California Court Holds Insured’s Activities Not an Occurrence

Traub Lieberman | January 9, 2018

In its recent decision in Henstooth Ranch LLC v. Burlington Ins. Co., 2018 U.S. Dist. LEXIS 1176 (N.D. Cal. Jan. 3, 2018), the United States District Court for the Northern District of California had occasion to consider whether an insured’s land restoration activities constituted an “occurrence” for the purpose of a general liability policy.

Burlington insured Henstooth, a limited liability corporation organized for the purpose of the ownership of a parcel of property that was encumbered by a conservation easement.  The easement was for the purpose of protecting the property’s natural habitat and specifically prohibited improvements and certain environmentally harmful activities.  Henstooth was sued by the easement holder for its efforts to construct a road and a home.  These efforts, claimed the underlying plaintiff, not only violated the easement, but also resulted into damage to the property requiring restorative efforts.  Prior to suit, and over the other side’s objections, Henstooth attempted to performed its own land restoration efforts.  These efforts not only failed, but allegedly resulted in further damage to the land.

Burlington argued that it had no coverage obligations in connection with the underlying suit because Henstooth’s conduct, as outlined in the underlying complaint, was intentional and thus did not come within the policy’s definition of “occurrence.”  Henstooth countered that at the very least, a defense obligation was triggered by its attempt at restoration efforts, which while performed intentionally, negligently failed, thus resulting in damage it did not intend.

The court sided with Burlington, observing that in undertaking the restoration efforts, Henstooth allegedly ignored the easement holder’s request that Henstooth hire a consultant and prepare a restoration plan for approval prior to implementation.  Henstooth’s failure to do so, and its unilateral actions in performing the restoration efforts, explained the court, was intentional in nature, regardless of whether Henstooth intended to cause additional harm to the property.  As the court reasoned, the term “accident” in the policy definition of “occurrence” refers to the nature of the insured’s conduct, not to its unintended consequences.


Expert Opinions in the Age of the Internet of Things: “You’re Gonna Need a Bigger Boat”

H. Michael O’Brien | Wilson Elser | December 21, 2017

In my September 2016 blog post, The Impact of the Smart Home Revolution on Product Liability and Fire Cause Determinations, I forecast that “dumb products made smart by connecting to the internet will present a new layer of complexity when a failure occurs.” When a product fails and causes property damage or bodily injury, experts are frequently tasked with assessing the root cause for the failure, which can lead to a claim or litigation against a potentially responsible third party. In the age of the Internet of Things (IoT) will experts who have knowledge, skill and training sufficient to address potential root cause failures with a “dumb” version of a product have the requisite expertise to address the root cause failure with a “smart” version of the product − and withstand the challenge to their qualifications and methodology in court? The courts are beginning to grapple with this.

In American Strategic Insurance Corp. v. Scope Services, Inc. (D. Md. September 15, 2017), the plaintiff’s expert witness was precluded from offering testimony on the standard of care for the installation of a “smart meter” that was the focus of the plaintiff’s subrogation action for property damage. The complaint alleged that the defendant’s employee was professionally negligent with the installation and was the direct cause of the fire due to high-resistance contact between the new smart meter and the meter base.

At the close of discovery, the defendant challenged the qualifications of the plaintiff’s expert witness with respect to the standard of care for the installation of a smart meter. The defendant argued that the expert did not have specific experience installing electric “smart” meters. In addition, the defendant claimed the plaintiff’s expert lacked sufficient knowledge of the industry standard of care. The defendant contended that the expert’s general experience in this field was not sufficient to meet the requirements of Rule 702 of the Federal Rules of Evidence.

In reviewing the expert’s qualifications, the court found the plaintiff’s expert did qualify to testify as an expert in the field of electric meter installation. However, it also determined that despite his qualifications, the plaintiff’s expert had to clear an additional hurdle as to the methodology that he used to form his opinions, in order to show that his opinions met the standard for admissibility. The plaintiff’s expert had offered a six-step procedure for the preparation and proper installation of the smart meter. The first three steps dealt with preparation for the installation and the last three dealt with the actual installation. During the plaintiff’s expert’s deposition, he could not identify the factual basis for the six steps he offered as being an accepted industry standard. In fact, he disavowed any knowledge of the industry having used his six-step procedure.

