagliarulo get down to the nitty-gritty in a discussion of the interplay of solar power capacity, generation and land use.

Resilience: Transforming the Energy Sector – Navigating Land Issues in Solar and Storage Projects | Episode 3 (11.14.24)

December 17, 2024 — Pillsbury's Construction & Real Estate Law Team - Gravel2Gavel Construction & Real Estate Law Blog

In the latest episode of the Resilience podcast, colleague Shellka Arora-Cox and Laura Pagliarulo, CEO and founder of SolaREIT, get down to the nitty-gritty in a discussion of the interplay of solar power capacity, generation and land use.

(Editor’s note: The following transcript has been edited for clarity.)

Welcome to Resilience, the vodcast where we talk about the most pressing challenges and the biggest opportunities in the energy sector. I’m your host, Shellka Arora-Cox, a partner at Pillsbury Winthrop Shaw Pittman. I’m thrilled to have Laura Pagliarulo, the CEO and founder of SolaREIT, with me today.

Reprinted courtesy of Pillsbury's Construction & Real Estate Law Team

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Woman athlete drinking water on stairs

Designed for the Kansas City Current by the women-led architecture firm Generator Studio, CPKC Stadium aims to revive an urban waterfront without public funds.

In Kansas City, a First-Ever Stadium Designed for Women’s Sports Takes the Field

December 17, 2024 — Mark Byrnes - Bloomberg

The Kansas City Current won its first-ever at-home playoff match on Nov. 9, a breakthrough for the team playing its fourth season in the National Women’s Soccer League. Although the Current’s postseason push ended a week later in a semifinals loss, women’s soccer nevertheless returns to Kansas City, Missouri, for the national championship on Nov. 23.

The title match will be a landmark for all of women’s sports: CPKC Stadium, the new home for the Current and host of the NWSL championship game, is the first purpose-built women’s professional sports stadium in the world.

Designed by Generator Studio, a women-led firm based in Kansas City, CPKC Stadium gives the young franchise a permanent base while providing inspiration for other women’s clubs looking for equal footing in an increasingly competitive and expensive era of stadium development. The Current played their first match at CPKC Stadium to a sellout crowd this spring, and attendance hasn’t dropped since.

Reprinted courtesy of Mark Byrnes, Bloomberg

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Robot doing construction work

Getting educated on the beginning basics of artificial intelligence is the best way to ensure it works right for your company.

AI in Construction: What Does It Mean for Our Contractors?

December 17, 2024 — Patrick Scarpati - Construction Executive

Artificial intelligence is revolutionizing the construction industry by enhancing efficiency, safety and decision-making throughout the project lifecycle. AI in construction involves the application of advanced technologies like machine learning, computer vision and data analytics to various construction processes. Through AI, machines can learn and imitate human cognitive functions.

The possibilities may sound endless, but as an industry traditionally looking from the outside in at technology, we must first step back to educate ourselves on the basics. This paper is meant to function as a starting point in your journey to understand AI and its potential impact on the construction industry. By reading through definitions, construction use cases and considerations, the reader should walk away with a base level of knowledge to ensure they can actively participate in future conversations on AI in construction.

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

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Clock split red half white half

The experts answering questions were representatives from two Finnish contractors (COfLOW and Fira), a client organization (HOAS), a building materials retailer (STARK), and a research institute.

How Finns Cut Construction Lead Times in Half

December 17, 2024 — Aarni Heiskanen - AEC Business

Rakennustieto organized a Q&A on December 5, 2024, titled “Halving Construction Lead Times—Responsible or Irresponsible?” The discussion focused on speeding up residential construction and renovations.

The experts answering questions were representatives from two Finnish contractors (COfLOW and Fira), a client organization (HOAS), a building materials retailer (STARK), and a research institute.

Can you halve construction lead time without sacrificing quality?
Jaana Matilainen of Rakennustieto asked the panelists whether halving construction time is a realistic goal today, whether they can provide any examples, and if the speed-up has increased or decreased quality.

