WSBA Construction Section Annual Seminar – June 9, 2017

On June 9, 2017, my colleague, Karl Oles, and I (both from the Seattle office of Stoel Rives) will present at the annual meeting and seminar for WSBA’s Construction Section, which this year is entitled Washington Statutes Affecting Construction.  This seminar, located at the WSBA Conference Center in Seattle, will feature in-depth discussions regarding important topics to the construction lawyer: statutory limitation periods, bidder responsibility and public works solicitations, top 10 mistakes in prevailing wage compliance, contractor registration requirements and condominium issues.  In addition, Karl and I will present on the subject of Washington construction lien claims and how the Washington statutes governing lien rights and claims are applied to different factual scenarios.  The seminar will also include information regarding new laws and legislative developments in the 2017 legislative session, an update on significant cases impacting the construction industry in Washington and ethical considerations for the construction law practitioner.  Lastly, attendees will gain insightful judicial perspectives on litigating complex construction cases from a panel of three King County Superior Court judges.  Click here to learn more and to register for this seminar online.

Important Lessons from Record-Setting Settlement in Building Collapse Case

Philadelphia, United States - June 11, 2013: Building collapse memorial on June 11, 2013 in Philadelphia. The unoccupied building collapsed during demolition on June 5, 2013 killing 6 and injuring 14 people.

Having lived in Philadelphia in 2013 when the four-story “Hoagie City” building collapsed during demolition and toppled the neighboring Salvation Army thrift store, killing seven people and injuring 12 others, I closely followed the recent civil trial that resulted in a $227 million settlement of the plaintiffs’ personal injury and wrongful death claims—a reported record for Pennsylvania state court.

According to news reports, $27 million of the settlement is being paid by the Hoagie City building owner, New York real estate investor Richard Basciano, and the remaining $200 million is being paid by the Salvation Army. Basciano’s demolition contractor, Griffin Campbell, and Campbell’s excavation operator, Sean Benschop, did not participate in the settlement, as both are serving long prison terms for their role in the collapse.  Also not participating: the architect hired by Basciano to monitor the demolition, Plato A. Marinakos, who was believed to have already exhausted his insurance coverage.  The settlement was reached while the jury was deliberating its damages award, having already found both Basciano and the Salvation Army liable to the plaintiffs.

According to the same new reports, evidence presented during the trial showed that Basciano—who died last week—did minimal due diligence before hiring Marinakos, who had little to no experience overseeing similar demolition projects, or before hiring Campbell, who was similarly unqualified and was unlicensed. The evidence also showed that the Salvation Army ignored warnings of the building’s imminent collapse and did not tell its employees and customers about the danger.

There are many lessons to be learned on all sides of this tragedy, including by owners who might otherwise assume they are insulated from liability for the acts and omissions of the professionals and contractors they hire. The tragedy in Philadelphia serves as an important reminder that owners have an obligation to perform reasonable due diligence in vetting designers and contractors—particularly when a project involves high-risk work.  And while carefully drafted contract provisions can provide owners with some degree of protection, even the most owner-friendly contract likely would not have saved Basciano.  For one, Basciano’s liability to the plaintiffs stemmed from his own obligation to vet and hire qualified professionals and contractors.  Further, many states—including Oregon—prohibit a party to a construction contract from indemnifying any other person for that person’s own negligence.

There are similar insights to be gained by designers and contractors, the most obvious being that they should not perform work for which they are unqualified, and should make sure that the consultants and subcontractors they hire also perform only work they are qualified to perform.

And—as the Salvation Army learned—even neighboring property owners without any involvement or control over construction activities can have liability if they ignore warnings of imminent danger caused by their careless neighbor.

These lessons may seem obvious. But too often obvious takes a back seat to expediency and up-front cost savings.

Oregon Women In Construction Conference

DSC_0180 DSC_0989 DSC_1057 (2) DSC_0013 (1) DSC_0031 (1) DSC_0056 (1)Stoel Rives is proud to have co-created and been the leading sponsor in the first annual “Oregon Women In Construction Conference” hosted by the University of Oregon last Thursday, April 27.  The event was emceed by City of Portland construction attorney Molly Washington (who led all aspects of the event including topics, speakers, locale, etc.) and featured Stoel’s Tami Boeck as one of the moderators.  The conference was a series of expert panels comprised of Oregon’s top construction industry leaders, including those from the legal, consulting, design, general contractor and subcontractor communities.  The event sold out quickly and, unlike many seminars, maintained a packed house for the entirety of the program and the cocktail hour afterwards.  Thanks to all who participated, including our own client representatives who donated their time and the other sponsors who participated with funds for the event and the charity raffle. We look forward to being a major part of this event again next year!



Buyer Beware: Oregon Courts Will Enforce Anti-Assignment Provisions in Insurance Policies

An anti-assignment provision in an insurance policy may prohibit the insured from assigning its rights under the policy. In my latest DJC article, I discuss a recent decision by the Oregon Court of Appeals, in which a claimant learned the hard way that Oregon courts will not hesitate to enforce an anti-assignment provision in an insurance policy to invalidate an insured’s assignment of its claim. Read the full article here.

“Buyer Beware: Oregon Courts Will Enforce Anti-Assignment Provisions in Insurance Policies” was originally published by the Daily Journal of Commerce on April 21, 2017.