A footnote in the decision reveals that during oral argument, the plaintiff’s counsel attempted to claim there was no standard of care as to the installation of smart meters. This obviously contradicted the plaintiff’s expert’s previous deposition testimony and was recognized by the court.

The court found the plaintiff’s expert’s opinions amounted to “little more than his personal views on the proper method of smart meter installation.” The court noted that the plaintiff’s expert’s proposed “six-step standard of care” lacked foundation because it could not be tied to any government regulation, industry standard or common practice. The court also noted the expert’s opinion was connected to existing data only by the ipse dixit (an assertion made but not proved) of the expert.

The court concluded: “Without reliably supported standard-of-care opinion testimony, the fact finder cannot answer whether the defendant’s actions fall below standards commonly held by those in the profession. Unfortunately, [the expert’s] testimony at best amounts to his personnel views on what the industry standard of care should be.”

Lessons Learned

In the 1975 blockbuster movie Jaws, Sheriff Brody, played by actor Roy Scheider, after sighting the great white shark for the first time was so gobsmacked by the enormous size of their prey, he uttered one of the more memorable lines in Hollywood history to Quint, the hired shark hunter – “You’re gonna need a bigger boat.” So it will be that smart products connected to the internet, where standards may or may not exist for them, pose a new challenge for experts who may have the requisite skills to offer opinions on the dumb version of a product but lack the new skill sets to avoid exclusion when offering opinions on the smart version … or will new experts need to step forward to complement and supplement traditional experts?

Is California’s Right to Repair Statute Really the Exclusive Remedy in Construction Defect Litigation?

Elizabeth D. Beckman | Kramer deBoer & Keane, LLP

Approximately fifteen years after California Governor Grey Davis signed into law Senate Bill 800,1 and much related judicial dispute, the California Supreme Court is set to resolve the legal standard for handling of construction defect claims in the matter of McMillan Albany, LLC v. Superior Court.2 The matter has been fully briefed and awaiting oral argument.

At present, California has different binding appellate court decisions in four of California’s six appellate districts with conflicting but nonetheless valid legal authority, and the uncertainty created by such is adversely affecting a wide range of cases at the trial court level statewide. At issue is whether SB 800 is the exclusive remedy for construction defect claims, or if homeowners may also recover damages under common law claims. The California Supreme Court has accepted the McMillan Albany, LLC matter for hearing, and we should have a final answer in the near future.

As background, SB 800, also known as California’s Right to Repair Act, was intended to establish a pre-litigation protocol for residential properties built after January 1, 2003. This included setting forth applicable standards for home construction, statute of limitations, burden of proof, and certain obligations on the part of the homeowners. SB 800 was intended to effectively reverse parts of the “Economic Loss Doctrine” and therein establish rights and procedures which would allow a homeowner to recover for construction defects in new construction even when there is no actual property damage other than the defective product or work itself.

After SB 800 became law, the Fourth Appellate District found that SB800 was not the exclusive remedy for homeowners in the case of Liberty Mutual v. Brookfield Crystal Cove, LLC.3 Specifically, the Fourth Appellate District found that, for alleged defects that have not yet resulted in actual property damage, a homeowner may elect to proceed under the Right-to-Repair Act and that, for alleged defects which have manifested actual property damage, a homeowner may elect to proceed under traditional common law causes of action. This rule was later adopted by the Second Appellate District in a case this firm was involved in (Burch v. Superior Court4), wherein the Court ruled that SB 800 does not preclude a homeowner from pursuing common law claims for construction defects that have caused actual property damage.

The conflicting line of authority first came from the Fifth Appellate District, who rejected the holding in Liberty Mutual and Burch. The Fifth Appellate District held that SB 800 was the exclusive remedy for homeowners asserting construction defects for both actual and anticipatory damages in the case of McMillan Albany, LLC v. Superior Court. 5 The Third Appellate District thereafter ruled similarly in Elliot Homes v. Superior Court.6

Consequently, California currently has two conflicting viewpoints in four of the State’s six appellate districts, all of which are valid legal authority. Because of this conflict, the California Supreme Court has accepted the McMillan Albany, LLC v. Superior Court matter for hearing. As of the present date, the matter has been fully briefed, including all amicus briefs. The next step is for the Supreme Court to set a date for oral arguments. This means that sometime in the near future the Supreme Court should resolve the standard for handling of construction defect claims in California, as was intended by the passing of SB 800 in the first place.

