4th Annual Southeast CDDC Agenda Announced

4th Annual Southeast CDDC
October 12, 2018
New Orleans, LA | Loyola University College of Law
6.5 Continuing Legal Education credits (LA – other states upon request) including 1 ethics credit!

Check-in with Continental Breakfast will start at 8:15 AM.
Lunch and post conference reception is included.

Check out this AWESOME agenda – come enjoy, network, learn and have a great day getting those pesky CLE credits out of the way!

Criminal Statutes for Contractors
Carl Barkemeyer | Carl Barkemeyer Attorney at Law

How to Evaluate a Delay Claim from General and Subcontractors Based on Changing Design and Site Conditions
Larry Mobley | Baldwin Haspel Burke & Mayer

Proving Damages in Construction Cases
Ben Aderholt | Coats Rose

Claims Against Architects and Engineers/Design Professionals
Andrew G. Vicknair | Shields Mott

Ethics Challenge
Eric Barefield | Louisiana State Bar

Do Right to Repair Statutes “Suit” an Insurance Company’s Duty to Defend?
Alexis Joachim | Phelps Dunbar

Top 5 Litigated Construction Defect Issues
Stewart Schmidt | Advise & Consult, Inc.
Insurance professionals are $77, but must still pre-register – CE credits not included.
email jeff@adviseandconsult.net from a work email to get discount code.


Legal Implications of 3D Printing in Construction Loom

Aldo E. Ibarra | Engineering News-Record | June 28, 2018

Imagine a printer in the middle of a construction site programmed with a designer’s plans and specifications to build an entire home from scratch. As concrete is fed into the printing device, a technician hits enter on her computer and a 3D printer starts fabricating the structure’s walls and roof.

The final product will be created almost entirely by pre-programmed software and a movable printer injecting concrete, with no need for human construction workers. This isn’t science fiction, it’s a reality on the cutting edge of construction and technology.

The use of 3D printers in the construction industry will have legal implications that will affect owners, contractors, manufacturers and software developers.

The additive manufacturing boom has reached the construction industry and will certainly impact the way construction projects are managed. The rise of 3D printers will translate into fewer workers on construction sites, as printers will be automated and largely autonomous. Projects will be completed faster, as 3D printers will be capable of working at all hours, and will not require overtime.

Current concrete-injection 3D printers developed by WinSun Decoration Design Engineering, in China, have the capacity to print small houses, including walls and roofs, at a pace of up to 10 small houses in 24 hours.

3D printing capabilities go beyond just concrete. The team of MX3D, in Amsterdam, is currently working on delivering the first completely 3D-printed steel bridge. U.S.-based Contour Crafting is developing 3D and autonomous construction technologies that would allow for the construction of tall concrete towers, such as wind turbines, using climbing robots that would “print” the contour of the structure as they move upward.

Developers have positioned 3D printers tailored to the construction industry to work almost like robots. That is, the 3D printer is not just printing a door or a beam that will later be installed by construction workers, although that capability certainly exists, it is effectively installing the printed component in-place.

For example, in the case of steel structures, a 3D printer/robot can print a small section of steel using metallic powders and a “printer” head in a process known as direct metal laser sintering that uses a welding arm that will move along over that portion to create the next one, and so on, until the structure is completed. The result is an entirely new structure constructed wholly by the 3D printer.

Innovation and disruptive technology bring new legal risks and implications. In the context of construction defects claims, 3D printers will expose manufacturers and developers to liability and claims that would normally be attributed to human error.

Instead of human workers building a structure, a 3D printer will additively manufacture it after a pre-generated plan is uploaded to the printer’s software. How will liability be apportioned when the finished structure is found to have cracks, be uneven, improperly thick or have the wrong finish?

Whether the 3D printer is owned by the contractor, is being leased as equipment or is the equipment of a subcontractor will affect who can be found liable.

If the defect is the result of the printer’s malfunction, the contractor will have warranty and indemnity claims against the manufacturer arising out of privity from purchasing or leasing the 3D printer.

If the defect is the result of a software malfunction, that could open the developer to negligence and warranty claims for the value of the defects in the project at issue.

If there is an independent technician, acting as a subcontractor, feeding the plans into the 3D printer could also be open it to liability if the defect was the result of improperly uploading those plans or operating the 3D printer.

