Monthly Archives: September 2021

Identifying and Accessing Coverage in Complex Construction Claims

Posted on by
Reply

Jeffrey J. Vita and Michael V. Pepe | Saxe Doernberger & Vita

I. Introduction

First-party, third-party, builder’s risk, professional liability, commercial general liability, wrap-ups, and additional insured status are all potential sources of insurance coverage for a large construction loss. Therefore, it is critical for construction industry participants, from owners and developers to general contractors and their subcontractors, to have a functional knowledge of the different types of insurance coverage available to them and how those coverages intersect to respond to a loss. This paper presents a brief overview of the various types of coverage available to contractors, construction managers, and owners in a large construction loss and the risks each coverage is designed to insure.

In general, there are two forms of coverage: (1) First-party liability coverage, which protects an insured’s own losses on a project during construction; and (2) Third-party liability coverage, which insures the project participants for losses that become the subject of claims or suits brought against the project participants by third parties. When a loss occurs, such as property damage, both types of coverage can be implicated. For example, if a fire burns down a building under construction, the contractor likely would incur first-party losses such as cleanup costs. The contractor may also have third-party exposure if the owner alleges that the contractor was responsible for the fire. On the other hand, when a bodily injury occurs, all losses to the contractor will be third-party losses. A broad overview of each of these policies is provided below.

II. First-Party Insurance Coverage for Construction Projects

First-party coverage protects the insured or its property against a covered loss.

A. Builder’s Risk Builder’s risk is a form of commercial property policy that provides coverage for direct physical loss to the construction project while it is being built. Unlike liability policies, builder’s risk coverage does not require a claim or suit to be brought against the insured to trigger coverage. Rather, builder’s risk policies provide first-party coverage, i.e., coverage for the insured’s own property (the building that is being constructed), typically along with any materials and fixtures to be incorporated into the finished project.

Generally, builder’s risk policies are written on either an “all-risk” (often referred to as “special form” policies) or “named peril” basis. All-risk policies provide the broadest coverage. All-risk policies typically insure against all risks of loss except those specifically excluded. Most jurisdictions that have analyzed all-risk policies have held that all-risk policies cover all fortuitous losses, which cause some form of physical alteration to covered property.1 Some courts have gone a step further by not requiring any actual physical damage or alteration of property to trigger coverage.2 Courts agree that the initial burden of showing that coverage is triggered is on the insured. This is generally satisfied by proving that there was a fortuitous loss to covered property. Then the burden shifts to the insurer to prove that an exclusion unambiguously applies.3

In contrast, “named peril” policies insure against only those losses caused by a specifically listed peril or cause of loss. Named peril policies typically include coverage for fire, windstorms and hail, flood, earthquake, and other specific risks. The insured has the burden of proving that one of the listed perils caused its loss to obtain coverage.4 Generally speaking, policyholders prefer broad all-risk coverage for construction projects; however, all-risk coverage is more costly than named peril coverage and may not be feasible for every project.

Builder’s risk insurance policies vary widely. Insurance Services Office (“ISO”) has developed a standardized builder’s risk form (CP 00 20), but most carriers nonetheless choose to write builder’s risk policies on their own forms. Also, many policyholders look to the London markets for coverage. Because of the variation in terms, policyholders must carefully review their policies to ensure that they receive the coverage they expect.5

One area to pay particular attention to is who is insured under a builder’s risk policy. An owner may choose not to insure any contractors or only the prime contractor, when the owner purchases a builder’s risk policy. When an owner negotiates with the prime contractor for the prime contractor to purchase a builder’s risk policy, the prime contractor will often require that the owner, as well as upstream parties and lenders, be added as additional insureds. It is possible that a builder’s risk policy may insure only the party that purchased the policy or every party in the contractual chain from the landowner to the lowest tier subcontractor. In addition, most policies limit an insured’s status to the scope of their insurable interest in the project. Thus, a subcontractor may only have coverage for its own work or materials.