While we cannot predict with certainty how the Supreme Court will rule, it is likely that a ruling which affirms the Liberty Mutual and Burch line of cases will result in parties litigating both statutory and common law tort claims concurrently. Presumably this would result in more extensive litigation because more evidence is require to establish a liability claim for general negligence than for an alleged SB 800 violation alone. Furthermore, because general negligence is often more difficult to establish than an alleged SB 800 violation, pretrial settlements may be more limited, which could force more of these cases to trial.

On the other hand, if the Supreme Court were to uphold the McMillan and Elliot Homes line of cases, presumably the scope of construction defect litigation in cases involving SB 800 claims would be limited to establishing statutory violations. Such claims are often more easier for property owners to establish, which may make pretrial settlements more desirable and thereby curtail the need for trial in many instances.

1 SB 800, codified as California Civil Code Section 895, et seq. went into effect on January 1, 2003.

2 McMillan Albany, LLC v. Superior Court (Supreme Court Case No. S229762.

3 Liberty Mutual v. Brookfield Crystal Cove, LLC, 219 Cal. App. 4th 98 (2013).

4 Burch v. Superior Court, 223 Cal. App. 4th 1411 (2014).

5 McMillan Albany, LLC v. Superior Court, 239 Cal. App. 4th 1132 (2015).

6 Elliot Homes v. Superior Court, 6 Cal. App. 5th 333 (2016).

Cross-Examining the Expert Witness in a PL Case Part II: What Are the Relevant Facts & Data?

Rosario M. Vignali | Wilson Elser | November 14, 2017

In the first part of this series, we examined how effective deposition questioning about an expert’s education, training and experience can ultimately call into serious question the expert’s qualifications to serve as an expert witness at trial and survive a subsequent Daubert motion. We examined how some experts, despite their seemingly extensive and impressive credentials, may actually have no experience in the relevant field or may be exaggerating the depth of their past work experience. This may ultimately lead to the Court finding that the expert is offering opinions in an area about which they know nothing.

In this second part of the series, we’ll examine the “facts and data” that the Plaintiff’s expert, under Rule 702, is supposed to collect and examine as the basis for an opinion. Experience indicates that careful questioning of the expert’s work in gathering facts and data related to the underlying accident and/or the allegedly defective product often shows that, in reality, the expert’s opinions rest on a shaky foundation or a selective version of the relevant facts that can, and often will, collapse with just a few nudges given at the expert’s deposition.

I am often amazed to learn how little work actually went into the expert’s finding that the underlying product is defective. Targeting the extent and depth of the expert’s process of fact gathering or, more accurately, the lack thereof should therefore be an important focus during the expert’s deposition. For example, most experts, even the least prepared, will have read the deposition transcript of the Plaintiff and the Defendant’s lead witness. Upon further questioning, however, we often learn that the expert has read and reviewed little else prior to developing the opinions and writing the Rule 26 report. Many experts don’t bother to view the video of Plaintiff’s deposition where, in some cases, a demonstration of how the accident happened was given. It is not uncommon to learn during the expert’s deposition that the expert did not read the transcripts or written statements from any eyewitnesses to the accident, nor has the expert attempted to independently interview any eyewitness, co-worker or even the Plaintiff’s employer.

Most expert reports will contain a list of the documents read or reviewed by the expert prior to developing the opinions and writing the report. Rather than concentrating on what the expert reviewed, we suggest concentrating on those documents that the expert did not review. Chances are that the expert has probably read the most important product-related documents produced by the Defendant, such as the product’s Operator’s Manual and an assembly drawing or two. Targeted questioning at the deposition often shows, however, that the expert may not have bothered to “drill down” to the second level of product-related documents (i.e., other than the Operator’s Manual and/or the design drawings) generated by the manufacturer during discovery. If the expert has no knowledge of the information contained in these more informative documents that may be favorable to the product’s design, the expert has by definition ignored important “facts and data” – albeit inconvenient information that the expert would probably prefer to ignore – that would call into question the expert’s work-up and overall credibility.

