Tag Archives: Construction Claims

YOLO: CBCA Finds that a Contractor Cannot Revive Its Expired Appeal Rights by Resubmitting a Claim

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Stephen J. McBrady, Michelle D. Coleman, Amanda H. McDowell and Zariah T. Altman | Crowell & Moring

On April 6, 2023, the Civilian Board of Contract Appeals (CBCA), in BES Design/Build, LLC, CBCA 7585, dismissed a contractor’s appeal for lack of jurisdiction, finding the appeal untimely, and underscoring that a contractor cannot reset the 90-day appeal window by resubmitting its original claim.

On February 24, 2021, BES Design/Build, LLC (BES) submitted a certified claim for non-payment under a task order to replace two exterior stairs at a courthouse. The contracting officer denied the claim in a final decision (COFD) on April 23, 2021. BES did not appeal that denial. More than a year later, on June 8, 2022, BES submitted a nearly identical certified claim. The contracting officer responded on August 22, 2022, stating that a COFD had already been issued on the matter. On November 18, 2022, BES appealed what it cited as the August 22, 2022 COFD to the CBCA. The GSA then filed a motion to dismiss for lack of jurisdiction, citing BES’s appeal as untimely.

The CBCA granted the GSA’s motion to dismiss, noting that there are three jurisdictional prerequisites for it to hear a contractor’s claim under the Contract Disputes Act (CDA): (1) the contractor’s submission of a claim to the contracting officer; (2) the issuance of a COFD or occurrence of a deemed denial; and (3) a timely appeal. Under the CDA, a contractor has 90 days from the date of receiving a COFD to appeal the decision to the relevant agency board. BES argued that, because the agency responded to its second claim on August 22, 2022, it should be entitled to 90 days from that date to appeal the agency’s denial. The CBCA disagreed, explaining that claims based on a common or related set of operative facts will be considered the same claim for the purposes of an appeal if “a court will have to review the same or related evidence to make its decision.” Here, because the contractor’s allegations and the relief sought in each claim were substantially the same, the CBCA found both of BES’s submissions were for the same claim, and the relevant date for calculating the 90-day appeal window was the issuance of the first COFD, on April 23, 2021.

This decision underscores the importance of timely appealing a claim upon the receipt of a COFD, as a contractor cannot revive its appeal rights by simply re-submitting an old claim it failed to timely appeal.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Preserve Your Claims by Preserving the Evidence

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John Mark Goodman | BuildSmart

A recent case out of Washington serves as a good reminder to preserve evidence that may be relevant to pending or future litigation. That includes not only evidence in the form of documents and electronic information, but also physical evidence. In Seattle Tunnel Partners, 2023 WL 2856616 (Wash. Ct. App. April 10, 2023) the contractor was hired to dig an underground tunnel to replace the Alaskan Way Viaduct in Seattle. While excavating the tunnel, the contractor encountered an abandoned well that damaged the tunnel boring machine and shut down mining operations for two years. Several pieces of the abandoned well were removed from the ground and placed in the contractor’s construction yard. Before the evidence could be moved to a storage warehouse, an unwitting equipment operator threw it into a dumpster while cleaning out the yard. By the time this was discovered, the dumpster was long gone.

In the ensuing litigation, the contractor claimed the abandoned well was a differing site condition and sought compensation from the owner and various insurers. The defendants denied liability and sought sanctions against the contractor for failing to preserve the physical evidence that it removed from the ground. The trial court found that the contractor failed to properly preserve the physical evidence and gave an adverse inference instruction to the jury, i.e., the judge instructed the jury that it could infer the spoliated evidence was harmful to the contractor’s case. The jury returned a verdict for the defendants and against the contractor. On appeal, the jury’s verdict was reversed because there was no evidence that the contractor intended to destroy the evidence or otherwise acted in bad faith. At most, it was guilty of negligence, which under Washington law does not justify sanctions for spoliating evidence. The appellate court was also not convinced that the physical evidence was all that important given that the contractor had smartly taken pictures of the evidence before it was discarded. While the contractor’s failure to preserve the evidence may not cost it the case this time, Seattle Tunnel Partners is nevertheless a good reminder to preserve relevant evidence whenever litigation is pending or reasonably contemplated. It could be crucial to preserving your claims.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Another Judicial Reminder for Policyholders to Carefully Review Policy Language and Provide Timely Notice of a “Claim”

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Stephen Foresta, Aaron Jaroff and Lee Royster | McGuireWoods

Insurance policies invariably require insureds to submit timely written notice of a “Claim” made by third parties to obtain coverage from the insurer.  A recent decision from the United States District Court for the Southern District of New York is yet another reminder that insureds need to closely analyze what constitutes a “Claim” under their policies in order to comply with the timely notice requirement. 

The issue of providing timely notice gained attention late last year in a widely-publicized ruling that Harvard University could not access $15 million in potential insurance coverage to pay for legal expenses incurred in a lawsuit concerning Harvard’s race-conscious admissions program.  In that case, the court found that Harvard failed to formally notify its insurer until more than a year after the policy period ended, and rejected Harvard’s argument that because the insurer was aware of the high-profile litigation, it could not have been prejudiced by the late notice. 

On March 20, 2023, Judge Mary Kay Vyskocil of the United States District Court for the Southern District of New York issued an opinion that further illustrates the consequences of failing to understand what constitutes a “Claim” triggering the notice requirement under an insurance policy.  In Pine Management Co. v. Colony Insurance Co., the insured, Pine Management, brought suit against its insurer, Colony Insurance Company, after Colony refused to defend and indemnify Pine against a third-party lawsuit.  The policy at issue covered the period from August 1, 2018 to December 1, 2019.  Importantly, the term “Claim” was defined as “a written demand received by the Insured for monetary, non-monetary or injunctive relief.” 

Before the Colony policy incepted, Pine had received a letter from an attorney representing a group of companies managed by Pine, advising of “serious issues arising from Pine’s management” and claims against Pine that “should survive a motion to dismiss and a motion for summary judgment.”  The letter specified some of the bases for those claims, requested non-monetary relief and the right to inspect documents, and suggested that the parties schedule a meeting in an effort to resolve the claims without the need for litigation.  More than a year later, on July 26, 2019, the companies filed a complaint in New York state court alleging similar claims and facts as the earlier letter.  After receiving the complaint, Pine provided written notice to Colony.  But Colony disclaimed coverage, contending that the wrongful acts alleged in the complaint were the same as those alleged in the letter and thus, according to Colony, constituted a “Claim” made prior to the inception date of the Colony policy.  Pine filed a coverage action against Colony and Colony moved for judgment on the pleadings, arguing that it had no duty to defend or indemnify Pine under the policy.

The Court agreed with Colony, and held that a “Claim” was first made against Pine when it received the letter before the policy period, not when it was served with the complaint during the policy period.  Because the Colony policy only covered Claims first made during the policy period, Pine was not entitled to coverage.

This decision reinforces the need for insureds to be fully familiar with the terms and conditions of their insurance policies as a general rule.  But it is especially important to know what facts and circumstances could trigger an insured’s obligation to submit notice of a claim to its insurer, even in the absence of formal litigation commenced against the insured.  For example, “a written demand received by the Insured for monetary, non-monetary or injunctive relief,” such as the letter received in Pine Management, will often be enough to require notice to the insurer.  Without knowing what triggers an obligation to submit notice of a claim, however, insureds may lose the right to coverage for an otherwise valid Claim. 

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Damages in Construction Claims: Are “Actual Costs” Actually Required?

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Ronald Espinal | Bradley Arant Boult Cummings

The golden standard for the measure of damages in a construction case alleging defective or incomplete work are the actual costs of completion or repair. That is to say, if there is a breach (or multiple breaches) of quality or quantity promises in a construction contract, each dollar spent to correct or complete the work should be linked to the discrete breach. Failure to present reasonable evidence of a  link for the money spent to correct or complete work will typically result in reduced recovery and can in some circumstances prohibit recovery altogether. This usually is a simple enough rule for construction defects.

But what happens when there are multiple impacts that contribute to a loss of productivity or inefficiency in actually delivering the product (a building, a highway, a mechanical system)? In other words, a contractor may not be able to point to a specific action or actions that resulted in a specific increased cost, but the totality of various impacts may have resulted in drastically increased costs. In such circumstances, it is often difficult, or perhaps impossible, to link a discrete impact to a particular set of costs despite clear evidence of an adverse effect on the contractor. In these circumstances, are “actual costs” actually required? The answer is ‘yes,’ but that does not mean one must draw a bright line from an incident to a specific labor cost overrun.

The difficulty in proving damages for loss of productivity claims in the construction context has given rise to alternative measures of damages to quantify the loss. Some examples of alternative measures of damages for loss of productivity claims include: total cost analysis, modified total cost analysis, factor analysis and measured mile analysis (among others). While each of these damage measures has different respective burdens of proof, the general underpinning of these damage measures is that a contractor shows entitlement to cost overruns due to a loss of productivity. Further, these alternative measures of damages do not require that a contractor show its cost overruns were tied to and caused by a specific impact. Instead, these alternative measures of damages use the general loss in productivity to establish causation and entitlement to damages.

A recent example of a permissable use of one such alternative measure of damages, the measured mile analysis, can be found in Appeal of Lockheed Martin Aeronautics Co., which was a dispute decided before the Armed Services Board of Contract Appeals (“ASBCA”). There, the contractor, Lockheed Martin, had a $23,000,000 contract with the government to upgrade government-owned military aircrafts. The parties made several modifications to the contract resulting in additional upgrades to be completed under the contract. As Lockheed Martin proceeded with the work, the government impacted Lockheed Martin’s work by engaging in actions such as, over inspection, overly restrictive flight acceptance criteria, unnecessary flight repairs, and frequent stops and re-starts to the work. These impacts drastically increased Lockheed Martin’s costs, who in turn, submitted a claim of $143,529,290 (greater than 600% of the original contract price) for additional costs related to these impacts.

With respect to its damages claim, Lockheed Martin submitted a totality of its cost overruns related to all of the work under the contract and conceded that it could not state the specific quantity of hours spent due to government impacts. Stated another way, Lockheed Martin could not specifically prove how each impact directly translated to additional cost. However, Lockheed Martin instead used a measured mile analysis to provide a comparison of a production period that was impacted by a disruption with a production period that was not impacted, or that was less impacted. Lockheed Martin argued that the delta in the efficiency of impacted work and nonimpacted work was attributable to the government’s impacts and recoverable as damages.

On appeal, the government moved for summary judgment based on Lockheed Martin’s use of the measured mile analysis. The government argued that summary judgment was appropriate because Lockheed Martin did not put forth specific evidence for the disruptive impacts and what costs were linked to said impacts. Stated another way, because it was not possible for Lockheed Martin to separately track additional hours that resulted from the government’s work impacts, Lockheed Martin failed to show actual costs related to the impacts.

The ASBCA denied the government’s motion for summary judgment and noted that the measured mile approach compares the productivity of an impacted period with an unimpacted (or less impacted) period and is a well-established method of proving damages. The ASBCA further stated that “It is a rare case where loss of productivity can be proven by books and records; almost always it has to be proven by the opinions of expert witnesses.” The ASBCA further rejected the argument that Lockheed Martin was required to track each and every cost, noting that damages do not have to be proven to exact certainty and that there was sufficient evidence of damages to permit Lockheed Martin’s claims to move forward to trial.

The fact of damages is not hypothetical and must be shown, as well as persuasive evidence the damages resulted from the factors alleged. But the allocation of those damages to singular events may not be feasible, because of their number or because of the way one event (a change) may then affect a later event (another change).

As this case demonstrates, construction projects can have many impacts that may be hard to quantify but nonetheless result in lack of productivity and significant cost increases. Alternative measures of damages in construction can bridge the gap in these circumstances and provide contractors with meaningful avenues to recovery. However, direct causation  remains the preferred standard for damages in the construction context as these alternative measures of damages may not always be available for use and, if they are, typically have difficult evidentiary hurdles. It is critical for owners, developers, and contractors to understand when and how these alternative measures of damages apply, to properly manage construction projects and to preserve or defend claims for loss of productivity. Failure to do so may result in liability for or waiver of substantial claims.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

What Are The Different Kinds Of Construction Claims?

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KPPB Law

The process of completing new construction requires communication and adaptability from all involved parties. However, when a project fails to adhere to the agreed upon scope, price or details, both contractors and owners may have the grounds to pursue legal action against the other.

Helping you to navigate such claims, whether you are the plaintiff or the defendant, is in the purview of a legal professional. The following are the most common types of construction claims and how they arise.

How Construction Is Fertile Ground For Legal Action

Most construction projects have many moving parts and if these parts come into conflict, legal action can arise. This could happen because parties misunderstood each other, didn’t complete a task on time, went over budget or there was a breakdown in communication.

The timeline can be one of the most contentious parts of a construction contract. Sometimes, missing deadlines is unavoidable due to acts of God or other uncontrollable events. Other times, poor planning or change orders leave the project unfinished by the time that the task should have been completed. No matter the cause, failure to adhere to the timeline established in the original agreement is a common sticking point between parties.

Materials acquisition may pose an issue. For example, contractors may not order the materials they need in time, making them unable to start the project as anticipated. Supply chain issues can also cause shipping delays; even if the product was ordered in a timely manner, the job may not start right away.

Sometimes, the wrong items are ordered; contractors may not discover until they start work that they don’t have the materials they expected or that the materials do not work for the intended purpose. Similarly, the wrong materials are delivered entirely, or they are delivered in the wrong quantity.

If a builder exceeds the allocated budget, or the owner requests changes that do not adhere to the previously agreed upon expense limit, this can result in conflict. A lot of money is changing hands during these projects, often between multiple parties, which can lead to uncertainty and disagreements. When an owner does not receive what was promised and agreed to in the initial contract, they can sue the contractor(s) involved in the project.

Many of the legal consequences that arise are a result of a breakdown of communication between all parties. Architects, engineers, owners, general contractors and subcontractors are some of the more typically involved parties; disputes can arise between any two or more of these parties or all parties. In general, contractors are responsible for resolving issues between themselves and their subcontractors.

