Construction Defects

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Earlier this year, my colleague Eric Grasberger authored a blog post about a crane collapse in Lower Manhattan.  In that post, he mentioned that neighboring landowners may seek to prevent cranes from intruding into the airspace above their property.  Contractors and owners alike are often surprised to learn that a crane swinging over adjacent property …

Oregon’s law on statutes of limitation and/or repose periods on construction claims is complex and ever-changing.  A recent Oregon Supreme Court ruling has introduced yet another instance of differing time limits on construction defect claims. In my recent article for the Daily Journal of Commerce, I discuss Schell v. The Schollander Companies, Inc. and …

In Shell v. Schollander Companies, Inc., the Oregon Supreme Court affirmed a line of appellate decisions distinguishing between defect claims arising out of construction performed for an owner and defect claims arising out of an owner’s purchase of an existing structure.  In Schollander, the homeowner sought recovery for defects in the construction of…

On Friday, February 5, one man died and three were injured when a 565-foot crane toppled in gusty winds in lower Manhattan, not far from the World Trade Center. The investigation will likely take weeks to months as experts try to reconstruct whether the engineering, erection, operation or manufacture of the crane, or some combination…

It will happen to almost every contractor at some point — an owner or project developer will try to sue you.  Hopefully your insurer agrees you are covered, and you’ve dodged a bullet. But if your insurer tells you that you are not covered, things get sticky.  One common strategy is for the parties to …

Subcontractor default is a construction project nightmare that can result in significant additional costs and delay completion of the project. But there are two chief options to protect against such risks — performance bonds and subcontractor default insurance.  In my recent article for the Daily Journal of Commerce, I outline the unique characteristics of …

Contractors often have limited liquid assets, so insurance and bonding are often the best resources available to an owner to protect against contractor default or defective work. However, not all policies and bonds are created equal, and owners should make sure these resources provide the security the owner needs. In my recent article for the…

Complex construction projects carry complex problems as they approach completion. In my recent article for the Daily Journal of Commerce, I address 10 potential pitfalls that owners, contractors and design professionals may encounter, and I offer tips to help you prepare for them.

Read the full article here.

“Finishing Strong vs. Finishing Wrong:…

In my recent article, “Provision Providing for Early Accrual of Statute of Limitations Held Inapplicable,” I discuss the Oregon Supreme Court’s reversal of a trial court’s decision that, by the terms of the parties’ contract, plaintiff’s tort claims accrued on the date of substantial completion and were time-barred.

Read the full article, here.

“Provision…

The apartment business is booming right now. Unfortunately, construction defects persist as well, particularly in garden-style and wood-framed construction. Most developers are savvy enough to maintain a good insurance program, but many do not understand (until too late) that the policies they bought may not cover the risk of construction defects. 

As an owner-developer, neither your property insurance policy (including your builder’s risk policy) nor your general liability policy is likely to protect you from the cost of repairing defects to property you own. Most likely, your property policy has an exclusion for any damages caused by defects in construction or design. And your liability policy has exclusions for property damage to any property you currently “own, rent, or occupy.” (See exclusion J(1) below.) 

Even more surprising to some is another exclusion that prevents coverage for property damage to property that you “sell, give away or abandon” (known as the “alienated property exclusion”).  (See exclusion J(2) below) This means that for projects you develop, occupy (i.e., rent) and sell, you likely have no coverage during your occupancy of that project or after you sell  (whether to unit owners through a condo conversion or to another apartment owner). 

j.          Damage to Property

“Property damage” to:

(1)        Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another’s property;

(2)        Premises you sell, give away or abandon, if the “property damage” arises out of any part of those premises;

Upon learning of this unfortunate situation, many developers ask: What good is the policy if it doesn’t cover me when I own the project and it doesn’t cover me after I sell it? Good question. The insurer’s response is that the policy only covers damage to other people’s property (like the project next door), not damage to your own property or the property you once occupied and sold.  Strangely, if you sell the project before you occupy it, coverage is more likely. 

Solutions?  There are steps you can take to minimize your risk: