Articles Posted in Construction defect

A 2015 opinion by the Fifth District Court of Appeal had significant ramifications for the application of the statute of repose in construction defect cases.  In response to the uncertainty created by the ruling, Florida lawmakers have introduced a bill to clarify one the trigger dates for the tolling of the statute of repose.

In Cypress Fairway Condominium v. Bergeron Construction Co., the condominium association brought suit on February 2, 2011 on behalf of the condominium, and as assignee of claims held by the general contractor, for recovery of more than $15 million in damages caused by construction defects.  Da Pau Enterprises, Inc., the only remaining defendant after other parties reached settlements, moved to dismiss and/or for summary judgment against the association, alleging that the statute of repose expired three days prior to the date the litigation commenced.

The statute of repose in Section 95.11(3)(c) provides that actions for latent construction defects must commence within 10 years of the last of the following four events:

  • the date of actual possession by the owner;
  • the date of the issuance of a certificate of occupancy;
  • the date of abandonment of construction if not completed; or
  • the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and their employer.

At issue was the last of the four trigger events under Section 95.11(3)(c).  The defendant argued that the statute of repose commenced the date the contractor submitted its Final Application for Payment on January 31, 2001, which represented the “completion of construction.”  However, the association contended that the repose period did not begin until the date final payment was actually paid by the owner on February 2, 2001, which represented the date of the “completion of contract.”  The trial court disagreed with the association and granted summary judgment to the defendant, dismissing its claims.

5DCA-Court-House-300x183The Fifth DCA reversed, reasoning that the unambiguous statutory language of Section 95.11(3)(c) required the completion of performance of the contract by both parties, and not just the completion of the performance of the contractor’s duties under the contract.  The appellate panel concluded that the statute of repose was not triggered upon completion of construction.  It found that the final act for the “completion of the contract” was final payment, and not three days earlier when the Final Application for Payment was submitted.

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LindseyTLehr-200x300The firm’s Lindsey Thurswell Lehr authored a guest column that appeared in the “Board of Contributors” page of today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which was titlted “Ruling Reinforces Need to Abide by Contracts in Construction Disputes,” focused on a recent Florida appellate court ruling finding that property owners which forgo the contractual mechanisms for resolving construction disputes will not prevail in the state’s courts.  Her article reads:

Strictly adhering to the modus operandi for addressing and resolving disputes that is codified in construction contracts is essential to prevailing in any resulting litigation.

The Florida Third District Court of Appeal recently reinforced the obligation of construction defect litigants to adhere to the terms of their contract, finding that property owners which forgo the contractual mechanisms for resolving disputes will not succeed in Florida’s courts.

The ruling by the Third DCA in the case of Magnum Construction Management v. City of Miami Beach relieved the contractor of liability for alleged safety concerns with a playground that it installed at the city’s South Pointe Park. The appellate panel ruled that the city did not give the contractor the opportunity to fix the purported issues with the playground as required under its contract. Instead, the court stated that the city replaced the playground in its entirety without considering that the safety concerns could have been corrected by the contractor.

dbrlogo-thumb-220x41-94239The court’s decision in this case reinforces the importance of abiding by all contract terms and requirements in construction disputes. Construction contracts often allow the contractor which performed the work to have the opportunity to fix and cure any purported problems and defects. If a property owner ignores this contractual stipulation, as the city of Miami Beach appears to have done in this case, Florida’s courts are very likely to rule against them.

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Steve Siegfried 2013 srhl-lawFirm partners Steven M. Siegfried, Stuart Sobel and Berenice M. Mottin-Berger were featured in an article about their work on behalf of one of the firm’s construction clients that appeared in today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The report, which was titled “Caribbean Construction Firm Scores $4M Judgment,” chronicles the highly contentious litigation and arbitration that led their securing a $4.3 million judgment against DeVry Education Group (NYSE: DV) for Moorjani Caribbean Ltd., a Barbados-based construction company.  The article reads:

Stuart Sobel 2013-thumb-180x270-86799Coral Gables lawyers won a $4.3 million award against a subsidiary of for-profit college company DeVry Education Group in what they say was one of the nastiest arbitration battles they’ve ever fought.

Barbados-based construction company Moorjani Caribbean Ltd. sued over alleged underpayment for the construction of student housing and classroom projects at DeVry’s St. Kitts veterinary school.

Although both parties admitted some aspects of their work relationship was relaxed, with unsigned contracts and loose deadlines, the father-and-son construction company claimed it submitted detailed accounting for both projects and spent years trying to get payment before filing suit.

DeVry Medical International Inc. fought back with counterclaims, alleging it spent more than $1 million fixing design and construction defects in Moorjani Caribbean’s work on the student housing project.

