Oregon Court of Appeals Clarifies Timing Rule for Construction Liens

Blake Robinson | Davis Wright Tremaine | August 8, 2019

Under Oregon law, a contractor or subcontractor must file a construction lien within 75 days “after the person has ceased to provide labor, rent equipment or furnish materials or 75 days after completion of construction, whichever is earlier.” ORS 87.035(1). But when does the 75-day period run when a subcontractor fully completes its work on a project, but is called back months later for additional work?

In a recent case, Bethlehem Construction, Inc. v Portland General Electric Company, the Oregon Court of Appeals determined that the 75-day period ran from completion of the additional work. 298 Or App 348, — P3d —- (2019). The court primarily based its conclusion on the fact that the subcontractor performed the additional work under a change order that specifically referenced the original contract.

Accordingly, contractors and subcontractors who are called back to a job to perform additional work and who have not already filed a construction lien should request a change order referring back to the original contract. Likewise, owners should recognize that even if a contractor or subcontractor fails to file a construction lien within 75 days of completion of the original work, the contractor or subcontractor’s lien rights can be revived if the contractor or subcontractor is called back to perform additional work under a change order that refers back to the original contract.

In Bethlehem Construction, PGE hired a general contractor, Abeinsa, for the construction of a power plant. Abeinsa, in turn, subcontracted with Bethlehem Construction. Under the subcontract, Bethlehem agreed to manufacture concrete panels for Abeinsa.

Bethlehem completed its work and issued a final invoice, but did not file a lien within the ensuing 75 days. Around eight months later, Abeinsa requested that Bethlehem return to the project to evaluate damage to the panels caused by a different subcontractor.

Bethlehem and Abeinsa signed a “Change Order Request” listing the original contract number and name in the “reference” field and describing a “scope of change” to the original contract. Bethlehem completed the work and, within 75 days of doing so, recorded a lien covering both the original and change order work.

The Oregon Court of Appeals concluded that Bethlehem’s lien was timely because all of the evidence (specifically, the language in the Change Order Request referring to the original contract) demonstrated that the parties intended the original and subsequent work to be “two parts of one single contract.”

The court also concluded that the later work was not “trivial or trifling”—which was significant because the 75-day deadline to record a lien is not extended by the contractor or subcontractor returning to the project to perform “some trifling work or a few odds and ends after apparently completing the job and removing its equipment.” Here, the later work was not trivial or trifling because the Change Order Request specifically required the work, and the work was “significant to the project.”

  1. A construction lien must be recorded within the earlier of 75 days of the contractor or subcontractor stopping its work on the project or completion of construction.
  2. If a contractor or subcontractor completes its work on a project but later is called back to do additional, related work, and it performs that work under a change order that specifically refers back to the original contract, the 75-day period will likely run from the date the later work is completed.
  3. If the later work is not required by the original contract or a change order, or is not significant to the project, the 75-day period will likely run from the date the original work was completed.

The Seventh Circuit Court of Appeals Weighs In On “Matching”

Edward Eshoo | Property Insurance Coverage Law Blog | August 10, 2019

Last year in one of my blogposts, I wrote about Windridge of Naperville Condominium Association v. Philadelphia Indemnity Insurance Company,1 and the issue whether appraisal is appropriate to resolve a dispute over the cost of repairing physically undamaged siding of townhome buildings to remedy a mismatch with repaired damaged siding. There, a federal district court in Illinois denied the Association’s motion to compel appraisal on the “matching” issue, reasoning it was a question of coverage, not loss amount, and thus inappropriate for appraisal. This coverage issue was subsequently resolved in favor of the Association, the district court concluding that Philadelphia must replace or pay to replace the siding on all four of the townhome buildings’ elevations if no siding is available that matches the undamaged siding on the north and east elevations, as claimed by the Association.2

Philadelphia appealed the district court’s entry of summary judgment in favor of Windridge. The Seventh Circuit Court of Appeals recently affirmed the ruling, rejecting Philadelphia’s argument that because only the south and west elevations suffered “direct physical loss to covered property” within the meaning of the policy’s coverage grant, it need only replace the siding on those elevations.3

With respect to the phrase “direct physical loss,” the Seventh Circuit applied a common sense meaning: physical damage to tangible property causing an alteration in appearance, shape, color, or in other material dimension, which is what occurred to the siding. As to the term “covered property,” the Seventh Circuit concluded that the unit of covered property to consider under the policy (each panel of siding vs. the building as a whole) was ambiguous, meaning that the Association’s reading of the policy prevailed.

One point the Seventh Circuit made clear though was that it was deciding the case on the policy language at hand, including the valuation and loss payment provisions in the Philadelphia policy. That is why the only case it found instructive was National Presbyterian Church, Inc. v. GuideOne Mutual Insurance Company,4 in which a federal district court in the District of Columbia ordered GuideOne to pay to replace all of a church’s exterior limestone panels, including those that were undamaged by a 2011 earthquake, to ensure that all of the panels matched in color and weathering.5 While the coverage grant, valuation, and loss payment provisions in the Philadelphia policy supported the conclusion that Philadelphia must pay to return the buildings to their pre-storm status (matching siding on all sides),6 the Seventh Circuit stated that matching may not be appropriate in situations involving limited damage, such as one mismatched shingle on a roof.

