At-Risk CM

August 16, 2017

Professional Services Exclusion Bars Coverage Where Ordinary Negligence is Inseparably Intertwined With Professional Service

Source: http://www.jdsupra.com, August 14,2 017

In Energy Ins. Mutual Ltd. v. Ace American Ins. Co. (No. A140656, filed 7/11/17, ord. Pub. 8/10/17), a California appeals court found that a professional services exclusion barred coverage for wrongful death and other claims blamed on pipeline inspectors’ failure to identify and properly mark a gas pipeline that was ruptured during construction of another pipeline, resulting in an explosion and fire.

In Energy Ins. Mutual, a pipeline owner hired two temporary construction inspectors through a staffing company. The inspectors had to ensure compliance with engineering and safety standards, practices and procedures for pipeline construction, and understand construction drawings and blueprints. They worked together with one of the owner’s employees to perform daily surveillance to ensure the integrity of the pipeline and avoid third party damage.

An excavator operated by a subcontractor punctured a high-pressure petroleum line releasing gasoline into the pipe trench that was ignited by another contractor’s welding. The resulting explosion and fire killed five employees, seriously injured four others and caused extensive property damage. A Cal/OSHA investigation concluded that failure to properly mark the petroleum pipeline was the primary cause. Wrongful death and other lawsuits followed.…

August 14, 2017

Avoiding Unintended Liability for Design

Source: https://www.lexology.com, August 8, 2017
By: Daniel McLennon, Smith Currie & Hancock

A recent trend in design-build contracting, especially on large projects, is for the owner to incorporate a heightened standard of care for the design aspects of the building. Creeping into contracts is language requiring the project to perform according to unspecified expectations, such as “fit for owner’s use” or “suitable for the use intended”. This heightened, ambiguous standard of care conflicts with the traditional designer’s standard of care—the ordinary care expected of reasonably competent designers—leaving a gap between the performance that may be required from the design team and the performance expected by the owner. This gap may result in uninsurable exposure to the design builder. This article explores that gap and how to prevent or handle it.

Traditional Design-Bid-Build Projects

In a traditional design-bid-build project, the owner hires the design team, and the contractor builds the design provided to it by the owner. The design team is typically liable to the owner for any failure to meet the standard of care resulting in design deficiencies. The owner would absorb any loss related to failure of the building to perform according to the owner’s expectations that did not result from a breach of the standard of care. Anecdotally, studies have shown that these losses have ranged between 3-4% of a project’s hard costs.…

August 14, 2017

Non-toxic black mold found in Chico condos, 6 condos affected

Source: http://www.krcrtv.com, August 9, 2017
By: Jerry Olenyn

Heavy rains expose design flaw in gutter system

Six condominiums in the Doe Mill subdivision at East 20th and Hutchinson Streets are being cleaned, repaired and redesigned because of a design flaw in the gutters, after non-toxic black mold was discovered inside.

Tom DiGiovanni, the president of New Urban Builders, acknowledged that his company is responsible and is paying for the temporary living costs of the three homeowners and three landlords.

The flaw was in the metallic gutters, which weren’t large enough to handle the torrential downpour of rain and wind that came crashing into the condos during the severe winter storms, as the water seeped into the walls.

“Especially when it was driving rain…that was wind-driven,” said DiGiovanni.

Chico code enforcement officer Leo DePaola said it appeared to him that this was a design issue that was exposed by the severe weather.

“Typically if you have a failure in one particular facet, it’s repeated multiple times,” said DePaola.

The three homeowners and three landlords will to have remain patient, as work may not be completed for at least three months.

DiGiovanni said his company recently received permission from their insurance company to complete the work, which includes re-stuccoing the outside of the buildings.…

August 10, 2017

The trains are too long. The platform is too short. Bad news for the new station

Source: http://www.miamiherald.com, January 29, 2017
By: Alfonso Chardy

The train is late out of the station. That’s because the station and the train have a size problem.

Plans to open the new Amtrak station near Miami International Airport are behind schedule, Florida transportation officials say. Source of the problem: an engineering error in the construction of the train platform , according to the state Department of Transportation.

The station won’t be ready to open until the end of the year at the Miami Intermodal Center, said Ivette Ruiz-Paz, an FDOT spokeswoman in Miami.

“FDOT is in the process of finalizing an operations and maintenance agreement with Amtrak to provide their passenger service at the MIC Central Station,” Ruiz-Paz said in an email. “The department anticipates to open Amtrak service by the winter of 2017.”

Though FDOT had not previously given a date for the opening, officials hinted it would happen soon after transportation officials acknowledged in 2013 that a mistake had been made in the construction of the platform.

The error?

August 9, 2017

Town files civil suit against Burchfield building’s architects, engineers

Source: http://wivb.com, August 7, 2017
By: Ali Ingersoll

The Town of West Seneca is moving forward, filing a civil lawsuit against the Burchfield designers — Louis Design Group and Nussbaumer & Clarke, inc. The town taking legal action after a consultant came in, looking at the Burchfield Nature and Art Center, determining a man made error and design flaw is the cause behind the site being structurally unsound.