Perhaps one of the biggest impacts of who is an insured under a builder’s risk policy is related to subrogation. Parties must be very careful in drafting waivers of claims and waivers of subrogation with respect to first-party losses covered under a builder’s risk policy. Suppose a party that is an insured under a builder’s risk policy has not waived claims against a downstream party, and the downstream party is not an insured under the builder’s risk policy. In that case, the builder’s risk insurer may bring a subrogation claim against the downstream party if the downstream party caused the property damage for which a claim was paid.6 In this situation, the downstream party may be surprised to find out it has liability even though a builder’s risk policy was in place. This example illustrates the importance of carefully drafting risk transfer provisions and reviewing them in conjunction with the insurance that is purchased to ensure the risk transfer mechanisms work as intended.

Finally, it is important to be mindful of the temporary nature of builder’s risk insurance. Builder’s risk coverage ceases once construction is completed. Thereafter, the owner must procure appropriate property insurance to cover operations at its new premises. Some policies call for a specific expiration date of coverage, while others automatically terminate upon occupancy of the project, whether in whole or in part. This may cause a coverage issue if the project contemplates a phased roll-out or if the owner otherwise decides to start its business operations in one area of the project before the entire project is complete. Therefore, builder’s risk policyholders must work with their insurers to ensure that there is no gap in coverage in these scenarios. If there is an overlap, there are appropriate “other insurance” provisions to establish priority clearly.

B. Subcontractor Default Insurance Subcontractor Default Insurance (“SDI”) is a first-party coverage that indemnifies an insured contractor for losses resulting from a subcontractor’s default. SDI insures the cost of completing the work, the cost of correcting defective/non-conforming work, legal and other professional expenses, costs incurred in the investigation, adjustment, litigation, and defense of disputes related to the default and other expenses as set forth in the policy. SDI is often considered an alternative product to performance bonds and differs from such bonds in several respects:

SDI is a two-party insurance agreement between Contractor and Insured as opposed to a three-party guarantee arrangement between bonding company, subcontractor, and contractor. The Contractor prequalifies the subcontractors as opposed to the bonding company. Coverage extends to the policy limit, unlike a bond which is limited to the value of the contract. The insurer responds quickly to the claim as opposed to the bonding company, which can take considerable time to investigate the claim.

III. Third-Party Liability Insurance for Construction Projects

Third-party coverage protects the insured against claims made against it. The person or entity making the claim is the third party that suffered some loss for which it seeks to hold the insured liable.

A. Commercial General Liability Insurance Commercial General Liability (“CGL”) insurance is the most common form of third-party liability insurance purchased by businesses, including those operating in the construction industry. CGL policies are meant to provide the policyholder “with the broadest possible spectrum of protection and to transfer to the insurer the risk of all liabilities for unintentional and unexpected personal injury or property damage arising out of the conduct of the insured’s business.”7

CGL policies are primarily a standardized product, written on a form drafted (and periodically revised) by the ISO (form number CG 00 01). The standard policy form provides coverage for “those sums that the insured becomes legally obligated to pay as damages” because of “bodily injury” or “property damage” caused by an “occurrence,” or because of “personal and advertising injury,” which takes place within the coverage territory during the policy period.8 Standard CGL coverage applies to the insured’s operations nationwide. It is common, however, for construction project participants to purchase a specific CGL policy to cover a single project, such as wrap-up insurance policies which are discussed in more detail below.

CGL insurers have two key duties to their insureds in the event of a covered loss. The first key duty is the insurer’s duty to defend. In practice, the insurer’s duty to defend means that it will retain an attorney on the insured’s behalf when the insured is made party to a lawsuit or claim. This duty to defend may convert to a duty to reimburse,9 or the insured may have the right to select their own counsel, which the insurer pays in cases of a conflict of interest.10 The duty to defend, which essentially functions as “litigation insurance,”11 is typically provided outside of the policy’s limits of liability, meaning that all costs the insurer expends in defense of its insured will not count towards reducing or exhausting the per-occurrence or aggregate limits of liability. Whether an insurer has a duty to defend a given claim is dependent on the policy terms and state law. Most jurisdictions recognize that the duty is broad and is triggered whenever a claim is alleged against the insured that has the potential to invoke coverage under the policy, including those claims which may appear groundless, fraudulent, or false.12

