Case Summaries – Page 14 – Construction Law

Court holds Surety has Common Law Claim for Indemnity Against Subcontractor, Despite Absence of Privity

May 10 2008

J.C. Gibson Plastering Co. v. XL Specialty Ins. Co., 2008 WL 1931348 (M.D. Fla. May 2, 2008)

In J.C. Gibson Plastering, the U.S. District Court for the Middle District of Florida held that a surety could state a claim for common law indemnity against a subcontractor despite the absence of privity. The court found that the two elements necessary to state a claim for common law indemnity were satisfied: (i) the surety may be constructively, vicariously or derivatively liable for the subcontractor’s failure to pay sub-subcontractors, and (ii) the surety was without fault in causing the loss it was required to bear, despite failing to timely respond to the claim.

Also, despite the lack of Florida authority on the question, the court also held that a surety’s failure to respond to the subcontractor’s claim for payment under a payment bond within forty-five days (as required under the bond) barred the surety from challenging the claim or from asserting counterclaims to the extent the surety could have reasonably identified the bases of its affirmative defenses or counterclaims’ during the forty-five day period. By failing to respond timely, the claim was undisputed and subject to summary judgment.

Statute of Limitations for Contractor Negligence and Breach of Warranties Does Not Accrue until Turnover of Control of Condo Association to Unit Owners

May 08 2008

Saltponds Condo. Assoc. v. Walbridge Aldinger Co., 979 So. 2d 1240 (Fla. Dist. Ct. App. 2008)

In this case, a condo association sued a contractor in connection with alleged construction defects discovered after the control of the association passed from the developer to the unit owners. The contractor argued that the claims were barred by the three-year “statute of limitations” set forth in Florida Statute Section 718.203. That Section, however, merely sets the warranty period for construction improvements and materials, not the statute of limitations.

Under Business and Professions Code § 7031, Contractor Must be Licensed Prior to Preparing Shop Drawings or Ordering Materials for Construction Project

May 07 2008

Great West Contractors, Inc. v. WSS Ind. Constr., Inc., 162 Cal. App. 4th 581 (2008)

WSS Industrial Construction, a steel subcontractor, sued general contractor Great West Contractors, to recover for work performed on a public works project in Riverside, California. At the time that WSS submitted its bid proposal to Great West, WSS had applied for but not yet obtained a corporate contractor’s license. WSS did receive a license after the bid was accepted, but only after it had already ordered multiple sets of shop drawings and some of the material necessary for the project. WSS initiated the lawsuit by suing Great West and its surety, Fidelity and Deposit Company of Maryland, for $91,000 due under the contract and subsequent change orders.

At trial, Great West and Fidelity moved for a nonsuit on the grounds that WSS was statutorily barred, pursuant to Business and Professions Code section 7031, from any recovery because WSS was not duly licensed at all times during performance of the contract. The trial court determined that WSS’s president had held valid individual licenses at all times and that, in any event, WSS was not required to have a license for the work that it performed prior to receiving its license. The court held that “there was substantial compliance with the licensing during the contract and work was performed in good faith.” The jury awarded WSS $220,000 in damages, including statutory penalties and interest. Great West and Fidelity appealed after the court rejected their post-trial motions for a new trial, vacation of judgment and judgment notwithstanding the verdict. Read More

Appellate Court Finds Liquidated-damages Clause Was Not a Penalty and Thus Was Enforceable

Apr 24 2008

Mineo v. Lakeside Village of Davie, LLC, 983 So. 2d 20 (Fla. Dist. Ct. App. 2008)

Where a contract for the purchase of real property and construction of a residence gave the seller the option of retaining deposits and change order payments as liquidated damages in the event of the buyer’s default, or the seller could sue for specific performance at the purchase price plus interest as delay damages, the liquidated damages provision was not an unenforceable penalty because the contract did not provide the seller with the option to sue for actual damages (which would have change the character of the forfeiture as agreed damages).

Subcontractor’s Contractual Indemnity Obligation to Contractor for EIFS Damage Not Covered by Indemnity Provisions of Texas Product Liability Act

Apr 24 2008

K-2, Inc. v. Fresh Coat, Inc., 253 S.W.3d 386 (Tex. App. 2008)

In this case, the court held that the Texas Product Liability Act did not provide a product seller with the right of indemnity against a product manufacturer for that seller’s independent liability under a contract.

