Roofing Project Specifications—The Details Required For Quality Roofing Insurers Rarely Pay For Or Mention in Estimates

Chip Merlin | Property Insurance Coverage Law Blog | December 4, 2019

Insurance estimators, appraisers, and adjusters of roofing claims should read the attached partial specifications of a commercial roofing project. There has been some discussion of what a “reasonable” cost should be, but I think most would require that the scope of a commercial roofing job involving insurance be one that is going to result in a “quality” job. So, how do you determine what a quality commercial roofing job would be? I suggest you would look at specifications that the construction industry has come up with to prevent non-quality work from occurring.

Where do you find the specifications for quality construction? The Construction Specifications Institute.

The Construction Specifications Institute is a national non-profit technical organization dedicated to the improvement of specifications and building practices in the construction industry through service, education, and research. Founded in 1948, CSI provides a forum for architects, engineers, designers, specification writers, contractors, manufacturer’s representatives, suppliers, and all others in the construction industry. Membership is open to all who are involved in the built environment.

Historically, the CSI helped ensure quality construction through standards of materials and methods of construction. I would encourage anybody who is in the insurance restoration business, as a restoration contractor or an individual who is somehow responsible for determining the scope of methods and materials to be used in a particular restoration project, to become intimately familiar with using the reference materials available from the CSI. I would also suggest that you contemplate obtaining certification from the Construction Specifications Institute as well.

Thought For The Day

Associate with men of good quality if you esteem your own reputation; for it is better to be alone than in bad company.
—George Washington

Arbitrator: Produce Those Construction Documents . . . And Me: You Have No Authority!

Matthew DeVries | Best Practices Construction Law | November 18, 2019

Construction disputes often involve voluminous amounts of discovery, including documents in the hand of third parties.   And if the case is subject to arbitration, it is likely that there will be a dispute about whether the arbitrator has the authority to compel production of third-party documents or witnesses for deposition.

On September 18, 2019, in Managed Care Advisory Group, LLC v. Cigna Healthcare, Inc.the Court of Appeals for the Eleventh Circuit concluded that Section 7 of the Federal Arbitration Act (“FAA”) precludes all pre-hearing discovery from non-parties.  Specifically, the court considered the enforcement of summonses sent to non-parties to appear by video conference and to produce documents.  According to the court, any non-party discovery must take place in person at the arbitration hearing.  Even if the arbitrator’s request is limited to document production, the non-party must appear at the hearing in person with the documents in hand.  This appears to now be the rule in the Second, Third, Fourth, Ninth and Eleventh Circuits.  The Eighth Circuit has held otherwise, suggesting that pre-hearing discovery is available under the FAA.

So what? As a practical matter, the majority of the circuits now hold that if a non-party receives an arbitral summons for pre-hearing discovery, this is outside the scope of the arbitrator’s power.  However, an arbitral summons may require discovery at the hearing so long as the non-party physically appears.

Don’t Waive Too Much In Your Mechanic’s Lien Waiver

Christopher G. Hill | Construction Law Musings | October 3, 2019

In the past few years, the Virginia General Assembly has, with certain caveats, precluded pre-furnishing waiver of mechanic’s lien rights.  While this essentially outlawed the types of mechanic’s lien waiver clauses that pervaded construction contracts in Virginia, the key to the previous sentence is “pre-furnishing.” What the General Assembly left intact were the usual waivers of mechanic’s lien rights typically required to be provided to Owners and others in the payment chain in exchange for payment.

These lien waivers come in a few “flavors” from conditional to unconditional, partial to full.  Their terms usually include an acknowledgement of receipt of payment (we’ll get to this later), and a statement that the one seeking payment knows of no possible claims by lower tier subcontractors and then waives all mechanic’s lien rights against the property for work performed and included in the request for payment.  Often over my years as a Virginia construction attorney, I have noticed that these waivers are often signed without comment or review.  They are just part of the process and more often than not are not even an issue for most projects.  Of course, if they are an issue they can be a big one, and their terms can come back to bite a claimant that has not properly vetted them.

The first potential issue is waiving lien rights while acknowledging receipt prior to actual receipt of the check or wire.  Many of the waiver forms that are out there list a payment amount, or possibly simply state that the waiver is in exchange for some small payment, and then state “receipt of which is acknolwedged” or something similar.  The issue here is that receipt may not have happened yet because these lien waivers are submitted as part of the payment package in order to get paid in the first place.  In short, should you sign the waiver prior to payment, you may have acknowledged a non-event and in the event of non-payment have a written document stating that you waived your claim to a lien for that money.  What a court would do with this, I am unsure, but why risk it?  My advice, be sure your waiver is contingent on actual clearance of payment as well as receipt.

