September 2007 – Construction Law

Statute of Repose Begins to Run on Negligence and Implied Warranty Claims when Building Occupants are First Issued Certificate of Occupancy

Sep 21 2007

Great N. Ins. Co. v. Architectural Env’ts, Inc., 514 F. Supp. 2d 139 (D. Mass. 2007)

On a motion for summary judgment, the Federal District Court for the District of Massachusetts held that for the purposes of the statute of repose, the limitation period began running when the temporary certificate of occupancy was issued on the building in question.

In this case, a fire occurred at a commercial property as a result of an electrical malfunction. The occupant’s insurer sued the mechanical and electrical contractor responsible for design and renovation of the building. The court held that the statute of repose began to run on the date that the temporary certificate of occupancy was issued on the building, and not at the later date when the permanent certificate was issued. Thus, the plaintiff’s claims for negligence and implied warranties were time-barred by the six-year statute of repose. Express warranties, however, were not subject to the statute of repose and those claims survived summary judgment.

Oregon Federal Court Remands Contractor Garnishment Action to State Court

Sep 19 2007

Triad Mech. v. Coatings Unlimited, Inc., 2007 WL 2713842 (D. Or. Sept. 12, 2007)

A general contractor successfully obtained a judgment against a subcontractor for breach of contract and negligence arising from a construction project. The general contractor then sought a garnishment action against one of the subcontractor’s insurers to collect the judgment, which was filed in Oregon state court. The general contractor was an additional insured under the subcontractor’s comprehensive general liability insurance. The insurer removed the action to federal court and the general contractor sought remand to state court. The district court remanded the action to state court.

Unintended Construction Defects May Constitute an “Accident” or “Occurrence” Under Commercial General Liability Policy

Sep 07 2007

Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007)

In this landmark decision, the Texas Supreme Court ruled that commercial general liability policies provide a duty to defend claims for property damage caused by an insured contractor’s defective construction. Resolving a split of authority on certified questions from the Fifth Circuit, the court ruled that unintended construction defects may constitute an “accident” or “occurrence” within the meaning of a commercial general liability policy. It also ruled that the resulting damage to or loss of use of the building may constitute “property damage” sufficient to trigger the insurer’s duty to defend. The court also held that the CGL policy made no distinction between tort and contract damages, rejecting the insurer’s economic loss rule defense.

Property Owner’s Claims Against Professional Engineer Reinstated Where Contractor Placed Water Line Outside of Utility Easement

Sep 07 2007

Merlini v. Gallitzin Water Auth., 934 A. 2d 100 (Pa. Super. Ct. 2007)

In this case, the Superior Court of Pennsylvania held that a professional engineer can be either “ordinarily negligent” or “professionally negligent” in the performance of his consulting engineering tasks, or both. He can be accountable in damages for mere negligence under common law theories of trespass, even if a plaintiff is not suing him for professional negligence.

This odd outcome is the result of an engineer directing a contractor to install a water line, without right-of-way, easement or permission, in the wrong place on the property owner’s property, that is, in a location outside of the recorded easement. When the property owner filed a complaint in the court, but did not file the technically required certificate of merit of professional negligence required by the Pennsylvania Rules of Court, the property owner’s complaint was dismissed. The property owner appealed, and the Superior Court had to determine whether the property owner’s complaint was asserting ordinary negligence or “professional negligence.”
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Findings of Arbitrator Will Not Be Overturned in Absence of Fraud

Sep 06 2007

Site, Inc. v. Peabody Constr. Co., Inc., 2007 WL 2458482 (Mass. App. Ct. Aug. 30, 2007) (Unpublished)

In this case, the Appeals Court affirmed the Superior Court’s denial of plaintiffs’ motion to vacate an arbitration award. The defendant general contractor, Peabody Construction Company, refused to pay the plaintiff subcontractor, Site, Inc. on a subcontract after terminating the subcontractor prior to completion of the job. The case went to arbitration. After considering extensive evidence and testimony, the arbitrator found that the general contractor’s failure to make timely payment was a material breach of the subcontract. Although the arbitrator found that general contractor’s material breach of the subcontract excused any subsequent failure by the subcontractor to perform its obligations under the subcontract, the arbitrator found that the subcontractor was not entitled to payment for the work it performed because the subcontractor “had not completely [and satisfactorily] performed all of its obligations under the subcontract.” Read More

Subcontractor Agreements Are “Residential Construction Contracts” Under New Jersey Construction Lien Law

Sep 04 2007

In re Kara Homes, Inc., 374 B.R. 542 (Bankr. D.N.J. 2007)

On an issue never before addressed in a published opinion, a U.S. Bankruptcy Court decided an issue critical to the New Jersey Lien Law. A major New Jersey based residential home building group (the “Debtors”), owning several large single-family home development projects, entered numerous agreements with various subcontractors who provided goods and services on the projects. When the Debtors failed to pay, the subcontractors took steps to protect their rights under the New Jersey Construction Lien Law. However, most of the Debtors initiated Chapter 11 bankruptcy proceedings before the subcontractors could fully complete all of the Lien Law’s requirements. The Debtors then filed adversary proceedings to determine the extent, validity, and priority of any liens.

Archive:September 2007