Construction Law Watch

Phantom Menace: Beware of Unknown Unknowns in Contracts

Posted in Construction Contracts

Written contracts generally provide a very stable method of making promises enforceable. Reducing all promises to a single self-contained writing reduces surprises and provides a single yardstick to measure compliance. Unfortunately, many contracts today – especially construction contracts – tend to be composites; assemblages of different documents into a single contract. We’ll call this a “Compound Contract” for ease of reference. Compound Contracts have the benefit of avoiding excessive cut-and-paste work, but also have a nasty potential side effect: parties may not know what is in their contract. Thus, contractors and owners are sometimes surprised when they seek to enforce certain promises, only to learn that those promises were altered by attachments to the main contract form.

Perhaps the simplest form of Compound Contract is a one-page invoice or bid with a statement at the bottom that says, “subject to terms and conditions on reverse side.” Flip the document over, and you’ll find a clump of fine print, which may add contour, nuance, or red tape to what was otherwise a clear exchange of money for goods or services.

The more complicated Compound Contract may have “terms and conditions” from numerous other documents intended to be attached to the contract itself, and all of which alter the parties’ promises in ways large and small. Today’s Compound Contracts can be several inches thick, making substantive review difficult. Continue Reading

Recent Oregon Supreme Court Case Suggests ‘Limited Liability’ Of LLCs Not So Limited

Posted in Construction Defect, LLC

The Oregon Supreme Court recently decided a case with serious implications to the liability of LLCs and their members. Taking note of the case, Cortez v. Nacco Material Handling Group will enable aggrieved homeowners and their attorneys to practice more effective construction defect litigation.

The plaintiff, Antonio Cortez, worked for a lumber mill organized as an LLC. He was badly injured when a forklift struck him during a stroll across company premises. Cortez received worker’s compensation benefits and then opted to go up the chain, suing the LLC’s owner and sole member manager, a company called Swanson Group, Inc.

Cortez’s principal allegations were twofold, only one of which is addressed here. He argued that Swanson was liable in negligence and under Oregon’s Employer Liability Law for failing to take safety precautions to protect employees. The trial court offered a cold reception, entering summary judgment in favor of Swanson. The court of appeals reversed and affirmed the trial court, each in part.

Not to be deterred, Cortez appealed again, and the Oregon Supreme Court stepped in to finally resolve the question. Continue Reading

Federal Court in Florida Finds Insurer Has No Duty to Defend Insured During Chapter 558 Process

Posted in Construction Defect, Florida, Insurance Coverage

Recently, a federal district court in Florida held that the Chapter 558 process is not a “suit” under a commercial general liability policy and the insurer had no obligation to defend the insured during this process. Under Chapter 558 of the Florida Statutes, before a lawsuit can be commenced concerning construction defects, the claimant must provide notice of the claim to the contractor and provide the contractor with an opportunity to resolve the claim (often referred to as the “558 process”).

This process can be expensive as it may require the hiring of counsel and experts and entail property inspections. Normally, a contractor will send the 558 Notice to its insurer and request the insurer hire counsel to protect the contractor’s interests. In most cases, the insurers will abide. Unfortunately for one contractor, its insurer denied to do so.

In Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, Altman Contractors, Inc. (“Altman”) was served with a Chapter 558 Notice of Claim regarding the construction of a high-rise residential condominium. Altman forward the Notice to its insurer, Crum & Forster, and demanded that Crum & Forster defend and indemnify Altman during the process. Crum & Forster denied that it had a duty to defend Altman because the matter was not in “suit.” Altman filed suit against Crum & Forster for breach of contract as well as for a declaration determining whether Crum & Forster owed Altman a duty to defend the 558 process. Both Altman and Crum & Forster filed motions for summary judgment on these issues. Continue Reading

Protecting Against Disclosure of Prior Settlement Agreements at Trial

Posted in Construction Defect, Oregon Court of Appeals

On July 22, 2015, the Court of Appeals reaffirmed its prior decision in Alfieri v. Solomon, 263 Or App 494 (2014), petition for review granted, 356 Or 516 (2014) that confidential communications made during and/or in furtherance of a mediation proceeding are protected and shall not be admitted into evidence in any subsequent adjudicatory proceeding under ORS 36.22. Yoshida’s Inc. v. Dunn Carney Allen Higgins & Tongue LLP, 272 Or App 436 (2015). ORS 36.22 states in pertinent part: Continue Reading

Florida Appellate Court Revives $15 Million Construction Claim

Posted in Condominium, Construction Defect, Florida

Can three days make a difference when filing a construction defect lawsuit? Absolutely! In Cypress Fairway Condominium v. Bergeron Construction Co. Inc., three days was the difference between the claim being time barred and timely filed.

Under Section 95.11(3)(c), Florida Statutes, an action founded on the design, planning, construction, or an improvement to real property must be commenced within ten years after the latest of four specific events: actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract. Continue Reading

Oregon Bill to Revise “Certificate of Merit” Statute for Lawsuits against Architects and Engineers Should Do More to Clarify Protections.