Another issue is that many of these forms waive “all claims” against the paying party up to the date of the waiver.  If you have other projects going with the same paying party, this could potentially waive your claims on those as well.  Again, this waiver is broader than necessary and puts payments at risk for other work.  Why take the chance?  Be sure your waiver is limited to the project at hand.

A third issue is that, particularly with final or unconditional waivers, the waiver may simply waive all rights for now and forever, but not accurately state what exceptions there may be (for instance outstanding claims, currently unresolved change orders, retention and the like) for payments in the future.  In theory, these could waive your rights to such claims if you do not properly state what exceptions or claims are out there.  As with the prior two, why take the chance with your money, be sure to note exceptions, should they exist and do so whether the form calls for it or not where the waiver is unconditional.

These are far from the exhaustive list of items to look out for but are illustrations of the potential pitfalls for payees with lien waiver forms.  As always, I recommend consulting with an experienced construction lawyer when presented with a waiver form.

California Supreme Court Holds “Notice-Prejudice” Rule is “Fundamental Public Policy” of California, May Override Choice of Law Provisions in Policies

Timothy Carroll and Anthony Miscioscia | White and Williams | September 3, 2019

On August 29, 2019, in Pitzer College v. Indian Harbor Insurance Company, 2019 Cal. LEXIS 6240, the California Supreme Court held that, in the insurance context, the common law “notice-prejudice” rule is a “fundamental public policy” of the State of California for purposes of choice of law analysis. Thus, even though the policy in Pitzer had a choice of law provision requiring application of New York law – which does not require an insurer to prove prejudice for late notice of claims under policies delivered outside of New York – that provision can be overridden by California’s public policy of requiring insurers to prove prejudice after late notice of a claim. The Supreme Court in Pitzer also held that the notice-prejudice rule “generally applies to consent provisions in the context of first party liability policy coverage,” but not to consent provisions in the third-party liability policy context.

The Pitzer case arose from a discovery of polluted soil at Pitzer College during a dormitory construction project. Facing pressure to finish the project by the start of the next school term, Pitzer officials took steps to remediate the polluted soil at a cost of $2 million. When Pitzer notified its insurer of the remediation, and made a claim for the attendant costs, the insurer “denied coverage based on Pitzer’s failure to give notice as soon as practicable and its failure to obtain [the insurer’s] consent before commencing the remediation process.” The Supreme Court observed that Pitzer did not inform its insurer of the remediation until “three months after it completed remediation and six months after it discovered the darkened soils.” In response to the denial of coverage, Pitzer sued the insurer in California state court, the insurer removed the action to federal court and the insurer moved for summary judgment “claiming that it had no obligation to indemnify Pitzer for remediation costs because Pitzer had violated the Policy’s notice and consent provisions.”

The insurance policy in Pitzer had three relevant provisions: (1) a notice provision requiring Pitzer to provide “notice of any pollution condition” with a “written report as soon as practicable;” (2) a consent provision requiring Pitzer to obtain the insurer’s written consent “before incurring expenses, making payments, assuming obligations, and/or commencing remediation due to a pollution condition;” and (3) a choice of law provision stating that New York law governed all matters arising under the Policy. Based on the choice of law provision, the federal district court in Pitzer held that New York law applied to the policy. Under New York law, a policy delivered in New York is subject to the notice-prejudice rule; however, a policy delivered outside of New York was subject to a “strict no-prejudice rule” under New York common law, “which denies coverage where timely notice is not provided.” Since the policy in Pitzer was delivered in California, the insurer did not need to prove prejudice from the College’s late notice of its pollution claim.

The district court in Pitzer held that the insurer was entitled to summary judgment because Pitzer College’s notice was not timely and the insurer did not need to show prejudice from that late notice. “[A]lthough a state’s fundamental policy can override a choice of law provision,” the district court observed, Pitzer “failed to establish that California’s notice-prejudice rule is such a policy.” Had it done so, Pitzer may have been able to avoid dismissal of its coverage claim due to its late notice of the pollution discovery and remediation work. Thus, Pitzer appealed to the Ninth Circuit Court of Appeals on the issue of whether the notice-prejudice rule was a fundamental public policy of California. The Ninth Circuit certified the question to the California Supreme Court.

The California Supreme Court in Pitzer held that the notice-prejudice rule was a fundamental public policy of California for several reasons, including that the rule “protects insureds against inequitable results that are generated by insurers’ superior bargaining power.” The notice-prejudice rule, the Supreme Court added, “is based on the rationale that the essential part of the contract is insurance coverage, not the procedure for determining liability, and that the notice requirement serves to protect insurers from prejudice, . . . not . . . to shield them from their contractual obligations through ‘a technical escape-hatch.’” (internal citations and quotations omitted). The Supreme Court left it for the Ninth Circuit Court of Appeals to determine, based on its holding that the notice-prejudice rule is California’s public policy, “whether California has a materially greater interest than New York in determining the coverage issue, such that the contract’s choice of law would be unenforceable because it is contrary to our fundamental public policy.”

