Battle of Experts Cannot Be Decided on Summary Judgment

Tred R. Eyerly | Insurance Law Hawaii | June 6, 2018

When two competing experts disagreed on the cause of the loss, the trial court erred in granting summary judgment to the insurer. Garcia v. Firs Community Ins. Co., Fla. App. LEXIS 4237 (Fla. Ct. App. March 28, 2018).

Garcia, the homeowner, discovered water damage in his home, allegedly due to a roof leak. Garcia notified his insurer, First Community Insurance Company. A forensic engineer, Ivette Acosta, was retained by First Community to inspect the property. After the inspection, coverage was denied.

The homeowner’s policy covered direct loss to property only if the loss was a physical loss. Loss caused by “”rain snow, sleet, sand or dust to the interior of a building was excluded unless a covered peril first damaged the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening.” Loss caused by wear and tear, marring, or deterioration was also excluded.

Garcia filed a complaint against First Community. The insurer moved for summary judgment arguing that the cause of the water intrusion through the roof was a combination of deterioration, tree branch abrasions, and construction defects. Acosta also found that the nails observed in the roof’s shingles created a direct path for water to penetrate the shingles, which was considered a construction defect.

Garcia opposed the motion for summary judgment and submitted a report by a professional engineer, Alfredo Brizuela, who also inspected the property. Brizuela found there was insufficient evidence to rule out that the damages were caused by hail impact or wind uplift damage caused by a one-time occurrence. He also opined the damage was not age-related or long term in nature. Instead, there was evidence that the damage was caused by high rain and/or wind. The trial court granted First Community’s motion and entered final judgment.

On appeal, it was noted that in ruling on summary judgment, the trial court may neither adjudge the credibility of the witnesses nor weigh the evidence. The court agreed with Garcia that the trial court erred in granting summary judgment in favor of First Community where the conflicting reports of the parties’ experts established that there was a genuine issue of material fact as to the cause of the loss. Given the conflict in the material evidence as to the cause of the loss, the trial erred in entering final judgment in favor of First Community.

Investigators Explain Focus on Pre-Collapse Cracking in Florida Bridge

Scott Judy and Richard Korman | ENRSoutheast | May 24, 2018

A final determination of the deadly accident’s cause could take 24 months

Elevation of the pedestrian bridge that collapsed in March, recently released by the National Transportation Safety Board. It shows the location of cracks in photos in the text below (a third image of the cracks is not shown).

The National Transportation Safety Board’s preliminary report on the fatal collapse in March of a pedestrian bridge at Florida International University in Sweetwater focuses attention on the widely discussed pre-collapse cracking in the main span. The report also confirms accounts about what the construction crew working on the bridge was doing before the structure fell.

But the report contains no definitive explanation of what occurred. Additional months, and possibly years, will be needed to determine the probable cause of the failure, which killed five motorists and one project worker.

Issued May 23, the NTSB report states that while the board “is evaluating the emergence of cracks” in diagonal members located at both ends of the bridge, it is also studying “the propagation of cracks” near diagonal member 11, located at the structure’s north end.

Photo 1: An image accidentally released by the National Transportation Safety Board earlier this month to the Miami Herald showing a crack in the region of bridge diagonal 11.

A video of the collapse appears to show the failure starting at that part of the concrete truss bridge’s main span.

Seven vehicles beneath the 174-ft-long bridge were occupied at the time of the collapse early in the afternoon of March 15. The partially constructed pedestrian bridge was being built by a design-build joint venture called MCM-FIGG, consisting of contractor MCM Construction and FIGG Engineers, both based in Florida.

Following the design plan, five days before the collapse construction crews “de-tensioned the bridge diagonal members on the north and south ends of the bridge,” the report states. At the time of the accident, a construction crew was busy “re-tensioning the number 11 diagonal member connecting the canopy and the deck at the north end of the bridge,” according to the report.

Photo 2: A second photo of a crack in the region of diagonal 11 of the failed Florida International University pedestrian bridge. The cracks are a focus of federal investigators.

Much speculation about the cracks has been published.

The project team’s knowledge of pre-collapse cracking in the bridge span was first reported on March 16, when the Florida Dept. of Transportation (FDOT) released the transcript of a voice mail it had received from the bridge project’s lead engineer prior to the collapse.

According to FDOT’s transcript of the voice mail, Denney Pate, of FIGG Bridge Engineers, tells the agency that the project team had “taken a look at [the cracking].”

