2013 – Page 2 – Construction Law

Determining the Scope of “Additional Insured” Coverage: Recent ISO CGL Insurance Form Revisions Merit Close Attention By Contracting Parties

May 09 2013

By Roberta D. Anderson, K&L Gates, Pittsburgh

It is common among parties to sophisticated construction projects, service agreements, leases, and many other types of projects and transactions, to assess the risks associated with their contractual activities and allocate those risks through a combination of contractual indemnification provisions and insurance requirements. In the construction setting, for example, project owners, general contractors and developers (so-called “upstream” parties) typically require their subcontractors and sub-subcontractors (“downstream” parties) to indemnify them for claims arising from the contract work. In addition to the contractual indemnification provisions, upstream parties frequently require that they be provided with “additional insured” status on the downstream indemnitor’s/named insured’s general liability insurance policy. This provides a number of benefits to the upstream indemnitee. It effectively gives the additional insured/indemnitee direct coverage rights under the indemnitor’s insurance policy, preserves the indemnitee’s own liability coverage and may protect the indemnitee in the event the contractual indemnification provision in the parties’ contract is determined to be void and unenforceable.

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Supreme Court of Minnesota Upholds Denial of Coverage to Additional Insured in the Absence of Vicarious Liability

Apr 23 2013

By Andrew R. Stanton, Frederic J. Giordano, David R. Osipovich

Introduction

Construction contractors and subcontractors, as well as commercial policyholders generally, will wish to take note of a recent Supreme Court of Minnesota decision that lends insight into the scope of coverage provided by additional insured endorsements in insurance policies, the scope of protection afforded by indemnity provisions in construction contracts, and the reach of anti-indemnity state statutes.

In Eng’g & Const. Innovations, Inc. v. L.H. Bolduc Co., Inc., 825 N.W.2d 695 (Minn. 2013), the Court held that an endorsement making a contractor an additional insured on its subcontractor’s general liability policy only to the extent that damage was caused by the subcontractor’s acts or omissions, and which further expressly stated that the contractor did not qualify as an additional insured with respect to its independent acts or omissions, provides additional insured coverage only for the contractor’s vicarious liability for the subcontractor’s negligence. Because a jury found that the subcontractor was not negligent, the Supreme Court held that no basis existed to hold the contractor vicariously liable and that the contractor did not qualify as an additional insured on the subcontractor’s policy.

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Welcome to the 22nd Edition of K&L Gates’ Arbitration World

Apr 15 2013

Welcome to the 22nd edition of Arbitration World, a publication from K&L Gates’ International Arbitration Group that highlights significant developments and issues in international and domestic arbitration for executives and in-house counsel with responsibility for dispute resolution.

To view Arbitration World in our new online magazine format, click here.

To download a printable PDF of the publication, open the link above and click on the far right icon in the magazine toolbar at the top of the page.

We are delighted to be able to include in this edition a guest contribution from Rubini Ventouras, Group Executive Legal Affairs, Asia Pacific, of Newmont Mining Corporation. In her article, Rubini offers her perspectives on the challenges associated with the management of disputes in multiple, widely varying jurisdictions and explains why arbitration remains her preferred process for the resolution of international commercial disputes.

We are also pleased to welcome a contribution from James Blick, Director at TheJudge Limited, a leading broker of litigation and arbitration funding and after-the-event insurance. In his article, James offers some practical tips and insights on how to get the best deal when negotiating with potential third-party sources of funding for arbitration.

This edition also includes our usual update on developments from around the globe in both international commercial arbitration and investment treaty arbitration, along with specific articles covering some of those developments and other topics of interest in more detail, authored by members of K&L Gates’ International Arbitration Group. This edition includes a contribution from our new colleagues in Melbourne, Australia (following the combination of K&L Gates LLP with Middletons, effective 1 January 2013) describing a recent constitutional challenge to the international arbitration regime in Australia.

We hope you find this edition of Arbitration World of interest, and we welcome any feedback (email ian.meredith@klgates.com or peter.morton@klgates.com).

New Jersey Court Requires Materials Suppliers to Ascertain Source of Payments Made By Insolvent Subcontractors Under New Jersey Lien Law

Apr 12 2013

L&W Supply Corp. v. DeSilva, 429 N.J. Super. 179 (N.J. Super. Ct. App. Div. 2012)

In this case, a New Jersey appellate panel expands and clarifies a material supplier’s obligations to determine the source of payments made by purchasers of materials and allocate the payments properly under the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1, et. seq. (the “Lien Law”).

Pursuant to the Lien Law, a contractor or supplier who is owed payment for work or materials is permitted to file a lien against the real property on which the improvements were constructed. L&W Supply, 2012 WL 6599966 at *1. The purpose of the Lien Law is two-fold. First, it ensures that suppliers are paid for materials supplied during construction. Second, it protects owners from paying more than once for the same work or materials. In order to facilitate the second purpose of the Lien Law, the value of a materials supplier’s lien fund is limited to the unpaid portion of the contract price for the contract for which the unpaid materials were utilized.

Changes to North Carolina’s Mechanics’ Lien Statute

Apr 01 2013

By Brian P. Evans & Samuel T. Reaves, K&L Gates, Charlotte

Significant changes in North Carolina’s mechanics’ lien statute take effect on Monday, April 1, 2013. These changes impose new duties on property owners regarding the designation of a private lien agent for almost every real estate construction project. An owner’s failure to comply may result in the inability to obtain grading and building permits and also in mechanics’ and materialmen’s liens being given added priority or validity, so it is important that parties involved in North Carolina real estate construction projects become familiar with the new procedures under the statute.

Evidence of Substantial Completion Critical to Statutes of Limitation and Repose Defenses

Jan 22 2013

Sunset Presbyterian Church v. Brockamp & Jaeger, Inc., 254 Or. App. 24 (Or. Ct. App. 2012)

In 2009, plaintiff church sued defendants, a general contractor and a number of subcontractors, alleging negligence claims for defective work on a new church, where services began in 1999. The trial court granted summary judgment to the defendants based on expiration of statute of limitation and statute of repose time periods.

The general contractor “contended that the two-year statute of limitation . . . had begun to run in 1999 and barred plaintiff’s claims against it.” It relied on a contractual provision that provided that all statutes of limitation for claims arising from the construction “would begin to run from the ‘date of substantial completion,’” which the contractor asserted occurred in 1999 “when plaintiff occupied and used the facility for its intended purpose.” The trial court granted the contractor summary judgment dismissing the case. The appellate court reversed, finding the general contractor failed to produce evidence of the certificate of substantial completion (distinguished from substantial completion by occupancy) as required by the contract, which was critical to commence of the statute of limitations.

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