The new year brings a reminder that owners need to be careful about changes to their contractors’ and designers’ insurance policies. Many of the most important terms of an insurance policy are in “endorsements” added to the policy. For example, a policy may
include an endorsement excluding claims between insured parties (say, a claim by
Pay Attention to Your Contract Terms and Scope – Recent Washington Supreme Court Decision Reshapes Independent Duty Doctrine
In a recent case, Donatelli v. D.R. Strong Consulting Engineers, Inc., 312 P.3d 620 (Wash. 2013), a sharply divided 5-4 opinion by the Washington Supreme Court provides further evidence that the line between Washington’s “economic loss” rule and “independent duty” doctrine remains quite blurred.
The case arose out of an agreement between property owners, the Donatellis, and D.R. Strong Engineers, Inc. (“D.R. Strong”) for the development of the owners’ property into two short plats. Initially, D.R. Strong orally agreed to help with the county permitting process and to manage the project through recordation of the plats. According to the Donatellis, D.R. Strong told them the project would be completed in 1.5 years. After obtaining preliminary county approval for the project, which would last 60 months, D.R. Strong sent the Donatellis a written contract for engineering services. The contract detailed the engineering services and estimated fee, but was silent as to D.R. Strong’s project management role. The Donatellis alleged that D.R. Strong assumed extensive managerial responsibilities on the project and charged them four times the initial estimate.
The county’s preliminary approval expired with the project incomplete. Before D.R. Strong could obtain a new preliminary approval, the Donatellis suffered financial hardship and the property was lost to foreclosure. The Donatellis then sued D.R. Strong, claiming over $1.5 million in damages and alleging breach of contract, Consumer Protection Act (“CPA”) violations, negligence, and negligent misrepresentation. The trial court granted summary judgment on the CPA claims, but denied summary judgment on the negligence claims, finding that “‘professional negligence claims can be stated even in the context of a contractual relationship.’” Id. at 622 (quoting trial court). The Court of Appeals affirmed the trial court’s ruling under the independent duty doctrine, based on the notion that engineers owe duties to their clients independent of any contractual relationship. See Donatelli v. D.R. Strong Consulting Eng’rs, Inc., 163 Wn. App. 436, 443, 261 P.3d 664 (2011).
The issues for the Washington Supreme Court included whether the independent duty doctrine applied to preserve the owners’ claims for negligence (despite factual questions regarding the scope of D.R. Strong’s work) and negligent misrepresentation (predicated on D.R. Strong’s alleged misrepresentations made to induce the Donatellis to contract). The Supreme Court affirmed the Court of Appeals’ ruling and thus refined application of the independent duty doctrine to extend the reach of tort-based claims beyond any contractual agreement.
Should Design Professionals in Washington File a Pre-Claim Notice to Protect Lien Rights? Yes!
Washington’s lien laws, like those of other states, set forth pre-claim notice requirements that, if not satisfied, may result in the forfeiture of lien rights. The applicable statute, RCW 60.04.031, presents an interesting array of “if-then” scenarios in which the notice requirements are imposed. Generally, unless falling under one of three exempted categories, RCW 60.04.031
Senate Bill 46 Shortens Repose Period for Claims Against Design Professionals
“Senate Bill 46” “Statute of Repose”
Sophisticated Parties? You May Shorten Both the Start and Length of the Statute of Limitations in CA Commercial Construction Contracts
Can parties waive both the commencement and length of the statutory limitation periods for construction defect actions? Yes, answered the Fourth Appellate District, by allowing the parties to contractually preclude the application of the “delayed discovery” rule that normally triggers the commencement of the limitation time period and affirming case law permitting the shortening of the 10-year latent limitation period to four years. The court did hold, however, that such waiver and shortening is permitted where there are sophisticated parties, in a commercial context, and perhaps that the contract must even be highly negotiated (or at least such negotiation is available).
On June 3, 2013, in Brisbane Lodging, L.P. v. Webcor Builders, Inc. (Cal. Ct. App., June 3, 2013, No. A132555) 2013 WL 2404154, the appellate court reviewed the trial judge’s granting of summary judgment in favor of the general contractor (“Webcor”) on the grounds that a provision in the 1997 version of the AIA 201 (General Conditions to the prime agreement between Owner and Contractor) unambiguously barred all claims, contract and tort, brought more than four years after substantial completion of the project, rather than four years after the Owner discovered the alleged breach or defect and within the 10-year statute of repose. The key language for both the trial court and the appellate court was found in provision 13.7:
“13.7 Commencement of Statutory Limitation Period
“13.7.1 As between the Owner and Contractor:
“.1 Before Substantial Completion. As to acts or failures to act occurring prior to the relevant date of Substantial Completion, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion ….” (AIA A201, Article 13.7.1.1 (Article 13.7.1.1), bolding and capitalization omitted.)
Nevada Lenders Beware! Mechanic’s Liens Not Easily Avoided
Following the market crash in 2008-09, the $2.8 billion Fontainebleau development in Las Vegas was halted with 70 percent of the construction completed. Naturally, numerous mechanic’s liens were filed by contractors, subcontractors, professionals and suppliers ("claimants"). In the bankruptcy proceeding, the lenders asserted novel and potentially legally destabilizing theories against the claimants’ rights: a.) the
You Are a Project Owner or Developer Who Wants to Build a Green Project? So, What Do You Actually Put in Your Contracts?
Despite the explosion of articles, seminars and webinars on green building and development during the last year or so, there is a dearth of information in the development world regarding what project owners and developers who do want to build a green project should actually put in their design and construction contracts.
Here is what I think is important regarding this subject:
General Green Building Certification Goal. The project owner first must decide in general what green building goal it wants to achieve. LEED certification (from the US Green Building Council), at a particular certification level (general, silver, gold, platinum), is an obvious option. But there are other general green building certifications, too, such as Green Globes (Green Building Initiative) and SBTool07 (International Initiative For a Sustainable Built Environment), as examples. The owner should make this basic decision early on, based on good information and analysis and the advice and recommendations of design and green building consultants, as applicable.
Industry-Specific Green Building Certification Goal. Deciding on an overall green building goal such as a LEED certification is not the only certification goal a project owner should consider, however. There also is a growing number of industry-specific certifications that the owner should evaluate, depending on the nature of the project and the owner’s business. For example, there are certifications available for health facilities (Practice Greenhealth), restaurants (Green Restaurant Association) and hotels (Hotel Pure Green). How important an industry-specific certification of this type is to an owner is a question to be addressed at the start of the design process.
Tax and Other Governmental Incentives Goal. Another element of green building goals to be considered is tax and other governmental incentives relating to green building. Particularly in Oregon and under new federal stimulus legislation, there may be tax credits, grants and other public sector incentives for green, sustainable and energy efficient construction that can be of substantial benefit to a project. However, these incentives must be identified as project goals early in a project’s design in order to ensure that the owner is able to take advantage of them.
Making Green Building Goals Explicit. Once an owner has sorted through its optional goals for LEED or other general certification, for industry-specific certification and for tax and other governmental incentives, these goals should be expressly set out in the owner’s design and construction contracts. Otherwise, the owner’s architect and contractor will not have any contractual obligations to achieve the owner’s green building goals. Typical form contracts, including 2007 American Institute of Architects (“AIA”) forms of contract, include minimal references to these kinds of obligations and do not include language in which to make the goals explicit.
LEED Decertification
If you think LEED certification of a building is a one-time deal, think again.
USGBC’s latest version of LEED (version 3) establishes several new changes to LEED certification. Two of those changes are particularly significant. First, USGBC now requires building owners to submit operational performance data on a recurring basis as part of the LEED