How To Get Insurance Coverage For A Construction Project

Transcription

1 Wednesday, November 14 1:30 3:30 p.m. UPDATE ON CONSTRUCTION AND INSURANCE LAW Presented by Brian L. Wagner Attorney Mateer Harbert, P.A. Construction law and insurance coverage law are constantly evolving, redefining contractors risks along the way. This presentation will bring attendees up to speed on recent legal developments in both of these areas, with an emphasis on national or multijurisdictional trends rather than state-specific developments. Topics to be covered include allowable indemnity and additional insured coverage, the definition of occurrence, delay damages, punitive damages, fraud, bad faith, agent and broker liability, and more. Developments will be timely right up to the date of the Conference. Attendees will leave with a better understanding of their risks and ideas for adjusting their business practices given the new developments in both statutory law and caselaw. Copyright 2012 International Risk Management Institute, Inc. 1

2 Construction... Great American Knows It Front-To-Back, Top-To-Bottom Our team understands the specialized coverage you need from A to Z. From groundbreaking to ribbon cutting. From foundation to rooftop. From roadway to skyscraper. You can count on our strength of specialization to serve you in letter-perfect fashion. Policy after policy. Claim after claim. Year after year. Property & Inland Marine Division Builders Risk Contractor s Equipment Installation Floater Property Great American Insurance Group Tower I 301 E Fourth Street I Cincinnati, OH 45202

3 Brian Wagner Attorney Mateer Harbert, P.A. Mr. Wagner is presenting, Update on Construction and Insurance Law, on Wednesday afternoon. Mr. Wagner is an attorney located in Orlando, Florida, and practices in the area of litigation with an emphasis on construction defect, insurance law, and complex litigation. His client list includes Fortune 500 companies, insurance companies, and small and midsized companies. He is a shareholder in the law firm of Mateer Harbert, P.A., with offices in Orlando and Ocala, Florida. Mateer Harbert, P.A., was recently chosen as a go to law firm by a Fortune 500 Company for litigation in Litigation 2012, a supplement of the American Lawyer. Prior to joining Mateer & Harbert, he helped start the Orlando office of a large regional law firm with a home office in Philadelphia. Mr. Wagner has given presentations all over the country at various conference and corporate in-house presentations on all types of litigation issues. Mr. Wagner received a P.A. from Nebraska Wesleyan University and graduated from the University of Nebraska College of Law. Mr. Wagner is licensed to practice law in the State of Florida. In addition to handling cases in Central Florida (consisting of the counties stretching from Tampa to Orlando to Daytona Beach), he maintains a large practice in South Florida. 3

4 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 4

5 Update on Construction and Insurance Law Presented by: Brian Wagner, Esq. MATEER & HARBERT, P.A. 225 East Robinson Street, Suite 600 Orlando, FL (407) Who and I and Why am I Here. Brief Background 2 5

6 Basic concepts: Key Policy Provision Most issues in construction cases deal with this, or similar policy provision: This insurance applies to bodily injury and property damage only if: The bodily injury or property damage is caused by an occurrence that takes place in the coverage territory ; [and] The bodily injury or property damage occurs during the policy period. 3 Basic Concepts: Duty to Defend/Indemnify Insurance policies deal with two key duties on the part of an insurance company Duty to Defend Duty to Indemnify What are these concepts? 4 6

7 Duty to Defend Travelers Property Casualty Company of America v. Centex Homes, 2012 WL (N.D. Cal. 2012) An insurance company who delays a decision to pay for the legal defense of its insured, or who reverses a denial of coverage may risk losing to ability to assign its own defense attorneys and control the defense of the insured s case. 5 Additional Insureds Westfield Insurance Company v. FCL Builders, Inc., 948 N.E.2d 115 (Ill.App.1 Dist. 2011) Common practice for general contractors to require all subcontractors to add them as additional insureds on their CGL insurance policies. Also common for subcontractors to sub-contract portions of their work to others, so there is no direct contract between the GC and the Sub-sub. 6 7

8 Additional Insureds Case states that the GC is not an additional insured of the Sub-sub s insurance policy because there is no contract between the two and Certificate of Insurance listed the GC as such did not contain the right wording. Be sure the name is on the certificate and the wording of the policy is adequate to provide coverage. 7 Chinese Drywall and Pollution Exclusions Auto-Owners Insurance Company v. American Building Materials, Inc., 820 F.Supp.2d 1265 (M.D.Fla. 2011) Granite State Insurance Company v. American Building Materials, Inc., 2011 WL (M.D. Fla. 2011) Most, if not all, CGL policies contain exclusions stating that they do not cover injury or damage caused by pollutants. Do claims for personal injury resulting from Chinese Drywall fall within the pollution exclusion of the GCL insurance policy, thereby taking them out of coverage? Two cases that came to opposite conclusions. A tale of two policies. Different language of the pollution exclusion brought about drastically different results. Know your policy! 8 8