Pate then added, “Obviously some repairs or whatever will have to be done but from a safety perspective we don’t see that there’s any issue there so we’re not concerned about it.”

Additionally, FIU acknowledged, the project team had met for more than two hours to discuss the cracking issue on the morning of the collapse.

FIGG Bridge Engineers says that it can’t comment on the interim report and that it is cooperating with the NTSB on its investigation, which “is still in the early fact-finding stages.”

Moving forward, NTSB plans to conduct “additional forensic examination of several bridge structural components and destructive testing of multiple core and steel samples.”

Also, the NTSB stated that “all aspects of the collapse remain under investigation,” including the bridge design plans.

Lawsuits and Liability

A final report on the FIU bridge collapse—which will include determination of a probable cause plus recommendations to avoid future accidents—likely won’t come until 2019, or possibly 2020, says the NTSB. Investigations involving fatalities usually take between 12 and 24 months to complete, the board stated.

One of the first lawsuits—filed on behalf of FIU student Emily Joy Panagos, whose car was crushed—suggests that post-tensioning triggered the failure that brought down the structure. The lawsuit alleges that the post-tensioning compressed the diagonal so that it overstressed a joint in the top chord, triggering hinge failure at a connection in the lower chord. That resulted in the catastrophic failure of the rest of the 174-ft-long structure.

Aside from the technical aspects of the tragedy, the legal and financial ramifications are likely to be severe.

One possibility, legal experts say, is that the two companies in the design-build joint venture—MCM actually employed FIGG on the project—will end up squaring off over the costs.

FIGG’s liability could hinge partly on whether it recommended, designed or supervised the work involving tension rods or cables being performed on the bridge the day of the collapse.

“When it comes to liability of a design-build joint venture, and the team is jointly and severally liable, within the team there will be what are called indemnity contribution claims,” says Judah Lifschitz, an attorney who is a principal and co-president of Washington, D.C.-based Shapiro, Lifschitz and Schram. “And each party will have its own insurers.”

The companies and insurers involved in a costly accident, says Lifschitz, “often look to the other companies, such as their subcontractors and suppliers, to share the pain.”

Time’s Up! Or Is It?

Dara Jebrock and Lindy Keown | CLM | Spring 2018

Proposed legislation in Florida would lengthen the statute of repose for counter, cross and third-party claims in construction defect.

The time for bringing certain actions for latent construction defects in Florida may be relaxed, depending on the outcome of proposed legislation. Senate Bill 536 and House Bill 875 – both up for vote during the 2018 legislative session – propose new language to Florida’s 10-year statute of of repose to allow counterclaims, cross-claims, and third-party claims up to one year after the statute of repose has otherwise expired.

To understand the effect of this proposed legislation, a quick primer on the statute of repose is necessary.  Unlike the statute of limitations, which establishes a time limit within which an action must be brought after a cause of action accrues, the statute of repose “cuts off the right of action after a specified time measured from the delivery of a product or the completion of work…regardless of the time of the accrual of the cause of action or of notice of the invasion of a legal right,” according to Sabal Chase Homeowners Ass’n, Inc. v. Walt Disney World Co. quoting Bauld v J.A. Jones Const. Co.

Now imagine a general contractor – let’s call it Better Builders – has been served with a construction defect suit on the afternoon of the day the 10-year statute of repose expires. Of course, Better Builders wants to sue the involved subcontractors whose scopes of work are implicated by the alleged defects. However, Better Builders’ project files on this 10-year-old project are at an offsite storage unit – inaccessible for review. Sadly for Better Builders, its potential third-party action will likely be time-barred because the statute of repose expired the day it was served – that is, unless a lucky lawyer has immediate access to the project files and works against time to detect issues and file suit against the responsible subcontractors on the same day Better Builders was served. Without a remedy, Better Builders may be liable for the entirety of any construction defect damages.

While the statute of repose is purposefully unforgiving – recognizing that an aging building should not be the subject of construction defect litigation in perpetuity – the new, proposed legislative language is a game changer for a time-pressed construction defect defendant. Practically, the pending legislation will allow a defendant, sued right before the statute of repose expires, to investigate and bring counterclaims, cross-claims and third-party actions against potentially liable entities for an additional year after the expiration of the statute of repose. Without this revision, time-barred defendants are left without recourse against parties that should be on the hook.

