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.
Divided Delaware Supreme Court Holds Highway Contractor Owes a Common Law Duty to Provide for the Safety of the Traveling Public, Above and Beyond Its Approved Traffic Control Plan
Pavik v. George & Lynch, Inc., No. 160, 2017, 2018 Del. LEXIS 133 (Mar. 23, 2018)
This case arises out of a highway reconstruction project and a car accident which occurred on the highway during non-working hours. The Delaware Department of Transportation (“DelDOT”) hired George & Lynch, Inc. (“G&L”) to repave Omar Road. The contract obligated G&L to perform its work in a manner that would provide reasonably safe passage to the traveling public and to provide for the protection and safety of the general public. DelDOT approved G&L’s traffic control plan, which provided for placement of temporary warning signs during working hours and permanent warning signs advising travelers of road work ahead. As part of its work, G&L performed cold in-place recycling, a process by which asphalt is removed, recycled, and reapplied as a base layer. As the recycled asphalt cures, the road surface can support traffic, but there is a risk that raveling—a condition in which the base layer breaks apart—can occur.
It was during a curing period that the accident occurred. On Friday, after asphalt had been installed and began to cure, the road was reopened. On Saturday, after a thunderstorm, DelDOT received complaints of potholes on the road. On Sunday, DelDOT patched the potholes and later that night, the driver lost control of her car and ran off the road. Plaintiffs claimed the accident was caused by raveling and that G&L was negligent because it failed to provide warning signs about the road’s condition during the non-working hours. G&L argued that it had no duty to erect additional signs and that DelDOT’s repairs broke the chain of causation.
How Much Control Is Too Much Control? Federal Court in Florida Holds Designers’ Supervision of Project and Issuance of Design Documents Creates Control Over—And Potential Tort Liability To—Project Contractors
Suffolk Constr. Co. v. Rodriguez & Quiroga Architects Chtd., 2018 U.S. Dist. LEXIS 42652 (S.D. Fla. Mar. 15, 2018)
This case arises out of the design and construction of a science museum in Miami, Florida (the “Project”). Museum of Science, Inc. (“MSI”), the Project owner, executed several agreements relating to the Project, including: (i) an agreement with Defendant Rodriguez and Quiroga Architects Chartered (“R&Q”) to serve as executive architect; (ii) an agreement with Defendant Grimshaw Architects P.C. (“Grimshaw”) to serve as the design architect; (iii) a construction services contract with Plaintiff Suffolk Construction Co. (“Suffolk”); and (iv) a direct contract with Suffolk’s subcontractor, Plaintiff Baker Concrete Construction, Inc. (“Baker”) for construction services after MSI terminated Suffolk for convenience. After execution of these agreements, R&Q executed contracts with Defendant Fraga Engineers, LLC (“Fraga”) for mechanical, electrical, and plumbing design services, and with Defendant DDA Engineers, P.A. (“DDA”) for structural design and engineering services.
Suffolk and Baker (collectively, “Plaintiffs”) filed suit for negligence against R&Q, Grimshaw, Fraga, and DDA (collectively, “Defendants”), claiming that by issuing deficient design documents, Defendants breached their duties owed to Plaintiffs causing Plaintiffs to incur economic losses. All Defendants but R&Q moved to dismiss the claims, arguing that they had no supervisory role or control over Plaintiffs, as demonstrated by the fact that their contracts with MSI did not designate them as “supervisory architects,” and thus, owed no duty to Plaintiffs.