Killing Meritless Claims against Design Professionals – Can a Certificate of Merit be the Answer to Ending Frivolous Lawsuits?

Kent B. Scott | Babcock Scott & Babcock | June 27, 2017


The problem of meritless lawsuits against design professionals continues to grow causing a great deal of time, money and unproductive use of the judicial process.  Just as important is the stress and unwarranted damage that could occur to a design professional’s reputation and means of providing a livelihood.  Until recently there has been no such check on the filing of meritless claims. Currently, in states without safeguards, people who perceive any defect in construction are allowed to allege an onslaught of litigation against anyone who was involved in the project. Design professionals are frequently named in these proceedings.  States that refrain from adopting legislation to safeguard against meritless claims are experiencing an increase in the costs of insurance and construction.

The availability of adequate insurance to protect the design professional is diminished resulting in a lack of protection to other project parties who may otherwise be adversely affected by the design professional’s negligent errors and omissions.  Consequently, a lot of time, money and judicial resources are wasted, construction costs grow and insurance protection becomes either inadequate or unavailable.

Is the Certification of Claims a Solution?

It is well established within the medical community that a claimant will need a “certificate of merit” as a precursor to filing a complaint against a doctor. This is a necessary measure to ensure a claim has merit before a lawsuit with no backing is filed, damaging the doctor’s reputation and wasting everyone’s time and money.  To address the need to counter the filing of unfounded claims some state legislatures have adopted a certificate of merit requirement that applies to design professionals. So far eleven states have enacted legislation that embodies the principles set forth in malpractice cases and extends them to design professionals. Arizona, California, Colorado, Georgia, Maryland, Minnesota, Nevada, New Jersey, Oregon, Pennsylvania, and Texas have enacted such statutes.

The ultimate intent of these certification statutes is to curb the growing number of meritless lawsuits against design professionals. While the statutes vary by state, most require an expert’s review as a necessary step before a claimant can file a complaint against a design professional. This expert must hold the same type of professional license as the one whom the claim is being alleged against.  The expert must also give an opinion that there is a reasonable basis for the claimant bringing a cause of action against the design professional.

The Colorado Certification Law

Colorado chose to enact a statute requiring a certificate of review before a claimant can allege any defects against a licensed professional. This certificate of review must be issued by an attorney who has consulted with a licensed professional of the same area of expertise as the one the claim is being alleged against. The retained licensed professional must vouch for the merits of the claim before the claimant can bring suit.

The Nevada Certification Law

Nevada has chosen to enact a statute that requires an affidavit of attorney. This requirement is necessary when a claimant is attempting to bring a lawsuit against a design professional, engineer, architects, or one who engages in land surveying. This affidavit must state that the attorney has consulted with an expert in the same discipline as the one the claim is being alleged against. Both the retained expert and the attorney must agree the claim has “a reasonable basis in law and fact.”

Ultimately, the intent behind the varied certification statues is not to unduly burden the claimant, but to shift the burden of proof back to the claimant. There is also the public interest to be considered in keeping construction costs down and providing the project parties with adequate insurance protection from the negligent errors and omissions of design professionals.

Creating the requirement of an expert, who carries the same license as the one the claim is being alleged against, reduces the risk of a meritless claim. This benefits the claimant and the one the claim is being alleged against, so neither party has to spend time and money on a claim that a court will likely determine to be unfounded.

Attorney: Good Installation, Strong Insurance are Vital for Window Companies

DWM Magazine | June 22, 2017

On Tuesday, attendees at the American Architectural Manufacturers Association (AAMA) Summer Conference in Newport, R.I., heard a presentation from Chip Gentry, a founding member of the Call & Gentry Law Group, about the important role of proper installation and good insurance when it comes to avoiding litigation.

“Build it ‘cheaper and faster’ is a core cause of construction defects,” said Gentry. “It means an inferior final project, and it’s a chronic problem.”

Some of the biggest risks are lofts and apartment conversions and redevelopments, hotels, condos, centralized owners and high-volume products, he said.

“Bad building or design cases manage to become bad window cases,” said Gentry. “They’ll sue the general contractor, and water in a building is blamed on fenestration no matter where it shows up.”