The second key duty is the insurer’s duty to indemnify their insureds from any covered legal liability. Whereas the duty to defend depends on filing a suit against the insured,13 the duty to indemnify is typically triggered by entry of a final judgment, settlement, or other means of final resolution.14 “In short, whereas the duty to defend is measured by the allegations of the underlying complaint, the duty to indemnify is measured by the facts as they unfold at trial or are inherent in the settlement agreement.”15

Parties to construction contracts also may shift their risk by requiring “additional insured” status on another party’s CGL insurance. More specifically, an “upstream” party (e.g., an owner or general contractor) will require in its subcontracts that all “downstream” parties (e.g., subcontractors and suppliers) provide the upstream party with additional insured status on the downstream parties’ CGL insurance. Parties may specify terms such as limits of liability, coverage triggers, and scope of additional insured status. There are several benefits to additional insured status. First, the additional insured is typically entitled to the same coverages under the CGL policy as the named insured, subject to the “triggering” language of the additional insured endorsement, which usually requires some causal connection between the named insured’s work and the additional insured’s liability.16 Second, the upstream party protects its own insurance program by shifting risk from the upstream party’s insurance to the downstream party’s insurance. The upstream party’s limits are not exhausted, and the loss does not count against its loss/claim history. This benefits the upstream party because it avoids the possible negative impact on insurability or increased premiums on future policies.

B. Excess Liability and Umbrella Coverage For many construction projects, the project participants’ risk of potential liability exceeds the amount of coverage available on a primary basis. Accordingly, policyholders often purchase excess and umbrella insurance policies, which provide coverage over and above the insured’s primary insurance. Excess and umbrella coverage responds only once the primary policy or policies have paid their limits of insurance.17 Excess and umbrella insurance, though both purchased to meet this need, differ in function.18

Excess insurance applies only after a set amount of primary insurance exhausts. There are many types of excess forms. Some excess policies strictly “follow form” to the designated underlying policy, except for items specific to the excess policy (e.g., limits and policy period). The policyholder enjoys the same or substantially similar coverage from the first dollar of primary coverage to the last dollar of excess coverage. Other excess policies may only follow form for specific items but not for others. For example, excess policies may contain their own terms that apply to the excess coverage, which may not match all terms of the primary policy.19 As a general rule, excess coverage will not be broader than the underlying primary coverage.

Umbrella insurance is a subset of excess insurance that provides potentially broader coverage than what is provided by the underlying policy. An umbrella policy performs two key functions: (1) it provides an additional layer of insurance for losses that are generally covered by primary insurance; and (2) it provides additional coverage for those less common liabilities that are not usually covered by primary CGL insurance (e.g., malpractice coverage). Thus, umbrella coverage is often considered a hybrid contract, which combines “aspects of both a primary contract and a following form excess insurance contract.”20

C. Wrap-Up Insurance Policies It has become increasingly common for contractors and owners to purchase some form of consolidated or “wrap-up” insurance policy covering the project and all or some of the project participants. Wrap-ups consolidate what would otherwise be multiple policies held by the owner, general contractor/construction managers, and subcontractors into a single, unified insurance program.21 Most often, a wrap-up includes CGL and excess/umbrella insurance; although, a wrap-up may also include workers’ compensation insurance. A wrap-up is usually procured by either the owner (an “Owner Controlled Insurance Program” or “OCIP”) or the general contractor (a “Contractor Controlled Insurance Program” or “CCIP”). All project participants performing on-site work, with a few notable exceptions,22 are typically included as insureds on the wrap-up policies and have equal rights to coverage thereunder. Wrap-up policies provide many advantages to both the entity procuring the coverage and the other project participants. Given the economies of scale involved, the procuring party typically has greater bargaining power with potential insurers. As a result, it can often secure better coverage terms than any one party could obtain on its own. This is particularly important in jurisdictions where subcontractors struggle to procure quality coverage (whether due to poor insurance markets or lack of sophistication). In a “traditional” (i.e., non-wrap) project, the upstream parties must rely on downstream parties to secure appropriate coverage that will protect them as an additional insured. Procuring a wrap-up alleviates this concern. The party sponsoring the wrap-up controls the coverage it procures.

