2007 – Page 3 – Construction Law

Allocation of Risk in Today’s Non-Residential Construction Marketplace

Dec 01 2007

By K&L Gates attorneys John R. Dingess and Kari M. Horner

In December 2006, the Connecticut Department of Transportation (“ConnDOT”) was surprised by the lack of contractor response to its request for proposals for a $400-million plus, seven-year project to build a ten-lane bridge replacement for the Pearl Harbor Memorial Bridge on Interstate 95. Not a single contractor bid on the project.

Contractors were likely hesitant to build on the Pearl Harbor Memorial Bridge project because of uncertainties and difficulties in predicting labor and material costs for a seven-year project. One surety commented that the length of the project also contributed to the "risk profile" of the project. Another deterrent was the fact that the contract terms placed most of the risk on contractors, while also imposing high liquidated damages for failing to meet milestones. In response to the lack of bids, ConnDOT may break up the project or re-allocate the risk to lessen the risk burden on the contractors.

The Termination for Convenience Clause: A Powerful Weapon in Contractual Disputes

Dec 01 2007

By K&L Gates partner Jason L. Richey

Imagine a contractor who has done an outstanding job of building a magnificent skyscraper in the heart of one of the world’s largest cities. The skyscraper is 65% complete, expected to be finished on time and within budget. The contractor has not defaulted, and proudly touts that this construction project will be the centerpiece of the company’s accomplishments. Suddenly, the owner of the project notifies the contractor that it has been terminated from the job for the owner’s convenience. To complete the skyscraper, the owner replaces the contractor with one of its competitors. Can the owner unilaterally terminate the contractor even though the contractor was not in default? If so, what compensation is the contractor entitled to recover? The answer to these questions lies within the termination for convenience provision which has become increasingly common in private construction contracts.

Waiving Good-Bye to Consequential Damages: Drafting Effective Waivers in Today’s Marketplace

Dec 01 2007

By K&L Gates attorneys Jason L. Richey and William D. Wickard

Contractual provisions that mutually waive the rights of the owner and contractor to recover consequential damages have become common-place in today’s construction contracts. Effective waivers will expressly define the type of consequential damages the provision is intended to bar. Such a provision will allow courts and arbitration panels to dismiss all or part of a construction case at an early stage if the waiver clearly bars a demand for certain types of consequential damages. However, a broad consequential damages waiver that is improperly drafted may cause contractors and owners to expend significant time and money defending claims that seek damages for delay, lost profits or other damages commonly thought to only be “consequential.”

Contractual Indemnity Clauses In Construction Contracts

Dec 01 2007

By K&L Gates attorneys Timothy L. Pierce and R. Michael Viayra, Jr.

Express indemnity clauses are a common component in virtually all construction contracts, yet they are routinely included in such contracts without a full understanding of the risk transfer objectives of the parties or whether the indemnity clause fulfills those objectives. Indemnity clauses are risk transfer provisions whereby one party seeks to shift the risks of claims on a construction project down the line to the entity closer to the actual work. Typically such clauses transfer risk from the owner to the general contractor and subsequently to the subcontractors. This article examines the forms of indemnity clauses, issues often not specifically addressed in such clauses, jurisdictional limitations on indemnity provisions and the influence such clauses may have on additional insured coverage. Finally guidance is provided on ways to negotiate more effective indemnity clauses.

Allocating Risk In Today’s Marketplace: Tracking Trends in The Insurance Arena Affecting Contractors

Dec 01 2007

By K&L Gates attorneys Joseph L. Luciana, III and Thomas C. Ryan

Proper risk allocation is critical to the ultimate success of a construction project. And, the cornerstone of proper risk allocation for any construction project is a well-conceived and appropriately tailored insurance program. Too often, the concept of insurance remains an afterthought because contracting parties blindly rely on standard language in form agreements prepared earlier without fully investigating and understanding the current insurance market conditions. Moreover, most contractors do not want to consider the possibility of a disaster or another party’s failure to perform that may have project-wide implications.

