Construction Law – Page 35 – Legal issues, news, and regulations concerning the construction industry

Kitchen Contractor Potentially Liable Under New Jersey’s Consumer Fraud Act

Feb 13 2008

CZAR, Inc. v. Heath, 939 A.2d 837 (N.J. Super. Ct. App. Div. 2008)

In this case, a homeowner brought claims against a custom kitchen contractor under New Jersey’s Consumer Fraud Act. During the construction of a new home, the homeowner had contracted directly with a custom kitchen contractor for the installation of custom kitchen cabinets, interior doors, a front door, and certain moldings. The trial concluded that the home improvement practice regulations found in N.J.A.C. 13:45A-16.1 to 16.2 were not applicable to plaintiff and, therefore, dismissed the CFA claims. The trial court reasoned that the kitchen contractor’s work was not a “home improvement” within the meaning of the regulation because the construction and installation of the doors, cabinets, and moldings were part of the construction of a new residence and, therefore, excluded from the definition of “home improvement.”

General Contractor Cannot Bring Direct Action Against Subcontractor’s Insurer Regardless of General Contractor’s Status as Additional Insured Under Subcontractor’s Policy

Feb 13 2008

Ohio Cas. Ins. Co. v. Time Warner Entm’t Co., L.P., 244 S.W.3d 885 (Tex. App. Feb. 6, 2008)

In this case, a general contractor brought a declaratory judgment action against its subcontractor’s primary and umbrella insurers to recover the cost of removing and replacing fiber optic cable that the subcontractor installed improperly. Although the trial court granted summary judgment in favor of the general contractor, the Dallas Court of Appeals reversed.
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Texas Statute Bars Property Owner’s Liability for Injury to Independent Contractors

Feb 07 2008

Vanderbeek v. San Jacinto Methodist Hosp., 246 S.W.3d 346 (Tex. App. 2008)

A plumber working on a remodel project for San Jacinto Methodist Hospital cut and capped a drainage pipe from a sink in an adjacent room. Although he instructed a hospital employee that the sink was out of order and should not be used, hospital employees poured a drain cleaner into the sink when it wouldn’t drain. When the plumber returned to remove the drainage line cap, a caustic liquid came out of the pipe, causing him chemical burns. He sued the hospital for negligence for allowing caustic drain cleaner into the sink when he had given notice it was not to be used. Read More

Owner Potentially Liable for Fraud and Consumer Protection Act Violations Based on False Promises of Payment

Feb 06 2008

Atlantis Int’l Constr. Servs., Inc. v. Sluggo, LLC, 71 Mass. App. Ct. 1106 (2008) (Unpublished)

In this unpublished decision, the Massachusetts Appeals Court held that an owner could be held liable for fraud, breach of contract and violation of the Massachusetts Consumer Protection Act (M.G.L. c. 93A) for inducing a general contractor continue work based on the promise that the general contractor’s numerous disputed change order requests would be paid in full. After completion of the project the owner refused to pay many of the general contractor’s change orders. Read More

Potential Pitfalls in Australian Dispute Resolution Clauses

Feb 05 2008

Seeley Int’l Pty. Ltd. v. Electra Air Conditioning BV, 2008 WL 276689, [2008] FCA 29 (Fed. Ct. Austl.)

This Australian case illustrates the issues, in that jurisdiction, which can turn on niceties in the drafting of dispute resolution clauses. Seeley, a distributor of air conditioners sued their manufacturer, Electra, in the Australian Federal Court for breach of contract, seeking a declaration and summary judgment. Electra sought to restrain the proceedings on the basis of an agreement to arbitrate any issue between the parties before a single arbitrator seated in Melbourne under the IAMA Rules. However, the relevant clause also provided that nothing in it “prevents a party from seeking injunctive or declaratory relief in the case of a material breach or threatened breach of this Agreement.”
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Municipal Authority’s Claim Against Surety for Bad Faith Falls Short

Feb 05 2008

Intercon Constr., Inc. v. Williamsport Mun. Water Auth., 2008 WL 239554 (M.D. Pa. Jan. 28, 2008)

This case involved standard breach of contract claims and counterclaims between a general contractor and a public municipal authority. In addition, the municipal authority also sued a performance bond surety on claims of bad faith. The municipal authority alleged that the manner in which the surety investigated and denied coverage under the performance bond, and its withholding of certain information from the authority, constituted bad faith under the Pennsylvania bad faith insurance statute. Read More

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.