D. Professional Liability Insurance Professional liability insurance is another type of third-party liability coverage that is particularly important to construction project participants performing some form of design or engineering services. Most CGL policies specifically exclude, by endorsement, coverage for bodily injury or property damage “arising out of the rendering of or failure to render professional services.”23 Professional liability insurance is intended to dovetail with this exclusion, providing broad coverage for any kind of act or service that arises out of specialized knowledge, skill, or labor that is predominantly intellectual.24 Although design professionals are not generally required by law to purchase and maintain professional liability insurance; most project owners require that they do to ensure there is an adequate means to respond to a loss caused by a breach of their professional services contract.25

Typically, professional liability insurance is supplied on a “claims-made” basis. This means that the policy will respond to claims first made against the insured during the period when the policy is in effect.26 When a claim is “made” for purposes of triggering coverage, it is often defined as when the insured receives a demand for money or services or is made party to a lawsuit.27 Professional liability policies frequently include a “retroactive date,” a date in the past that cuts off coverage for claims that result from wrongful acts or omissions which took place prior to that date, regardless of whether the claim is made during the policy period. It is critical that construction industry policyholders ensure the retroactive date pre-dates the start of their services or work on the project to avoid incurring a gap in coverage.

Finally, additional insured status is not available on professional liability insurance, so upstream parties should not expect that project consultants can supply the upstream parties with that coverage. There are, however, specialized products available for those project participants who may be concerned about incurring liability on a vicarious basis for the errors and omissions of their consultants. Those products are known as owner’s or contractor’s protective indemnity policies. These protective indemnity policies are a source of recovery for losses incurred by a contractor or owner because of a consultant’s professional negligence.

E. Other types of Coverage Other lines of insurance coverage that may be implicated in a large construction project include, but are not limited to:

Pollution Liability Protects against injury or damage caused by pollution, which is generally excluded under CGL policies. Pollution liability policies can provide coverage for both first-party and third-party losses. Pollution liability policies are often “claims-made” policies, meaning that coverage expires when the project is completed. However, insureds can often purchase a “tail” to provide continued coverage after project completion.

Workers Compensation Worker’s compensation is a type of first-party insurance that protects an insured’s injured workers and limits the insured’s liability for claims.

Business Auto Policy The Business Auto Policy (“BAP”) is an ISO commercial auto policy that provides coverage for both auto liability and physical damage. Auto liability insurance covers third-party loss resulting from accidents caused by vehicles used in the policyholder’s business. Auto physical damage insurance covers first-party loss resulting from loss events, which include, but are not limited to, collisions, hail, theft, and vandalism.

Policyholders may expand coverage available under a BAP by endorsement.

Cyber Cyber risk insurance provides both first-party loss and third-party liability coverage for data breach events, privacy violations, and cyber-attacks. There are variations in the types of cyber insurance policies available; however, cyber insurance generally provides risk shifting for costs associated with having to respond, investigate, defend, and mitigate loss arising from a cyber-attack.

Inland Marine Originally covering ocean materials and vessels, inland marine insurance has expanded to cover various types of property, including tools and mobile equipment at or in transit to a project site.

“Rip and Tear” Third-party coverage insuring contractors from costs to remove and replace defective work.

Crisis Management First-party coverage that protects the contractor for professional responsibility and response costs in a publicized event.