Fourth Department Rules on Labor Law Claims

Nov 30 2007

Mulcaire v. Buffalo Structural Steel Constr. Corp., 846 N.Y.S.2d 838 (N.Y. App. Div. 2007)

In this case, a construction worker and a family member alleged Labor Law and common law negligence causes of action for injuries plaintiff sustained while installing floor decking in a building undergoing construction. Plaintiff slipped and fell through an uncovered opening approximately 18 feet to the floor. The trial court granted in part and denied in part plaintiffs’ motion for summary judgment, and denied defendants’ motion for summary judgment. Defendants appealed.

Statute of Limitations Begins to Run When Subcontractor Completes All Work on Subcontract, Including Change Orders

Nov 28 2007

N.B. Kenney Co., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 876 N.E.2d 1175 (Mass. App. Ct. 2007)

In this case, the Massachusetts Appeals Court held that for the purposes of the statute of limitations, a subcontractor’s time to file suit begins to run at the completion of all work on a particular subcontract, including any change orders thereto.

The defendant insurance company in this case moved for summary judgment on the basis that the plaintiff completed the change order giving rise to the complaint more than one year prior to filing suit and that the suit was therefor time-barred. The court rejected this argument, holding that the subcontractor’s work on other change orders pursuant to the same subcontract tolled the limitations period until all work on the subcontract was complete. The court noted that continued work for the same owner or on the same location, but under a new and independent subcontract would not have tolled the limitations period.

Jury to Decide Whether Falling Debris was Foreseeable at Construction Site

Nov 27 2007

Amerson v. Melito Constr. Corp., 845 N.Y.S.2d 457 (N.Y. App. Div. 2007)

In this case, the Second Department reversed a finding of summary judgment concerning an alleged violation of Labor Law § 241(6). Plaintiff, a masonry subcontractor, was injured while performing his duties at the construction site when a concrete block fell on his head. At the time he was injured, plaintiff was wearing a hard hart and had various pieces of equipment, including a chipping hammer, scraper, shovel and wheelbarrow, in his possession as needed to perform his work. Read More

General Contractor Not Entitled to Damages for Performing Subcontractor’s Work, Where General Contractor Failed to Give Required Notice to Subcontractor

Nov 22 2007

Rockwell Roofing, Inc. v. Jan Five Corp., 2007 WL 4248144 (Mass. Super. Ct. Nov. 15, 2007)

The Superior Court ruled on plaintiff’s motion for summary judgment on both its claim and defendant’s counterclaim. The court allowed summary judgment in part and denied it in part. Plaintiff subcontractor filed the action against defendant general contractor and its payment bond surety. The defendant general contractor filed a counterclaim for breach of contract. The subcontractor moved for summary judgment on the general contractor’s counterclaim, arguing that the general contractor failed to provide notice as required by the contract prior to performing work on the contract that was the responsibility of the subcontractor. Summary judgment was granted, dismissing this portion of the general contractor’s counterclaim.
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Chapter 558 Pre-suit ADR Process Does Not Apply to Construction Defect Claimant Who is Both Owner and Contractor

Nov 21 2007

Specialty Eng’g Consultants, Inc. v. Hovostone Props. Fla., LLC, 968 So. 2d 680 (Fla. Dist. Ct. App. 2007)

This construction defect case involved a condominium project. Defendant argued that the pre-suit alternative dispute resolution requirement in Chapter 558 of the Florida Statutes applied to the claimant, who was both the owner and the contractor of the project. Chapter 558 requires that construction defect “claimants,” as defined therein, participate in a complex pre-suit ADR process, which includes various inspection and cure period requirements. The definition of “claimant” in Chapter 558 specifically includes property owners, but specifically excludes contractors. The court held that a construction defect claimant who is both the property owner and the contractor is not a “claimant” as defined in Chapter 558, and therefore the pre-suit ADR requirement did not apply.

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