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Maxum Indemnity Co. v. Robbins Co., P.C., No. 1:17-CV-01968, 2018 U.S. Dist. LEXIS 57729 (N.D. Ohio Mar. 28, 2018)

On March 21, 2018, the United States District Court for the Northern District of Ohio granted a motion for judgment on the pleadings in favor of Maxum Indemnity Co. and declared that Maxum has no duty to defend or indemnify The Robbins Company in an international arbitration initiated by a third-party, JCM Northlink, LLC.

Robbins is a designer, manufacturer, and supplier of tunnel-boring machines (“TBMs”) and was engaged by JCM to supply a TBM for Seattle’s Northgate Link Extension project to add additional light rail lines to the city’s existing public transportation system.  Maxum insured Robbins under two commercial general liability policies in connection with the Northgate Link Extension project.

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.

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.

Manley Architecture Grp., LLC, v. Santanello, 2018 Ohio App. LEXIS 2372 (June 7, 2018)

Dr. Steven A. Santanello (“Santanello”) contracted with Manley Architecture Group, LLC (“MAG”) to design and manage the construction of a large home, riding barn, pond, tennis court and outdoor pool.  Santanello acted as his own general contractor.

During construction, problems arose with the barn roof, and Santanello stopped paying MAG’s and his subcontractors’ invoices.   MAG advanced $55,557.68 to Santanello’s subcontractors to induce them to complete the project.  MAG later filed a breach of contract action against Santanello seeking to recover these advances.

Santanello filed a counterclaim for breach of contract, alleging that MAG breached its obligation to properly manage the construction of the barn, ultimately necessitating the replacement of the roof.  After a bench trial, the trial court found that both parties had breached the contract.  The parties cross-appealed.

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.

McMillin Albany LLC v. Superior Court, No. S229762, 2018 Cal. LEXIS 211 (Jan. 18, 2018)

Several homeowners (“Plaintiffs”) brought suit against developer/general contractor McMillin Albany LLC (“McMillin”) for alleged defective construction of new homes.  Plaintiffs alleged the defects caused property damage and economic loss in the form of repair costs and reduced property values, and asserted common law claims for negligence, strict product liability, breach of contract, and breach of warranty, and a statutory claim for violation of the construction standards outlined in the Right to Repair Act (Civ. Code §§ 895–945.5, the “Act”).  The Act defines standards for the construction of individual dwellings; governs various builder obligations, including provision of warranties; creates a prelitigation dispute resolution process; and describes mandatory procedures for lawsuits under the Act.  McMillin sought a stay of proceedings so that the parties could proceed through the Act’s prelitigation dispute process, which includes notice to the builder of defects and an opportunity to cure.  Plaintiffs refused to stipulate to the stay and instead, dismissed their statutory claim.  McMillin then sought a court-ordered stay which Plaintiffs contested, arguing that their suit now omitted any claim under the Act, and therefore, was not subject to its procedures.

Addison Ins. Co. v. 4000 Island Blvd. Condo. Ass’n, 2017 U.S. App. LEXIS 26870 (11th Cir. Dec. 28, 2017)

The owner of a high-rise condominium building in Florida hired a contractor to replace the building’s concrete balcony railings with new railings featuring aluminum and glass.  The contractor on the project, Poma Construction (“Poma”), entered into a subcontract with Windsor Metal Specialties (“Windsor”), under which Windsor agreed to paint the new aluminum railings.

Two years after the work was completed, the owner sued Poma and Windsor in Florida state court, alleging that the railings were defective and required replacement.  In addition to replacing the railing system, the owner alleged that Windsor’s defective paint finish damaged other surrounding property, including railing post pockets and the concrete balcony slabs.

