CDDC Announce 2018 Award Winners

The 4th Annual Intermountain Construction Defect & Dispute Conference was held Friday, February 9th, 2018 and were honored to recognize five professionals for their contributions in the industry as well as in their community.

Craig R. Mariger received our Tim D. Dunn Lifetime Achievement Award for his many years of service as arbitrator and mediator and is Jones Waldo’s Construction Law Practice Group Leader.  His qualities of honesty, integrity and service highly represent the Tim. D. Dunn Lifetime Achievement Award.

Our Attorney of the Year Award recipient is Lincoln Harris or Richards Brandt Miller Nelson. His practice has included several years of experience in construction law and he has interest in local government and legislative issues his clients face.  He has worked for the Appalachian Education and Defense Fund.

Michael A. Stahler was honored with our Young Attorney of the Year award.  He has already earned the respect of his peers and clients, first as a paralegal and now as an attorney. His attention to detail and thoroughness are qualities that make him a worthy and qualified recipient of this award.

Our Paralegal of the Year award winner is Erin Stauffer of Snell & Wilmer who is a certified paralegal with over 15 years of paralegal experience. She is a member of the Paralegal Division of the Utah State Bar and is recognized for her litigation, pleadings and legal writing skills and is a great asset to her firm, attorneys and their clients and is committed to serving them.

Margie Arnovitz received our Insurance Professional of the Year award.  Margie is an account manager at Dale Barton Agency and has previous experience as a Sr. Claim Specialist and Large Account Senior Claim Representative.  Her skills and knowledge greatly help those dealing with the insurance process.

Congratulations to all of our 2018 award winners!  We are all better off with these professionals raising the bar in their industries and in their communities.

 

Claim of Fraudulent Inducement of a Construction Contract Does Not Invalidate Arbitration Clause in That Same Contract

Emily D. Anderson | Pepper Hamilton | February 8, 2018

Koudela v. Johnson & Johnson Custom Builders, LLC, 2017 Ohio App. Lexis 5800 (December 29, 2017)

In this case, Nicolas and Monica Koudela (the “Koudelas”) entered into a construction contract with “Johnson & Johnson Builders” (the “Agreement”), whereby Johnson & Johnson Builders agreed to construct a single family home for the Koudelas in Ohio.  However, Johnson & Johnson Builders was a fictitious name for Johnson & Johnson Custom Builders, LLC (“J&J”), and was not an entity registered with the Ohio Secretary of State.

In the Agreement, the parties agreed to submit all disputes to binding arbitration in Cleveland, Ohio.  The arbitration clause further provided that the cost of the arbitration would be borne by the party initiating the claim.

After disputes arose on the project regarding the work performed by J&J, the Koudelas filed suit in the State Court of Ohio against J&J and its principals, alleging claims for fraud in the inducement, breach of contract, negligence, conversion, unjust enrichment/detrimental reliance, and a declaratory judgment that the arbitration clause in the Agreement was unenforceable.  J&J moved for an order dismissing the complaint, or, in the alternative, staying the litigation pending binding arbitration.  The trial court granted J&J’s motion and stayed the litigation pending binding arbitration. 

On appeal, the Koudelas argued that the arbitration provision in the Agreement was void because J&J did not properly register the trade name (“Johnson & Johnson Builders”) with the Ohio Secretary of State, and that the effect of fraud and the fictitious nature of the contracting party negated the arbitration clause.  The Koudelas further argued that section 1329.10 (B) of the Revised Code prohibited J&J from relying upon the arbitration clause in the Agreement.  Section 1329.10 (B) of the Revised Code provides:

No person doing business under a trade name or fictitious name shall commence or maintain an action in the trade name or fictitious name in any court in this state or on account of any contracts made or transactions had in the trade name or fictitious name until it has first complied with section 1329.01 of the Revised Code and, if the person is a partnership, it has complied with section 1777.02 of the Revised Code, but upon compliance, such an action may be commenced or maintained on any contracts and transactions entered into prior to compliance.”

The Court of Appeals disagreed and affirmed the trial court’s decision to stay the litigation pending arbitration.  The Court observed that the Koudelas’  reliance on section 1329.10 (B) of the Revised Code was misplaced because J&J did not initiate the action, but was merely defending it.  Instead, the relevant section of the Revised Code was section 1329.10 (C), which provides:

An action may be commenced or maintained against the user of a trade name or fictitious name whether or not the name has been registered or reported in compliance with section 1329.01 of the Revised Code.

