Workshop W9
Workshop W9
Wednesday, November 14
1:30–3:30 p.m.
UPDATE ON CONSTRUCTION AND INSURANCE LAW
Presented by
Brian L. Wagner
Attorney
Mateer Harbert, P.A.
Construction law and insurance coverage law are constantly evolving, redefining
contractors’ risks along the way. This presentation will bring attendees up to speed on
recent legal developments in both of these areas, with an emphasis on national or
multijurisdictional trends rather than state-specific developments. Topics to be
covered include allowable indemnity and additional insured coverage, the definition of
“occurrence,” delay damages, punitive damages, fraud, bad faith, agent and broker
liability, and more. Developments will be timely right up to the date of the Conference.
Attendees will leave with a better understanding of their risks and ideas for adjusting
their business practices given the new developments in both statutory law and
caselaw.
Our team understands the specialized coverage you
Great American Knows It
Front-To-Back, Top-To-Bottom
Workshop W9
Brian Wagner
Attorney
Mateer Harbert, P.A.
Mr. Wagner is presenting Workshop W9, “Update on Construction and Insurance Law,” on Wednesday
afternoon. Mr. Wagner is an attorney located in Orlando, Florida, and practices in the area of litigation
with an emphasis on construction defect, insurance law, and complex litigation. His client list includes
Fortune 500 companies, insurance companies, and small and midsized companies. He is a shareholder in
the law firm of Mateer Harbert, P.A., with offices in Orlando and Ocala, Florida. Mateer Harbert, P.A., was
recently chosen as a “go to” law firm by a Fortune 500 Company for litigation in Litigation 2012, a
supple-ment of the American Lawyer. Prior to joining Mateer & Harbert, he helped start the Orlando office of a
large regional law firm with a home office in Philadelphia. Mr. Wagner has given presentations all over the
country at various conference and corporate “in-house” presentations on all types of litigation issues.
Mr. Wagner received a P.A. from Nebraska Wesleyan University and graduated from the University of
Nebraska College of Law. Mr. Wagner is licensed to practice law in the State of Florida. In addition to
han-dling cases in Central Florida (consisting of the counties stretching from Tampa to Orlando to Daytona
Beach), he maintains a large practice in South Florida.
Notes
This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If
you print this file, we suggest that you set your printer to duplex.
Workshop W9
Presented by:
Brian Wagner, Esq.
MATEER & HARBERT, P.A.
225 East Robinson Street, Suite 600Orlando, FL 32801 (407) 425-9044 [email protected]
Update on
Construction and
Insurance Law
Who and I and Why am I Here.
Basic concepts:
Key Policy Provision
Most issues in construction cases deal with this,
or similar policy provision:
This insurance applies to “bodily injury” and
“property damage” only if:
The “bodily injury” or “property damage” is caused by an
“occurrence” that takes place in the “coverage territory”; [and]
The “bodily injury” or “property damage” occurs during the
policy period.
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Basic Concepts:
Duty to Defend/Indemnify
Insurance policies deal with two key duties on
the part of an insurance company
Duty to Defend
Duty to Indemnify
What are these concepts?
Workshop W9
Duty to Defend
Travelers Property Casualty Company of
America v. Centex Homes, 2012 WL 1657121
(N.D. Cal. 2012)
An insurance company who delays a decision to pay
for the legal defense of its insured, or who reverses
a denial of coverage may risk losing to ability to
assign its own defense attorneys and control the
defense of the insured’s case.
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Additional Insureds
Westfield Insurance Company v. FCL Builders,
Inc., 948 N.E.2d 115 (Ill.App.1 Dist. 2011)
Common practice for general contractors to require
all subcontractors to add them as additional
insureds on their CGL insurance policies.
Also common for subcontractors to sub-contract
portions of their work to others, so there is no direct
contract between the GC and the Sub-sub.