BerenicMottinBergerBut arbitrators found DeVry made improvements to the residence hall so that it could qualify as a place of refuge during a hurricane, not because of deficient construction.

By the time the 2009 bills for the two projects came to the arbitration panel this year, interest and attorney fees made the award much larger than it might have been, Moorjani Caribbean’s lawyers said. Interest on the award continues to grow at a rate of about $593 per day, according to the Aug. 19 final arbitration award.

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A recent opinion by the Fifth District Court of Appeal has significant implications for the application of the statute of repose in construction defect cases.

In Cypress Fairway Condominium v. Bergeron Construction Co., the condominium association brought suit on February 2, 2011 on behalf of the condominium, and as assignee of claims held by the general contractor, for recovery of more than $15 million in damages caused by construction defects. Da Pau Enterprises, Inc., the only remaining defendant after other parties reached settlements, moved to dismiss and/or for summary judgment against the association, alleging that the ten-year statute of repose period expired three days prior to the date the litigation commenced.

The ten-year statute of repose in Section 95.11(3)(c) provides that actions for latent construction defects must commence within 10 years of the latest of the following four events:

  • the date of actual possession by the owner;
  • the date of the issuance of a certificate of occupancy;
  • the date of abandonment of construction if not completed; or
  • the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and their employer.

At issue was the last of the four trigger events under Section 95.11(3)(c). The defendant argued that the statute of repose commenced the date the contractor submitted its Final Application for Payment on January 31, 2001, which signified the “completion of construction.” However, the association contended that the repose period did not begin until the date final payment was actually paid by the owner on February 2, 2001, which signified the date of the “completion of contract.” The trial court disagreed with the association and granted summary judgment to the defendant, dismissing its claims.

5DCA.JPGThe Fifth DCA reversed, reasoning that the plain unambiguous statutory language of Section 95.11(3)(c) required the completion of performance of the contract by both parties, and not just the completion of the performance of the contractor’s duties under the contract. Thus, the statute of repose was not triggered upon completion of construction. Rather, here, the appellate panel held that the final act for the “completion of the contract” was final payment, and not three days earlier when the Final Application for Payment was submitted.

It is unclear how this decision will be applied by the courts when the owner fails to issue final payment or holds off on making the payment for a considerable length of time after the completion of construction and issuance of the certificate of occupancy. There are often disputes that arise resulting in the final payment being withheld, and as in Cypress v. Bergeron, three days can make a critical difference of whether or not the statute bars any claims.

This decision should serve to remind property owners who discover latent defects of the importance of consulting with highly qualified and experienced construction attorneys. Our firm’s other construction lawyers and I write in this blog about important legal and business issues for the construction industry in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

The firm’s Stuart Sobel, Steven Siegfried and Michael Clark represented Miami Dade College in securing a $33.5 million settlement over the partial collapse of its parking garage while it was under construction at the school’s West Campus in Doral in 2012.

After repeated mediations over period of more than a year, the construction settlement that was finalized last week enabled all of the 22 parties that were involved to avoid the uncertainties and vicissitudes of litigation.

According to Stuart, the most significant obstacle for the college was to have all of the parties accept the engineering reality that the remaining portion of the newly constructed garage had to be demolished, including removal of its foundation, with a new garage being constructed from the ground up. Based on its belief that it was the safest and most appropriate course, the college demolished the remaining portion of the garage while the mediation was still in progress and before a settlement had been reached. It relied on its trial team to either convince the responsible parties and their insurers through the mediation process or, if necessary, convince a jury through trial that its action was justified. Through the settlement, the SRHL trial team achieved consensus supporting the college’s course of action.

Click below to watch the video of the report by Willard Shepard of NBC 6, click here to read the article from the Daily Business Review (registration required), and click here for the article that appeared in The Miami Herald.

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In the recent decision of Carithers v. Mid-Continent Casualty Company, the Eleventh Circuit Court of Appeals affirmed a trial court’s decision that a general liability carrier had an obligation to defend a homebuilder and satisfy a $90,000 consent judgment, which had been entered against the homebuilder.

The appeal stemmed from a lawsuit filed by homeowners Hugh and Katherine Carithers against Cronk Duch Miller, their homebuilder. The Carithers alleged that their home, built in 2005, had been constructed with numerous defects. The suit alleged that shoddy work by subcontractors had resulted in a faulty electrical system, damage to tile and exterior bricks and a leaky balcony that caused wood rot in the garage.