Several homeowners sued their builder, its subcontractor which installed synthetic stucco cladding (EIFS) on their houses and the EIFS manufacturer after experiencing water penetration leading to structural damage. After the claims made by the homeowners and the home builder against the subcontractor were settled, the subcontractor obtained a judgment against the manufacturer for indemnification of the amounts it paid in the settlement. The manufacturer appealed that portion of the judgment finding it liable to indemnify the subcontractor for the amount it paid to settle the home builder’s claims because it was paid under an indemnity clause in the subcontract. It did not dispute that part of the judgment obligating it to indemnify the subcontractor for settlement of the homeowners’ claims. Read More

Insurer’s Duty to Defend Construed Broadly in Favor of Insured

Apr 23 2008

WTC Captive Ins. Co. v. Liberty Mut. Fire Ins. Co., 549 F. Supp. 2d 555 (S.D.N.Y. 2008)

After the World Trade Center disaster in September 2001, the City of New York created a captive insurance company, funded by a grant from the Federal Emergency Management Agency, to insure the costs of lawsuits arising from the WTC clean-up efforts. Liberty Mutual was the primary insurer and had agreed to defend and indemnify the city against claims including, but not limited to, bodily and personal injury. A group of secondary insurers agreed to provide the same coverage if the Liberty Mutual policy became exhausted. All of the policies were retroactive to September 11, 2001. Read More

Constructive Notice Not Established by Discussion in Meetings

Apr 22 2008

Geonie v. O.D. & P. N.Y., Ltd., 855 N.Y.S.2d 495 (N.Y. App. Div. 2008)

An injured worker, Geonie, filed a negligence suit against multiple defendants, including the general contractor, after stepping into an opening left by the removal of a tile from a raised floor in a computer room. Geonie argued that defendants failed to provide adequate safety devices to protect against an elevation-related hazard and failed to adequately supervise the work area. He further claimed that because the removed tile was discussed at weekly safety meetings, the defendants had, at least, constructive notice of the problem. The trial court dismissed Geonie’s claims under New York Labor Law and his negligence claim against the general contractor. Read More

Landscaper Must Have Proper License to Recover Damages for Breach of Contract

Apr 22 2008

Hakimi v. Cantwell Landscaping & Design, Inc., 855 N.Y.S.2d 273 (N.Y. App. Div. 2008)

Hakimi filed a breach of contract claim against Cantwell stemming from landscaping work performed on the property where Hakimi was having a new home built. Cantwell admitted that it was not licensed as a home improvement contractor at the time it did the work. In response to the lawsuit suit, Cantwell filed a mechanic’s lien and a notice of pendency against Hakimi’s property. Cantwell claimed that it did not need a home improvement contractor’s license because Hakimi was building a new house and the administrative code exempted new home construction from the home improvement licensing requirements. Hakimi moved to dismiss Cantwell’s counterclaims and the Supreme Court denied the motion. Read More

Federal Arbitration Act Does Not Preempt California Code of Civil Procedure § 1281.2; California Court May Refuse to Enforce Arbitration Agreement To Prevent Possibility of Conflicting Rulings

Apr 18 2008

Best Interiors, Inc. v. Millie and Severson, Inc., 2008 WL 1122182 (Cal. Ct. App. Apr. 11, 2008)

A dispute arose between general contractor Millie and Severson, Inc. and subcontractor Best Interiors, Inc. related to the construction of a hospital in Whittier, California. Best sued M&S, the hospital and two building inspectors, alleging various delay and disruption damages caused by improper management and inspection of the project. M&S petitioned to compel arbitration of the dispute and to stay Best’s lawsuit, based on arbitration clauses in the subcontract and the prime contract. Best opposed on the grounds that (1) the building inspectors could not be compelled to arbitrate; (2) the arbitration might result in inconsistent results; and (3) the court had authority under California Code of Civil Procedure § 1281.2 to refuse to enforce the arbitration clause. The trial court granted Best’s petition. On appeal, M&S raised two arguments. First, M&S argued that the Federal Arbitration Act, 9 U.S.C. § 1 et seq., applied to the arbitration agreement and did not give the trial court discretion to deny arbitration. Second, M&S argued that, even if California law applied to the arbitration agreement, there was no possibility of conflicting rulings. Read More

Whether Liquidated Damages Clause is Properly Invoked Depends on Whether Actual Damages Can be Determined

Apr 15 2008

Zeer v. Azulay, 2008 WL 1134239 (N.Y. App. Div. Apr. 8, 2008)

In this case, defendant contractors agreed to construct a home on property owned by plaintiffs pursuant to a written contract executed by the parties in September 2003. The parties agreed that if the contractor did not complete the project by February 29, 2004 and obtain a certificate of occupancy, it would be liable for liquidated damages of $250 per day until the work was completed. Read More

Catagory:Case Summaries