IV. Conclusion In any given construction project, policyholders are faced with a multitude of potential risks. It is critical that policyholders carefully consider and evaluate potential risks in determining which types and amounts of insurance coverage will provide the best protection from those risks. Parties to a construction contract should first obtain some form of first-party insurance: generally, a builder’s risk policy, to protect the property of the insured during the project, and some form of third-party insurance, generally in the form of a CGL policy, to protect parties in the case of third-party claims In addition to those policies, policyholders should consider the advantages of obtaining additional insurance, such as (1) excess coverage to cover losses that exceed the limits of the primary policy; (2) professional liability coverage, to cover risks relating to the performance of a specialized or design-related nature; (3) pollution liability coverage, to cover any risks associated with the release of contaminants and/or mold; (4) a performance bond, to ensure completion of the project; and/or (5) SDI insurance to cover risks associated with subcontractor default.

Once policyholders have obtained coverage for their construction project, they should carefully maintain records evidencing that coverage. Because most third-party coverage is “occurrence” based, policies may still hold value years after the construction project is completed. If policyholders do not carefully maintain records, they may find themselves in a position, years after project completion, where they are forced to pay out-of-pocket because there is no record of the policy in place for that year. Thus, policyholders should carefully evaluate what coverage is necessary and maintain records of that coverage in case of future claims.

Understand the Dispute Resolution Provision you are Agreeing to

Posted on by
Reply

David Adelstein | Florida Construction Legal Updates

When negotiating a contract, do not overlook the dispute resolution provision.  It is one of the more important provisions in your construction contract.   This provision will come into play and have ramifications if there is a dispute, which is certainly not uncommon on a construction project.

In dispute resolution provisions in subcontracts on federal projects, it is not unusual for that provision to include language that requires the subcontractor to STAY any dispute that concerns actions or inactions of the owner pending the resolution of any dispute between the owner and prime contractor relating to that action or inaction.   A provision to this effect should be included for the benefit of the prime contractor.  For instance, the provision may say the subcontractor agrees to stay any such claim against the prime contractor or prime contractor’s surety pending the outcome of any pass-through claim (or otherwise) submitted under the Contract Disputes Act.

For example, in U.S.A. f/u/b/o Ballard Marine Construction, LLC v. Nova Group, Inc., 2021 WL 3174799 (W.D. Wash. 2021), a prime contractor hired a subcontractor to perform a scope of work at a naval shipyard.  A differing site condition was encountered and the subcontractor was directed to continue performance and track its costs.  The subcontractor completed its work and submitted its approximate $13 Million claim from the prime contractor and its Miller Act payment bond surety.  The prime contractor and surety refused to pay until the resolution of the pass-through differing site conditions claim to the federal government.  The prime contractor had submitted a claim under the Contract Disputes Act to the federal government.  The subcontractor was not interested in waiting until the resolution of the Contract Disputes Act claim and filed suit against the prime contractor and Miller Act payment bond surety.  The prime contractor and surety moved to stay pending the outcome of the Contract Dispute Acts claim.  The trial court agreed with the prime contractor explaining, “It is not fruitful to require [the prime contractor] to fend off [the subcontractor’s] claim against it, and the [Miller Act] sureties [the prime contractor] agreed to indemnify, while simultaneously advancing [the subcontractor’s] claim for additional payment from the government through the ongoing CDA process.  [The subcontractor] agreed to such a dispute resolution procedure, and it does not claim that the increased costs were [the prime contractor’s] fault.”  Nova Group, supra, at *8.

A subcontractor with such a provision is still required to timely perfect and preserve its rights by timely filing a lawsuit against the Miller Act payment bond surety.  However, the subcontractor is now beholden to the Contract Dispute Act procedure which requires an initial decision by the contracting officer and, then, certain appeal rights.   This is not what the subcontractor wanted because it elongates any potential resolution.  However, this is what the subcontractor agreed to in the dispute resolution provision and benefits the prime contractor so that it does not have to fight the fight on two fronts, particularly when it is supporting the pass-through claim under the Contract Disputes Act claim process.

Remember, the dispute resolution provision in your contract is important and should not be overlooked; the provision has ramifications as shown in the above case!