Construction-defect litigation is time-consuming and draining, both financially and emotionally. And when more parties get involved, it can make it harder to reach a settlement. Often there are fights between insureds and insurers, and it can be difficult to get people on the same page, said Gentry.

Fenestration companies are sued most commonly for things like contract disputes, disgruntled employees, patent litigation – and, more often than not, installation issues.

“Installation mistakes are a big one, and they can be prevented,” said Gentry. “We have to be at least somewhat involved in installation because of this.”

Gentry, who is also a blogger for DWM, offered several of the most common installation mistakes that can lead to litigation. Among them are not sealing house wrap, lack of end dams, flashing or subsills, and poor shimming. Poor caulking is also a common mistake, whether it means not cleaning the substrates thoroughly, not using the proper tools, or not leaving space for caulk to expand or shrink.

Final checks matter, Gentry said.

“Installers are the face of the window industry,” he said. “You have to see, does it open? Does it close? Does it lock? Were specs followed? Get your standards set; be involved in specs. Get boots on the ground, and make sure it’s done right.”

A dollar today can save your company millions tomorrow, he added.

Aside from avoiding installation mistakes, the best thing you can do is have good insurance, said Gentry. He recommended making sure you have enough insurance limits to effectively protect you.

“Be better prepared,” he said. “Be aware of the various clauses you can shop for that provide better and more meaningful protections for your company.”

Knowing your rights is also critical, said Gentry.

“You have a right to add counsel of your choice,” he said. “Find one with fenestration experience and knowledge of your company. Find a reputable broker you can trust, who has experience in window manufacturing, to make sure you have the right insurance.”

To keep costs low, avoid, or at least limit, claims. Manage risk by keeping track of prior claims and erosion of limits. Update a list of claims under each policy. Be prepared for a carrier to sue. Control exposure, and keep a paper trail.

Finally, Gentry advised all to keep their old policies.

“Old insurance policies are golden,” he said.

Construction Disputes Becoming Faster and Cheaper, says Report | June 22, 2017

The value of construction disputes and the time taken to resolve them have both fallen over the past year, according to the annual Global Construction Disputes report from construction consultancy company Arcadis.

The global average value of disputes dropped by $42,800,000 while the time taken fell by one month, to 14 months, the report said.

Disputes in North America tend to last the longest, at an average of 15.6 months, the report said.

Asia took the top spot from the Middle East with the highest average construction dispute value at $84 million, it said, and the UK saw a double-digit increase in both average dispute value at US$34 million and dispute duration of 12 months.

The most common cause of disputes globally was ‘failure to properly administer the contract’. This has been the most common reason for four years running, Arcadis said. It is followed by ‘poorly drafted or incomplete/unsubstantiated claims’, and ’employer, contractor or subcontractor failing to understand and/or comply with contractual obligations’.

The social infrastructure and public sectors had the most disputes, Arcadis said.

When it comes to resolving disputes, party to party negotiation remains the most popular alternative dispute resolution method.

Construction law expert Fraser McMillan of Pinsent Masons, the law firm behind, who contributed to the report, said: “The report highlights the most common cause of disputes. As construction contracts become increasingly complex, the allocation of risk and the administrative requirements of these contracts are not properly appreciated by those who have to operate them, at all levels of the supply chain.  Something is being lost between the contract and the site.  Parties in the process need to find a way ensure their people get the commercial understanding they need if disputes are to be avoided.”

In California, Can an Insured Homeowner Recover Full Replacement Cost by Purchasing a Home at Another Location?

Stephanie Poll | Property Insurance Coverage Law Blog | June 25, 2017

The short answer is yes. In Conway v. Farmers Home Mutual Insurance Company, the California Court of Appeal followed several out-of-state authorities in considering the issue and ruling in favor for the insured.1 Chip Merlin raised this issue with respect to Texas back in 2009 – finding that the courts there apply the law a bit differently. You can revisit the blog here: Obtaining Full Replacement Cost Benefits Through Replacement at a Different Location – Texas Style.