So, is Illinois a “matching” state? With respect to any case filed in an Illinois federal district court under the ISO Commercial Property Building and Personal Property Coverage Form, I would submit yes, as long as matching is sought for something other than “limited” damage as the Seventh Circuit discussed in its opinion. As far as Illinois state courts, the answer likely will depend on the court considering the issue, as Illinois state courts are not bound to follow federal district court opinions, including Seventh Circuit opinions, as they are considered persuasive authority and not precedential authority.7
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1 Windridge of Naperville Condominium Association v. Philadelphia Indem. Ins. Co., No. 16-3860, 2017 WL 372308 (N.D. Ill. Jan 26, 2017).
2 Windridge of Naperville Condominium Association v. Philadelphia Indem. Ins. Co., No. 16-3860, 2018 WL 1784140 (N.D. Ill. April 13, 2018).
3 Windridge of Naperville Condominium Association v. Philadelphia Indem. Ins. Co., 2019 WL 3720876 (7th Cir. August 7, 2019).
4 Nat’l Presbyterian Church, Inc. v. GuideOne Mut. Ins. Co., 82 F. Supp. 3d 55 (D. D.C. 2015).
5 The policy at issue in both Windridge of Naperville Condominium Association and Nat’l Presbyterian Church, Inc. was a slightly modified version of the ISO Building and Personal Property Coverage Form (CP 00 10).
6 Philadelphia’s counsel conceded at oral argument that matching siding was not available.
7 Bridgeview Health Care Center, Ltd. v. State Farm Fire & Cas. Co., 10 N.E.3d 902 (Ill. 2014).c

Pretrial Motion Practice in Federal Court

Ian Dankelman | Property Insurance Coverage Law Blog | August 9, 2019

This blog post will describe the difference between pre-trial case dispositive motions and motions that impact the admissibility of evidence at trial. I recounted in a previous post that (1) motions to dismiss and (2) motions for summary judgment are case dispositive motions. That means that if either party ultimately wins the motion, the claim or a portion of the claim is definitively won by the moving party unless the court grants leave to fix the identified issue. Motions in limine and Daubert motions, however, concern what evidence is admissible at trial.

Motions in Limine

Federal evidentiary rules require the court to conduct a jury trial so that inadmissible evidence is not suggested to the jury by any means.1 Policyholders and insurers often seek to clarify a trial’s evidentiary parameters by filing motions in limine. Motions in limine are requests made before or during trial “to exclude anticipated prejudicial evidence before the evidence is actually offered.”2Motions in limine provide the judge an opportunity to stop prejudicial error from infecting the trial before it even begins. Federal courts often grant motions in limine when the introduction of certain evidence is clearly so improper that it would substantially impair a party’s ability to receive a fair trial. Preventing the jury from hearing this type of inadmissible evidence can save the court from being forced to declare a mistrial in the action. Nonetheless, judges have recognized that evidentiary decisions are often context-specific rulings that should generally be made during the actual trial.3 Therefore, courts will often defer ruling or deny without prejudice motions in limine and address the issue identified in the motion once a proper objection is raised at trial.

Daubert Motions

Daubert motions concern the admissibility of expert opinions at trial. Federal evidence rules permit experts qualified by their knowledge, skill, experience, training, or education to provide opinion testimony if:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.4

Successful Daubert motions—which challenge an expert based on one or more of the criteria above—can dramatically impact a case. The courts possess inherent gatekeeping authority to prevent an expert from opining on ultimate issues. Thus, if an expert is barred from testifying, the party may face an inability to meet its evidentiary burden of proof. Therefore, although the party was permitted to proceed to trial, the bar of expert testimony may severely inhibit a party’s ability to win at trial.

Conclusion

This blog series has identified and explained the four most common motions filed in federal court: (1) the motion to dismiss, (2) the motion for summary judgment, (3) motions in limine, and (4) Daubert motions. The next phase of the series will address what policyholders can expect during trial and after trial.
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1 Fed. R. Evid. 103(d).
2 Luce v. United States, 469 U.S. 38, 40 n. 2 (1984).
3 See Robinson v. Linde Lift Truck, 2003 WL 25686836, at *1 (M.D. Fla. 2003).
4 Rule 702(a)-(d), Fed. R. Evid.

One Way Arbitration Provisions are Enforceable in Virginia

Christopher G. Hill | Construction Law Musings | August 8, 2019

Here at Construction Law Musings, I’ve discussed arbitration clauses (pros and cons) as well as the fact that in our fair Commonwealth, contracts are enforced as written (for better or worse).  A case out of the Eastern District of Virginia takes both of these observations and uses them to make it’s decision.