“It is a design and engineering problem,” said Eugene Hart, one of the town council members.

Taxpayer dollars covered most of the construction costs for the center and that’s why the town is moving forward with the lawsuit seeking between $800,000 and $1.7 million in financial compensation.

The Burchfield building is only 16 years old; already, though, areas in the structure are giving way, deteriorating, and starting to bend and buckle.

“It shouldn’t be happpening to something that new,” said Ken Pearl, an architect the town is consulting with to analyze the state of the site.

Pearl points out issues in the design, showing the original blueprints where the engineers and architects expected the ground to be about 2 feet below where it actually is. Pearl says those who constructed the building probably faced some difficulties looking but feels they just brought things to code, never actually altering the design details.…

July 17, 2017

Construction Specifications: Professional Liability Risk

Source: https://www.irmi.com, July 2017
By: Jeff Slivka, New Day Underwriting Managers LLC

Over the past year, questions have increasingly emerged about construction specifications and the subsequent professional liability exposures they pose to contractors.

First, it’s important to identify the two basic types of construction specifications: design and performance.

Design Specifications

The most common concerns prescriptive or design specifications, which constitute all the construction methods, procedures, parts, material, or equipment to be used as well as the dimensions, tolerances, and sequencing of events and installations related to the project’s assembly.

This type of specification is like the incredibly detailed and tedious “directions” and materials that come with new do it yourself furniture kits, minus the tools, materials, and fun. OK, there is one other exception. It’s not that big of a deal when a few nuts and bolts are left over when the assembly is complete. Unfortunately, the same cannot be said when “spare” parts or “extra” material exists at the end of the design and build of a heat exchanger for a petrochemical plant.

It’s also important to note that, when design specifications are created by the owner or the owner’s engineer, the owner or that engineer assumes the risk of any errors in the specifications. The contractor must simply construct the component of the structure as specified.

This implied warranty was established by the Spearin doctrine.1 Generally speaking, this landmark Supreme Court decision states the owner warrants that the design documents are free of defects and in the event the contractor builds according to the design documents, the ultimate responsibility for design errors resides with the owner, provided the contractor does not have any responsibility or participated in the design or engineering. As a result, under these guidelines, the contractor will not be liable to the owner for loss or damages that result solely from insufficiencies or defects in such information, plans, and specifications. So, in this instance, professional risk for the contractor is minimal at best.

Performance Specifications

The other type of specification is referred to as performance specifications, which does not focus on the construction methods, procedures, equipment, parts, or materials but rather the end result. In other words, the contractor is free to select the equipment, materials, and process (let alone the engineering that may accompany those services) to ensure the structure or components of the structure perform as intended.

For example, a performance-based specification was used on air handling units for a commercial structure. The contractor selected the only units that appeared suitable for this condition or structure. Unfortunately, they did not fit into the space provided by the overall design, and, as a result, the contractor was found liable for the costs associated with altering the unit, framing system, and space needed to accommodate all air handling units.

When contractors assess, select, and install the equipment or components based on their own expertise and experience, their exposure to professional liability increases or expands in the event the structure or component of the structure fails or does not perform as intended. With that said, it may not be as simple as “the contractor failed to select the proper equipment, so it’s a professional liability claim.” There could be many contributing factors ranging from product malfunction and improper installation to maintenance errors before one can establish the contractor was negligent in providing a professional service.…

July 17, 2017

Settlement reached between Yeager, engineering firm in connection with hillside collapse

Source: http://wvmetronews.com, July 13, 2017
By: Carrie Hodousek

Charleston’s Yeager Airport has entered into a partial settlement with an engineering firm it sued following the 2015 hillside collapse at the end of the airport’s main runway.

Yeager’s Resolution Committee announced Thursday it has settled with Triad Engineering, Inc. for $900,000.

“It releases the officers and their company assets from any claims that we would have against them,” explained Airport Director Terry Sayre.

Yeager has been tied up in litigation against a number of defendants, including Triad, in connection with the construction of the airport’s EMASS system on the runway extension. The system collapsed on March 12, 2015.

“There’s never a perfect decision when you have lawsuits and things of that nature, so it’s the best deal for today,” Sayre said.

Several other lawsuits in connection with the collapse remain unsettled.

The airport has struggled to come up with enough money to pay for a temporary slope repair. Sayre said they’re in constant communication with the Federal Aviation Administration in hopes of receiving funds for a short term fix.

“Hopefully get a grant in hand for that, which would be a substantial grant — probably somewhere between $10-20 million to where we can start work,” he said.

The long term goal, Sayre said, is to extend the other end of the airport’s runway into Charleston’s Coonskin Park.

It took close to two years and cost nearly $5 million to remove the more than 550,000 cubic yard of debris off Keystone Drive, located at the base of the slope. The road reopened after debris was completely removed in February.