Windsor submitted the claim to its liability carrier, Addison Insurance Company (“Addison”).  Addison then filed a declaratory judgment action in the United States District Court for the Southern District of Florida, seeking a declaration that it had no duty to defend Windsor in the owner’s underlying lawsuit.  Windsor’s policy provided a defense against claims alleging that an “occurrence” caused “property damage.”  But the policy excluded claims alleging damage to Windsor’s own work product or to the particular part of a property on which Windsor performed its work.  Addison had invoked that exclusion, arguing that the owner merely alleged damage to Windsor’s own work and/or the part of the property on which Windsor performed its work, i.e. the balcony.  The District Court granted summary judgment in favor of Windsor, and Addison appealed.

Fulton County v. Soco Contracting Company, Inc., 2017 Ga. App. LEXIS 568 (Ga. Ct. App., November 15, 2017) 

Fulton County contracted with SOCO Construction Company (“SOCO”) to build a cultural center near the Fulton County Airport.  The contract specified that the contract sum and the contract time could only be changed according to County procedure, which required “a written, bilateral agreement (Modification) between the County … and the contractor.”

Adverse weather conditions, design delays, change order requests, and a federal government shutdown allegedly delayed the project.  Despite the County’s program manager listing more than 30 change orders in the project’s change order evaluation log, the County never issued any written change orders, including any change orders extending the contract time to account for the delays.  The County also withheld payment from SOCO.

SOCO sued the County for breach of contract and bad faith performance of contract, and it sought attorney fees and injunctive relief.

Frontier Dev. LLC v. Craig Test Boring Co., 2017 U.S. Dist. Lexis 149950 (D.N.J. Sept. 15, 2017)

On September 15, 2017, the Federal District Court for the District of New Jersey dismissed plaintiff’s, Frontier Development LLC’s, complaint for breach of contract against defendants, Craig Test Boring Co., Inc. and Craig Testing Laboratories, Inc., on the grounds that plaintiff failed to timely file an affidavit of merit as required by New Jersey statute.  The case is a reminder that plaintiffs making claims that sound in professional negligence must be aware of state statues requiring the submission of an affidavit of merit.
Plaintiff was the developer of a commercial building in Egg Harbor Township, New Jersey.  To prepare the site for construction, plaintiff was required to determine the depth of the topsoil it would have to remove and whether the soil beneath the topsoil was stable enough to support the foundations.  To do so, plaintiff engaged the services of defendants to perform geotechnical testing and prepare a soil boring report.  After receiving the report from the defendants and implementing the report’s recommendations, plaintiff claimed that the report’s conclusions were faulty and, as a result, plaintiff removed an excessive amount of topsoil and loose ground underneath the topsoil causing unnecessary delays and construction costs.

Tomlinson v. Douglas Knight Constr., Inc., 2017 Utah Lexis 132 (August 29, 2017)

This case arises out of the construction of a residential property.  Lot 84 Deer Crossing (“Lot 84”) purchased the property and contracted with Douglas Knight Construction, Inc. (“DKC”) to build a house on it.  The parties’ contract included a one-year construction warranty.  Lot 84 then assigned to Outpost Development, Inc. (“Outpost”) all of its rights in the property and the construction agreement.  As the home neared completion, Outpost noticed defects in its construction and, pursuant to the warranty, directed DKC to fix the deficiencies.  Despite DKC’s efforts, the defects remained.  Outpost then sold the home to Joseph Tomlinson, but did not assign to Tomlinson its interests in the DKC construction agreement.  Tomlinson subsequently noticed defects in the home and filed suit against Outpost and DKC.
Shortly thereafter, Outpost declared bankruptcy and was dismissed from the case.  During the bankruptcy proceedings, Tomlinson was assigned an interest in any claims that Outpost had asserted or may assert against DKC.  Tomlinson maintained that this assignment encompassed claims for breach of the DKC construction agreement and amended his complaint to include claims for breach of express and implied warranties.  Tomlinson sought to assert these claims as an assignee of rights of parties in privity with DKC: first, through the assignment made when Outpost purchased the property from Lot 84, and second, through the assignment in Outpost’s bankruptcy proceedings.  The district court rejected these theories and dismissed Tomlinson’s claims, holding that they were barred because Tomlinson had never acquired a direct interest in the DKC construction agreement.