Additional Insureds
Case states that the GC is not an “additional
insured” of the Sub-sub’s insurance policy because
there is no contract between the two and Certificate
of Insurance listed the GC as such did not contain
the right wording.
Be sure the name is on the certificate and the
wording of the policy is adequate to provide
coverage.
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Chinese Drywall and Pollution
Exclusions
Auto-Owners Insurance Company v. American Building
Materials, Inc., 820 F.Supp.2d 1265 (M.D.Fla. 2011)
Granite State Insurance Company v. American Building
Materials, Inc., 2011 WL2446633 (M.D. Fla. 2011)
Most, if not all, CGL policies contain exclusions stating thatthey do not cover injury or damage caused by pollutants.
Do claims for personal injury resulting from Chinese Drywall
fall within the “pollution exclusion” of the GCL insurance policy, thereby taking them out of coverage?
Two cases that came to opposite conclusions.
A tale of two policies. Different language of the pollution
exclusion brought about drastically different results.
Know your policy!
Workshop W9
Franco Belli Plumbing and Heating and Sons, Inc.,
v. Liberty Mutual Insurance Company, 2012
WL2830247 (E.D.N.Y., 2012)
Good explanation of issues surrounding insurance
coverage issues involving “occurrence” and “property damage”
Insurers are not obligated to defend claims where the only
“damage” alleged is to the defective product installed by the insured
Essentially means they are not insurers of the contractor’s
work.
Doesn’t cover breach of contract actions.
Coverage-”Property Damage”
and “Occurrence”
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Amerisure Mutual Insurance Company v. Auchter
Company, 673 F.3d 1294, (11th Cir. 2012)
Illustrates what can go wrong when framing a claim to an
insurance company.
Involved claim that GC installed roof incorrectly, causing
roof tiles to fall and necessitating installation of a new roof.
Stipulated that there was no damage to any property other
than the roof.
Court ruled that insurance policy afforded no coverage
under the policy because there was no “property damage”.
Result may have been difference if the GC had proved other
damage than just the roof, i.e., defective tiles, fasteners, etc.
Coverage-”Property Damage”
and “Occurrence”
Ewing Construction Company Incorporated v.
Amerisure Insurance Company, 2012 WL3205557
(5th Cir. 2012)
Originally, Court ruled that a contractor’s obligation to
perform its contract in a “workmanlike manner” constituted an “assumption of liability”, which would trigger the
contractual liability exclusion in the insurance contract.
Held that the insurance company had no duty to defend
the subcontractor in a construction defect action because the contractual obligation to perform the work in a
“workmanlike manner” itself constituted an assumption of liability sufficient to exclude coverage.
Result meant that virtually all construction defect claims
would be taken out of insurance coverage based upon that contract provision.
Coverage-”Property Damage”
and “Occurrence”
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Ewing Construction Company Incorporated v.
Amerisure Insurance Company, 2012 WL3205557 (5th
Cir. 2012)
On August 8, 2012, the Court withdrew its decision and certified
an important question to the Texas Supreme Court:
1. Does a general contractor that enters into a contract in which it
agrees to perform its construction work in a good and workmanlike manner, without more specific provisions enlarging this obligation, “assume liability” for damages arising out of the contractor’s defective work so as to trigger the Contractual Liability Exclusion.
2. If the answer to question one is “Yes” and the contractual
liability exclusion is triggered, do the allegations in the underlying lawsuit alleging that the contractor violated its common law duty to perform the contract in a careful, workmanlike, and non-negligent manner fall within the exception to the contractual liability exclusion for “liability that would exist in the absence of contract.”
Coverage-”Property Damage”
and “Occurrence”
Workshop W9
Ewing Construction Company Incorporated v.
Amerisure Insurance Company, 2012 WL3205557
(5th Cir. 2012)
What does that mean for me???
If the Texas Supreme Court answers the first question
“Yes” and the second question “No”, then any construction defect claim in Texas involving a construction contract with a “workmanlike manner” provision will likely not have insurance coverage.