Sayre said they’re hoping work to rebuild the slope can begin this fall.

“All the mess is cleaned up,” he said. “It’s time to go to work.”…

July 17, 2017

The Spearin Doctrine Revisited: Penzel Construction v. Jackson R-2 School District

Source: http://www.lexology.com, July 12, 2017
By: Carly Miller, Bradley Arant Boult Cummings LLP

In a recent Missouri appellate decision, the court recognized and reaffirmed the Spearin Doctrine which provides that an owner impliedly warrants the adequacy of plans and specifications it provides to a contractor. In Penzel Construction v. Jackson R-2 School District et al., No. ED103878 (Mo. Ct. App. Feb. 14, 2017), a general contractor sued a school district for furnishing deficient and inadequate plans and specifications to the contractor for the construction of an addition to a high school. The contractor alleged that providing the deficient plans was a breach of the owner’s implied warranty of the sufficiency of the design. The owner furnished the plans and specifications to the contractor who, in turn, provided them to the electrical subcontractor. Neither the contractor nor electrical contractor noticed any errors in the plans during the bidding process. At the end of the much-delayed project, the electrical subcontractor claimed the 16 month delay was the result of the design’ defects and inadequacies.

The Spearin case established that when the federal government provides the detailed design for a construction contract, it impliedly warrants the adequacy of the design. If the contractor follows the plans and specifications which then turn out to be defective, the contractor will not be liable for either the additional costs incurred in attempting to follow the defective design or costs to repair or otherwise address the design deficiencies. To be clear, the government has been held to the standard that impliedly warrants that the design plans are “reasonably accurate,” but not that they are necessarily perfect. In determining whether the design is defective, one of the things courts may look at is the cumulative effect of the alleged errors. Since the Spearin case was decided in 1918 by the U.S. Supreme Court, the same or a similar doctrine has been adopted in a majority of states.

In Penzel, the court had to first address whether the contractor’s claim based on the Spearin Doctrine was actionable in Missouri, which had not previously adopted the doctrine. The court found that Spearin claims were acceptable vehicles for bringing claims for a defective design on government construction projects. Spearin aligns with principles established by prior Missouri case law—namely, that if a contractor bids on a job based on the government’s representations of what the project will entail, he should not be punished because the resulting product is defective.

The two issues of concern in this case were (1) whether the government owner actually breached the contract, and (2) whether the contractor suffered damages that it can prove with reasonable certainty. Focusing on the first issue, the plans and specifications must be “defective” or “substantially deficient,” and they are considered “defective” if they are “so faulty as to prevent or unreasonably delay completion of the contract performance.” The court found that the contractor had sufficiently met its burden as to whether the plans were defective. As to the second point, the court found that there was sufficient evidence to determine that damages were suffered and the amount of those damages.…

July 14, 2017

The Case of the Misplaced Air-Handling Unit

Source: http://www.ecmweb.com, December 1, 2008
By: Leonard Greene, P.E., Orbital Engineering and Consulting

The Case of the Misplaced Air-Handling UnitMaintenance technician makes shocking discovery while performing routine service call on middle school’s A/C unit.

When the work order came across his desk, it seemed like any other routine maintenance call to the school district’s service technician — certainly nothing out of the ordinary. The complaint was not uncommon for the old middle school that housed the problem: a noisy above-ceiling air handler.

After working for the district for several years, the technician had visited the building in question many times prior on various service calls. Arriving onsite just after the students had been dismissed for the day, he thought to himself it was probably just a bad fan belt. Little did he know that the air-conditioning (A/C) unit he was about to troubleshoot was not the same one he’d worked on in the past — a minor detail that would prove to cause him major trouble as the job unfolded.…

July 6, 2017

2016: A Busy Year for the Supreme Court of Virginia, Including 2 Significant Decisions for the Construction Industry

Source: http://www.jdsupra.com, July 5, 2017
By: Williams Mullen

If you are a design professional providing services in Virginia, or a general contractor on a public works project for the Commonwealth of Virginia, you need to know of two Virginia Supreme Court decisions in 2016. You ask why? The answer is because your current practices and protocols may expose you to the same risks and liabilities that the design professional and general contractor experienced respectively on the projects the Virginia Supreme Court addressed in its two decisions. Now is the time to learn of these decisions and to review and, if appropriate, modify your practices to avoid the same risks and liabilities.

The first decision is William H. Gordon Associates, Inc. v. Heritage Fellowship Church, 291 Va. 122, 784 SE2d 265 (2016), which involved an array of construction issues, including the duty of care that design professionals owe when preparing construction plans and specifications. The second decision is Hensel Phelps Construction Company v. Thompson Masonry Contractors, Inc., 791 SE2d 734 ( Va. 2016), in which the Court limited the effect of the general contractor’s flow-down clause in its subcontracts and rejected the general contractor’s indemnity claim against its subcontractor.