Construction Law – Page 40 – Legal issues, news, and regulations concerning the construction industry

Power of Court to Uphold Arbitral Award on Alternative Grounds

Oct 24 2007

CTI Group Inc. v. Transclear SA (The Mary Nour), 2007 WL 3001775, [2007] EWHC 2340 (Queen’s Bench Div., Commercial Court)

This case arose out of the non-delivery by the sellers of a quantity of cement. The sellers had argued that the contract had been frustrated by the actions of the Mexican cement cartel. The Tribunal held that the contract had been frustrated but, if they were wrong on that, the buyers had a valid claim for damages. The buyers appealed to the English High Court on the main finding of frustration of contract. The appeal succeeded, the High Court finding the wrong legal test for frustration had been applied.
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Court Intervenes Where Arbitrator Held Not to Have Power to Act Effectively

Oct 18 2007

Pacific Maritime (Asia) Ltd. v. Holystone Overseas Ltd., 2007 WL 2944844, [2007] EWHC 2319 (Queen’s Bench Div., Commercial Ct.)

Pacific sold an accommodation vessel to Holystone under an agreement which made special provision for the return of a block of accommodation or its equivalent to Pacific. Under s.44 of the Arbitration Act 1996 (the “Act”), and in advance of commencement of arbitration, Pacific applied for and obtained a freezing order on the grounds of Holystone’s failure to provide a replacement accommodation block. Arbitration then commenced and Holystone applied for the discharge of the freezing order partly on grounds that the arbitrator had jurisdiction to grant the relief Pacific wanted. Read More

Surety May Waive Right to Challenge Claim Against Payment Bond by Failing to Answer Notice of Claim, Even Where Claimant Did Not Submit Proof of Loss or Documentary Support

Oct 15 2007

J.C. Gibson Plastering Co. v. XL Specialty Ins. Co., 521 F. Supp. 2d 1326 (M.D. Fla. 2007)

In this case, a subcontractor gave notice of a payment bond claim to a surety using a 14-page letter that set forth the factual and legal bases for the claim. The subcontractor moved for summary judgment against the surety arguing that the surety waived its right to challenge the subcontractor’s claim because the surety failed to answer that notice of claim within 45 days, as required under the bond. The surety argued in response that the subcontractor’s notice of claim was insufficient because the subcontractor disregarded the surety’s requests for: (i) a “proof of loss,” and (ii) documentary support for the claim. The surety also argued that, to the extent the court may consider the subcontractor’s notice sufficient, the surety’s requests for additional information satisfied the answer requirement under the bond because the requests indicated that the surety disputed the claim.
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Contractor, But Not Owners of Contractor, Protected Under Maine’s Insurance Guaranty Association Act

Oct 07 2007

Belanger v. N. Am. Specialty Ins. Co., 504 F. 3d 147 (1st Cir. 2007)

In this case, North American Specialty Insurance Company, a surety, brought a suit against its principal contractor, Seacoast Crane Company and Seacoast’s owners (the “Belangers”) to recover monies paid out under a performance bond. NAS had issued the performance bond on behalf of Seacoast to build a corporate headquarters project for DCC Development Corporation. In the suit, initiated in the United States District Court for the District of Maine, NAS asserted claims for indemnification, breach of contract and specific performance based on a judgment that was entered against NAS and Seacoast, and against the Belangers for breach of contract in connection with the DCC project. Read More

Undermining Competitive Bidding Process through Collusion Violates Massachusetts Consumer Protection Act

Oct 04 2007

Prof’l Servs. Group v. Town of Rockland, 515 F. Supp. 2d 179 (D. Mass. 2007)

In this case, the Federal District Court for the District of Massachusetts issued a decision concerning the subversion of the public procurement process by a bidder. The defendant-contractor colluded with a public official of the plaintiff-town to ensure that it would be the only bidder and would thereby receive the bid at an artificially high price. The court held that this collusion violated the Massachusetts Consumer Protection Act (M.G.L. c. 93A), and that the town was entitled to double damages pursuant to that that statute because the contractor’s violations were knowing and willful. The contractor attempted to escape liability by arguing that the employee who was responsible for the bidding and collusion was a rogue employee. The court rejected this argument and found that the contractor’s employee was acting within the scope of his employment and therefore the contractor was liable by the doctrine of respondeat superior. Read More

Statute of Repose Begins to Run on Negligence and Implied Warranty Claims when Building Occupants are First Issued Certificate of Occupancy

Sep 21 2007

Great N. Ins. Co. v. Architectural Env’ts, Inc., 514 F. Supp. 2d 139 (D. Mass. 2007)

On a motion for summary judgment, the Federal District Court for the District of Massachusetts held that for the purposes of the statute of repose, the limitation period began running when the temporary certificate of occupancy was issued on the building in question.

