December 2007 – Construction Law

“Waiver of Subrogation” Clauses Do Not Bar Actions Arising Out of Gross Negligence or Violation of Statute or Regulation

Dec 31 2007

Am. Ins. Co. v. Siena Constr. Co., 2007 WL 4711517 (Mass. Super. Ct. Dec. 24, 2007)

In this case, the Superior Court considered two consolidated cases that both arose out of an explosion of a newly constructed building. In both cases the plaintiffs were insurance companies acting as subrogees. Defendants (general contractors and subcontractors) moved for summary judgment on the ground that recovery was barred by “Waiver of Subrogation” clauses found in the contracts. The plaintiffs argued that the waiver of subrogation clause did not extend to damages caused by a defendant’s gross negligence or its violation of a statute or regulation. In addition, they argued that the subcontractors were not protected by the waiver of subrogation clause.

The original judge in the case held that analogous case law concerning exculpatory clauses supported a denial of defendants’ summary judgment motion. The judge also held that, by its terms, the waiver of subrogation clause did not include subcontractors. In the consolidated case, the new judge accepted the rulings of prior judge and the motions for summary judgment were allowed in part and denied in part. Plaintiffs’ claims were allowed to proceed but as to defendants with valid waiver of subrogation clauses (contractors not subcontractors) recovery was limited to damages arising from defendant’s gross negligence, or negligence premised on a violation of statute or regulation.

Washington Supreme Court Re-Affirms Mike M. Johnson Rules Regarding Waiver of Contractual Claims Provisions

Dec 31 2007

Am. Safety Cas. Ins. Co. v. Olympia, 162 Wash.2d 762, 174 P.3d 54 (2007)

The Washington Supreme Court affirmed summary judgment for the City of Olympia against American Safety Casualty Insurance Company where the contractor (whose rights the surety was pursuing) failed to comply with contractual notice procedures. During construction, the contractor had written letters purporting to reserve its right to bring a claim at a later date. The contractor defaulted, and the surety completed the job. After completion, the surety presented Olympia with a Request for Equitable Adjustment. Though Olympia expressed a willingness to enter into negotiations if the surety provided sufficient supporting documentation, Olympia ultimately rejected the surety’s claim for failing to comply with the contract’s claims provisions. When the surety filed suit, the Thurston County Superior Court granted Olympia summary judgment, which was then overturned by Division Two. Read More

No Need for “Base of Operations” Within Municipality in Order for Contractor to be Subject to Business Privilege Tax

Dec 31 2007

V.L. Rendina, Inc. v. City of Harrisburg, 938 A.2d 988 (Pa. 2007)

In this case, a plurality of the Pennsylvania Supreme Court held that a municipality may apply its business privilege tax to the gross receipts from construction work performed within its borders regardless of whether the contractor maintained a “base of operations” within the municipality. Reversing a Commonwealth Court decision in favor of the construction company, the majority focused on whether the company’s activities in Harrisburg fell within the definitive of “business” contained in the City’s tax ordinance. Read More

Plaintiff Wins Recovery in Quantum Meruit for Heating and Cooling Services Provided

Dec 28 2007

Capital Heat, Inc. v. Buchheit, 848 N.Y.S.2d 481 (N.Y. App. Div. 2007)

In this case, the court awarded recovery in quantum meruit to plaintiff for heating and cooling services it had provided at the defendant’s residence. The court explained that: (i) by issuing invoices, (ii) the plaintiff established an expectation that it would receive payment for its services, (iii) the invoices established the reasonable value of those services, and (iv) the defendant did not dispute that the plaintiff performed the heating and cooling work in good faith or of acceptable quality.

