KICC –Alcan Gen. v. Crum & Forster Specialty Ins. Co., 2017 U.S. Dist. LEXIS 37560 (March 16, 2017)

A Contractor/Construction Manager, KICC-Alcan General (“KICC”), entered into a subcontract with an MEP subcontractor, Superior Group (“Superior”), concerning the construction of two buildings at an airforce base in Alaska. Superior sued KICC for approximately $2 million in costs it incurred in excess of the contract value, allegedly caused by KICC’s failure to properly manage the project.  KICC tendered Superior’s claims to its Errors and Omissions insurance carrier, Crum & Forster Specialty Insurance Company (“C&F”).  C&F denied both defense and indemnity of Superior’s claims.  KICC settled its claims with Superior prior to trial.  KICC then sued C&F for its breach of the duty to defend and indemnify against Superior’s claims, as well as a breach of its duty of good faith.

The terms of KICC’s E&O policy provided coverage for “damages… because of… an act error or omission in the rendering or failure to render professional services by any insured.”  The contract defined “professional services” as “those functions performed for others by you or by others on your behalf that are related to your practice as a consultant, engineer, architect, surveyor, laboratory or construction manager.”

Superior alleged that KICC: mismanaged a soil contamination issue at the beginning of the project; failed to provide timely responses to requests for information and contract modifications; and directed other subcontractors to work in the same areas at the same time as Superior, resulting in delays and added costs to Superior on the project. Superior submitted a request for equitable adjustment (“REA”) for these costs and delays, but KICC denied the REA.  In its lawsuit, Superior asserted claims for breach of contract and quantum meruit.

Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 2017 Colo. App. Lexis 261 (March 9, 2017)

R.G. Brinkmann Company, as general contractor, was retained by Sunrise Development, Inc., a major national developer, for the construction of a senior assisted and independent living facility in Broomfield, Colorado. The project was owned by Broomfield Senior Living Owner, LLC.

Section 13.7 of the contract between Brinkmann and Sunrise provided that all claims arising from defects in Brinkmann’s work would be deemed to accrue no later than final completion of the project. On May 15, 2009, the project achieved final completion when a certificate of occupancy was issued.  No defects in the project were noted at that time.  In the Fall of 2012, however, Broomfield discovered broken sewer pipes at the project.  Further investigation revealed a number of defects that Broomfield attributed to Brinkmann’s poor construction.

On July 21, 2014, Broomfield filed a lawsuit asserting various defective workmanship claims against Brinkmann. Brinkmann responded by moving for summary judgment, arguing that under Section 13.7 of its contract with Sunrise, all defective work claims accrued no later than final completion on May 15, 2009 and that Colorado’s two year statute of limitations for civil claims therefore expired on May 15, 2011.  The trial court granted Brinkmann’s motion and dismissed Broomfield’s claims.

LaShip, LLC v. Hayward Baker, Inc., 2017 U.S. App. LEXIS 3694 (5th Cir. Mar. 1, 2017)

Beginning in 2007, LaShip, LLC (“LaShip”) undertook the construction of a large shipbuilding facility in Houma, Louisiana (the “Project”), situated on its own private land as well as land owned by the Terrebonne Port Commission (“TPC) – a subdivision of the Louisiana state government. In July 2008, LaShip accepted a bid from Hayward Baker, Inc. (“HBI”) to complete the soil mixing and drill shaft work on the Project.

The contract between LaShip and HBI (the “Contract”) provided for HBI to install subterranean soil-mix columns to form the foundation of the shipbuilding facility and prevent it from collapsing into the soft and compressible Louisiana soil. Pursuant to the Contract, HBI obtained soil samples to ascertain the columns’ strength.  Laboratory testing revealed that, in general, the soil possessed the requisite compressive strength provided for in the Contract.  Nevertheless, as the work progressed the columns exhibited spiraling, and HBI experienced several cave-ins during its installation of the drill shafts and unwanted settlement of the foundation columns.

