January 2008 – Construction Law

Insurer May Intervene Where it Has Legitimate Interest as Judgment Creditor in Outcome of Litigation

Jan 24 2008

U.S. Fid. & Guar. Co. v. E. Contractors, Inc., 2008 WL 190758 (D. Mass. Jan. 15, 2008)

In this case, the Federal District Court for the District of Massachusetts issued an order on a Motion to Intervene and Dissolve Attachment. The motion to intervene was allowed and the petition for dissolution was allowed in part and denied in part. Plaintiff was an issuer of security bonds and defendant was a construction company. Plaintiff issued a series of bonds to secure defendant’s performance on several construction projects. Defendant defaulted on the projects and subsequently plaintiff successfully secured an ex parte attachment of four of defendant’s properties. Another insurance company that had also entered into surety agreements with the defendant previously secured a judgment against the defendant for $8,342,233.27. This judgment was never satisfied due to defendant’s insolvency. The insurance company claimed an interest in the attached properties. Read More

Issue of Fact Precludes Summary Judgment in Indemnification Action

Jan 21 2008

Ins. Co. of New York v. Central Mut. Ins. Co., 850 N.Y.S.2d 56 (N.Y. App. Div. 2008)

In this case, the First Department examined cross-motions for summary judgment in relation to contractual indemnification. Plaintiffs – the property owner and general contractor in a related personal injury action – brought this action against a subcontractor, S&S Construction Group. Plaintiffs sought a declaration that S&S’s liability insurer, Central Mutual Insurance, was required to defend and indemnify plaintiffs in connection with the underlying action. According to plaintiffs, the contract between the general contractor/plaintiff and S&S required S&S to obtain insurance covering plaintiffs. Read More

Court Examines Definition of Progress Payments in Connection with California’s Prompt Payment Penalty Statute

Jan 19 2008

Murray’s Iron Works, Inc. v. Boyce, 158 Cal. App. 4th 1279 (2008)

In this case, the California Court of Appeal addressed whether the prompt payment penalty statute was properly applied against the owner and, in doing so, provided a definition for progress payments under the statute.

California requires that an owner pay its contractor any progress payment due as to which there is no good faith dispute within 30 days following receipt of a demand for payment. If there is a good faith dispute between the owner and contactor, the owner may withhold no more than 150 percent of the disputed amount. Any amount wrongfully withheld by the owner is subject to a penalty of 2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due. The prevailing party is also entitled to attorney’s fees and costs. (Cal. Civ. Code § 3260.1.) Other statutes establish similar requirements for progress payments between contractors and subcontractors (Bus. & Prof. Code § 7108.5) and for payment of retention (Cal. Civ. Code § 3260).

Contractor Escapes Negligence and Indemnity Liability

Jan 17 2008

Luby v. Rotterdam Square, L.P., 850 N.Y.S.2d 252 (N.Y. App. Div. 2008)

In this negligence action, plaintiff sustained injuries when he fell over a transition flare of a handicapped ramp. That ramp had been constructed by defendant Clifford H. Quay & Sons fourteen years earlier pursuant to a contract between Quay and another defendant, Rotterdam Square. The architectural firm that designed the plans pursuant to which the ramp was constructed was also named as a defendant. Two issues were at stake.

Court Rules Surety had Right to Settle Principal’s Claims Against Owner, Grants Motion for Summary Judgment

Jan 15 2008

Liberty Mutual Ins. Co. v. Aventura Eng’g & Constr. Corp., 534 F. Supp. 2d. 1290 (S.D. Fla. Jan. 8, 2008)

The U.S. District Court for the Southern District of Florida has interpreted Florida law as allowing a surety to settle not only an owner’s claims on a performance bond, but also the principal’s claims against the owner. In Aventura Eng’g, a surety completed construction of a project pursuant to an owner’s demand against a performance bond. The principal, a general contractor, had allegedly defaulted on its contract with the owner, and thereafter refused the surety’s demands for indemnification. The surety eventually executed a settlement agreement with the owner, whereby the surety exercised its power of attorney to execute a release of all claims that the contractor had against the owner growing out of the bonded contract.

Architects Do Not Owe Special Duty of Care to Construction Workers

Jan 10 2008

Leyden v. Spaulding & Slye Co., Inc., 2008 WL 241085 (Mass. Super. Ct. Jan. 3, 2008)

In this case the Superior Court granted an architect’s motion for summary judgment on claims brought against it by a construction worker for personal injuries sustained when the worker fell through a collapsed sump pump grate. The defendant architect argued it was entitled to summary judgment because it owed no duty of care to the plaintiff. Read More

General Contractor Recovers Final Payment on Public Contract, Even Though Subcontractor Violated Prevailing Wage Act

Jan 04 2008

Worth & Co., Inc. v. Dept. of Labor & Ind., 938 A. 2d 239 (Pa. 2007)

In this case, the Supreme Court of Pennsylvania decided the appeal of a general contractor, whose final payment was being withheld by a public school district on account of the GC’s subcontractor’s failure to pay prevailing wages to its workers. Under the authority of regulations issued by the Department of Labor & Industry’s prevailing wage division, the Department had instructed the school district to withhold final payment from the general contractor, because workers of the subcontractor remainied unpaid following the subcontractor’s default and eventual bankruptcy. Read More

Court Addresses Implied Warranty of Habitability in Condominium Context

Jan 03 2008

Berish v. Bornstein, 71 Mass. App. Ct. 1101 (2007) (Unpublished)

In this unpublished decision, the Massachusetts Appeals Court addressed the implied warranty of habitability as applied to construction of a residential condominium development. Plaintiffs, who were trustees of a condominium association, appealed from the trial court’s ruling that faulty window installation in the units was not a latent defect and that faulty chimney attachments were not a safety threat to condominium unit inhabitants. Plaintiffs also challenged the judge’s findings that certain other claims were time-barred. The defendants (the condominium developer, an original trustee of the condominium trust, and the general contractor) cross-appealed from the judge’s ruling on the timeliness of plaintiffs’ claims for breach of the implied warranty of habitability and for negligence. Read More

Archive:January 2008