In addition to claims against the contractor, the owner could also have claims against the manufacturer or software developer for economic loss, even in the absence of direct privity, if the owner can show the damage to his property caused by the 3D printer was foreseeable.

The case Biakanja v. Irving (1958) 49 Cal. 2d 647, 649 gives courts a roadmap even if they didn’t foresee technology such as additive manufacturing.

When faced with a construction defect caused by a 3D printer used by the contractor or one of its subcontractors, the owner will certainly have, at the very least, an argument that the manufacturer of the printer or developer of the software should have been aware that a malfunction of its hardware or software would, in turn, impact the owner’s property.

Increased prevalence of this emerging technology will also have an impact on material suppliers. If 3D printers will be used in a specific project, designers and contractors should provide proper specifications for material compatible with the specific 3D printer. Material suppliers will also have to certify their materials as compatible with the printers.

Failure to do so could open designers and material suppliers to liability for construction defects resulting from the incompatibility of the material with the specific 3D printer.

The use of 3D printers in construction projects is also likely to conflict with current licensing and permit regulations.

For example, California Code of Regulations, Title 24, Building Standards Code, Section 110 et seq. provides for different types of inspections that are necessary before the government certifies a structure for use and occupancy. The increased speed with which 3D printers can complete projects could be slowed down by current inspection requirements and inspection scheduling procedures.

As the use of 3D printers becomes more common, government agencies in charge of inspecting construction projects will have to adapt to the faster-paced construction offered. In the ideal scenario, governmental agencies would embrace the new technologies in the construction industry and, for example, invest in automated scanner drones that could inspect an automated 3D printer’s work and, immediately thereafter, send the inspection’s result to the governmental agency for certification.

Such advances, however, may be difficult to achieve unless states, cities and counties make significant investments in infrastructure.

As 3D printers/robots become more commonplace on construction projects, contractors should be mindful of including express warranty clauses in purchase and leasing contracts for 3D printers.

Designers and material suppliers will have to confirm that construction materials under plans and specifications will be compatible with 3D printers; and governmental agencies will have to adapt to the fast production rate of 3D printers.

Federal Court Says Subpoena Is a “Claim” Triggering Insurance Coverage

Jared Zola | Policyholder Informer | July 12, 2018

An issue frequently raised in coverage disputes involving claims-made liability insurance policies is determining whether certain pre-lawsuit events or disputes constitute a “claim” sufficient to trigger coverage.

Unlike occurrence-based liability policies that respond in the policy year or years during which the coverage-triggering event occurred (e.g., the years in which a person sustained injury in an asbestos bodily injury claim), a claims-made liability insurance policy is triggered upon the insured’s receipt of a claim. Upon an insured providing notice of a claim, its insurers may dispute whether the notice-triggering event constitutes a “claim” at all.

Given variations in policy “claim” definitions and the lack of defined terms in some instances, the point at which a dispute ripens into a “claim” that triggers coverage is frequently disputed. A recent Illinois federal district court decision rejected the insurer’s motions to dismiss and held that a Department of Justice (“DOJ”) subpoena was a “claim” when, as was the case there, the insured sought coverage for defense costs incurred responding to the subpoena.

While issued in the context of a motion to dismiss and not on the merits, the decision deftly rebukes the insurer’s assertions that a government subpoena fails to assert a “claim” against the insured for “wrongful acts” triggering coverage.

Astellas US Holding, Inc. v. Starr Indemnity and Liability Company

In a May 30, 2018 decision, an Illinois federal district court refused to dismiss three insurers from insured Astellas US Holding, Inc.’s suit seeking coverage for the costs it incurred responding to a U.S. Department of Justice subpoena.

The DOJ issued a subpoena to Astellas demanding certain documents relating to the DOJ’s industrywide investigation of pharmaceutical companies for alleged federal healthcare offenses. The subpoena directed Astellas to appear before government officials and produce documents about Astellas’ payments to charitable organizations that provided financial assistance to patients taking its drugs. It advised Astellas that failure to comply exposed it to liability in judicial enforcement proceedings and punishment for disobedience.

Astellas incurred defense costs responding to the subpoena that exceeded the self-insured retention stated in its primary D&O insurance policy. The primary insurer refused to provide coverage—as did several excess insurers—and a coverage lawsuit followed. The insurer filed a motion to dismiss Astellas’ complaint asserting, amongst other purported grounds for dismissal, that (1) the subpoena did not rise to the level of a “claim” that triggers coverage, and (2) the subpoena did not allege a “wrongful act.”