Contractor Succeeds At the Supreme Court Against Public Owner – Obtaining Fee Award and Determination The City Acted In Bad Faith

Posted on by
Reply

Lindsay T. Watkins | Ahlers Cressman & Sleight

A contractor won a rare but much-deserved victory at the Supreme Court on July 8, 2021 in Conway Construction Co. v. City of Puyallup, 197 Wn.2d 825, 490 P.2d 221 (2021). The case, which involved an aggressive stance by a public owner:

  • confirmed that the public owner bears the burden of demonstrating a termination for default is justified,
  • reaffirmed the requirement to provide an opportunity to cure, and
  • rejected the public owner’s attempts to escape its own contract language that the contractor relied upon.

John Ahlers and Lindsay Watkins of Ahlers Cressman and Sleight and Jamie Becker of Osborne Construction submitted the Amicus Brief for the Associated General Contractors (AGC) of Washington in support of Conway to the Supreme Court.

In the spring of 2016, the City of Puyallup terminated Conway Construction (“Conway”) for default from a road and utility project. At the time, Conway had numerous pending claims filed for changes and a quantity dispute. The City, however, alleged that certain portions of the work was defective. Despite Conway’s and its subcontractor’s attempts to remedy the issue, the City rejected Conway’s attempts to resolve the dispute and terminated Conway for default. After the termination, Conway filed a declaratory judgment action in Pierce County Superior Court to convert the default termination to one for convenience. In addition, after the City denied Conway’s certified claims, Conway amended its complaint to seek damages. Notably, also after the termination, the City identified additional alleged non-conforming work but did not provide Conway the opportunity to cure. However, the City did seek these costs from Conway as part of the litigation.

The trial court bifurcated the case and heard the termination issue first.  Applying Federal Court of Claims precedent, which required that the City demonstrate termination was justified, Conway prevailed and the Court overturned the default termination and converted it to a termination for convenience. 

In the next phase of the trial to determine damages, the trial court again ruled for Conway, awarding Conway damages for its contract balance and a number of Conway’s claims. In addition, pursuant to an attorneys’ fees clause in the contract, the trial court found Conway to be the prevailing party and awarded Conway $1.1 million in attorney fees. The trial court rejected the City’s arguments that (i) RCW 39.04.240—a statute that provides an avenue for the award of attorneys’ fees in public works construction contracts (provided an offer of settlement is issued)—was the exclusive remedy for attorneys’ fees, and that (ii) the contractor’s failure to make an offer pursuant to RCW 39.04.240 when it was relying upon its express contract language.

On appeal, the Court of Appeals affirmed most of the trial court ruling but reversed and denied the award of attorneys’ fees, concluding that RCW 39.04.240 was an exclusive attorneys’ fees remedy. Both sides appealed. 

The Washington Supreme Court’s decision reversed the Court of Appeals and provided three key decisions in favor of Conway:

  • Termination for Default:  The Court affirmed the trial court’s ruling that the default termination was improper and should be converted to a termination for convenience. Notably, the Court found that the City breached the implied duty of good faith and fair dealing that exists in all contracts because the City’s actions leading up to the termination (e.g., refusal to cooperate or discuss potential repairs) were unreasonable. Relying on federal caselaw, the Court concluded that the public owner has the burden of demonstrating its termination for default is justified and that the contractor is in default at the time of the termination, and that the City failed to meet that burden.
  • Opportunity to Cure: The Court held that the City could not make a claim for additional defective work damages discovered after the termination when the City terminated Conway and did not give Conway the opportunity to investigate or repair the alleged defect. 
  • Attorneys’ Fees:  The Court again rejected the City’s argument and concluded that RCW 39.04.240 is not an exclusive attorneys’ fee provision; it held that Conway was entitled to fees pursuant to its contract prevailing party attorneys’ fee provision and reversed the Court of Appeals. As part of its analysis, the Court emphasized that RCW 39.04.240 was a statute designed to address the significant imbalance in bargaining power between contractors and public owners when public owners generally do not include attorneys’ fees provisions in their contracts (contracts the public owners draft), and as found by the Legislature, public owners often “react to litigation as if their attorneys are free.” Conway,197 Wn.2d at 839. Thus, the statute was designed to benefit contractors—not as a weapon by public owners as the City attempted to apply the statute and contrary to the terms of the contract the City drafted.

