Construction Law – Page 36 – Legal issues, news, and regulations concerning the construction industry

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

“Waiver of Subrogation” Clauses Do Not Bar Actions Arising Out of Gross Negligence or Violation of Statute or Regulation

Dec 31 2007

Am. Ins. Co. v. Siena Constr. Co., 2007 WL 4711517 (Mass. Super. Ct. Dec. 24, 2007)

In this case, the Superior Court considered two consolidated cases that both arose out of an explosion of a newly constructed building. In both cases the plaintiffs were insurance companies acting as subrogees. Defendants (general contractors and subcontractors) moved for summary judgment on the ground that recovery was barred by “Waiver of Subrogation” clauses found in the contracts. The plaintiffs argued that the waiver of subrogation clause did not extend to damages caused by a defendant’s gross negligence or its violation of a statute or regulation. In addition, they argued that the subcontractors were not protected by the waiver of subrogation clause.

The original judge in the case held that analogous case law concerning exculpatory clauses supported a denial of defendants’ summary judgment motion. The judge also held that, by its terms, the waiver of subrogation clause did not include subcontractors. In the consolidated case, the new judge accepted the rulings of prior judge and the motions for summary judgment were allowed in part and denied in part. Plaintiffs’ claims were allowed to proceed but as to defendants with valid waiver of subrogation clauses (contractors not subcontractors) recovery was limited to damages arising from defendant’s gross negligence, or negligence premised on a violation of statute or regulation.

Washington Supreme Court Re-Affirms Mike M. Johnson Rules Regarding Waiver of Contractual Claims Provisions

Dec 31 2007

Am. Safety Cas. Ins. Co. v. Olympia, 162 Wash.2d 762, 174 P.3d 54 (2007)

The Washington Supreme Court affirmed summary judgment for the City of Olympia against American Safety Casualty Insurance Company where the contractor (whose rights the surety was pursuing) failed to comply with contractual notice procedures. During construction, the contractor had written letters purporting to reserve its right to bring a claim at a later date. The contractor defaulted, and the surety completed the job. After completion, the surety presented Olympia with a Request for Equitable Adjustment. Though Olympia expressed a willingness to enter into negotiations if the surety provided sufficient supporting documentation, Olympia ultimately rejected the surety’s claim for failing to comply with the contract’s claims provisions. When the surety filed suit, the Thurston County Superior Court granted Olympia summary judgment, which was then overturned by Division Two. Read More

No Need for “Base of Operations” Within Municipality in Order for Contractor to be Subject to Business Privilege Tax

Dec 31 2007

V.L. Rendina, Inc. v. City of Harrisburg, 938 A.2d 988 (Pa. 2007)

In this case, a plurality of the Pennsylvania Supreme Court held that a municipality may apply its business privilege tax to the gross receipts from construction work performed within its borders regardless of whether the contractor maintained a “base of operations” within the municipality. Reversing a Commonwealth Court decision in favor of the construction company, the majority focused on whether the company’s activities in Harrisburg fell within the definitive of “business” contained in the City’s tax ordinance. Read More

Plaintiff Wins Recovery in Quantum Meruit for Heating and Cooling Services Provided

Dec 28 2007

Capital Heat, Inc. v. Buchheit, 848 N.Y.S.2d 481 (N.Y. App. Div. 2007)

In this case, the court awarded recovery in quantum meruit to plaintiff for heating and cooling services it had provided at the defendant’s residence. The court explained that: (i) by issuing invoices, (ii) the plaintiff established an expectation that it would receive payment for its services, (iii) the invoices established the reasonable value of those services, and (iv) the defendant did not dispute that the plaintiff performed the heating and cooling work in good faith or of acceptable quality.

Mechanic’s Lien on Owner’s Real Estate Not Precluded Where Contract is Made with Party Other than Owner, but with Owner’s Consent

Dec 26 2007

Madigan v. Trace Constr., Inc., 878 N.E.2d 568 (Mass. App. Ct. 2007)

In this case, the Appeals Court dismissed an action seeking discharge of several mechanics’ liens encumbering plaintiff’s real estate. The plaintiff, who was the owner of the encumbered property, claimed that because the general contractors entered into contracts with a tenant of the plaintiff, not the plaintiff, it was inappropriate to encumber plaintiff’s real property with a mechanic’s lien. The Appeals Court affirmed the Superior Court dismissal, holding that summary discharge of a mechanic’s lien by the court was inappropriate and that defendants were entitled to discovery.

Court Denies Summary Judgment in Insurance Dispute Concerning Indemnification for Wrongful Death Claim

Dec 23 2007

Grand Crossing, L.P. v. U.S. Underwriters Ins. Co., 2007 WL 4591989 (S.D.N.Y. Dec. 18, 2007)

This case concerned an insurance policy claim made for partial coverage of settlement in a wrongful death action based on a construction site fatality. The Southern District of New York denied the parties’ cross-motions for summary judgment.