The Devil is in the Details: Contractual Additional Insured Requirements

Owners frequently require their contractors to name them as additional insureds. Owners and contractors often include requirements seeking to have the obligation to name them as additional insureds “flow down” to parties with whom they lack a direct contractual relationship (e.g., subconsultants, subcontractors, and suppliers).  Despite the simplicity and appeal of this arrangement, contractual additional insured requirements can be worthless without the appropriate insurance endorsements.

The standard additional insured endorsement, ISO form CG 20 33, requires a direct contractual relationship between the named insured and the additional insured.  The problem is apparent.  Although CG 20 33 allows an owner to assert a claim as an additional insured under its contractor’s insurance policies, it does not allow an owner to assert a claim as an additional insured under subconsultants’, subcontractors’, or suppliers’ insurance policies.  This could undermine the benefits of additional insured coverage and expose a contractor or designer to a breach of contract claim based on its failure to procure, or require the procurement of, the required insurance coverage.

Insurance companies do offer a wide variety of additional insured endorsements, and endorsement CG 20 38 provides a solution for owners, designers, and contractors seeking to avoid the problem identified above. That endorsement provides broad contractual additional insured coverage to “any other person or organization you are required to add as an additional insured under the [same] contract or agreement.”  Owners should require use of CG 20 38 and confirm that the subcontractors have provided the endorsement.  Contractors should likewise require their subcontractors to use this endorsement to fulfill these contractual requirements or they may be in breach of their contractual duties to provide insurance.

Eight Things to Remember When Reviewing an Access Easement

An access easement is a key link in the legal chain when builders need to cross another’s land to develop property. A poorly drafted easement could hobble an entire development.  Counsel should always be consulted to avoid the crippling impact of a development held hostage.  Here are eight tips to remember in reviewing an access easement where the developer is seeking easement rights. Continue Reading

Alter Ego: The $5MM personal danger of neglecting corporate formalities and utilizing substandard building materials

Many building developers utilize a single purpose entity limited liability company (an “LLC”) to purchase and develop property, such as an apartment complex, a subdivision, or a shopping center. Generally, an LLC’s debts, whether incurred or judicially imposed, belong only to the LLC, not to its members.  However, an LLC’s individual member may be subject to personal liability under the doctrine of alter ego liability if (1) the individual and the LLC share a unity of interest and ownership such that the separate personalities of the two no longer exist, and (2) treating the debts as the LLC’s alone would impose an inequitable result that rewards the bad faith of the individual.  A recent legal decision from Southern California highlights the dangers of disregarding an LLC’s corporate formalities during any construction project. Continue Reading

Brokers Beware: Acting as a Dual Agent Means Expanded Fiduciary Duties in California

It is well known that under California law a real estate broker may act as a “dual agent” for both the seller and the buyer in a property transaction, provided both parties consent to the arrangement after full disclosure. In such representation, a dual agent owes fiduciary duties to both buyer and seller.  Pursuant to a recent case, Horiike v. Coldwell Banker, these fiduciary obligations have now been expanded to also apply to “associate licensees” acting on behalf of a brokerage firm (or the salespeople of the given brokerage firm, as they are more commonly known).  In a unanimous decision, the court ruled that when an agent representing a seller is working for the same firm as the agent representing the buyer, they are considered an “associate licensee” and must properly investigate and disclose all important information related to the property subject to the transaction.

In Horiike, the seller and buyer of a luxury Malibu mansion were represented by separate real estate agents.  However, both of these agents were acting under the license of a single brokerage firm, Coldwell Banker.  The seller’s agent had reason to know that residence’s square footage was significantly different than what was represented in the sales material.  The buyer purchased the property and began making renovations.  Upon reviewing a building permit previously obtained by the prior owner, the buyer discovered that the property had thousands of square feet less living space than what was disclosed in the marketing materials.  Coldwell Banker claimed that because the seller’s agent exclusively represented the seller, there was no fiduciary duty to disclose information relating to the square footage to the buyer.  The California Supreme Court thought otherwise. Continue Reading

“Blurred Lines”: Important Caveats to Consider with Integrated Project Delivery

The shared risk/reward concept of an integrated project delivery (IPD) arrangement is an increasingly attractive collaborative approach to construction projects.  But IPD is still a relatively new concept with unique risks and challenges.  In my recent article for the Daily Journal of Commerce, I discuss some key points that should be considered before undertaking any IPD agreement.  Read the full article here.

 “‘Blurred Lines’: Important Caveats to Consider with Integrated Project Delivery” was originally published on January 20, 2017, by the Daily Journal of Commerce.

Coverage for Crane Damage Proves Tricky

Following a presentation I made at a Seminar Group conference in Oregon on crane easements, one of my colleagues brought to my attention the recent NY case of Lend Lease (US) Construction LMB Inc. v. Zurich American Insurance Co.  The NY Court of Appeals found that damage caused to a tower crane when Superstorm Sandy hit land was not covered under Zurich’s builders’ risk policy.  While the policy contained a grant of coverage for “temporary works” (such as scaffolding, shoring, formwork and fences), the policy contained a “contractor’s tool exclusion,” which the Court found excluded coverage for the tower crane.  The opinion addressed only the damage to the crane as opposed to damage caused by the crane, the latter being likely covered under other provisions of the policy.  While not alone dispositive, the Court noted that the plaintiff contractor was unable to show that the value of the crane itself was disclosed as part of the “total project value” being insured under the policy.  Given the costs and risks associated with heavy equipment, a good insurance evaluation at project inception should always consider coverage for large tools, equipment and machinery.