Michael Schwartz, Kristin Jones, and John Gazzola were published in the August 2023 Pratt’s Government Contracting Law Report article, “Suppliers Beware: U.S. Government Continues Prosecution of Disadvantaged Business Enterprise Fraud Cases Involving Supplies Passed Through Disadvantaged Business Enterprises.”
PA Appellate Court Issues Strong Reminder: CASPA’s Fee-Shifting Mechanism Applies to Subcontractors, Contractors, and Owners Who Prevail in Payment Disputes
SDSP, LLC v. Attias, 2023 Pa. Super. Unpub. LEXIS 1518
The Superior Court of Pennsylvania vacated a multimillion-dollar award to subcontractors arising from a payment dispute, and remanded the matter to the trial court for an attorney’s fees award to the developer who prevailed on appeal. This is a strong reminder to all tiers of the construction chain that Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA) allows substantially prevailing parties — whether owners, contractors, or subcontractors — to recover fees incurred in proceedings involving payment claims.
Statutory Remedies for Non-Payment on Public and Private Construction Projects
This article summarizes statutory remedies available to contractors, subcontractors and material suppliers when upstream parties fail or refuse to release payments on public and private construction projects. Entities furnishing work or materials have several statutory means to enforce their rights to payment, including mechanic’s liens, payment bond claims, and/or claims for violation of state prompt
Pennsylvania Appellate Court Affirms Dismissal of In-State Subcontractor’s Suit Against Out-of-State General Contractor for Lack of Jurisdiction, Despite “Long-Term and Ongoing Contractual Relationships”
Bean Sprouts LLC v. LifeCycle Construction Servs. LLC, No. 001268-CV-2021 (Pa. Super. Feb. 17, 2022)
The Superior Court of Pennsylvania recently raised the bar for state courts to assert jurisdiction over out-of-state defendants in actions brought by residents arising from out-of-state projects.
Pennsylvania Appellate Court Affirms Homeowner’s Recovery Against Developer on Tort Claims, Despite Contract and Challenges Based on Gist of the Action Doctrine, Economic Loss Rule, and Statute of Limitations
Dolan v. Hurd Millwork Co., No. 2951 EDA 2015, 2019 BL 229344 (Pa. Super. Ct. June 21, 2019)
This cases arises out of defective windows installed in a residential construction project. In 1999, Leo J. Dolan purchased a custom home from Bentley Homes, Ltd. and its affiliates (“Bentley Homes”). Hurd Millwork Company, Inc. provided many of the home’s windows. Dolan almost immediately observed issues in the home’s construction, including air and water leaks around the windows. Bentley Homes, however, led him to believe the issues had been fixed.
Continue Reading Pennsylvania Appellate Court Affirms Homeowner’s Recovery Against Developer on Tort Claims, Despite Contract and Challenges Based on Gist of the Action Doctrine, Economic Loss Rule, and Statute of Limitations
Supreme Court of New York Rejects Property Owner’s Request for Further Itemization of Mechanic’s Lien, Holding Production of Invoices Detailing the Quantity, Price and Date of Delivery of Materials Is Not Required
Matter of Red Hook 160 LLC v. Borough Constr. Grp. LLC, No. 524909/18, 2019 BL 122210 (N.Y. Sup. Ct. Mar. 19, 2019)
This cases arises out of a project owner’s request for further itemization of amounts claimed in a construction manager’s mechanic’s lien. Red Hook 160 LLC (“Red Hook”), the owner of the property sought to be liened, demanded a revised itemized statement of the mechanics’ lien filed by Borough Construction Group, LLC (“BCG”), the construction manager hired in connection with the construction and renovation of a six story building located at 160 Imlay Street in Kings County, New York.
Continue Reading Supreme Court of New York Rejects Property Owner’s Request for Further Itemization of Mechanic’s Lien, Holding Production of Invoices Detailing the Quantity, Price and Date of Delivery of Materials Is Not Required
Federal Court in Maryland Holds Subcontractor Waived Right to Bring Labor Inefficiency Claim Despite Voicing ‘Expression[s] of Frustration’ and ‘General Complaints’ of Mismanagement Throughout Project
Hagen Constr. Inc. v. Whiting-Turner Contracting Co., No. JKB-18-1201, 2019 BL 36862 (D. Md. Feb. 04, 2019)
This case arises out of the construction of a pediatric outpatient center in southern New Jersey. Plaintiff subcontractor Hagen Construction, Inc. (“Hagen”) filed suit in New Jersey state Court against defendant general contractor Whiting-Turner Construction Co. (“W-T”), seeking reimbursement for labor inefficiency costs incurred as a result of W-T’s alleged project mismanagement. Hagen claimed it incurred additional costs to repeat work and remobilize to multiple areas because it was not afforded unimpeded access or timely supply of necessary materials and information. Once the case was removed and transferred to Maryland federal Court, W-T moved for partial summary judgment on the portion of Hagen’s breach of contract claim reflecting labor inefficiency costs.