Posted in Construction Claims

The Oregon Legislature is currently considering Senate Bill 383, which would revise Oregon’s “certificate of merit” statute, ORS 31.300. The Bill has already passed through the Senate Judiciary Committee, and is now before the House Committee on Consumer Protection and Government Effectiveness. The Bill would add a requirement that a court filing against an architect or engineer include a summary or the conduct complained of, and would narrow who can certify claims against what type of disciplines. A “certificate of merit” law with clear standards and processes is more likely to achieve the goal of limiting actions against design professionals to meritorious claims. SB 383 muddies the waters, and worse, conflicts with Oregon’s Rules of Civil Procedure which lawyers must follow.

“Certificate of merit” statutes in Oregon, and other states, are designed to limit frivolous lawsuits against design professionals by requiring that the attorney filing the lawsuit certify that the attorney has consulted with another design professional who will testify to the standard of care required in the profession, and that the standard of care was breached. Senate Bill 383’s proponents wish to strengthen and clarify the Oregon statute. But Senate Bill 383 does not go far enough, and is not specific enough, to achieve what the Bill’s proponents wish to achieve. Instead, in its current form, it simply invites further litigation and questions. Worse, it conflicts with Oregon’s Rules of Civil Procedure, which attorneys must follow in Oregon. Continue Reading

The Oregon Court of Appeals Weighs in Again on Releases

Posted in Release of Liability

Last month, in Becker v. Hoodoo Ski Bowl Developers, Inc., the Oregon Court of Appeals issued another decision concerning whether a standardized release of liability bars claims from an injured customer. Following the lead of the earlier Oregon Supreme Court case of Bagley v. Mt. Bachelor, Inc., the Court of Appeals decided that Hoodoo Ski Bowl’s release of liability was unenforceable because it was unconscionable.

In this case, the plaintiff, Tabitha Becker was injured in the process of boarding a lift at Hoodoo. The chair of the lift was upright, and it struck Ms. Becker as she tried to move out of the lift area. She was injured and filed her lawsuit against Hoodoo Ski Bowl, arguing that Hoodoo was negligent. Ms. Becker’s husband had bought the lift ticket for her that day, and on the reverse side of the ticket was the type of release language many are familiar with. In particular, the release stated that:


Eleventh Circuit Provides Critical Path to Defense and Indemnity

Posted in Construction Claims, Construction Defect, Insurance Coverage

On April 7, 2015, a federal appellate court issued a critical opinion on insurance coverage for construction-defect cases. In Carithers v. Mid-Continent Casualty Company, the Eleventh Circuit held that (1) the duty to defend is triggered unless there is certainty (factual and legal) that no coverage exists; (2) there is coverage under a contractor’s commercial general liability policy for property damage caused by one subcontractor’s work to another subcontractors work; and (3) “rip and tear” costs are covered “property damage.” Continue Reading

What’s behind the insurance curtain: Oregon levels the playing field

Posted in Construction Defect, Discovery Rule, Insurance Coverage, Oregon Supreme Court, Uncategorized

With the sanctity of any time-honored tradition, insurers resist discovery of their claim file with the ritualistic incantation that it is protected from discovery because it was prepared in anticipation of litigation, and therefore qualifies as work product.  To support this argument, oftentimes insurers outsource the adjustment of the claim (a normal business activity) to outside attorneys, and then refuse to provide the attorney’s file, or communications with the insurer and the attorney, on the basis that those documents are protected by the attorney-client privilege. Courts across the county have been increasingly dismissive of these arguments, holding that an insurer cannot cloak its claim file with privilege simply by paying a lawyer to do what is otherwise an everyday claim handling activity for the insurer.  Oregon finally has a chance to weigh in on this issue and level the playing field for insureds.  Read more on The Policyholder Report blog.

Management of Reconstruction Projects—Tips for Owners and Associations

Posted in Community Associations, Construction Contracts, Construction Defect, Construction Defect Repairs, Construction Management, Homeowners Association, Risk Management

After having successfully recovered, borrowed, or assessed funds for the repair of damaged buildings, an owner, property manager, or homeowners association (I’ll use the term “Owner” in this piece for brevity) must shift gears, and determine how most wisely to spend those funds.  The Owner may not have experience with significant construction projects, and likely must rely on outside expertise for management of reconstruction.

  1. Continuation with Forensic Consultants

If the Owner engaged a forensic analyst to study the damage, continuing a relationship with that analyst through the construction project usually makes sense. The analyst can be hired to continue assistance in a number of capacities: convert its recommended repairs to formal construction drawings, review and administer construction through completion, or provide peer review and comment on the work of others. The Owner should confirm with the analyst up front whether it has that capacity and expertise to perform these functions, and meet with the personnel at the firm who would be assigned such duties. Continue Reading