The court first examined what appropriate “trigger” controlled the date on which the property damage “occurred” and thus what policy period was implicated. The court noted that Florida state courts were divided as to whether the injury occurred when it “in fact” occurred or when it “manifested” itself. In this instance, the damages allegedly “manifested” themselves in 2010 after the Mid-Continent policy had expired. However, the trial court found that, although the injury might have manifested itself in 2010, it “in fact” occurred in 2005 giving rise to coverage. Notably, in affirming the trial court, the appellate court limited its holding that the “in fact” trigger applied to this case, noting that its application would be problematic where it is difficult or impossible to determine when the injury actually occurred:

“We note the difficulty that may arise, in cases such as this one, where the property damage is latent, and is discovered much later. We also note that the district court found as a fact in this case that the property was damaged in 2005. For this reason, we limit our holding to the facts of this case, and express no opinion on what the trigger should be where it is difficult (or impossible) to determine when the property was damaged. We only hold that the district court did not err in applying the injury-in-fact trigger in this case.”

11circourtappeals.jpgIn the remainder of the decision the appellate court applied Florida law from United States Fire Insurance Co. v. J.S.U.B., Inc. and its progeny in concluding what did and did not constitute covered property damage. Generally speaking, the J.S.U.B. court held that damage which resulted from the defective work of a subcontractor constitutes covered property damage. The Carithers court followed Amerisure Mutual Ins. Co. v. Auchter Co., 673 F.3d 1294 (11th Cir. 2012), which held that property damage constituted an occurrence, giving rise to coverage, if it was damage to work other than that which the subcontractor performed. For instance, if the bricks were damaged by the application of the brick coating, and the installation of the bricks and application of the brick coating was performed by two separate subcontractors, the damage to the brick constituted property damage.

Most notably, perhaps, the court held that the cost to demolish and repair the defective balcony, which was not otherwise covered, was covered property damage because it was necessary to repair the damage to the non-defective garage. The court held that this was part of the “cost of repairing damage caused by the defective work . . . “, quoting U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 889 (Fla. 2007).

Complications often arise when ongoing property damage remains latent and is not discovered for years, and this decision will only add some clarity to cases involving the exact set of circumstances and policy language that applied in this case. However, the court’s decision to cover “rip and tear” costs as property damage could have far reaching implications.

A recent case involving an engineering firm’s lawsuit for nonpayment against a Miami Beach condominium association illustrates the importance for contractors and engineers to file liens for work performed under a single contract as opposed to umbrella liens for services rendered under multiple contracts.

Pursuant to Florida law, construction liens may only be imposed for work performed under a single contract. However, an engineering firm sought to recover more than $107,000 for concrete and stucco remediation, replacement windows, sliding glass doors, cabanas and a new entrance as part of its work under nine separate contracts with the condominium association.

The Miami-Dade Circuit Court Judge overseeing the case issued partial summary judgment in favor of the condominium association. The decision extinguished the lien for failing to comply with Florida Statute §713.09, which states: “A lienor is required to record only one claim of lien covering his or her entire demand against the real property when the amount demanded is for labor or services or material furnished for more than one improvement under the same direct contract.”

It is well established in Florida that separate liens are required for claims attributable to separate contracts, yet filing mistakes such as this one by the engineering firm and its attorneys occur from time to time. flbarbcconstruction.jpg As liens can be filed against real estate only within 90 days of the final furnishing of non-corrective work being performed, the repercussions of flawed lien filings such as the one in this case can prove to be very costly for construction and design firms.

This case is yet another example of the importance of working exclusively with highly experienced construction attorneys for all matters involving construction-related liens and litigation. Our firm’s other construction attorneys and I write regularly in this blog about important legal and business issues for construction professionals in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

The Florida Bar Continuing Legal Education Committee and the Construction Law Committee of The Florida Bar Real Property, Probate and Trust Law Section’s 8th Annual Construction Law Institute took place in Orlando March 12-14, 2015, and I was privileged to have had the opportunity to work with The Honorable John W. Thornton, Judge of the Complex Business Division of the Circuit Court for Miami-Dade County, presenting “Expert Opinion Testimony in Florida: Navigating the Mine Field.”

Our presentation was based on a paper that I developed together with one of our firm’s outstanding law clerks, John Criste. It began with a discussion of the necessity for the use of expert testimony due to the technical nature of most construction disputes, which typically involve defects in design, delays, building codes, contractual obligations and the apportion of responsibility. We then covered the guiding principles behind the use of expert testimony, including the “Daubert Reliability Test” and how it applies in construction litigation.