Continue Reading Federal Court in Maryland Holds Subcontractor Waived Right to Bring Labor Inefficiency Claim Despite Voicing ‘Expression[s] of Frustration’ and ‘General Complaints’ of Mismanagement Throughout Project
The Buckeye State Bucks Recent Trend: Ohio Supreme Court Holds That Property Damage Caused by a Subcontractor’s Faulty Work Does Not Constitute an “Occurrence” Covered Under CGL Policies
Ohio N. Univ. v. Charles Constr. Servs., 2018 Ohio LEXIS 2375 (Oct. 9, 2018)
This post was published in the National Association of Credit Management eNews on December 20, 2018.
This case arose out of the construction of an inn and conference center at Ohio Northern University (“ONU”). After completion of the project, ONU discovered water damage and structural defects in the work and filed suit for breach of contract against its general contractor, Charles Construction Services, Inc. (“Charles”). Charles, in turn, sought defense and indemnity from its commercial general liability insurer, Cincinnati Insurance Company (“CIC”). As required by ONU, Charles’s policy contained a “products-completed operations-hazard” (“PCOH”) clause and terms specifically related to work performed by subcontractors. Under Charles’ policy, the insurance covered “property damage” only if it was caused by an “occurrence,” defined as “[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions.” “Accident,” however, was not defined. CIC intervened in ONU’s suit, seeking a declaratory judgment that it was not required to defend or indemnify Charles.
The trial court granted CIC summary judgment, holding that CIC had no duty to indemnify or defend Charles. The trial court based its holding on Westfield Inc. Co. v. Custom Agri Sys., Inc., 979 N.E.2d 269, a 2012 decision in which the Ohio Supreme Court concluded that claims for faulty workmanship are not fortuitous, and therefore, not claims for “property damage” caused by an “occurrence” covered by a CGL policy.
Continue Reading The Buckeye State Bucks Recent Trend: Ohio Supreme Court Holds That Property Damage Caused by a Subcontractor’s Faulty Work Does Not Constitute an “Occurrence” Covered Under CGL Policies
Fifth Circuit Holds Settlement Proceeds Received by General Contractor From Subcontractors Constitute “Other Insurance” Which Offsets the Liability of the Excess Carrier and General Contractor Bears the Burden of Properly Allocating the Proceeds Among Covered and Non-Covered Claims
Satterfield & Pontikes Constr., Inc. v. United States Fire Ins. Co., 2018 U.S. App. LEXIS 21488 (5th Cir. Aug. 2, 2018)
This case arises out of an excess insurance provider’s refusal to cover damages incurred by the insured general contractor after it was terminated from a construction project. Satterfield & Pontikes Construction, Inc. (“S&P”) served as general contractor for the Zapata County courthouse project and purchased two layers of insurance to cover potential liabilities: commercial general liability insurance and excess insurance. Excess insurance, provided by United States Fire Insurance Company (“Excess Carrier”), would apply when the first layer was exhausted. S&P also required its subcontractors to purchase insurance and execute indemnity agreements to cover damages they caused to the project.
During the project, Zapata County terminated S&P and filed suit to recover the damages it incurred to complete and correct S&P’s work. At arbitration, Zapata County was awarded over $8 million in damages, fees, and costs. S&P covered over $4 million of the award through settlement agreements it executed with its subcontractors—which did not specifically allocate the proceeds to the damages or liabilities they covered—and nearly $3 million from its commercial general liability insurance providers. S&P sought to obtain coverage for the balance of the award from its Excess Carrier, but the Excess Carrier refused to pay any amount, arguing that the first layer of insurance had not been completely exhausted. S&P filed suit for breach of the policy, arguing that its Excess Carrier was obligated to make up the shortfall of the arbitration award. The Excess Carrier argued that not all of the damages awarded at arbitration were covered under its policy (such as mold, attorney’s fees, and prejudgment interest) and that those that may have been covered were likely satisfied by the subcontractor settlements.
Continue Reading Fifth Circuit Holds Settlement Proceeds Received by General Contractor From Subcontractors Constitute “Other Insurance” Which Offsets the Liability of the Excess Carrier and General Contractor Bears the Burden of Properly Allocating the Proceeds Among Covered and Non-Covered Claims
Supreme Court of Minnesota Holds Ventilator Motor Incorporated Into a Home’s HVAC System Qualifies as “Machinery” Excepted From the State’s Ten-Year Statute of Repose
Great N. Ins. Co. v. Honeywell Int’l, Inc., No. A16-0997, 2018 Minn. LEXIS 236 (May 9, 2018)
This case arises out of a residential construction project and the installation of ventilators into a home’s HVAC system. Sixteen years after completion of the work, a fire occurred in one of the ventilators, causing property damage. After paying the homeowners’ insurance claim, Great Northern Insurance (“Great Northern”), as subrogee, filed suit against McMillan Electric Company (“McMillan”), the manufacturer of the motors in the ventilators, asserting claims for product liability, breach of warranty, and negligence, including a claim for breach of a post-sale duty to warn consumers of the risk of fires in ventilator motors.
The trial court granted McMillan summary judgment concluding that Minnesota’s 10-year statute of repose barred all of Great Northern’s claims except for the post-sale duty to warn claim, which also failed because McMillan owed no such duty. The Court of Appeals reversed both holdings. On appeal, the Supreme Court affirmed the Court of Appeals’ decision that McMillan’s motor was “machinery,” to which the statute of repose does not apply.