The insurance policy defined a “claim,” in pertinent part, to include a “written demand for non-monetary relief.” It also defined “wrongful act” to include “any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Company.”

The insurer asserted that the production of documents in response to a subpoena does not rise to the level of a “demand for relief.” In its motion papers, the insurer sought to define “relief” as “legal remedy or redress,” or as “the redress or benefit, especially equitable in nature (such as an injunction or specific performance), that a party asks of a court.” Of course, these so-called definitions that the insurer sought to impose on its insured do not appear in the insurance policy.

Because the subpoena only sought information and did not make a request of the court, the insurer concluded that it did not fit within the plain meaning of a demand for relief. It asserted that the threatened enforcement proceedings are discrete from the informational investigation.

The court rejected the insurer’s position. The court refused to conclude that the subpoena merely requested, as opposed to demanded, information. It reasoned that courts have the power to compel parties to give testimony or to produce documents as demanded in the subpoena. Accordingly, the court held that the subpoena demanded a form of non-monetary relief and that the subpoena was not distinct from the potential enforcement proceedings—“it defined the scope of the judicial enforcement.”

The insurer also argued that Astellas’ interpretation would lead to an absurd result because the insurance policy is only meant to protect insureds from potential liability due to allegations of wrongdoing, which the subpoena lacked.

The court disagreed with the insurer’s characterization of the subpoena. It held that the insurance policy’s broad definition of a “claim” indicated that the policy was designed to cover something like the subpoena—which is a demand for relief in response to an accusation of wrongdoing. Accordingly, the court held that the “result” in this insistence—that the insurer may have to cover Astellas’ defense costs incurred responding to the subpoena—“is not absurd, it is precisely what the policy intended.”


Inherent in coverage cases addressing whether subpoenas constitute “claims” is the recognition that insurers frequently argue both sides of this issue in an effort to avoid their coverage obligations to the insureds. If an insured provides notice of a pre-lawsuit event, its insurer frequently contends that the event does not constitute a “claim.” However, if an insured determined that the same pre-lawsuit event did not yet rise to the level of a “claim” under the policy and later gives notice of a lawsuit arising from the same factual nexus, for example, its insurer frequently contends that coverage does not exist for the subsequent lawsuit because the insured should have provided notice of the earlier event; a “claim.”

If insurers truly want to preclude coverage for costs incurred responding to government subpoenas, there is an easy solution—explicitly and unambiguously exclude coverage for such defense costs. Unwilling to risk losing market share by excluding this valuable coverage, insurers do not use exclusionary language and then seek to impose onerous interpretations not found in the insurance policy.

Perhaps recognizing this tactic, the Astellas case is an example of courts across the country accepting the insured’s business judgment of what event constitutes a “claim” to maximize coverage. The insureds involved in everyday business disagreements and disputes are better positioned than an insurer in determining when such a matter rises to the level of a “claim” for which the insured will seek coverage.

Utah Still Thinks Privity of Contract is Important

Parker A. Allred | Snell & Wilmer | July 16, 2018

In recent years, a few law firms have made a cottage industry of enticing condominium home owners associations to sue the project developers over many issues, very often for alleged construction defects. Numerous homeowners’ associations have filed lawsuits against developers, contractors, and builders for purportedly defective work. The recent Utah Supreme Court ruling in Gables v. Castlewood-Sterling, 2018 UT 04, reiterates what many courts seem to have forgotten. Specifically, Gables is a good reminder that unless a plaintiff has contractual rights, or has been assigned such rights, it cannot maintain a cause of action when privity of contract is an essential element of a claim.

In Gables, a developer planned a large residential development. Once the development was completed, the developer drafted and recorded the Declaration of Covenants, Conditions, and Restrictions (CC&Rs), by which the developer retained control of the HOA until a certain number of units were sold. In 2008, the target number of units had been sold and the developer turned over control of the HOA to the members. A short time later, the HOA claimed it began noticing many purported construction defects in the structural components of the development. As it investigated the extent of the damages, the HOA retained an expert who estimated that the damages exceeded $4,600,000.00. As a result, over the next several years, the HOA levied assessments on its members to pay for such costs, but then ultimately decided to sue the developer for damages.

