Last week, the Oregon Supreme Court held in Goodwin v. Kingsmen Plastering (June 16, 2016), that a property owner must sue a contractor for negligent construction, if at all, within two years of when the property owner “knew or should have known of the injuries or damage that form the basis of their claims” under ORS 12.110(1). The ruling highlights the issue of “discovery,” and appears to be at odds with the Supreme Court’s ruling in Rice v. Rabb, 354 Or 721 (2014), which held that a claim for conversion or replevin must be brought within six years of the time “plaintiff knows or reasonably should know of the elements of such claims[.]” What does it take for a property owner to “discover” its claim?

Historically, the Supreme Court has written that claims accrue only after the potential plaintiff discovers “harm (i.e., injury), causation, and tortious conduct.” Gaston v. Parsons, 318 Or 247, 255-256 (1994). The Oregon Supreme Court has held that such language requires not only knowledge of “injury” in a vacuum, but also knowledge of tortious conduct and causation for that damage. Gaston. Continue Reading The Focus is on “Discovery” of Claims after Goodwin v. Kingsmen Plastering, Inc.

Recently, the Oregon Court of Appeals issued a decision that may have far reaching impacts for communities looking at whether a particular project constitutes a “capital improvement” under their Covenants, Conditions and Restrictions (more commonly known as CC&Rs). The case, known as Eagle-Air Estates Homeowners Ass’n, Inc. v. Haphey, 272 Or App 651 (2015), involved whether an assessment levied by a homeowners association to pay for certain attorney fees incurred in a prior litigation constitutes a “capital improvement,” and therefore a “special assessment” under the HOA’s CC&Rs.

Relying on Black’s Law Dictionary, the Court of Appeals found that the term capital improvement “is commonly understood to mean a permanent structural improvement to property.” (Emphasis added). The Court also cited to Webster’s Dictionary’s definition of “capital expenditure,” as further explanation of the phrase, noting that a “capital expenditure” refers to “long-term additions or betterments properly chargeable to a capital assets account.”

After analyzing the above two definitions, along with the language in the HOA’s CC&Rs regarding other types of specific capital improvements, the Court of Appeals held that “[a]n assessment to pay for attorney fees in litigation. . . is not the type of expense that an ordinary person would regard as a ‘capital improvement’.” As a result, the assessment did not constitute a “special assessment” under the HOA’s CC&Rs and was therefore not subject to any temporal limits as to how long the assessment may be issued. Continue Reading Just What Is a Capital Improvement and Does a Judgment Against an HOA Have Preclusive Effect on the HOA’S Directors and Members?

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.

The following is a report from my blog post on The Policyholder Report on November 20, 2014.

The Seventh Circuit just released an opinion in Strauss v. Chubb Indemnity Insurance on November 18, 2014, upholding coverage for insureds who discovered the presence of long-term water damage five years after their insurance policies had expired, and likely well after the statute of limitations passed for a construction-defect action. With this opinion, the Seventh Circuit joins with other jurisdictions that have determined there is coverage for long-term latent defects that go undiscovered for years.

The insureds constructed a new home in Wisconsin that was completed in 1994. They moved in and purchased insurance with various insurers through 2005. But unknown to the insureds, the defective construction in 1994 had been allowing water to infiltrate their home. These damages went undiscovered until 2010, five years after the last insurance policy had expired and likely beyond the time allowed to file a lawsuit against the negligent contractor. The insurers denied coverage, arguing that there was no coverage for the water damage because it didn’t “manifest” until 2010 and a “manifestation trigger” applies to all first-party property insurance claims. Not only is that an incorrect statement of the language of the policies, it is also a blatant misstatement of the law. The district court rejected the insurers’ arguments. So did the Seventh Circuit. Continue Reading Past the Statute of Limitations for a Construction-Defect Case? Try Looking at Your First-Party Property Policy for Coverage.

