Articles Posted in Construction defect

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.

Jeffrey Respler srhl-law.jpgThe firm’s lawsuits alleging major construction defects against the developer, general contractor, architect and engineers behind Miami’s Quantum on the Bay condominium towers were the subject of an article by the Daily Business Review that appeared in the June 16, 2014, edition of the newspaper. The lawsuits allege that the defendants’ work resulted in hundreds of defects, including stucco and HVAC problems as well as inadequate drainage that has led to severe flooding in the community’s fitness center and loading dock.

Firm Partner Jeffrey S. Respler is quoted in the article indicating that “[t]he unit owners want to have the property that should have been delivered to them. At the end of the day, we’re not looking for a windfall. We’re only looking to be made whole.”

The lawsuit names as defendants developer Terra ADI-International Bayshore LLC, builder Facchina-McGaughan LLC, architect Nichols Brosch Wurst Wolfe & Associates Inc., contractor Fred McGilvray Inc., and engineers Florida Engineering Services Inc., VSN Engineering Inc., Gopman Consulting Engineers Inc. and John J. Kirlin LLC, a Maryland-based firm that specializes in plumbing, heating, ventilation and air conditioning.

“The biggest problem is whenever there’s even a minor rain event, there’s flooding,” explains Respler in the report. “Every single day, the association people have to go out and pump the drainage wells in this luxury development. If not, there’s flooding – even when there’s no rain.”

The article describes how sandbags are being used at the property to keep water out of a service area during storms, and residents have been forced to have repairs made to swamped elevators.

Respler concludes: “The parties who we know are responsible are pointing fingers at each other. We are just the end users. We weren’t there when it was being built. The bottom-line fix is we’re probably going to have to move the drains to the front of the property. The speculation is the building was built too low.”

Click here to read the complete article in the DBR’s website (registration required).

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(This article appears in The Dispute Resolver Blog from Division 1 of the American Bar Association Forum on the Construction Industry – ADR, Dispute Avoidance and Litigation. Click on the link below to read the complete article).

In representing a purchaser, developer or a developer/builder involved in a warranty dispute pertaining to a residence in the State of Florida, consider the Florida Supreme Court’s most recent ruling concerning the scope and application of common law implied warranties in Maronda Homes, Inc. v. Lakeview Reserve Homeowners Ass’n, 127 So. 3d 1258 (Fla. 2013).

In Maronda, a homeowner’s association filed suit against its developer for breach of common law implied warranties for a defective storm water drainage system serving the entire property. The association experienced buckling, splitting of pavement and asphalt, excessive flooding, soil erosion, mosquito infestation and swamp-like conditions, which directly affected the homes and access to the homes.

The developer filed a third party action against the contractor seeking indemnification for the allegations raised by the association. The developer and the contractor filed a motion for summary judgment against the association, and relied, in part, on the Fourth District Court of Appeal’s application of common law implied warranties in Port Seawall Harbor & Tennis Club Owners Association, Inc. v. First Federal Savings & Loan Association of Martin County, 463 So. 2d 530 (Fla. 4th DCA 1985). They argued that the defects did not meet the elements required for asserting common law implied warranties because the alleged defects did not immediately support the residences.

{Click here to see the complete article in the ABA blog}.

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Michael J. Kurzman.jpgFirm partners Michael J. Kurzman and Elisabeth D. Kozlow will be playing important roles at the Construction Defect Process full-day seminars taking place in Miami on Wednesday, May 1, and in Orlando on Friday, May 3. Michael will be serving as the co-chair and one of the speakers for these seminars, which qualify for 7.5 hours of continuing education credits for Florida contractors, engineers and attorneys, and 6.5 AIA LUs for architects. Elisabeth will also be one of the featured speakers, and she will be presenting the first session on the morning of the event titled “Construction Contract Terms Relevant to Warranty and Defect Claims.”

elisabeth kozlow.jpgAll of the sessions at this seminar will focus on the latest developments and evolving solutions in construction defects. They will cover how to minimize the risk of construction defects, deal with them when they occur, and assess insurance coverage needs.

Michael will introduce Elisabeth and conduct the opening remarks for the seminars together with his fellow co-chair Miroslav “Misha” Mladenovic, PE, of M2E Consulting Engineers. Elisabeth will then focus her discussion on methods for avoiding warranty and defect problems before they occur, the terms to consider in construction contracts, typical and atypical contract forms, and a number of insurance considerations. In the afternoon, Michael and Misha will conduct a session titled “The Repair Process,” which will focus on the risks associated with repair work, claims of lien for non-payment of repair work, insurance, and surety liability for repair work.

The Miami event on May 1 will take place at the Hampton Inn & Suites, 50 S.W. 12th Street in the Brickell area, and the May 3 seminar will take place at the Crowne Plaza at 304 West Colonial Drive in Orlando. For additional information and online registration, which ranges from $327 to $525, visit www.TheSeminarGroup.net or call toll-free at 1-800-574-4852.

I recently had the honor of appearing as a special guest on the ArchiTalk radio show airing on 880-AM “The Biz” in South Florida on Mondays at 11 a.m. Local architects Sebastian Eilert and Jane Decker host the show, which focuses on what’s happening in the South Florida architecture world and beyond. Additional info on the show can be found at www.architalkradio.com.

My discussion with Sebastian and Jane focused on the current trends in South Florida real estate and related litigation, and how these trends impact architects. We discussed the statute of repose for design and construction defect claims for condominiums, which is ten years, and how litigation that commences before the ten year mark can continue for years after it. This served as a reminder about the importance of Errors and Omissions insurance for architects, who are often viewed as being a viable target for litigation by associations for latent defects in the years immediately prior to the expiration of the ten year statute of repose.

architalklogo.jpgWe discussed how architects should protect themselves and limit their liability by using the standard AIA contract provisions noting that they are not providing certification or supervisory services over the work of the general contractor at the jobsite.

We also discussed the importance for architects who are working on renovation projects at condominiums to ensure that their client, the unit owner, is aware of the association’s rules and regulations regarding repair work, including the time of day work can take place and the importance of ensuring that all necessary permits are in place before the start of the project. I also recommended that architects should include similar requirements in their plans and specifications to make certain that the contractor is bound to comply with these requirements, as the contractor will ultimately be performing the work.

Click here to listen to my appearance on the show, and feel free to contact me with any questions about the information that I cover via email at nsiegfried@siegfriedlaw.com or by calling me at (305) 442-3334.

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Construction Defects ABA manual.jpgThe firm’s Steven Siegfried and Jason Rodgers-Da Cruz recently had the honor of co-authoring a chapter (Chapter 4) for the American Bar Association’s new Construction Defects legal manual, which is available for purchase from the ABA by clicking here. The 384-page manual provides an analytical guide to construction defect law throughout the United States. It covers key issues in the law and serves as a complete frame of reference for any construction defect case.

Chapter 4, titled Statutes of Limitation and Repose, reviews cases from multiple jurisdictions and applies the statutes of limitations and repose to various scenarios that a practitioner may encounter.

Congratulations to Steven and Jason on being selected by the American Bar Association to serve as contributing writers for this legal manual.