We also find at depositions that the so-called expert did not bother to visit the actual accident scene, nor has the expert obtained and read the police report or the relevant medical records. Some experts don’t even bother to conduct an inspection of the product involved in the accident. Even if the product is not available because it was lost or destroyed during or after the accident, there is a real likelihood that the expert did not bother to obtain a new exemplar in order to determine what the product looked like when it was new and before it was altered or abused by the Plaintiff or others.

Facing a difficult case with an uncertain outcome, and perhaps as a legacy of state court practice, Plaintiffs’ attorneys often keep their expert on a shoestring budget – forcing the expert to develop opinions “on the cheap.”  The first thing sacrificed by these economic constraints is the kind of “sufficient facts and data” required under the Daubert standard before an opinion can be properly rendered in a courtroom. Under the federal court’s “gatekeeping” role to keep out “junk science” and ipse dixit opinions, the Defendant’s exploration of the basis for the expert’s opinions need not be similarly constrained by the Plaintiff’s decision to cut corners. Showing that the “Emperor has no clothes” through targeted questioning at the expert’s deposition can devastate the expert’s credibility and the legitimacy of the opinions being given. Even if the expert survives a later Daubert motion, the expert’s ability to persuade the jury will likely be seriously impacted.

In our next installment in this three-part series, we’ll look at questions that target the expert’s methodology.

2018 California Construction Law Update

Garret Murai | California Construction Law Blog | January 4, 2018

The California State Legislature introduced 2,495 bills during the first year of the 2017-2018 Legislative Session. Of these, 859 were signed into law.

While much political attention was focused on several California laws that could be viewed as California’s rebuke of Washington, including California’s legalization of marijuana, enactment of “sanctuary state” legislation, and bills focused on climate change, 2017 also saw the enactment of a package of bills intended to address the state’s housing affordability crises (for a great summary of these bills see Wendel Rosen’s Landuse Group’s recent  article Slate of New Housing Bills Takes Effect January 1, 2018), as well as a range of other bills of interest to the construction industry including bills related construction financing, alternative project delivery methods, and solar construction.

Each of the bills discussed below took effect on January 1, 2018, except as otherwise stated.


AB 534 – Prohibits a mechanics lien from being recorded against any other property of an owner in a common interest development on which work was performed unless consent was provided by that owner or that owner made a request for labor or finishing of materials or services. However, permits the recording of a mechanics lien against another owner in a common interest development where emergency repairs are made. Permits the owner of a separate interest in a common interest development to remove a mechanics lien by paying a mechanics lien claimant a proportional fraction of the total sum secured by the mechanics lien or to record a lien release bond.

AB 1278 – Revises requirements related to the notification to the Contractors State License Board of an unsatisfied judgment, bonds for the judgment and suspension for failure to comply. Provides that if a judgment is entered against a contractor, the qualifier is automatically prohibited from serving as a qualifier or personnel of record on another license until the judgment is satisfied.

AB 1357 – Permits C-39 roofing contractors to perform repairs pursuant to a roof inspection for purposes of providing a roof certification.

SB 486 – Authorizes the Contractors State License Board (CSLB) to issue a letter of admonishment to an applicant, licensee, or home improvement registrant instead of issuing a citation if, upon investigation, the CSLB has probable cause to believe that a licensee, applicant or registrant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration.

Public Works Projects

AB 92 – Extends until January 1, 2023, the limitation by public entities, direct contractors and subcontractors to withhold more than 5 percent retention on public works projects unless a specific finding is made by the public entity that a higher retention is required.

AB 1223 – Requires state agencies, within 10 days of making a construction contract payment on projects of $25,000 or more, to post on the Internet the name of the construction contractor or company paid, the date the payment was made or the date the state agency transmitted instructions to the controller or other payer to make payment, the payment application number or other identifying information, and the amount of the payment.

Prevailing Wages, Apprentices, and Workers’ Compensation

AB 55 – Effective July 1, 2018, adjusts the time period from two to three years for a worker to have completed at least 20 hours of approved advanced safety training at high hazard facilities to qualify as a “skilled journeyperson” for purposes of performing this type of work.

AB 199 – Expands the definition of private residential projects exempt from the payment of prevailing wages to include projects built pursuant to an agreement with a successor agency to a redevelopment agency.

AB 1066 – Expands the definition of public works for purposes of paying prevailing wages to include tree removal work.