The Court further reasoned that the arbitration clause in the Agreement should be enforced because J&J remained liable for any obligations incurred while doing business under its trade name, the Koudelas did not allege that the arbitration clause itself was fraudulently induced in either its complaint or in its briefs in opposition to J&J’s motion, and the Koudelas clearly knew who to sue since they named the correct entity in the litigation.  The Court also noted that the Koudelas did not perform any searches beforehand to see if any lawsuits had been filed against J&J’s trade name nor did they perform a routine search of the Ohio Secretary of State website, which, in the Court’s opinion, was further proof that the Koudelas were not fraudulently induced to enter into the Agreement.

Autonomous Vehicles and Ride Sharing Will Reshape Our Buildings, Our Cities, and Our Lives

Foley & Lardner | February 2018

When the first automobile hit roadways in the early 1900s, developers, planners, and city officials had to completely re-think the design and planning of cityscapes, both new and old. The era of narrow streets, communities defined by walking distance or streetcar line, and short-distance commuting gave way to massive boulevards, interstate highways, and the rise of suburbanization. These shifts in urban planning had the sole objective of utilizing the car to move as many people as quickly and safely as possible, without the limitations of public transit. But, because of this, cities themselves suffered, resulting in obsolete buildings being demolished, neighborhoods destroyed for highways, public transit being reduced or removed, and intimate communities ripped apart to shoehorn in 7-lane boulevards. Now, as autonomous cars, busses, and other next-generation technologies entering the mass-market, developers and city officials are again having to re-think how disruptive technologies will shape the way we live, work, and play in our cities.

Unlike urban planners of the past, cities and their planners are trying to integrate new technologies into their existing city-scape, rather than let that technology destroy the existing city and redefine how a city is built. Contrary to the change-and-destroy method of yesteryear, this means “future proofing” projects and city-wide masterplans. By future-proofing existing cities and future developments, planners and city officials hope to build structures that can accommodate and anticipate the changes in the way people commute and live in urban and suburban environments. This means designing buildings that can be retrofitted to convert parking structures to offices or living space, turning roadways to greenspace, or parking lots to parks and commercial spaces that add value to the urban and suburban fabric while still producing a return on investment for the city and developers alike.

As more people look to ride-sharing and car sharing services to meet their commuting and transit needs developers are anticipating a drop-off in personal car ownership and use of a personal car for day-to-day commuting. While current developments require parking space to accommodate commuters, the future might make these spaces obsolete. To avoid this predicted obsolescence, some developers are trying to figure out how they can repurpose these spaces for future use. This could mean the constructing of buildings with internal parking structures that can be converted to office, commercial, or residential space if demand for parking decreases in the future. This also means cities such as Los Angeles are studying how to repurpose their existing surface parking inventory which currently accounts for nearly 14% of the city’s footprint, or about 200 square miles of land, just for parking a car. Other cities are looking to for ways to possibly existing roadways into greenspace and repurpose existing automotive infrastructure for autonomous car staging or increasing pedestrian usage.

In San Francisco, the San Francisco Giants are looking at how they can incorporate the driverless futures into their Mission Rock project. In this 27-acre project, developers are attempting to designing future streets and street-frontage with a focus on prioritizing pedestrian pick-up and drop-off in the world of autonomous vehicles. Similarly, as e-commerce continues to rise in popularity and autonomous delivery trucks on the horizon, many apartment developments are building large storage and cold-storage areas into their footprint and delivery bays to accommodate this shift in consumer shopping.

Although developers and planners are focusing on future proofing their projects, it is not without risk. The cost to build a structure with future proofing in mind not only is more expensive, but in the scope of parking structures, it means fewer cars can fit compared to non-future proofed structure. But, the payoff later can make up for this cost. For instance, one convertible project design includes 117 spaces per floor to park cars, about 17 per floor fewer than if it were built using a conventional parking structure design. But, if this project is converted to office space or even residential living, the return on investment could be 2 to 3 times the return of keeping this a traditional parking structure.