Mechanic’s Lien on Owner’s Real Estate Not Precluded Where Contract is Made with Party Other than Owner, but with Owner’s Consent

Dec 26 2007

Madigan v. Trace Constr., Inc., 878 N.E.2d 568 (Mass. App. Ct. 2007)

In this case, the Appeals Court dismissed an action seeking discharge of several mechanics’ liens encumbering plaintiff’s real estate. The plaintiff, who was the owner of the encumbered property, claimed that because the general contractors entered into contracts with a tenant of the plaintiff, not the plaintiff, it was inappropriate to encumber plaintiff’s real property with a mechanic’s lien. The Appeals Court affirmed the Superior Court dismissal, holding that summary discharge of a mechanic’s lien by the court was inappropriate and that defendants were entitled to discovery.

Court Denies Summary Judgment in Insurance Dispute Concerning Indemnification for Wrongful Death Claim

Dec 23 2007

Grand Crossing, L.P. v. U.S. Underwriters Ins. Co., 2007 WL 4591989 (S.D.N.Y. Dec. 18, 2007)

This case concerned an insurance policy claim made for partial coverage of settlement in a wrongful death action based on a construction site fatality. The Southern District of New York denied the parties’ cross-motions for summary judgment.

Court Strictly Interprets Notice Requirements in Construction Contract

Dec 20 2007

Marcor Remediation, Inc. v. County of Broome, 847 N.Y.S.2d 702 (N.Y. App. Div. 2007)

In this case, defendant hired the plaintiff contractor to perform lead abatement work. The contractor sued for breach of contract and quantum meruit, alleging that the county had failed to pay for work performed. The terms of the contract prohibited plaintiff from bringing any action arising out of the contract unless plaintiff “strictly complied with all requirements relating to the giving of notices and information with respect to such claim . . . .” The contract further required plaintiff to file a “verified, detailed statement” in order to claim that it performed revised work under the contract, as plaintiff claimed here. Plaintiff appealed after the action was dismissed by the trial court.

The appellate court affirmed, finding that plaintiff had failed to provide a "verified, detailed statement." The court explained: “compliance with notice of claim provisions of a municipal contract constitutes a condition precedent to the commencement of an action for breach of contract which may only be avoided if the municipality acted in a manner that precluded the other party from complying.”

No Victory for Plaintiff Where Renovations Were Made in Good Faith

Dec 19 2007

Baker v. City of Plattsburgh, 847 N.Y.S.2d 300 (N.Y. App. Div. 2007)

In this case, plaintiff sought recovery of property damages due to water runoff caused by a utilities renovation and paving project carried out by defendants on an adjacent property. The Supreme Court granted defendants’ summary judgment motion, dismissing the causes of action against them alleging that water runoff caused property damage. However, defendants’ motion papers did not specifically address the remaining causes of action for trespass, due process rights violations and zoning ordinance violations, and thus those claims remained.

Court Awards Attorneys’ Fees in Breach of Contract Action

Dec 18 2007

Fabcon East, LLC v. Steiner Bldg. Co. NYC, 848 N.Y.S.2d 267 (N.Y. App. Div. 2007)

In this case, the court upheld an award of damages and contractually-based attorneys’ fees to plaintiff, finding sufficient support for the conclusion that defendant had breached the parties’ construction subcontract and the implied covenant of good faith and fair dealing. However, the court reduced the attorneys’ fee award in the amount of $19,250.50 — the amount of fees incurred by plaintiff in a separate action commenced against it by a sub-contractor. The court explained: “the subcontract provision dealing with an award of contractual attorney’s fees to the prevailing party in a covered action did not include the New Jersey action, to which [defendant] was not a party.”

Subcontractor Forfeited Right to Damages by Abandoning Project Prior to Completion

Dec 14 2007

Colin C&M Corp. v. Bacon Constr. Co., 2007 WL 4711503 (Mass. Super. Ct. Dec. 7, 2007)

In this case, the Superior Court considered a subcontractor’s claims against a general contractor and the general contractor’s counterclaims relating to a public high school construction project. In finding for the general contractor, the court found that the subcontractor was not entitled to damages because it walked off of the project and therefore failed to comply in strict accordance with the subcontract. Further, the court found that the general contractor was entitled to damages because it had to finish the subcontractor’s work and pay outstanding invoices to the subcontractor’s vendors. Read More

Archive:December 2007