On January 21, 2011, LaShip filed suit against HBI in the Louisiana Federal District Court alleging that HBI violated Louisiana law by not warning LaShip about alleged defects in the design of the columns. TPC joined the lawsuit on March 6, 2013, also claiming that HBI acted negligently in failing to warn of a dangerous condition.  The District Court ruled that LaShip failed to prove by a preponderance of the evidence its claims against HBI.  LaShip and TPC then appealed.

Int’l Fidelity Ins. Co. v. Americaribe-Moriarty JV, 2017 U.S. App. LEXIS 3628 (11th Cir. Feb. 28, 2017)

Americaribe-Moriarty Joint Venture (“Americaribe”) entered into a subcontract with Certified Pool Mechanics I, Inc. (“CPM”) for construction of a pool in a mixed-use development that Americaribe was building in Miami, Florida. CPM provided a performance bond, issued by International Fidelity Insurance Company and Allegheny Casualty Company (collectively, “Fidelity”) as security for performance of the pool subcontract.  According to Americaribe, CPM failed to perform its obligations under the pool subcontract.  As a result, Americaribe terminated CPM, made a claim on the performance bond, and contemporaneously hired a replacement contractor (“Dillon”) to complete CPM’s scope of work.

In the event of default by CPM, the subcontract required three days’ written notice before undertaking completion of CPM’s work. The bond incorporated the subcontract by reference and also required a further, but undefined, period of time after CPM’s termination during which Fidelity could evaluate options for responding to CPM’s alleged default.  In the event that Fidelity did not conduct such an evaluation with reasonable promptness, Americaribe could declare a default by Fidelity upon seven days’ written notice.  Although Americaribe provided the written notices of default, it proceeded to complete CPM’s work with Dillon before the notice periods expired.

Amberwood Dev., Inc. v. Swann’s Grading, Inc., No. 1 CA-CV 15-0786, 2017 Ariz. App. Unpub. LEXIS 207 (Ct. App. Feb. 23, 2017)

This case arose out of a housing development project, with Amberwood Development Inc. (“Amberwood”) acting as the general contractor and Swann’s Grading, Inc. (“SGI”), as a subcontractor. In their subcontract agreement, SGI agreed to defend, indemnify and hold harmless Amberwood from claims and “liability of every kind whatsoever arising out of or in connection with [SGI’s] work.”  This indemnity extended to any claims asserted by any subsequent owner alleging improper or defective workmanship.

After construction concluded, eighteen homeowners sued Amberwood, alleging numerous construction defects. Amberwood then sought indemnification from its subcontractors, including SGI. Ten of the eighteen homeowners arbitrated their claims to award and the remaining eight settled with Amberwood.  Amberwood then settled with all of its subcontractors except SGI.

Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., 2017 Cal. LEXIS 1024 (Cal. February 16, 2017)

This tort lawsuit relates to a dispute over the bidding process on several public works contracts in California. Between 2009 and 2012, American Asphalt outbid Roy Allan Slurry Seal and Doug Martin Contracting on 23 public works contracts for the application of slurry seal to roadways in five California counties.

Allan and Martin suspected that American illegally underbid them, and they sued American for intentional interference with prospective economic advantage. They alleged that American illegally under-paid its employees to ensure that it won the bid as the lowest “responsible” bidder.  Allan and Martin alleged that but for American’s illegal conduct, they would have been awarded the contracts because they were the second lowest bidders.

The trial court dismissed Allan and Martin’s complaint holding that it failed to state a viable claim for intentional interference with prospective economic advantage. The appellate court reversed the trial court, but American appealed to the Supreme Court of California.

Lend Lease (US) Constr. LMB Inc. v. Zurich Am. Ins. Co., No. 11, 2017 N.Y. LEXIS 112 (N.Y. Feb. 14, 2017)

Early, in its opinion, the New York Court of Appeals noted that “[o]ne of the most dramatic images of [Superstorm Sandy] depicts the damage caused to [a] crane [being used on the construction of a 74-story skyscraper] when the boom of the crane collapsed in high winds and teetered precariously from a height equal to the top of the building.” At the time of the incident, Extell, the owner of the project, was the named insured on a $700 million builder’s risk insurance program comprised of five separate insurance policies.  Lend Lease, the contractor, was an additional insured on the policies.

