Claims – Contr Prof Liability

September 27, 2017

Architect/Design-Builder Responsible for Construction Subcontractor’s Site Safety

Source: https://www.constructionrisk.com, September 2017
By: J. Kent Holland, Jr.

On a design-build project where an architect held the prime contract under DBIA forms 530 and 535, it was liable for overall site safety – including that which it had by subcontract expressly delegated to its construction subcontractor.   Because the language of the prime agreement imposed safety duties on the prime design-builder, the court held that those duties could not be avoided or delegated down to a subcontractor.   Ryan v. TCI Architects/Engineers/Contractors, Inc., 72 N.E. 3d 908 (Indiana 2017).

This case deals with a general contractor. The question was whether it assumed a non-delegable duty of care to keep a worksite safe when it executed the DBIA form contract. Looking at the language of the contract, the court held that the contract demonstrated the design-builder’s intend to assume a duty of care for everyone at the site.

An employee of a sub-subcontractor sustained a workplace injury. The injured individual filed suit against the design-builder to recover for its injuries. The trial court, on the basis that the subcontract agreement between the prime and sub stated that all site safety responsibility was delegated to the subcontractor, granted summary judgment for the design-builder.…

September 27, 2017

Crum & Forster prevails in claims-made policy period dispute

Source: http://www.businessinsurance.com, August 23, 2017
By: Judy Greenwald

A federal appeals court has upheld Crum & Forster Specialty Insurance Co. Inc.’s denial of an insurance claim for a claims-made policy by a construction firm because the claim was not submitted within the policy period, even though it was submitted during the policy’s subsequent renewal period.

Morristown, New Jersey-based Crum & Forster issued a professional errors and omissions liability claims-made policy to Anchorage-based Alaska Interstate Construction L.L.C. with an initial policy period of Dec. 1, 2011, to May 1, 2013, and then a renewal policy with a policy period of May 1, 2013, to May 1, 2014, according to Tuesday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Alaska Interstate Construction L.L.C. v. Crum & Forster Specialty Insurance Co. Inc.

A claim against the policy was made by a wine producer on Jan. 10, 2013, during the initial policy period.  But Alaska Interstate did not report the claim until June 19, 2013, during the renewal policy period, according to the ruling.

After Crum & Forster denied coverage, Alaska Interstate filed suit in U.S. District Court in Anchorage, which granted the insurer summary judgment.

A three-judge appeals court panel unanimously upheld the lower court. Alaska Interstate argues “‘policy period’ can reasonably be interpreted as encompassing both the initial and renewal policy periods,” said the ruling.  “Under this interpretation, (Alaska Interstate) would have made and reported the claim within the single continuous policy period.”

But this proposed interpretation of “policy period” is not reasonable, said the ruling.  “According to the plain language of the policies, a claim must be made and reported within a single policy period, as stated in the Declarations for a given policy,” it said.

“An insured cannot reasonably expect coverage under such circumstances,” the ruling said, in upholding the lower court.…

September 15, 2017

Keeping Construction Risks Less Risky

Source: https://www.lexology.com, August 14, 2017
By: John J. Sylvanus, Barley Snyder

Major construction is full of risk and reward. Owners, architects, engineers, contractors and subcontractors – all are bound to each other by a web of agreements, common schedules and desired outcomes. Everyone on a project is dependent on everyone else and subject to events beyond their control. Your ability to complete work timely and on budget depends on others.

Controlling risk requires recognition of events with risk potential and taking appropriate steps to limit its potential impact. Risk events will occur, and when they do, you need to be prepared to act promptly and appropriately. It is critical to remember that the process of determining the appropriate response to such an event requires looking at it not only from your viewpoint and determining how best to respond based on your potential costs and losses, but also considering how others may react and the risk of that reaction to you. When foreseeable but unanticipated problems occur, you can incur losses by having your schedule disrupted or pushed back, your work interfered with or problems caused for others. Although delays and additional costs you may incur are easy to determine, the biggest risks might be those that don’t affect you directly. Follow these rules to minimize risk factors:…

September 8, 2017

When building materials fail, who’s to blame?

Source: http://www.constructiondive.com, August 15, 2017
By: Kim Slowey

This summer, the world looked on in disbelief as fire consumed the 24-story Grenfell Tower residential high-rise in London. The building burned for more than 24 hours before firefighters could extinguish it in full. Reports have confirmed approximately 80 fatalities so far, but that number could still grow as inspectors continue to survey the site and identify victims.

An investigation into the fire’s cause has centered on exterior cladding that was part of a renovation completed in May 2016, although the building’s lack of fire sprinklers has come under public scrutiny as well. Those panels, which contain the highly flammable polyethylene, are thought to have helped spread the flames after a refrigerator electrical fire on the fourth floor.

Polyethylene was also found in the pile of material that burned so hot under Interstate 85 in Atlanta in March that it collapsed a 350-foot section of highway. And it is because of that flammability that the panels’ manufacturer, Arconic, formerly part of Alcoa, says they are not meant for use in high-rise construction. Yet they were installed at Grenfell and other towers.