Building on that holding, the Supreme Court also concluded that, with respect to the policy’s consent provision, “failure to obtain consent in the first party context is not inherently prejudicial” to insurers, and “the usual logic of the notice-prejudice rule should control. . . .” The Supreme Court found “no reason to believe imposing this rule on first party insurers will prove so unmanageable for those suffering actual prejudice to justify a contrary conclusion.” Thus, the court held, “California’s notice-prejudice rule is applicable to a consent provision in a first party policy where coverage does not depend on the existence of a third party claim or potential claim.” The California Supreme Court distinguished consent provisions in third-party liability policy context, “sometimes called ‘no voluntary payment’ provisions,” which “are designed to ensure that responsible insurers that promptly accept a defense tendered by their insureds thereby gain control over the defense and settlement of the claim.” In the third-party liability policy context, the Supreme Court observed, “the insurer’s right to control the defense and settlement of claims is paramount,” and California courts “generally refuse[ ] to find the notice-prejudice rule applicable to consent provisions in third-party policies.”

Installation of Solar Panels Ain’t “Roofing Work” Under OSHA Says 9th Circuit

Garret Murai | California Construction Law Blog | July 22, 2019

In a straightforward case, but one with widespread applicability today, the 9th Circuit Court of Appeals held that rooftop installation of solar panels isn’t (ain’t) “roofing work” under OSHA.

In Bergelectric Corp. v. Secretary of Labor, Case No. 17-72852 (June 6, 2019), contractor Bergelectric Corporation sought review of a final order of the Occupational Safety and Health Review Commission, in which OSHA held that Bergelectric was required to comply with the stricter safety standards governing work on “unprotected sides and edges” as opposed to the more lenient safety standards governing “roofing work.”

In 2016, Bergelectric was hired to install solar panels on the roof of a hangar at the Marine Corps Air Station Miramar in San Diego, California. While Bergelectric was performing work OSHA conducted an inspection.  Bergelectric informed OSHA that they were using “warning lines” and a “safety monitor” in compliance with OSHA’s safety standard for roofing work and, further, that its employees would use personal fall arrest systems (PFAS) should they do work outside the warning lines.

OSHA issued a citation alleging that Bergoelectric had violated 29 C.F.R. § 1926.501(b)(1), which requires employees working near unprotected sides and edges to be protected by guardrail systems, safety net systems, or PFAS.

At the hearing on the violation, Bergelectric argued that the alternative standard under 29 C.F.R. § 1926.501(b)(10), which allows workers performing roofing work on low-sloped roofs to use warning lines and a safety monitor, applied.  The hearing officer disagreed, and Bergelectric appealed but OSHA declined review.

On appeal to the 9th Circuit Court of Appeals, the 9th Circuit noted that for OSHA to prove a prima facie violation of a particular safety standard:

[T]he Secretary [of Labor] must show by a preponderance of the evidence that (1) the cited standard applies; (2) the employer failed to comply with the terms of the cited standard; (3) employees had access to the violative condition; and (4) the cited employer either knew or could have known with the exercise of reasonable diligence of the violative condition.

And here, explained the Court,  29 C.F.R. § 1926.501(b)(1), which OSHA relied on, provides:

Unprotected sides and edges. Each employee on a walking/working surface (horizontal and vertical surface) with an unprotected side or edge which is 6 feet (1.8 m) or more above a lower level shall be protected from falling by the use of guardrail systems, safety net systems, or personal fall arrest systems.

Whereas, 29 C.F.R. § 1926.501(b)(10), which Bergelectric argued should apply, provides:

Roofing work on Low-slope roofs. Except as otherwise provided in paragraph (b) of this section, each employee engaged in roofing activities on low-slope roofs, with unprotected sides and edges 6 feet (1.8 m) or more above lower levels shall be protected from falling by guardrail systems, safety net systems, personal fall arrest systems, or a combination of warning line system and guardrail system, warning line system and safety net system, or warning line system and personal fall arrest system, or warning line system and safety monitoring system.

The Court held that the more stringent “unprotected sides and edges” standards applied, relying on 29 C.F.R. § 1926.500(b), which defines “roofing work” as the “hoisting, storage, application, and removal of roofing materials and equipment, including related insulation, sheet metal, and vapor barrier work, but not including the construction of the roof deck.”

Solar panels, explained the Court, are not among the materials involved in “roofing work.” Simply put, held the Court, solar panels are neither “roofing materials [or] equipment” used in the construction of a roof, such as “insulation, sheet metal [or] vapor barriers.”

So there you have it, if you’re installing rooftop solar panels on a roof with unprotected sides or edges more than 6 feet above a lower level you must either: (1) use guardrail system; (2) safety net system; or (3) each employee must use personal fall arrest systems.

Be careful out there.