Should you leave the provision out of the contract?
What are the costs/benefits in doing so? Would an owner/GC even think of leaving out such a
provision?
Coverage-”Property Damage”
and “Occurrence”
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Axis Surplus Insurance Company v. Contravest
Construction Company, 23 Fla.L.Weekly Fed. D
279 (M.D. Fla. 2012)
In construction litigation, a hotly contested issue involves when coverage is triggered under a CGL insurance policy, giving rise to the duty to defend/indemnify.
Different theories of “triggers” of coverage exist within the court system.
“Injury in fact” trigger theory “manifestation” trigger theory Applied the “injury in fact” theory Why is this significant?
Coverage-”Property Damage”
and “Occurrence”
Patton v. Worthington Associates, Inc., 43 A.3d
479 (Pa.Super. 2012)
Pennsylvania Superior Court materially altered a
defense that had been available to general
contractors sued following injury to an employee of
one of their subcontractors.
“Statutory Employer” defense
Under PA Workers’ Comp. Act, an employer is generally
immune from tort liability for injury to its employees, assuming the employer provides WC coverage.
The Act also provides general contractors with this cloak of
immunity as the “statutory employer when certain factors are met:
Workers’ Compensation
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Patton v. Worthington Associates, Inc., 43 A.3d
479 (Pa.Super. 2012)
Purpose of the “statutory employer” was to provide
“secondary” first party coverage (WC) to injured
employees in the event the injured party’s employer
is without coverage.
Five factors:
GC must be under contract with an owner Must have a present on the jobsite Must subcontract with another entity
Part of its regular business is entrusted to the sub Injured party is the employee of the sub.
Workers’ Compensation
Workshop W9
Patton v. Worthington Associates, Inc., 43 A.3d
479 (Pa.Super. 2012)
This Court changed things by adding another factor
that must be satisfied before the defense can be
used:
Must demonstrate that the injured party is its “employee” as
opposed to an “independent contractor.”
Essentially eliminates the protection of the “Statutory
employer” defense.
How can you lessen the impact of this ruling?
Workers’ Compensation
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Statute of Repose
Jacobs Engineering Group v. State of
Minnesota, 132 S.Ct. 2682 (2012) Also, In
re: Individual 35W Bridge Litigation, 806
Statute of Repose
A statute barring a suit a fixed number
of years after the defendant had acted
(usually by designing or manufacturing
an item), even if the injury suffered by
the plaintiff occurred after the period
had lapsed.
Difference between Statute of Repose
and Statute of Limitations
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Statute of Repose
Jacobs Engineering Group v. State of
Minnesota, 132 S.Ct. 2682 (2012) Also, In
re: Individual 35W Bridge Litigation, 806
N.W.2d 820 (Minn.2011)
Case involving the 2007 I-35 bridge collapse
over the Mississippi River in Minneapolis that
killed 13 people and injured almost 150.
Following this accident, the Minnesota
legislature created a fund for the victims and
survivors of the incident.
Workshop W9
Statute of Repose
Jacobs Engineering Group v. State of Minnesota, 132 S.Ct.
2682 (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011)
Included in the compensation statute was the following provision:
Notwithstanding any statuary or common law to the contrary,
the State is entitled to recover from any third party, including an agent, contractor, or vendor retained by the state, any payments made from the emergency relief fund or under section 3.7393 to the extent the third party caused or contributed to the catastrophe. Minn.Stat. Sec. 3.7395(5)(a)
This one sentence breathed life into liabilities that had been
dead for 26 years under Minnesota’s statute of repose.
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Statute of Repose
Jacobs Engineering Group v. State of Minnesota, 132 S.Ct.
2682 (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011)
Far reaching case.
This case revived claims that had been barred long ago. This proposition was upheld by the Minnesota Supreme Court and the U.S. Supreme Court declined to hear the case, which means it is the law in Minn.
Statute of Repose
Jacobs Engineering Group v. State of Minnesota, 132 S.Ct.