Mr. Heiskanen may be contacted at aec-business@aepartners.fi

Reprinted courtesy of Aarni Heiskanen, AEC Business

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US Existing-Home Sales Rose in October After Mortgage-Rate Drop

December 17, 2024 — Michael Sasso - Bloomberg

Sales of previously owned US homes rose in October by the most since earlier this year, as buyers took advantage of a dip in mortgage rates in the previous month.

Contract closings increased 3.4% from a month earlier — the most since February — to a 3.96 million annualized rate, according to data released Thursday by the National Association of Realtors. That was in line with the median estimate in a Bloomberg survey of economists and followed the weakest pace since late 2010.

Reprinted courtesy of Michael Sasso, Bloomberg

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Construction workers

Evaluating the Effect of Historic Masculinity on the Construction Industry's Future

December 17, 2024 — Evelyn Long - Construction Executive

Traditional masculine societal norms have historically prioritized physical strength, emotional suppression and self-reliance, values that are still prominent within the male-dominated construction industry. While the industry has increased efforts towards inclusion, diversity and merit, along with bolstered mental-health support, the embedded history of traditional masculine values within construction has taken a toll on America’s top labor-intensive sector. A healthier, more inclusive future may be on the horizon, but there are still workforce issues to be addressed and ways to overcome them.

THE CULTURAL ROOTS OF MASCULINITY IN CONSTRUCTION
While construction workers are generally loyal to their trade and exhibit a strong work ethic, many outside of the industry—women, young workers, etc.—perceive the field as man’s work due to its highly physical nature, including operating machinery and lifting heavy materials while working in hazardous conditions. These cultural roots stem from the early labor movements and industrial growth of the 20th century.

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

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Pen resting on Surety Bond

Special Agents: The Right Surety Agent to Help You Obtain the Right Surety Bond

December 17, 2024 — Todd A. Feuerman - Construction Executive

For construction contractors, securing surety bonds is not merely a formality, but a critical aspect of business operations. Surety bonds serve as financial guarantees that contractors will fulfill their contractual obligations, providing assurance to project owners and stakeholders. However, the path to obtaining these bonds has challenges that require careful navigation and proactive communication with the surety producer and the bonding company. That is why it is vital for construction firms to maintain strong relationships with their surety agent since they are most skilled at understanding the key elements that will need to be addressed when obtaining project surety bonds.

Surety bonding lines between the contractor and surety firm are very similar to that of a banking line of credit. While a construction firm’s banking line of credit is extremely important and is underwritten with financial scrutiny, a company’s bonding line can be even more important and have a more intense underwriting process. Surety firm credit analysts are well versed in the nuances of construction firms and skilled at dissecting and evaluating financial statements and work-in-progress schedules, as well as the global operating level of a contractor.

Reprinted courtesy of Todd A. Feuerman, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

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Town hall exterior

AGC Contract Documents Forum Virtual Town Hall

December 17, 2024 — Beverley BevenFlorez – CDJ Staff

The Associated General Contractors of America (AGC) presents a virtual town hall meeting to discuss “mixing and matching different standard contract documents (and bespoke contracts) at the prime and subcontract levels.” It will also include “a micro presentation on tariffs and how they might impact private and public contracts, followed by a discussion on how you might address this issue contractually.” Attendees will learn about “subcommittee activities and announce volunteer opportunities, including one for progressive design-build.”

January 16th, 2025
Virtual Event

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San Francisco Residents Assess Damage After Storm Brings Fierce Winds, Tornado Warning

The Bay Area is cleaning up and drying out after a fierce storm moved through, bringing heavy rain and even a tornado warning, ABC 7 News Bay Area reported.

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Franklin Fire in Malibu Still Smoldering As Favorable Weather Conditions Aid in Firefight

The Franklin Fire continues to smolder in “very dangerous” terrain in Malibu, but cooler conditions this weekend are set to make the firefight easier, officials say, KTLA 5 reported.

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