In Conway, the plaintiffs purchased a house in Imperial Beach, California, paying $230,000 for the home and subsequently renting it out to tenants. They also obtained $100,000 in fire insurance on the property from Farmers Home Mutual Insurance Company (Farmers). The home was damaged by fire and although it could have been replaced, the Plaintiffs decided not to make any repairs because they believed it made more economic sense to develop the subject parcel in conjunction with development of an adjacent parcel they owned. So instead of repairing the damage within months of the fire, they paid $230,000 for another single-family home in Imperial Beach. After disagreements as to the value the insureds were entitled to, Farmer’s paid the actual cash value and refused to pay the replacement value of the loss.

The policy Farmers issued to Plaintiffs was pretty straightforward, promising that in the event of a fire at the insured premises, Farmers would pay for: “c. Buildings under Coverage A or B at replacement cost without deduction for depreciation…”2 Plaintiffs argued that the policy placed no restriction on where an insured may replace a damaged building.

Conway was a case of first impression in California, however the appellate court considered the other states that found replacement costs can include purchase of another building at a different location, namely Connecticut, Alabama, Michigan, New Jersey, New York, Maine, and Washington.3

The court noted in particular, that in the case of Hess v. North Pacific Insurance Company out of Washington, the policy there had standard limitations on the recovery of replacement costs identical to the ones in the Farmer’s policy in Conway. Quoting Hess the court noted,

[T]he insured desires to rebuild either a different structure or on different premises. In those instances, the company’s liability is not to exceed what it would have cost to repair an identical structure to the one lost on the same premises. Although liability is limited to rebuilding costs on the same site, the insured may then take that amount and build a structure on another site, or use the proceeds to buy an existing structure as the replacement, but paying any additional amount from his or her own funds.4

In rejecting Farmer’s arguments and analyzing the definition of “replace,” the court held,

The dictionary definition does not draw any distinction between what can be repaired and what cannot be repaired. More importantly, although the term replace certainly includes rebuilding on the same premises, the term also includes the notion of substituting for an original item another item which serves the same function as the original but is different in nature from the original. The broader and widely accepted meaning would certainly encompass the purchase of another house at a different location. Thus at best, Farmers can only contend there is an ambiguity in the policy with respect to the limitations on replacement of a damaged home…Because the ordinary and popular use of ‘replace’ includes the purchase of a replacement dwelling at another location and no other provision of the policy alerts the insured to a narrower limitation on payment of replacement costs, Farmers’ argument brings us to the rule which requires that ambiguities are to be resolved in favor of the insured.5

Therefore, it is important to carefully review all fire insurance policies for any limitations with respect to replacement costs. But absent such limitations, obtaining full replacement cost benefits by replacement at a different location is allowable under California law.
1 Conway v. Farmers Home Mutual Ins. Co., 26 Cal.App.4th 1185 (1994).
2 Conway, at 1188.
3 (See, e.g.S and S Tobacco v. Greater New York Mut. 224 Conn. 313 (1992); Huggins v. Hanover Ins. Co. 423 So.2d 147, 150 (Ala.1982); Smith v. Michigan Basic Property Ins. Assn. 441 Mich. 181, (1992); Ruter v. Northwestern Fire & Marine 72 N.J.Super. 467, 471–473 (1962); Johnson v. Colonial Penn Ins. Co. (1985) 127 Misc.2d 749, 751–752, 487 N.Y.S.2d 285; Blanchette v. York Mut. Ins. Co. (Me.1983) 455 A.2d 426, 427–428; see also Hess v. North Pacific Ins. Co. (1993) 122 Wash.2d 180, 859 P.2d 586, 588).
4 Conway, 26 Cal.App.4th at 1190 (citing Hess, 859 P.2d at 587).
5 Conway, at 1191-92.

Green Cladding on London High-Rises Has Fueled Fires Before

Justin Pritchard | Claims Journal | June 20, 2017

For the last decade, engineers specializing in fire safety have worried about the hidden danger posed by the kind of insulated metallic skin that transported flames up a high-rise apartment building in London, killing dozens.

Panels of the armor-like “cladding” have become a popular facade on tall buildings worldwide, both for their sleek look and energy-saving virtues. They also have helped fuel spectacular infernos in the Middle East, Europe, Asia and the United States.