Judge Thornton and I then turned the discussion to the standards that should be used to qualify an expert, and how experts can rely on reports by others if they were used to help form their opinion or conclusion. We covered the statutes governing the use and admissibility of lay opinion testimony, including that of project of personnel, and we also discussed important case management considerations, including the order of the expert disclosures, whether written reports are required, depositions of experts, and the timing of Daubert challenges. We concluded with a discussion of the effective use of non-testifying experts to translate technical construction information for attorneys and find the potential loopholes in your client’s case as well as in the opposition’s arguments.

The discussion was lively, with very active participation from the standing room audience of some 300 construction lawyers from throughout Florida. Thanks, also, to the insightful comments of audience member, Fourth District Court of Appeal Chief Judge Dorian Damoorgian, the presentation was very well received.

Click here for the complete paper.

During the 2015 legislative session in Tallahassee, the Florida construction industry will be keeping a close eye on the outcome for House of Representatives Bill 87 and the corresponding bill in the Senate that is expected to be filed. The bill was developed with the assistance of the South Florida Chapter of the Associated General Contractors of America, and it seeks to amend Chapter 558, Florida Statutes, to address several issues with the current construction defect notice process in order to help contractors to address these claims and avoid litigation.

The proposed changes include:

  • Revising the legislative intent to address the involvement of insurers.
  • Revising the legislative intent to indicate that Chapter 558 is intended to provide an opportunity to resolve construction defect claims through confidential settlement negotiations.
  • Revising the definition of the term “Completion of a building or improvement” to include issuance of a temporary certificate of occupancy.
  • Providing additional requirements for a notice of claim, including the identification of specific location(s) of each alleged construction defect, as well as the specific provisions of the building code, project plans, project drawings, project specifications, or other documentation, information, or authority that serve as the basis of the claim for each alleged construction defect.
  • Revising the requirements for a response to a notice of claim to address monetary settlement offers.
  • Providing that, if a claimant proceeds with an action that includes any claim previously resolved in accordance with Chapter 558, the associated portion of that action shall be deemed frivolous.
  • Providing for sanctions for such frivolous claims, including attorneys’ fees.
  • Revising the provisions relating to production of records requested under Chapter 558, to include a claimant’s maintenance records and other documents related to the discovery, investigation, causation, and extent of the alleged defects identified in the notice of claim and any resulting damages.
  • Providing for sanctions for construction defect claims that were solely the fault of a claimant or its agents, including costs of investigation, testing, and attorneys’ fees.

The bill also includes additional amendments to conform other statutory sections to the revised definition of the term “Completion of a building or improvement.” It is now before the House’s Civil Justice Subcommittee, and it will also be referred to the Business & Professions Subcommittee and the Judiciary Committee.

Our firm’s other construction law attorneys and I will continue to monitor the status and outcome for this legislation in the coming months, and we will write about this and other important legal and business issues for the Florida construction industry in this blog. We encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

A recent ruling by the Fourth District Court of Appeal reiterates that Florida’s courts will favor arbitration when there is a clear arbitration provision in construction contracts, even if the contracts also include a jury waiver provision.In the case of Bari Builders, Inc. v. Hovstone Properties Florida, LLC, a condominium association sued the developer for construction defects, and the developer filed a third-party complaint against Bari Builders (its subcontractor). The subcontract with Bari included both a provision that the parties agreed to binding arbitration to resolve any claim as well as a separate provision stating that “the parties waive the right to jury and agree to determination of all facts by the court.”

Hovstone prevailed in having the trial court find that the jury waiver provision in its subcontract with Bari rendered the arbitration provision ambiguous and unenforceable. 4th DCA photo.jpg The Fourth DCA reversed this decision, finding that under Florida law arbitration is a preferred method of dispute resolution, and all doubt regarding the scope of an arbitration clause should be resolved in favor of arbitration. The appellate panel also found that the two provisions were actually not in conflict, as the jury waiver provision would be applied if the parties waived their right to arbitrate.

The ruling reads:

“The jury waiver language in the subcontract does not render the arbitration provision ambiguous, as the two provisions can be reconciled in favor of arbitration. Read together, the provisions provide that the parties agree to submit any ‘controversy or claim’ to arbitration and, thereafter, any award may be reduced to judgment in court without the right to a jury trial. Additionally, in the event that the parties choose to waive their right to arbitration, the clause provides that any ‘action’ in court will be in the form of a bench trial.”

This recent ruling is another reminder to developers and general contractors of the significance of arbitration clauses in construction contracts and subcontracts, and it highlights the importance of working closely with qualified and experienced legal counsel in order to ensure that the provisions of their subcontracts adhere with those of the primary contracts for all construction projects.

Our firm’s other construction law attorneys and I write regularly in this blog about important legal and business issues that impact the construction industry in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.