Current State of the Law

For construction defect claims, section 95.11(3)(c) of the Florida Statutes sets forth time periods within which a party must bring suit for a deficiency in construction. If the party does not file a suit within the given time frames, any claims regarding the defect(s) will be barred. One legislative purpose for enacting this statute was to “limit the amount of time an architect, engineer or contractor could be exposed to potential liability for the design or construction of an improvement to real property,” as found in Long v. First Fed. Sav. & Loan Ass’n.

Under the statute’s guidelines, the statute of repose applicable to “[a]n action founded on the design, planning, or construction of an improvement to real property” must be commenced within 10 years after the latest of the following four events:

1) Date of actual possession by the owner

2) Date of the issuance of a certificate of occupancy

3) Date of abandonment of construction if not completed

4) Date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his employer.

At least on Florida court has held the repose periods in Fla. Stat. § 95.11(3)(c) apply to “all claims,” including claims for indemnity and contribution. See Fla. Dep’t of Transp. v. Echeverri, 736 So. 2d 791, 792 (Fla. 3d DCA 1999), finding that the plain language of the statute indicates it applies to indemnity and contribution actions.

Proposed Legislation

The proposed legislation is simple but powerful. The legislation recommends the following language be added to Section 95.11(3)(c) of the Florida Statutes:

[C]ounterclaims, cross-claims, and third-party claims that arise out of the conduct, transaction or occurrence set out or attempted to be set out in a pleading may be commenced up to 1 year after the pleading to which such claims relate is served, even if such claims would otherwise be time barred.

If passed, this legislation will undoubtedly benefit construction defect defendants, such as general contractors. For instance, our hypothetical Better Builders, which was served with a lawsuit in the 11th hour on the very day the statute of repose expired, would have a meaningful opportunity to investigate and pursue claims against the subcontractors whose scopes of work are implicated by the defect claims and may therefore be liable. Likewise, if Better Builders has a counterclaim or cross-claim, it can pursue those claims in the year that follows service of process.

Florida’s legislative session began Jan. 9, 2018. As of press time, the bills were both being evaluated by legislative subcommittees. If passed, the new legislation will go into effect July 1, 2019.


Federal Court Certifies Question Regarding Collapse to Connecticut Supreme Court

Jason Cleri | Property Insurance Coverage Law Blog | June 6, 2018

Last year I wrote a blogpost about the large class action lawsuit in Connecticut centered on the crumbling foundations due to pyrrhotite in the concrete poured by the J.J. Mottes Company in approximately 20,000 buildings across Connecticut.

Recently, a federal judge has asked the Connecticut Supreme Court for a better definition of the word collapse,1 that was given in Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987). In Beach, the Connecticut Supreme Court determined that collapse was not limited to a sudden and catastrophic nature, but, included substantial impairment of structural integrity of a building.

Many of the insureds’ lawsuits brought against insurance carriers due to the structural integrity of the concrete used the Beach definition of collapse in their defense. The trial court noted that although highly instructive, the Beach decision provides insufficient guidance and no appellate decision has squarely applied Beach and arrived at a definition of “substantial impairment of structural integrity.”

Three questions were presented for certification:

  1. Is “substantial impairment of structural integrity” the applicable standard for “collapse” under the provision at issue?
  2. If the answer to question one is yes, then what constitutes “substantial impairment of structural integrity” for purposes of applying the “collapse” provision of this homeowners’ insurance policy.
  3. Under Connecticut law, do the terms “foundation” and/or “retaining wall” in a homeowner insurance policy unambiguously include basement walls? If not, and if those terms are ambiguous, should extrinsic evidence as to the meaning of “foundation” and/or “retaining wall” be considered?

The Connecticut Supreme Court chose to certify only the second question, noting that if the term collapse is not defined, then Beach is the applicable standard. With respect to the third question, Connecticut courts have “consistently rejected” insurers’ arguments concerning the term foundation, having “determined that those policy terms were ambiguous,” and have “construed them against” the insurers.2

Stay tuned for updates.