2682 (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011)
What do you do now?
Use “Choice of law” provisions as a protection against a legislature changing the playing field.
Florida example:
Court in Florida has ruled that “[o]nce barred, the legislature
cannot subsequently declare that ‘we change our minds on this type of claim’ and then resurrect it. Once an action is barred, a property right to be free from a claim has accrued.”
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Statute of Repose
Shaw Construction, L.L.C. v. United Builder
Services, Inc., 2012 WL311665 (2012)
Addressed the issue of when the Statute of Repose clock starts.
Colorado Court ruled that the Statute of Repose clock begins on the date the Certificate of Occupancy was issued, as compared to the date all work was completed.
Workshop W9
Insurance Claims File as Work
Product
Zirkelbach Construction, Inc., v. Rajan, 2012
WL3046925 (2d DCA Fla. 2012)
So long as litigation is “foreseeable” when they
are prepared, the claims files of an insurance
company’s investigation of a claim is protected
from production.
Important because the claims file contains all
kinds of information, including impressions on
the validity of the claim, strengths and
weaknesses of a case and the like.
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Third Party Liability
Meridian at Windchime, Inc. v. Earth Tech, Inc., 960
N.E.2d 344 (Mass. App.Ct. 2012)
Mass Court ruled that an engineer hired by a
town to inspect a construction project could not
be held liable to the developer when the
developer did not have a contract with the
engineer.
Third Party Liability
Meridian at Windchime, Inc. v. Earth Tech, Inc., 960
N.E.2d 344 (Mass. App.Ct. 2012)
Engineering firm hired by the town as a
consultant to conduct subdivision reviews and
inspections.
Included inspecting the work performed by a contractor
on a developer’s housing project.
Gave periodic inspection reports to town and the
developer.
Developed close working relationship with developer. Only engineering firm on site for about two years.
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Third Party Liability
Meridian at Windchime, Inc. v. Earth Tech, Inc., 960
N.E.2d 344 (Mass. App.Ct. 2012)
Turned out that the contractor improperly installed water lines, fire hydrants, curbing, manhole covers and other infrastructure.
Developer sued the engineering firm for failing to
discover the issues, which caused a considerable
about of money to fix.
Court ruled that the engineering firm owned no duty of care to the developer.
Workshop W9
Third Party Liability
Meridian at Windchime, Inc. v. Earth Tech, Inc., 960
N.E.2d 344 (Mass. App.Ct. 2012)
The lesson in this case is: Hire your own engineer/inspector to inspect the work. Don’t rely on the gratuitous work of others.
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Liability for Injuries-Breach of
Contract Theory
Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7
(Ga.App. 2011)
Court found in favor of the estate of a worker fatally injured in a project site accident and against the project owner, the prime contractor and the first tier subcontractor on a breach of contract theory.
What about Workers’ Comp? “breach of contract” theory!
Complicated set of facts
Liability for Injuries-Breach of
Contract Theory
Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7
(Ga.App. 2011)
FACTS:
Worker injured on the job by a third party (not his employer, but a second-tier sub on the job)
Obtained a multi-million dollar verdict against the third party
Third party did not carry the $10 million auto insurance policy required under the contract chain from the owner to the second tier hauling contractor.
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Liability for Injuries-Breach of
Contract Theory
Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7
(Ga.App. 2011)
FACTS:
In a separate lawsuit from the liability case, the Estate filed suit against the owner, prime contractor and sub-contractor alleging a breach of contract (failure to carry the required insurance)
Court ruled that the decedent was a “third party
beneficiary” of the contractual insurance requirements
and, thus, his estate was not barred by the exclusiveity
of remedy afforded under the Workers’ Comp. process.
Workshop W9
Liability for Injuries-Breach of
Contract Theory
Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7
(Ga.App. 2011)
Case exposes a “blind spot” of exposure.
Do you really know if a second tier has obtained the required auto insurance policy?
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Workshop W9