9 Coverage- Property Damage and Occurrence Franco Belli Plumbing and Heating and Sons, Inc., v. Liberty Mutual Insurance Company, 2012 WL (E.D.N.Y., 2012) Good explanation of issues surrounding insurance coverage issues involving occurrence and property damage Insurers are not obligated to defend claims where the only damage alleged is to the defective product installed by the insured Essentially means they are not insurers of the contractor s work. Doesn t cover breach of contract actions. 9 Coverage- Property Damage and Occurrence Amerisure Mutual Insurance Company v. Auchter Company, 673 F.3d 1294, (11th Cir. 2012) Illustrates what can go wrong when framing a claim to an insurance company. Involved claim that GC installed roof incorrectly, causing roof tiles to fall and necessitating installation of a new roof. Stipulated that there was no damage to any property other than the roof. Court ruled that insurance policy afforded no coverage under the policy because there was no property damage. Result may have been difference if the GC had proved other damage than just the roof, i.e., defective tiles, fasteners, etc. 10 9

10 Coverage- Property Damage and Occurrence Ewing Construction Company Incorporated v. Amerisure Insurance Company, 2012 WL (5th Cir. 2012) Originally, Court ruled that a contractor s obligation to perform its contract in a workmanlike manner constituted an assumption of liability, which would trigger the contractual liability exclusion in the insurance contract. Held that the insurance company had no duty to defend the subcontractor in a construction defect action because the contractual obligation to perform the work in a workmanlike manner itself constituted an assumption of liability sufficient to exclude coverage. Result meant that virtually all construction defect claims would be taken out of insurance coverage based upon that contract provision. 11 Coverage- Property Damage and Occurrence Ewing Construction Company Incorporated v. Amerisure Insurance Company, 2012 WL (5th Cir. 2012) On August 8, 2012, the Court withdrew its decision and certified an important question to the Texas Supreme Court: 1. Does a general contractor that enters into a contract in which it agrees to perform its construction work in a good and workmanlike manner, without more specific provisions enlarging this obligation, assume liability for damages arising out of the contractor s defective work so as to trigger the Contractual Liability Exclusion. 2. If the answer to question one is Yes and the contractual liability exclusion is triggered, do the allegations in the underlying lawsuit alleging that the contractor violated its common law duty to perform the contract in a careful, workmanlike, and non-negligent manner fall within the exception to the contractual liability exclusion for liability that would exist in the absence of contract

11 Coverage- Property Damage and Occurrence Ewing Construction Company Incorporated v. Amerisure Insurance Company, 2012 WL (5th Cir. 2012) What does that mean for me??? If the Texas Supreme Court answers the first question Yes and the second question No, then any construction defect claim in Texas involving a construction contract with a workmanlike manner provision will likely not have insurance coverage. Should you leave the provision out of the contract? What are the costs/benefits in doing so? Would an owner/gc even think of leaving out such a provision? 13 Coverage- Property Damage and Occurrence Axis Surplus Insurance Company v. Contravest Construction Company, 23 Fla.L.Weekly Fed. D 279 (M.D. Fla. 2012) In construction litigation, a hotly contested issue involves when coverage is triggered under a CGL insurance policy, giving rise to the duty to defend/indemnify. Different theories of triggers of coverage exist within the court system. Injury in fact trigger theory manifestation trigger theory Applied the injury in fact theory Why is this significant? 14 11

12 Workers Compensation Patton v. Worthington Associates, Inc., 43 A.3d 479 (Pa.Super. 2012) Pennsylvania Superior Court materially altered a defense that had been available to general contractors sued following injury to an employee of one of their subcontractors. Statutory Employer defense Under PA Workers Comp. Act, an employer is generally immune from tort liability for injury to its employees, assuming the employer provides WC coverage. The Act also provides general contractors with this cloak of immunity as the statutory employer when certain factors are met: 15 Workers Compensation Patton v. Worthington Associates, Inc., 43 A.3d 479 (Pa.Super. 2012) Purpose of the statutory employer was to provide secondary first party coverage (WC) to injured employees in the event the injured party s employer is without coverage. Five factors: GC must be under contract with an owner Must have a present on the jobsite Must subcontract with another entity Part of its regular business is entrusted to the sub Injured party is the employee of the sub

13 Workers Compensation Patton v. Worthington Associates, Inc., 43 A.3d 479 (Pa.Super. 2012) This Court changed things by adding another factor that must be satisfied before the defense can be used: Must demonstrate that the injured party is its employee as opposed to an independent contractor. Essentially eliminates the protection of the Statutory employer defense. How can you lessen the impact of this ruling? 17 Statute of Repose Jacobs Engineering Group v. State of Minnesota, 132 S.Ct (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011) 18 13

14 Statute of Repose A statute barring a suit a fixed number of years after the defendant had acted (usually by designing or manufacturing an item), even if the injury suffered by the plaintiff occurred after the period had lapsed. Difference between Statute of Repose and Statute of Limitations 19 Statute of Repose Jacobs Engineering Group v. State of Minnesota, 132 S.Ct (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011) Case involving the 2007 I-35 bridge collapse over the Mississippi River in Minneapolis that killed 13 people and injured almost 150. Following this accident, the Minnesota legislature created a fund for the victims and survivors of the incident