In United States ex rel. Harbor Constr. Co. v. T.H.R. Enters., the Newport News Division of the Eastern District of Virginia federal court considered the following provision and it’s enforceability:

At CONTRACTOR’s sole election, any and all disputes arising in any way or related in any way or manner to this Agreement may be decided by mediation, arbitration or other alternative dispute resolution proceedings as chosen by CONTRACTOR…. The remedy shall be SUBCONTRACTOR’s sole and exclusive remedy in lieu of any claim against CONTRACTOR’s bonding company pursuant to the terms of any bond or any other procedure or law, regardless of the outcome of the claim. The parties further agree that all disputes under this Subcontract shall be determined and interpreted pursuant to the laws of the Commonwealth of Virginia….

This provision was the crux of the argument made by T. H. R., the Defendant, in making a motion to dismiss or stay the lawsuit for payment filed by Harbor Construction.  As background, Harbor Construction contracted with T. H. R. to perform work at Langley Air Force Base.  Alleging non-payment of approximately $250,000.00, Harbor filed a complaint with three counts, one under the Federal Miller Act, one for breach of contract, and a third for unjust enrichment.

Citing the above referenced clause, T. H. R. moved to stay the Miller Act claim, a claim that the Court agreed was not subject to the arbitration provision, and to compel arbitration of the remaining claims.  The Court considered and rejected arguments by Harbor Construction that the clause was void for vagueness and that the unilateral nature of the provision makes the obligation illusory. The Court further considered and rejected a waiver argument by Harbour based upon a 4 month delay in deciding to move to compel arbitration by T. H. R.  I recommend the Court’s analysis to you (the case is linked above) because it lays out clear reasoning on these points of Virginia law.

Finally, the Court agreed to stay the Miller Act claim pending the arbitration of the other claims.

The takeaway?  First of all, the contract will be enforced and one sided provisions such as this will be read as written.  Second of all, arbitration is highly favored in the state and federal courts of Virginia.  A court will not interpret an arbitration provision away.  Because of the nuances of these sometimes one-sided provisions, when presented with a contract, the advice of an experienced Virginia construction attorney can help avoid surprises and hopefully help balance the contract.

Be sure to read the opinion for yourself and let me know if you see anything I missed or let me know if you have any other takeaways.

No Coverage for Faulty Workmanship Based Upon Exclusion for Contractual Assumption of Liability

Tred R. Eyerly | Insurance Law Hawaii | June 5, 2019

    The Supreme Court for West Virginia determined the policy’s contractual assumption exclusion barred coverage for the general contractor based upon claims of faulty workmanship. J.A. St & Assocs. v. Bitco Gen. Ins. Corp., 2019 W. Va. LEXIS 205 (May 1, 2019).

    J.A. Street & Associates, Inc. entered a contract with the developer, Thundering Herd Development, L.L.C., to build a commercial shopping center on seventy-eight acres of land. Street agreed to oversee the site preparation for the development and the construction of many of the buildings. Thundering Herd retained an engineering firm, S&ME, Inc. to do geotechnical exploration and to provide advice regarding land preparation for the shopping center. Thundering Heard also entered an agreement with the Target Corporation to construct a store on a pad to be prepared at the shopping center. 

    Street hired subcontractors to prepare the site by grading the land and installing fill material. A slope was constructed at the rear of the proposed Target site, but it failed, causing a landslide, damage to the pad, and damage to adjacent property owned by a third party. Thundering Heard incurred $721,875 in additional costs to repair this slope, reconstruct the Target site, and compensate the neighbor for the damage to the adjacent property. 

    Another problem arose with the foundation of Shops A when the walls began cracking due to settlement. Remedial action included the installation of pilings under the foundation and grout injection under the slab, as well as repairs of damage to the building. 

    Thundering Heard filed suit against S&ME. The complaint was later amended to add Street as an additional defendant based upon Street’s failure to comply with the construction contracts. resulting in harm to the shopping center due to the landslides.

    Street was insured under several CGL, umbrella and excess policies. Bitco General Insurance Corporation provided a defense to Street. Bitco also filed a declaratory judgment action asking the court to rule that it had no duty to defend or indemnify. Street filed a third-party complaint against all of its insurers who issued CGL, umbrella or excess policies during the period of construction. 

    In ruling on six different summary judgment motions, the circuit court found there was an “occurrence” resulting in “property damage” under the insurers’ policies. However, the contractual liability exclusion precluded coverage under each policy. 

    On appeal, the court found that the installation of fill material, the grading of the land, the construction of the slopes and other site preparation work constituted faulty workmanship and use of materials. Therefore, correction of the site preparation work was not covered under Bitco’s CGL policy. But damages for other injury to property that resulted from the alleged faulty workmanship, such as cracked walls or floors in structures caused by the setting of improper fill material, was covered “property damage.”

    But Bitco’s policies excluded “‘bodily injury’ or ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.” Thundering Herd’s underlying complaint sought to have Street to pay damages by reason of Street’s alleged assumption of liability in contract claims for the recovery of money. Such a claim was not covered by the policies. 

      In addition to the exclusion in Bitco’s policies, the umbrella and excess policies had similar exclusions for the contractual assumption of liability. Therefore, none of the insurers owed a defense to Bitco and the circuit court’s six orders granting summary judgment to the insurers were affirmed.