Comment:  The Conway decision represents a contractor-friendly decision from a Court that has generally leaned toward owners. The City, however, took very aggressive positions—terminating the contractor for default despite Conway’ and its subcontractor’s attempts to remedy the alleged default, attempting to seek additional costs from the contractor after termination, and then attempting to disregard the terms of the Contract drafted by the City to avoid paying attorneys’ fees—that ultimately were rejected and, with respect to the Project level actions, were deemed to be in bad faith. The Court’s rebuke of these actions provides not only a shift towards more equitable contractor decisions but, more importantly, provides additional clarification and framework for contractors who find themselves either in the position of a potential default (wrongful or otherwise) or may need to terminate a subcontractor or supplier (a decision that should be carefully considered and counsel consulted). At its essence, however, the decision is a good reminder that courts will hold the parties to the contracts they enter into and will uphold the implied duty that both parties act in good faith as part of their contract obligations.  

Smart Construction and the Future of the Construction Industry

Posted on by
Reply

Caroline A. Harcourt, James W. McPhillips and Adam J. Weaver | Gravel2Gavel

“Smart Construction” is a loose term but generally refers to the development and use of processes and applications that improve construction planning and the management of projects (thereby potentially streamlining costs of construction).

The increased deployment of collaboration tools (e.g., Zoom, Microsoft Teams, WebEx) and other cloud-based technology solutions during the COVID-19 pandemic will invariably result in more efficient project management in construction going forward. These type of efficiencies are sorely needed, especially as the industry is trying to recover from supply chain issues, lockdown challenges and social distancing requirements resulting from the pandemic.

However, smart construction goes well beyond those basic business efficiency and collaboration tools. For example, drones are regularly used on construction projects to monitor site conditions, detect problems, and assess conditions safely. Meanwhile, newer technologies such as “programmable” cement, “self-healing” concrete, and autonomous and robotic machinery are increasingly being deployed in construction projects. And yet, these current technology solutions are just the tip of the iceberg as researchers continue to look for new ways machines and technology can be used to solve complex engineering challenges.

Improving Safety, Increasing Productivity
Often overlooked, construction remains one of the deadliest occupations, with over 1,000 deaths annually according to the 2019 Census of Fatal Occupational Injuries (CFOI) from the Bureau of Labor Statistics.

Innovative cloud solutions, such as building information models (BIM), offer increased resource and safety visibility enhancements to virtually track and optimize resources and equipment (and potentially improve job site safety). With 3D modeling technology, BIM manages and synthesizes project data and provides visuals for on-ground analysis. BIM allows contractors, workers and project participants to view precise details of a building and the building’s design and construction using drones, visual 3D renderings, and environmental data, which removes the need for individuals to visit potentially dangerous project sites in person. Data integration allows workers to visualize a finished project such as pipe placement, electric wiring, or even potential foundation hazards while in its physical location. The implementation of data analytics can also help project managers detect patterns to determine when and where most accidents occur and which variables play a factor in those accidents. This will enable contractors and project managers to prioritize certain tasks at certain times to avoid unsafe conditions and avoid common issues that lead to accidents, which in turn will increase the safety on their site.

In addition, BIM’s emphasis on collaboration allows for instantaneous views of project logistics. Indeed, using the data from manufacturers, BIM can relay live lead times for the production of construction materials. Smart construction can also take advantage of augmented and virtual reality to increase productivity without incurring significant costs. Architects, engineers, designers, and even tenants can “see” the finished product through augmented or virtual reality, which would provide each of them an opportunity to make structural or architectural changes without having to undo any of their previous work on incur additional costs. Ultimately, the adoption of data sourcing technology such as BIM and other smart construction will improve construction project safety and result in cost savings and increased productivity and efficiency.