15 Statute of Repose Jacobs Engineering Group v. State of Minnesota, 132 S.Ct (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011) Included in the compensation statute was the following provision: Notwithstanding any statuary or common law to the contrary, the State is entitled to recover from any third party, including an agent, contractor, or vendor retained by the state, any payments made from the emergency relief fund or under section to the extent the third party caused or contributed to the catastrophe. Minn.Stat. Sec (5)(a) This one sentence breathed life into liabilities that had been dead for 26 years under Minnesota s statute of repose. 21 Statute of Repose Jacobs Engineering Group v. State of Minnesota, 132 S.Ct (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011) Far reaching case. This case revived claims that had been barred long ago. This proposition was upheld by the Minnesota Supreme Court and the U.S. Supreme Court declined to hear the case, which means it is the law in Minn

16 Statute of Repose Jacobs Engineering Group v. State of Minnesota, 132 S.Ct (2012) Also, In re: Individual 35W Bridge Litigation, 806 N.W.2d 820 (Minn.2011) What do you do now? Use Choice of law provisions as a protection against a legislature changing the playing field. Florida example: Court in Florida has ruled that [o]nce barred, the legislature cannot subsequently declare that we change our minds on this type of claim and then resurrect it. Once an action is barred, a property right to be free from a claim has accrued. 23 Statute of Repose Shaw Construction, L.L.C. v. United Builder Services, Inc., 2012 WL (2012) Addressed the issue of when the Statute of Repose clock starts. Colorado Court ruled that the Statute of Repose clock begins on the date the Certificate of Occupancy was issued, as compared to the date all work was completed

17 Insurance Claims File as Work Product Zirkelbach Construction, Inc., v. Rajan, 2012 WL (2d DCA Fla. 2012) So long as litigation is foreseeable when they are prepared, the claims files of an insurance company s investigation of a claim is protected from production. Important because the claims file contains all kinds of information, including impressions on the validity of the claim, strengths and weaknesses of a case and the like. 25 Third Party Liability Meridian at Windchime, Inc. v. Earth Tech, Inc., 960 N.E.2d 344 (Mass. App.Ct. 2012) Mass Court ruled that an engineer hired by a town to inspect a construction project could not be held liable to the developer when the developer did not have a contract with the engineer

18 Third Party Liability Meridian at Windchime, Inc. v. Earth Tech, Inc., 960 N.E.2d 344 (Mass. App.Ct. 2012) Engineering firm hired by the town as a consultant to conduct subdivision reviews and inspections. Included inspecting the work performed by a contractor on a developer s housing project. Gave periodic inspection reports to town and the developer. Developed close working relationship with developer. Only engineering firm on site for about two years. 27 Third Party Liability Meridian at Windchime, Inc. v. Earth Tech, Inc., 960 N.E.2d 344 (Mass. App.Ct. 2012) Turned out that the contractor improperly installed water lines, fire hydrants, curbing, manhole covers and other infrastructure. Developer sued the engineering firm for failing to discover the issues, which caused a considerable about of money to fix. Court ruled that the engineering firm owned no duty of care to the developer

19 Third Party Liability Meridian at Windchime, Inc. v. Earth Tech, Inc., 960 N.E.2d 344 (Mass. App.Ct. 2012) The lesson in this case is: Hire your own engineer/inspector to inspect the work. Don t rely on the gratuitous work of others. 29 Liability for Injuries-Breach of Contract Theory Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7 (Ga.App. 2011) Court found in favor of the estate of a worker fatally injured in a project site accident and against the project owner, the prime contractor and the first tier subcontractor on a breach of contract theory. What about Workers Comp? breach of contract theory! Complicated set of facts 30 19

20 Liability for Injuries-Breach of Contract Theory Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7 (Ga.App. 2011) FACTS: Worker injured on the job by a third party (not his employer, but a second-tier sub on the job) Obtained a multi-million dollar verdict against the third party Third party did not carry the $10 million auto insurance policy required under the contract chain from the owner to the second tier hauling contractor. 31 Liability for Injuries-Breach of Contract Theory Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7 (Ga.App. 2011) FACTS: In a separate lawsuit from the liability case, the Estate filed suit against the owner, prime contractor and sub-contractor alleging a breach of contract (failure to carry the required insurance) Court ruled that the decedent was a third party beneficiary of the contractual insurance requirements and, thus, his estate was not barred by the exclusiveity of remedy afforded under the Workers Comp. process

21 Liability for Injuries-Breach of Contract Theory Estate of Pitts v. City of Atlanta, et al, 719 S.E.2d 7 (Ga.App. 2011) Case exposes a blind spot of exposure. Do you really know if a second tier has obtained the required auto insurance policy? 33 Questions? 34 21

22 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 22