AB 1701 – For contracts entered into on or after January 1, 2018, makes direct contractors involved in the erection, construction, alteration, or repair of a building, structure ,or other work, liable for wages, fringe and other benefit payments or contributions (including interest incurred by a subcontractor of any tier), except penalties or liquidated damages.

SB 96 – Effective June 27, 2017, the budget trailer bill makes several changes to the state’s prevailing wage laws and registration requirements for public works projects, including increasing the registration fee from $300 to $400, permitting registrations for three year periods beginning June 1, 2019, exempts from registration by public agencies construction projects of $25,000 or less and maintenance projects of $15,000 or less, provides for penalties for failure to register a public work, eliminates the discretion of the Labor Commissioner to waive liquidated damages for prevailing wage violations, and makes other changes.

SB 189 – Effective July 1, 2018, expands the exception to the requirement that employees be covered by workers’ compensation insurance to include officers and directors who render service for pay who (1) own at least 10 percent of the issued and outstanding stock; or (2) own at least 1 percent of the issued and outstanding stock if that officer or director’s parent, grandparent, sibling, spouse, or child owns at least 10 percent of the issued and outstanding stock, the officer or director is covered by a health care service plan or health insurance policy, and executes a written waiver.

SB 418 – Revises the definition of skilled and trained workforce by providing that: (1) for work performed on or after January 1, 2018, at least 40 percent of the skilled journeypersons are graduates of an apprenticeship program, with the exception certain occupations; (2) for work performed on or after January 1, 2019, at least 50 percent of the skilled journeypersons are graduates of an apprenticeship program, with the exception of certain occupations; and (3) for work performed on or after January 1, 2020, at least 30 percent of the skilled journeypersons are graduates of an apprenticeship program, with the exception of certain occupations.

Alternative Project Delivery

AB 115 – Extends the authority of the California Department of Transportation to use the construction manager/general contractor (CM/GC) project delivery method, which was originally limited to no more than 12 projects, to an additional 12 projects. Expands the use of the CM/GC project delivery method by regional transportation agencies to railroad grade separations and bridge rehabilitations and replacements in Riverside County. Permits Alameda, Los Angeles, Riverside, San Bernardino, San Diego, Solano and Yuba Counties to use the cost-plus-time bidding procedure for certain projects.

AB 851 – Extends the authorization of counties to utilize construction manager at-risk (CMAR) project delivery method on projects exceeding $1 million from January 1, 2018, to January 1, 2023. Provides that CMs shall not be prequalfied or shortlisted unless the CM certifies that the CM and its subcontractors of every tier will use a skilled and trained workforce. Authorizes the City of San Diego to use the CMAR project delivery method and authorizes the Santa Clara Valley Water District to use the design-build method of project delivery.

AB 994 – Authorizes the Beach Cities Health District to use the design-build project delivery method until January 1, 2023.

SB 373 – Authorizes the Stanislaus Regional Water Authority to use the design-build procurement process for its Regional Surface Water Supply Project.

SB 622 – Authorizes bridge and highway districts to use informal bidding for construction, repair, maintenance and alteration work with an estimated expenditure that does not exceed $50,000.

SB 793 – Authorizes the Peninsula Health Care District, Midpeninsula Regional Open Space District and Santa Clara Valley Open-Space Authority to use design-build process for construction of facilities or buildings. Exempts the Midpeninsula Regional Open Space District and Santa Clara Valley Open-Space Authority from the minimum project limitation of $1 million. Authorizes the Counties of Alameda, Los Angeles, Riverside, San Bernardino, San Diego, San Mateo, Solano and Yuba to select bidders on the basis of bet value for construction projects in excess of $1 million but not to exceed $3 million, adjusted annually by the California Consumer Price Index, through January 1, 2020.

School Construction

AB 203 – Requires the Department of Education, in establishing standards for school districts to ensure that the design and construction of school facilities are educationally appropriate and promote school safety, to provide for design flexibility by school districts. Requires the Department of Education, Division of the State Architect, and Office of Public School Construction, on or before July 1, 2018, to submit a report to the State Legislature on streamlining their application processes.

AB 618 – Permits school districts to set the monetary threshold by which they are authorized to use job order contracting. Prohibits contractors retained by a school district to assist in the development of job order contract documents from bidding on job order contracts or participating in the preparation of a bid with any job order contractor. Authorizes community college districts to use job order contracting through January 1, 2022.