In this case, a fire occurred at a commercial property as a result of an electrical malfunction. The occupant’s insurer sued the mechanical and electrical contractor responsible for design and renovation of the building. The court held that the statute of repose began to run on the date that the temporary certificate of occupancy was issued on the building, and not at the later date when the permanent certificate was issued. Thus, the plaintiff’s claims for negligence and implied warranties were time-barred by the six-year statute of repose. Express warranties, however, were not subject to the statute of repose and those claims survived summary judgment.

Oregon Federal Court Remands Contractor Garnishment Action to State Court

Sep 19 2007

Triad Mech. v. Coatings Unlimited, Inc., 2007 WL 2713842 (D. Or. Sept. 12, 2007)

A general contractor successfully obtained a judgment against a subcontractor for breach of contract and negligence arising from a construction project. The general contractor then sought a garnishment action against one of the subcontractor’s insurers to collect the judgment, which was filed in Oregon state court. The general contractor was an additional insured under the subcontractor’s comprehensive general liability insurance. The insurer removed the action to federal court and the general contractor sought remand to state court. The district court remanded the action to state court.

Unintended Construction Defects May Constitute an “Accident” or “Occurrence” Under Commercial General Liability Policy

Sep 07 2007

Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007)

In this landmark decision, the Texas Supreme Court ruled that commercial general liability policies provide a duty to defend claims for property damage caused by an insured contractor’s defective construction. Resolving a split of authority on certified questions from the Fifth Circuit, the court ruled that unintended construction defects may constitute an “accident” or “occurrence” within the meaning of a commercial general liability policy. It also ruled that the resulting damage to or loss of use of the building may constitute “property damage” sufficient to trigger the insurer’s duty to defend. The court also held that the CGL policy made no distinction between tort and contract damages, rejecting the insurer’s economic loss rule defense.

Property Owner’s Claims Against Professional Engineer Reinstated Where Contractor Placed Water Line Outside of Utility Easement

Sep 07 2007

Merlini v. Gallitzin Water Auth., 934 A. 2d 100 (Pa. Super. Ct. 2007)

In this case, the Superior Court of Pennsylvania held that a professional engineer can be either “ordinarily negligent” or “professionally negligent” in the performance of his consulting engineering tasks, or both. He can be accountable in damages for mere negligence under common law theories of trespass, even if a plaintiff is not suing him for professional negligence.

This odd outcome is the result of an engineer directing a contractor to install a water line, without right-of-way, easement or permission, in the wrong place on the property owner’s property, that is, in a location outside of the recorded easement. When the property owner filed a complaint in the court, but did not file the technically required certificate of merit of professional negligence required by the Pennsylvania Rules of Court, the property owner’s complaint was dismissed. The property owner appealed, and the Superior Court had to determine whether the property owner’s complaint was asserting ordinary negligence or “professional negligence.”
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Findings of Arbitrator Will Not Be Overturned in Absence of Fraud

Sep 06 2007

Site, Inc. v. Peabody Constr. Co., Inc., 2007 WL 2458482 (Mass. App. Ct. Aug. 30, 2007) (Unpublished)

In this case, the Appeals Court affirmed the Superior Court’s denial of plaintiffs’ motion to vacate an arbitration award. The defendant general contractor, Peabody Construction Company, refused to pay the plaintiff subcontractor, Site, Inc. on a subcontract after terminating the subcontractor prior to completion of the job. The case went to arbitration. After considering extensive evidence and testimony, the arbitrator found that the general contractor’s failure to make timely payment was a material breach of the subcontract. Although the arbitrator found that general contractor’s material breach of the subcontract excused any subsequent failure by the subcontractor to perform its obligations under the subcontract, the arbitrator found that the subcontractor was not entitled to payment for the work it performed because the subcontractor “had not completely [and satisfactorily] performed all of its obligations under the subcontract.” Read More