Keeping goals on time, on budget and on track is also about managing expectations. Contractors can encounter challenges in any of these areas and more. A more detailed look at some of the most common claims in construction include:

When The Completion Date Is Delayed

When the completion of a project exceeds the timeline, the owner may pursue a remedy. The timeline should be clearly delineated in the original contract, in conjunction with any extenuating circumstances (such as acts of God) that could impact when legal action is acceptable.

In general, even if the cause was unforeseen events, a delayed completion date can result in a legal claim. Permit issues, defective materials and weather or natural disasters may not be the fault of the contractor, but they may still delay the completion of a project and result in lost income or damages for the owner.

However, in some instances, a project is not finished on time due to direct negligence by the contractors in charge of the project. This could include their failure to work in a timely manner or properly plan the scope of the project. They may also fall short in other areas such as the quality of their work, in which case the owner may ask that they reconstruct sections to a proper standard.

The extra time spent correcting mistakes could delay the completion date, and even if they do successfully complete the project up to adequate standards, the contractor may still be liable for their failure to abide by the initial timeline.

Of course, all of this exists in conjunction with change orders, or other amendments to the original contract that change the scope of the work. If the owner decides before a project is complete that they would like more or different work performed, they can submit a change order. Alterations to the contract brought about by change orders can cause tension between parties, especially if the new changes are expected to fit into the preexisting timeline.

When The Price Changes

Prices on a contract can change over time due to a variety of factors. Most often, this is a shift due to changes in material costs, change orders (as mentioned previously), other unforeseen conditions or even the owner or contractor wanting to change the price.

Material costs can be particularly problematic for properly planning a construction task. While it is fairly simple to identify the cost of materials during an initial order, the problems usually arise if more materials are later required. Contractors may find that the price of the material has increased, the identical material is no longer available or shipping is more expensive.

Unforeseen conditions are another big culprit behind price changes in construction projects. Most often, these appear within the site itself. An example of this would be if the contractor started to build and discovered unsuitable soil conditions. This would change the scope of the project in a way that was not predicted and may result in higher costs to accommodate.

When The Property Is Damaged

Contractors may occasionally cause damage that creates a legal situation. Damage to the owner’s property may occur during construction, such as by hitting underground lines (sewer, internet, etc.) that must then be replaced. The contractor may claim that the area was not properly marked and claim the damage was an accident, while the owner may be asking for the contractor to pay for these damages which creates a legal dispute.

Owners have the right to specify any areas that they do not want to have changed or disturbed. For example, an owner may state that they want a specific tree to be preserved throughout construction. If a contractor cuts down or severely damages that tree, it may qualify as property damage from which the owner can seek legal remedy.

Contractors are not the only parties directly at fault; subcontractors can also cause damage. In this situation, it is the contractor who is typically responsible for subcontractor damage. Subcontractors may carry specific insurance to protect against this; however, with all of the involved parties, legal claims can quickly become complex.

Possible Secondary Claims

While the above scenarios represent the most common construction claims, other construction issues can also arise. This is why it is important to work with a legal professional during the contract drafting phase, to ensure such potential issues are addressed in advance:

  • Contractor pollution: If a builder pollutes the area (such as by dumping chemicals into the ground), the owner may sue for damages.
  • Defects in the construction: No matter which contractor is completing a project, the finished work must adhere to a minimum reasonable standard of quality. Construction must be finished according to the level of skill that is typical for that trade. Additionally, the contractor is required to exercise a reasonable degree of care, skill, and ability under similar conditions and like surrounding circumstances as is ordinarily employed by others in the same profession. If a contractor does not adhere to these standards and creates defective work, the contractor may be liable for damages, or be required to correct the work.
  • Failure to comply with code: Every type of construction project must adhere to local municipal codes for how the building is expected to be constructed. This includes placing the main water shutoff valve in a certain protected location, ensuring there are enough exits and more. It is the responsibility of the contractor to stay current with changing codes and regulations and abide by them as required. If a building receives a code violation as a result of the contractor’s work, the landowner may make a claim to recover those damages and fix the problem.
  • Failure to comply with plans and specifications: Most often, disagreements in this area will arise when a contractor does not comply with the details that the owner specified. This may include building the structure differently than the original plan or to different size specifications. If a building does not include amenities that were incorporated into a contract, this could be another fertile ground for legal action. If an owner believes that their contractor did not abide by the plans the parties agreed upon, they can file a legal claim to be provided with construction that meets the plans and specifications that were promised.

Trust The Professionals To Help You Navigate A Legal Claim During A Construction Project

Many issues can arise during a construction project, regardless of the size or scope, giving both the owner and the contractor the right to pursue a claim against the other. Materials may change cost, a number of issues could arise that impact the completion date or the workmanship may not adhere to the specifications that were agreed upon from the beginning of the project.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.