AB 1082 – Authorizes electrical corporations to file with the Public Utilities Commission by July 30, 2018 a pilot program proposal for the installation of vehicle charging stations at school facilities and other educational institutions.


AB 1282 – Requires the Secretary of Transportation, in consultation with the Secretary of the Natural Resources Agency, to establish a Transportation Permitting Task force to develop a process for early engagement in the development of transportation projects, establish reasonable deadlines for permit approvals, and provide for greater certainty of permit approval requirements by April 1, 2018, and to prepare and submit a report by December 1, 2019.

Project Funding

AB 56 – Revises the definition of “public development facilities” under the Bergeson-Peace Infrastructure and Economic Development Act to mean real and personal property, structures, conveyances, equipment, thoroughfares, buildings, and supporting components thereof, excluding any housing, that are directly related to providing housing-related infrastructure including city streets, drainage, water supply and flood control, etc.

AB 560 – Authorizes the State Water Resources Control Board to use funds from the Safe Drinking Water State Revolving Fund to provide grants or revolving fund loans for the design and construction of projects in service areas that qualify as severely disadvantaged communities.

SB 3 – Enacts the Veterans and Affordable Housing Bond Act of 2018, which, if adopted by voters in teh November 2018 general election, would authorize the issuance of $4 billion in bonds for veterans and affordable housing.

SB 5 – Authorizes, upon approval by the voters, the issuance of $4 billion in bonds to finance drought, water, parks, climate, coastal protection and outdoor access programs, including construction.

Environmental, Solar and Climate Change

AB 28 – Provides that the State of California consents to jurisdiction by the federal courts with regard to compliance, discharge, or enforcement of environmental review and clearance under U.S. Department of Transportation’s surface transportation project delivery pilot program.

AB 262 – Requires the Department of General Services, by January 1, 2019, to publish in the State Contracting Manual, a maximum acceptable global warming potential for “eligible materials,” defined as carbon steel rebar, flat glass, mineral wool board insulation and structural steel. Requires, for public works contracts entered into on or after July 1, 2019, that an awarding agency require a successful bidder to submit an Environmental Product Declaration for eligible materials.

AB 634 – Prohibits common interest development associations from prohibiting the installation or use of a rooftop solar energy system on the roof of a building in which an owner resides or on a garage or carport adjacent to a building that has been assigned to an owner for his or her exclusive use.

AB 733 – Authorizes enhanced infrastructure financing districts established by cities and counties to finance projects that enable communities to adapt to the impacts of climate change.

AB 797 – Requires the Public Utilities Commission to reserve 50 percent of the solar water heating program for the installation of solar thermal systems in low-income residential housing or in buildings in disadvantaged communities.

AB 1070 – Requires the Contractors State License Board in collaboration with the Public Utilities Commission to develop and make available on the Internet a disclosure document that provides consumers with accurate, clear, and concise information regarding the installation of solar energy systems by January 1, 2018, and requires that this disclosure document be provided to consumers by solar energy systems companies, including  for solar energy systems utilizing PACE financing.

AB 1414 – Extends the prohibition of building permit fees for rooftop solar systems from exceeding certain maximum amounts unless the  local agency provides substantial evidence of reasonable need for higher fees from January 1, 2018 to January 1, 2025.

SB 242 – Requires PACE program administrators to orally confirm that at least one owner of the property has a copy of specified documents and forms, to provide an oral confirmation of key terms of an assessment contract, and to record such oral confirmations.

SB 541 – Requires the State Water Resources Control Board, in consultation with regional water quality control boards, and the Division of the State Architect to recommend best design and use practices for stormwater and dry weather runoff capture practices by January 1, 2019.

Americans with Disabilities Act

AB 1148 – Clarifies ent of existing law regarding the requirement that commercial property owners or lessors state in every lease or rental agreement executed on or after January 1, 2017, whether or not the premises have undergone inspection by a Certified Access Specialist (CASp), applies only to commercial properties rented or leased to persons operating, or intending to operate, a place of public accommodation or a facility to which the general public will be invited.

California Fires

AB 367 – Permits the issuance of a building permit for a residence to be supplied by a water hauler, bottled water, a water-vending machine or retail water facility if the residence is being rebuilt because of a fire.