Following the incident, Extell and Lend Lease submitted a claim to the insurers seeking to recover the damages incurred by Extell and Lend Lease resulting from weather-related harm to the crane. The insurers denied the claim and disclaimed that there was coverage under the policies.  This action ensued.  Both parties filed motions seeking summary judgment on the coverage issue.  The trial court denied the motions, ruling that there was an issue of fact regarding the applicability of certain exclusions in the policies.  On appeal, the Appellate Division granted the insurers’ motion for summary judgment, finding that there was no coverage because the crane did not fall within the policies’ definition of “temporary works.”  This appeal followed.

Resolving the appeal required the Court of Appeals to answer two questions. First, was the damage to the crane covered under the policies in the first instance.  Second, if there was coverage, was it defeated by the policies’ contractor’s tools exclusion.  As explained below, the court concluded that although there may have been coverage in the first instance, the coverage was defeated by the exclusion.

United States v. Int’l Fid. Ins. Co., No. 16-0472-WS-C, 2017 U.S. Dist. LEXIS 16791 (S.D. Ala. Feb. 7, 2017)

This action arose out of a payment dispute between Bay South Limited, Inc. (“Bay South”) and Stephens Construction & Concrete, Inc. (“Stephens”). Bay South entered into two subcontracts with Stephens, whereby Bay South agreed to furnish labor and materials to Stephens on two federal construction projects.  In connection therewith, International Fidelity Insurance Company (“Fidelity”) issued payment bonds (the “Bonds”) to Stephens.  Bay South filed a complaint in federal court to assert claims against the Bonds under the Miller Act (40 U.S.C. §3133), as well as other claims.  Stephens sought to compel arbitration of Bay South’s claims, pursuant to the arbitration provision in the subcontracts, which provided:

“In the event of a dispute arising between [Stephens] and [Bay South] under the Subcontract Agreement, the dispute shall be settled by arbitration in accordance with the Construction Industry Rules of the American Arbitration Association then in effect …”

Bay South argued that the 1999 Amendment to the Miller Act prohibits such claims from being arbitrated, and, in the alternative, even if these claims may be arbitrated generally, Bay South’s specific claims are not subject to arbitration because they are not within the scope of the parties’ arbitration agreement.

Hill County High School District No. A v. Dick Anderson Construction, Inc., 2017 Mont. LEXIS 38 (Mt. Feb 7, 2017)

This action arose out of the design and construction of a new roof for a high school in Hill County, Montana. The roof was built by Dick Anderson Construction, Inc. (“Contractor”) and designed by Springer Group Architects, P.C. (“Architect”). While the parties disputed whether the roof was ever completed to the School District’s satisfaction, the school was in full use by April 1998 and final payment was issued around that same time.

Problems emerged with the roof almost immediately. The Contractor and Architect worked with the School District to address the problems through October 2003 when the Architect informed the School District that repairs were finished and that no further work was necessary. But the roof partially collapsed in 2010 and the School District filed suit the following year.

Nappa Constr. Mgmt., LLC v. Flynn, 2017 R.I. LEXIS 13 (R.I. Jan. 23, 2017)

Caroline and Vincent Flynn (the “Flynns”) contracted with Nappa Construction Management, LLC (“Nappa”) to construct an automobile repair facility. The parties executed the American Institute of Architects’ A101-2007 Standard Form of Agreement Between Owner and Contractor.  The contract provided that the owner could terminate the contract for cause; could order the contractor to suspend the work without cause “for such period of time as the Owner may determine”; and could terminate the contract for convenience.

Six months after Nappa commenced work, the Flynns directed Nappa to “immediately cease any further work on the project,” contending that Nappa was not constructing the flooring according to the project plans or industry standards. Thereafter, Nappa submitted a payment application that included expenses for the disputed flooring, which the Flynns declined to pay.  Nappa notified the Flynns that they were in breach of the contract and filed for mediation.  Nappa ultimately terminated the contract for nonpayment.