Finding one person or company to hold liable when a building material has been improperly or unscrupulously specified or installed is often impossible — and given the increasingly collaborative nature of construction projects today, perhaps not advisable. According to Judah Lifschitz, principal and co-president at Shapiro Lifschitz & Schram, in Washington, DC, it’s likely that any party involved in the product’s manufacture, sales, specification or installation would be at risk of being named in a lawsuit.…

September 6, 2017

Secret Bechtel Report Details ‘Significant’ Problems at V.C. Summer Nuclear Project

Source: http://www.enr.com, September 5, 2017

The doomed V.C. Summer nuclear project suffered from flawed construction plans, faulty designs, inadequate management of contractors, low worker morale and high turnover, according to a lengthy and long-secret report released Monday by S.C. Gov. Henry McMaster’s office.

The report, completed by the Bechtel Corp. about 18 months before the project was shut down in July, also notes strained relationships between the project’s contractors, as well as a lack of shared vision and accountability among the major companies involved.

Bechtel’s report, which senior partner SCE&G did not want released, might answer questions from lawmakers about what went wrong with the project. Many lawmakers want to know whether the fiasco could have been prevented.

Cayce -based SCE&G and state-owned Santee Cooper spent nine years and $9 billion on the Fairfield County project before pulling the plug July 31 . Ratepayers at both companies have been charged at least $2 billion for two nuclear reactors that won’t be completed. The utilities have said rising costs, construction delays and the bankruptcy of chief contractor Westinghouse led them to walk away.

Lawmakers fumed after reviewing the report.…

September 1, 2017

Delay Claim Analysis

Source: http://www.newyorklawjournal.com, August 29, 2017
By: Kenneth M. Block and Joshua M. Levy, New York Law Journal

Construction delays, whether from lack of subcontractor coordination, construction defects, design errors or omissions, late decision making, force majeure, etc., can have disastrous consequences for owners and contractors alike. Owners can suffer extended management, supervisory, administration, insurance and financing costs, overhead expenses, loss of income, and real estate taxes. Contractors can suffer similar expenses, as well as increased general conditions expenses, increased labor and material expenses, lost productivity and lost opportunities for new work.

Well-drafted contracts can limit the liability of the responsible party for the other parties’ losses and expenses through waivers of consequential damages for the benefit of the contractor (but often replaced with liquidated damages provisions) and “no damages for delay clauses” for the benefit of the owner (but often allowing for the recovery of actual general conditions costs incurred by the contractor). However, while minimizing exposure to the consequences of delay, contractual language cannot eliminate delay claims, and owners and contractors should be prepared to deal with them.

Time Impact Analysis

The first step in dealing with a delay claim involves schedule analysis, i.e., the comparison of the original project schedule (the “as-planned schedule”) with the project schedule showing how the project was actually built (the “as-built schedule”). The as-planned schedule is the schedule originally prepared by the contractor and accepted by the owner. Where an as-planned schedule does not exist it can be created from the original contract documents in order to establish a base line plan. The as-built schedule is developed using factual project data to determine how the project was actually built, such as daily reports, logs, photographs, payment requisitions, and meeting minutes.

The comparison of the two schedules is used as part of a “time impact analysis” or TIA, which consists of breaking down the differences between the as-planned and as-built schedules into “time slices.” The TIA follows the critical path of the project and examines the actual events which may have caused delay. This procedure also allows the analyst to separate critical issues (which affect the critical path) from non-critical issues (which do not). Once the critical issues are identified, the job records are analyzed in order to determine the cause of the delay and the assignment of responsibility.…

September 1, 2017

Sergeant Bluff sues firm over water plant design

Source: http://siouxcityjournal.com, August 30, 2017
By: Nick Hytrek

The city of Sergeant Bluff has sued the engineering firm that designed its water treatment plant, claiming the facility does not function as promised.

The city paid Veenstra & Kimm Inc., of West Des Moines, Iowa, more than $4.5 million to design the plant, but since its opening in October 2011, the city has seen increased cost for water treatment chemicals, labor and repairs because the plant was not designed properly, according to the lawsuit.

“The plant as designed and engineered does not comply with the contract specifications in that the plant cannot operate at the contracted capacity,” the city said in the lawsuit, filed Tuesday in Woodbury County District Court.

The lawsuit charges Veenstra & Kimm with breach of contract and negligence and seeks compensation for the city’s ongoing and future costs to repair the water plant.

Veenstra & Kimm president Bob Veenstra said Wednesday that he was unaware that the lawsuit had been filed and could not comment.

Citing the pending litigation, Sergeant Bluff officials have declined further comment on the suit. In a press release, the city said its water is safe and that residents should not be concerned about using or drinking it.

According to the lawsuit, the city hired Veenstra & Kimm in 2008 to study its future water needs, costs for a water plant that would provide iron and manganese removal, and costs for water wells to supply it. The firm was later contracted to review the city’s facilities at that time, study site selection for a new water treatment plant and provide an estimate on operating costs.

In November 2008, Veenstra & Kimm recommended that the city build a new water plant, and the city contracted with the firm to design a facility cable of handling approximately 2.2 million gallons per day, including iron and manganese removal, and also be capable of possible future expansion.

The city’s website says the plant, at 50 S. Lewis Blvd., is capable of producing 2.7 million gallons of water per day and has the ability to upgrade production to 4.2 million gallons.

Sergeant Bluff contends the firm designed the plant with equipment incapable of producing at the required level and that the firm did not analyze and use all the water data while designing the project.

The engineering firm attempted to make the plant operational according to contract terms, the lawsuit said, but walked away from the project in August 2014.

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.…