Formal design-build agreements are used by property owners in circumstances where a single firm is hired that will be responsible for both designing and constructing a project. Sometimes projects fall into this category by default.  For example, a contract that simply states the contractor will install a bill of materials, without reference to plans, is in fact a design-build agreement—but may leave unclear who is responsible for the actual design of the construction.  This can lead to numerous problems down the road.  Fortunately, the American Institute of Architects (AIA) publishes a commonly-used form for design-build agreement forms, the AIA A141. This AIA form may be worthy of consideration when choosing among starting points for a design-build project – but I recommend proceeding with caution.

The AIA recently published a 2014 update to the 2004 A141 form, and the 2004 form will no longer be available for use after 2015.  The 2014 updated form includes a variety of modifications.  Some clarify 2004 provisions, some simplify the form, and some change the risks and responsibilities of the parties.

Of particular note is that the 2014 form includes a key structural change from the 2004 from.  Continue Reading New AIA Design-Build Agreement: The Waiting Game

If you look through the general conditions (or back page provisions) of your standard construction contract, you might be surprised to see a “choice of law” provision.  This provision is a term in the contract that states that the law of another jurisdiction applies to disputes arising from the work performed or obligations incurred under the construction contract.  For example, a construction contract for a house being built in Portland, Oregon could contain a provision that in the event of a dispute between the owner and builder, Washington law will apply.  A choice of law provision may be included for a variety reasons such as an out-of-state contractor, or an out-of-state  developer, the parties’ use of an unreviewed, standard form contract, or more favorable laws for the drafting partyin other jurisdictions.  Whatever the reason, for projects built in Oregon, cherry-picking Continue Reading Choice of Law in an Oregon project? Not in THIS House!

The Bulletin in Bend, Oregon, reports on the benefits and limitations of the Construction Contractors Board’s dispute resolution process in the article, “More construction disputes could go to court.  State no longer resolves complaints through arbitration” by  Joseph Ditzler / The Bulletin, published June 27, 2014.  Read it online at the Bend Bulletin here.

 

Oregon’s lien statutes appear to have a gap in protection for architects who provide services at the request of someone other than the owner.  Because non-owners frequently hire architects, this issue should make all parties extra cautious about the nature of their contractual relationships. 

Like most states, Oregon protects payment rights for contractors, Continue Reading Obvious Gap in Oregon Lien Laws for Architects?

When the plaintiff’s claims arise out of the same transaction or occurrence as a timely filed third-party complaint.

The Florida State Supreme Court recently that a plaintiff can file claims against third-party defendants after the expiration of the Statute of Limitations, provided the third-party plaintiff filed its third-party complaint against the defendant/third-party defendants before the expiration of the Statute of Limitations and the plaintiff’s claims arise out of the same transaction or occurrence as the third-party complaint.   Continue Reading When can a plaintiff in Florida file claims outside the Statute of Limitations?

UPDATE:

The Supreme Court issued an important decision about statutes of limitations under Oregon law on January 30, 2014.  In Rice v. Rabb, 354 Or 721 (2014) the Court held that there is a discovery rule for conversion claims under ORS 12.080(4) and reversed the Court of Appeals, which held that Rice’s conversion claim was time-barred because plaintiff sued more than six years after the tort, the taking of the Queen of the Pendleton Round-Up outfit, was committed.   (See our previous post about the Court of Appeals opinion in that case for the full round-up of the facts.)  The Supreme Court concluded that Rice’s claims “accrued” when she obtained the knowledge of the tort committed on her by Rabb.  Because Rice did not know that Rabb had taken the outfit until 2007, years after Rabb took the outfit, her claim did not accrue until then.

Construction defects and damage caused by construction defects are often not immediately perceptible to owners.  Based on the reasoning of Rice v. Rabb, claims for negligent construction under ORS 12.080(3) are likely subject to a discovery rule and claims for breach of contract under ORS 12.080(1) may also be subject to a discovery rule.  Cases currently pending before the Court of Appeals may answer those questions.