According to McKinsey, recent research has shown that a digital transformation can increase productivity by 14 to 15 percent and reduce costs by up to 6 percent. The value “smart construction” can bring to the redevelopment and optimization of the construction industry is a solution that is necessary, and the key to keep up with the fast-moving world of engineering, construction and operations.

Sustainability
Innovations in construction are also allowing for more “sustainable” design and construction. Sustainable design or “green construction” refers to the structure and application of environmentally responsible and resource-efficient processes throughout a construction project. Examples of such innovations include the use of solar power on buildings, the use of biodegradable materials in a building, the use of green insulation (for example, using recycled denim and newspaper instead of non-renewable materials) and the use of tiny electric signals embedded in glass windows or facades (known as electrochromic smart glass) that alter the amount of solar radiation that can be reflected and therefore reduce energy consumption.

By adopting “smart construction or construction tech,” many contractors, owners, property owners, and developers could find innovative ways to decrease the financial burden of construction projects and meet new regulatory standards for building practices. For example, contractors could use data analytics and detecting devices to track releases of certain chemicals to ensure that they are running their site in an environmentally friendly way. With the advances in 3D printing, contractors could also find ways to print commonly used products using recycled materials as a way to lower their overall footprint and increase the sustainability of their project. As the country moves into a new era of digital connectivity after the pandemic, adopting smart construction tech will become a necessity rather than an option. And as legislators look to regulate sustainable building, smart construction provides a simple solution for an industry looking to maintain growth.

The Common Element Conundrum – When Common Elements Damage Unit Interiors

Posted on by
Reply

John S. Prisco | Stark & Stark

One of the most frequent hot button issues in condominium communities, particularly those with multi-residential buildings, is whether or not the association will pay to repair damage to a unit’s interior stemming from a defect or issue, such as a water leak, in the common elements. A condominium association has specific duties and obligations in maintaining the general common elements of the community for which it is responsible for operating and managing. These duties and obligations are not only spelled out in the association’s governing documents, but also are required by law. For instance, the New Jersey Condominium Act requires that the association “shall be responsible for” such things, including but not limited to, “[t]he maintenance, repair, replacement, cleaning and sanitation of the common elements.”

However, while the controlling regulations and typical governing documents of a condominium association assign responsibility for the repair and maintenance of the common elements to the association and the interior of units to the unit owner, that distinction—in practice—does not always work to resolve conflicts between associations and unit owners arising from a leaky common element.

In the most typical of circumstances, a defect or issue with a common element, such as a roof or even a section of improperly installed shingles, allows water to infiltrate the building’s common element exterior and cause damage to the interior finishings of a unit. While it may bring some solace to the unit owner that the roof has been repaired or the path of infiltration remediated, that in and of itself will not make the unit owner whole. After all, the unit owner’s property was damaged because of the common element. In these circumstances, condominium association Boards, absent guidance or controlling provisions in the governing documents, must make the determination, many times a very politically-volatile decision, as to whether the association will compensate unit owners when common elements cause damage to unit interiors.

Condominium Board of Directors could rely on the typical language in governing documents requiring unit owners to “repair and replace” damaged unit property to support their decision not to compensate a unit owner for damage stemming from common elements. However, such a stance may only exacerbate a difficult situation and may ultimately cost both parties a pretty penny. In fact, taking such an approach could result in a lawsuit not only against the association, but against the board and even board members individually for breaching their duties to properly maintain and repair the common elements. Such lawsuits are not uncommon, and New Jersey courts routinely allow unit owners to bring claims against associations for damage to unit interiors caused by common element issues.

Of course, not all damage to unit property will be the association’s fault and careful consideration must be taken when assessing these situations. It must be noted that an association will generally only be liable for damages to a unit’s interior if it is determined that the association negligently maintained or failed to repair the at-issue common elements. Additional considerations include whether the damage is covered under the unit owner’s insurance policy, the association’s policy, or can be recovered against a third-party such as the original builder or recent contractor.

Balancing these considerations can often be a daunting task, but association boards do not have to make these difficult decisions alone. Having experienced counsel on your board’s side will ensure the right decisions are made for your community.