Some fire experts worry that, with energy efficiency a priority worldwide, the proliferation of “green” buildings has the unintended consequence of fanning fire danger. Though cladding can be flame-resistant, the result can be deadly when it is not.

“The good intent of sustainability translates into a potential fire safety problem,” said Brian Meacham, a fire protection engineering professor at Worcester Polytechnic Institute in Massachusetts. His concerns began to crystalize in 2010, he said, when he was in South Korea presenting a paper on new technology and fire safety and a cladded high-rise burned.

At London’s Grenfell Tower, flames raced with alarming speed up 24 stories of cladding in which a plastic core was sandwiched between thin sheets of aluminum. That composite is one of several kinds of exterior paneling that helps moderate inside temperatures, saving on energy needed for heating and cooling.

The tower’s aging concrete facade received the face-lift last year as part of a 10 million pound ($13 million) publicly funded refurbishment effort aimed, in part, at making the building more energy efficient.

The tower, home to as many as 600 people, burned Wednesday. At least 58 people were confirmed or presumed dead, a tally that could rise.

Authorities are still investigating the fire. Its behavior strongly implicated the cladding, several fire safety experts said in interviews. Anger has mounted in the community following reports that contractors had used cheaper panels in which the plastic insulation was not fire-resistant.

Cladding with pure plastic insulation costs less and insulates better than an alternative that incorporates fire-slowing minerals, experts said. On short buildings, it makes sense.

Not so for taller buildings. The International Building Code – a model of construction standards adopted widely in the United States, some areas of the Middle East and the Americas – calls for the use of fire-resistant cores in buildings over 40 feet (12 meters) tall. The code in England is less specific, giving architects latitude in how they make sure exterior insulation is safe as long as “the external walls of the building shall adequately resist the spread of fire.”

Two British government officials – Trade Minister Greg Hands and Treasury chief Philip Hammond – said in separate TV appearances Sunday that the cladding used on Grenfell seems to be prohibited by British regulations. Hands cautioned that officials don’t yet have exact details about the renovation.

Fires fueled by metal composite cladding in the past five years have charred high-rises in France, Dubai and South Korea. A 2007 casino fire in New Jersey was a wake-up call in the United States. Fires in buildings with other types of outer insulation have struck in other places, including Australia and China, where one killed 58 people. Though the fires may not be frequent, their quick spread makes them very dangerous.

To get a green certification, a building must, among other things, be more energy efficient than local codes require. The designation, conferred by private firms for a fee, does not focus on fire safety, referencing instead local code requirements. While the cladding made Grenfell Tower more energy efficient, the building did not reach green certification.

Green building practices may not be “inherently introducing risk, but I think it makes it a lot easier to make mistakes,” said Peter Weismantle, a Chicago-based architect who specializes in “supertall” buildings, including the world’s highest in the United Arab Emirates. He cited factors such as workmanship as well as the improper use of flammable cladding.

The U.S. Green Building Council, which oversees the industry-leading certification known as Leadership in Energy and Environmental Design (LEED), said in a statement to The Associated Press that the Grenfell tragedy holds safety lessons.

“We stand with those who will learn these lessons in honest efforts to advance the aligned goals of life/safety and environmental building performance,” said the statement attributed to Brendan Owens, an engineer and senior vice president at the council. “Compromising life/safety in search of environmental gain is not a choice.”

In 2012, fire safety experts invited green building representatives to a symposium in Chicago. The engineers’ concern was that various green requirements could inadvertently conspire to increase fire danger. Meacham, the Massachusetts professor, addressed the gathering and said he did not sense much interest in fire safety within the green building industry then – or since.

“I think they view it as outside of their agenda,” Meacham said. “I don’t think they’re being necessarily mean about it; I think it’s more ignorance of the issues.”

In some places, the issue is impossible to ignore.

At least 30,000 buildings across the United Arab Emirates alone have cladding or paneling similar to the kind that safety and construction experts have blamed for rapidly spreading high-rise fires there, Dubai Civil Defense director-general Maj. Gen. Rashid Thani al-Matrooshi acknowledged in April 2016.

In January, Dubai authorities announced new fire safety rules, saying existing buildings with questionable cladding would “have to change it” under normal maintenance schedules. But they offered no further information to the public.