Several parties were named in the suit, but whether the HOA was in privity of contract with the developer, and thus had standing to assert a claim for breach of implied warranty, was a key issue. There was no contract between the developer and the HOA; so, the HOA argued that the CC&Rs and the Real Estate Purchase Contracts created privity of contract. The trial court disagreed with the HOA and granted summary judgment in favor of the developer, finding that the HOA had no right to sue third parties for damages on behalf of its members. An appeal ensued.

On appeal, the HOA raised additional arguments, but the Utah Supreme Court really only considered whether the CC&Rs somehow established privity of contract between the HOA and the developer. Utah law requires privity of contract to assert a claim for breach of the implied warranty of workmanlike manner and habitability. In fact, Utah Code §78B–4–513 provides that “an action for defective design or construction may be brought onlyby a person in privity of contract with the original contractor, architect, engineer, or the real estate developer” (emphasis added), but that “[n]othing in this section precludes a person from assigning a right under a contract to another person, including to a subsequent owner or a homeowners association.” Ignoring this statutory proclamation of Utah policy, the HOA argued that the CC&Rs granted the HOA broad authority to act on behalf of its members, and inferred that under the CC&R’s, the members had effectively assigned the HOA their rights to assert claims against third parties.

Although the court recognized that claims could be assigned in this context, it also made clear that under Utah law, an assignment of claims required specific language that demonstrated a manifestation that the parties intended something be transferred or assigned. And here, the CC&Rs demonstrated no such intent. In particular, the court noted that if a contractual provision lacked the words “assumes” “assigns,” “transfers,” or “conveys” of a specific subject matter, then that provision fails to manifest an intent to transfer or assign a right. In other words, words matter. Thus, because nothing in the CC&Rs demonstrated any intent whatsoever of the HOA’s members to assign, transfer, or convey their contract rights to the HOA, the HOA had no rights to pursue against third parties. The Utah Supreme Court affirmed the lower court, and ruled that the HOA could not maintain an action against the developer for lack of privity.

While this case transcends construction litigation, it is a useful reminder that the participants in construction projects, from owner to the finish subcontractor, need to mind the contract p’s and q’s to keep and understand their rights.

When Is “Too Late” for an Insurance Company to Invoke Appraisal?

J. Ryan Fowler | Property Insurance Coverage Law Blog | July 10, 2018

I often take calls from potential clients and public adjusters frustrated with an insurance company that has denied, delayed and then underpaid a claim and then ultimately invoked appraisal. Often the insured or public adjuster states that multiple inspections have taken place with substantial correspondence between the parties and the question is, “can the insurance company do that? It has been too long and time and resources have been wasted. Can we argue the insurance company waived the right to invoke appraisal?”

The San Antonio Court of Appeals recently looked at this issue in a case in litigation.1 In the case at issue the insurance company invoked appraisal three months after being ordered to be ready for trial; after multiple depositions had been taken; experts had been designated and multiple motions filed. The insured refused to participate in appraisal and argued the insurer had waived the right to invoke appraisal. The trial court denied insurer’s motion to compel appraisal and the insurer filed a writ of mandamus to the appellate court.

The appellate court first looked at the nonwavier clause in the policy. The insurance company argued that it was determinative of all issues since the alleged wavier of the appraisal provision was not done in writing. The nonwaiver clause read:

This policy contains all the agreements between you and us concerning the insurance afforded….This policy’s terms can be amended or waived only by endorsement issued by us and made a part of this policy.

The court held that the inclusion in an insurance contract of a broadly-worded nonwaiver clause such as the one in this case is not dispositive, as a matter of law, on whether the insurer waived any of its rights under the contract.

The appellate court next addressed prejudice to the insured. The insured argued that the financial impact of the insurance companies conduct exceeded $145,000 to the insured. The insured pointed out that several depositions, motions, expert retentions, mediation and even a declaratory act have been required because of insurers litigation conduct and the case had actively been litigated for months between the parties.

The court looked at the fact that the appraisal provision allowed either party to invoke appraisal and that if a party knows of its right to request an appraisal and does not make that request, it is difficult to attribute the costs incurred to the opponent.

The court ultimately held that the trial court erred by denying the insurance companies motion to compel appraisal because the insured did not show prejudice.

So, the answer ultimately is fact intensive for a case but often: Yes, the insurance company can invoke appraisal and they didn’t waive the right to appraisal.
1 In re American National Prop. and Cas. Co., No. 04-18-00138-CV (Tex. App. – San Antonio, July 5, 2018).