I leave you with a relevant quote from former country music singer David Allan Coe:

“It is not the beauty of a building you should look at; it’s the construction of the foundation that will stand the test of time.”
1 Karas v. Liberty Insurance Corp., No. 13-1836 (D. Conn. April 30, 2018).
2 Jang v. Liberty Mut. Fire Ins. Co., 2018 WL 1505574, at *3 (D. Conn. Mar. 27, 2018); see also, e.g.Gabriel v. Liberty Mut. Fire Ins. Co., 2017 WL 6731713, at *2 (D. Conn. Dec. 29, 2017) (noting prior determination “that the terms ‘foundation’ and ‘retaining wall,’ as used in the policy, were ambiguous.”); Belz v. Peerless Ins. Co., 46 F. Supp. 3d 157, 164 (D. Conn. 2014); Karas v. Liberty Ins. Corp., 33 F. Supp. 3d 110, 115 (D. Conn. 2014) (“Each party thus has a reasonable but different interpretation of the phrases [‘foundation’ and ‘retaining wall’] supported by dictionaries and case law, so the phrases are ambiguous, and the insurance policy should be construed against Liberty Mutual.”); Bacewicz v. NGM Ins. Co., 2010 WL 3023882, at *4 (D. Conn. Aug. 2, 2010) (“[A] reasonab[e] jury could find that the basement walls of the Bacewiczes’ house did not constitute the ‘foundation’ of the house.”)

Insurer Must Defend Contractor Against Claims of Faulty Workmanship

Tred R. Eyerly | Insurance Law Hawaii | May 21, 2018

The magistrate judge recommended that the insurer’s motion for summary judgment seeking to determine there was no coverage for claims of faulty workmanship be denied. Greystone Multi-Family Builders v. Gemini Ins. Co., 2018 U.S. Dist. LEXIS 56770 (S.D. Tex. Feb. 26, 2018).

TPG (Post Oak) purchased an OCIP policy to cover construction of an apartment complex. TPG was sued by the contractor, Greystone, after TPG cancelled the construction contract. TPG filed a counterclaim against the contractor, alleging that Greystone had failed to properly perform in building a luxury apartment complex which resulted in monetary damages to TPG. The complaint further alleged that the project was nine months behind its substantial completion date, far from complete, and over budget when TPG cancelled the contract. The cost to fix the mismanagement caused by Greystone was $18.9 million.

The insurer denied coverage for the counterclaim against Greystone. Greystone then sued for a declaration judgment and the insurer cross-moved for summary judgment.

The insurer argued there was no occurrence because Greystone’s actions were not an accident. The court, however, found no allegations in the underlying complaint that Greystone intended its work to cause the damage or that the damage was the natural and expected result of Greystone’s actions. Simply because Greystone paid its subcontractors upfront did not mean Greystone intended the result to be shoddy workmanship. The up-front payments may have been a management failure, but not intentional conduct to cause poor construction of the project. Therefore, the allegations included actions meeting the definition of “occurrence.”

Next, the insurer agreed that there was property damage, but argued most of the complaints were of increased costs of construction due to duplication of effort, purchasing gaps, use of wrong materials, deviations from plans and specifications, code violations, and delays. The court agreed that the counterclaim alleged that Greystone’s shoddy work caused property damage. But there were also allegations that fell within the definition of property damage.

Finally, the court determined that the exclusions did not bar coverage. The insurer relied upon exclusion j (5) which barred coverage to “that particular part of real property on which you . . . are performing operations, if the ‘property damage’ arises out of those operations.” The court noted that it must look not to when the construction defect occurred, but when the property damage itself occurred. Greystone argued that some of the damage could only have occurred after it was no longer working on its particular part of the project. There was no clear allegation in the counterclaim tying the property damage to a particular date. Therefore, exclusion j(5) did not allow the insurer to escape its duty to defend.

Exclusion j (6) was also not applicable. The exclusion barred coverage for “property damage” to “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” The exclusion did not apply to property damage included in the products-completed operations hazard, i.e., when all of the work called for in the contract had been completed. The exclusion barred coverage only for property damage to parts of a property that were themselves the subject of defective work by the insured. The exclusion did not apply, however, for damage to parts of a property that were the subject of only nondefective work by the insured and were damaged as a result of defective work by the insured on other parts of the property.

The counterclaim alleged that some of Greystone’s work that was non-defective was damaged by defective work. For example, the counterclaim alleged that due to defective structural work, “the floor of the structure began to sag and critical plumbing elements were damaged.” The counterclaim further alleged that the roof was installed defectively, which caused water leaks on the property. The allegations also established that not all of Greystone’s work was completed because the contract was never completed. Therefore, the products-completed operations hazard was inapplicable. Exclusion j (6) did not apply to the extent that the counterclaim alleged that non-defective work was damaged by defective work.

Consequently, the insurer had a duty to defend.