Compliance with Building Code Included in Property Damage

Tred R. Eyerly | Insurance Law Hawaii | February 5, 2018

A Circuit Court in Florida issued a final judgment determining that the insured’s obligation to comply with building code provisions was included in the property damage experienced. Pin-Pon Corp. v. Landmark, Am. Ins. Co., No. 312009CA012244 (Fla. Cir. Ct. Dec. 28, 2017). The decision is here.

At trial, the plaintiff’s architect testified that the total pricing for the code upgrades was $6.2 million. On appeal, the appellate court ruled that plaintiff’s Exhibit 98, an Upgrade Insurance Claim, was improperly admitted as a business record. The appellate court stated that the jury may have considered Exhibit 98 in determining the amount of code upgrade damages. Therefore, the verdict was reversed and remanded for a trial on the code upgrade damages only.

On remand, the plaintiff presented testimony from its architect that the code upgrades were required by the 2004 Florida Building Code because the storm damaged more than 50% of the aggregate area of the building. Another witness testified that the amount of code upgrade damages sustained by the plaintiff and submitted to Landmark was $6.2 million. The testimony and documentary evidence submitted by the plaintiff showed that the cost analysis and methodology used in preparing it was accurate.

Landmark did not present any testimony regarding the scope of code upgrade repairs required by the building code. Nor did Landmark present any testimony establishing that plaintiff’s claimed damages were unreasonable or unnecessary. Therefore, Pin-Pon was allowed to recover from Landmark the amount of $5,644,668.79, together with statutory interest.

The Importance of Promptly Providing Notice of Loss

Jonathan Bukowski | Property Insurance Coverage Law Blog | February 10, 2018

Most property insurance policies require that the insured must provide “prompt” notice of a loss as soon as possible after a covered loss. While many states throughout the country have adopted the Notice-Prejudice Rule which prevents an insurer from denying a claim unless it can demonstrate actual prejudice resulting from the delayed notice of loss, the District Court of Colorado recently issued an opinion rejecting this majority rule in first-party insurance contracts and instead applying the Traditional Notice Rule:

Failure to notify the insurer within a reasonable time constitutes a breach of that contract requiring a justifiable excuse or extenuating circumstances explaining the delay. Unless the delay is so explained, the insurer cannot be held liable under the insurance contract to defend the insured and pay any judgments recovered against him.1

Located in Aurora, Colorado, the Cherry Grove East community suffered property damage caused by hail storms in September 2014 and May 2015. Cherry Grove reported damages resulting from the September 2014 storm in June 2016, twenty-one months after its occurrence. Similarly, damages resulting from the May 2015 storm were reported in July 2016, fourteen months after its occurrence. When Cherry Grove attempted to compel appraisal, the carrier moved to dismiss the case due to Cherry Grove’s failure to promptly notify the carrier of its hail loss.

In analyzing Colorado cases applying both the Notice-Prejudice Rule and the Traditional Notice Rule, the court determined that the Notice-Prejudice Rule cases were third party liability cases in which the Colorado Supreme Court was particularly focused on public policy interest in protecting innocent tort victims. Absent public policy concern, the court determined there was no reason justifying judicial modification of an insured’s contractual obligation to provide prompt notice of a loss to an insurer and that the Tradition Notice Rule would apply in determining whether Cherry Grove provided prompt notice as required under the policy.

While the court acknowledged that ordinarily what constitutes a reasonable time for giving notice as provided in insurance policies would be a question for the jury, the court ultimately held that it was indisputable that Cherry Grove failed to notify the carrier within a reasonable time. While Cherry Grove attempted to justify its delay in reporting the claim by explaining that it was governed by volunteers, many of whom were unsophisticated regarding insurance, claims and legal matters, the court held that Cherry Grove had presented no facts that would establish justifiable excuse of extenuating circumstances for the untimely reporting of the claim.

This recent decision demonstrates the importance of not only quickly identifying and documenting damage after a storm, but also providing notice to the carrier as soon as possible to avoid the consequences of untimely notice.
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1 Cherry Grove East II Condo. Assoc. v. Philadelphia Indem. Ins. Co., No.1:16-cv-02687 (Colo. D. Dec. 27, 2017), quoting Certified Indem. Co. v. Thun, 439 P.2d 28, 30 (Colo. 1968).