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Utah Appellate Court: Homeowners’ Claim for Defective Construction Against Geotechnical Engineer Dismissed Due to Lack of Contract and the Economic Loss Rule A recent Utah Appellate Court upheld the dismissal of a homeowners’ claims against a geotechnical engineer because the homeowners did not have a contract with the geotechnical engineer and therefore their claims were barred by the economic loss rule. See Hayes v. Intermountain Geoenvironmental Services, Inc., 2019 UT App 112, 2019 WL 2621931.  In Utah, the economic loss rule only allows lawsuits for defective design or construction to be based on a breach of contract.  Such a claim…
Each year, hurricane season presents a challenge to contractors and developers along the Gulf and Atlantic coasts as they face the risk of impacts from significant weather.  Hurricanes Michael, Irma, Harvey and Florence are only the most recent reminders of how devastating one of these storms can be.  With the construction industry being as active as it is, projects in storm-prone areas should be prepared to deal with and minimize the physical and financial risks that come along with these storms.  I was recently able to share my insight about what project teams can do to deal with a storm…
Owners of a Massachusetts waste collection, recycling and removal company recently were held personally liable for their failure to pay their employees at prevailing wages.  See Donis v. American Waste Services, LLC, 95 Mass.App.Ct. 317 (2019).  Under Massachusetts law, wage violations are subject to triple damages and payment of attorney’s fees.     The waste services company entered into contracts with several Massachusetts towns that required compliance with prevailing wage laws at hourly rates of $20 — $24.  However, the company paid workers $16 — $17 an hour, or at flat day rates.  The company tried several unsuccessful defenses: (1) the…
New Sustainability Ordinances for Construction Enacted in Florida and Colorado Cities  The City of St. Petersburg, Florida is one of the latest municipalities to incorporate the concepts of sustainable construction, sometimes referred to as “green building”, into the requirements of their municipal code.  On April 26, 2019, the City adopted Ordinance No. 359-H; which requires City-owned buildings over 5,000 square feet, which are either existing and being substantially modified or are being newly constructed, to achieve a rating of LEED Gold from the U.S. Green Building Council.   The new ordinance makes clear that the purpose of adopting the sustainability…
In a case of first impression, Maryland’s intermediate appellate court recently held that a subrogation waiver in an owner’s prime contractor contract does not bar a subcontractor claim for contribution against the prime contractor.  See Gables Constr., Inc. v. Red Coats, Inc., No. 907, SEPT.TERM, 2017, 2019 WL 2067348 (Md. Ct. Spec. App. May 10, 2019).  Upper Rock, Inc. (Owner) filed a $22 million claim against Red Coats, Inc., a “security and fire watch company” (Subcontractor), for fire damage to a building under construction.  Red Coats filed a third-party claim against the prime contractor, Gables Construction, Inc. (Contractor), for contribution…
Construction contracts often contain agreements requiring mediation before a party may file a lawsuit.  However, a party may not want to wait through the mediation process and instead may prefer to go straight to a lawsuit.  Given that mediation is not binding and does not guarantee a resolution, can a party ignore a contractual agreement to mediate and instead go right to litigation?  A recent Kentucky federal court decision said no, a party cannot ignore a previous contractual agreement to mediate. See Mitsui Mumitomo Insurance USA, Inc. v.  Denham-Blythe Company Inc., et al., No. 5:18-CV-152-JHM, 2019 WL 1938791 (E.D. Ky.…
A recent article in the Baltimore Business Journal on a Maryland construction industry survey reports that tight labor markets and rising materials costs are influencing the opinion of Maryland contractors that there may be a downturn coming in the near future.  While contractors are individually optimistic about their own businesses, they recognize that the labor crisis is growing.  Fewer young people are entering the construction industry and over 80 percent of contractors surveyed responded that “finding and retaining quality employees” is their top concern.  Although salaries are generally on the rise, corporate culture appears to be a greater concern to…
Illinois Considers Following Trend Toward Making General Contractors Liable for Wages of Subcontractors A bill pending in the Illinois legislature (HB2838) exemplifies a nationwide trend in the construction industry to hold a contractor who has a direct contract with an owner (“Direct Contractor”) liable for the unpaid wage and fringe benefit obligations of its subcontractors on a private project. Direct Contractors already have liability for employee wages owed by their subcontractors on public projects covered by the Davis Bacon Act, and the same responsibility is owed under the prevailing wage acts of many states. Direct Contractors may also have liability…
Baseball Stadium Developer Owes Bond Insurer $39.1 Million Due to Indemnification Agreement A recent decision from the United States District Court for the District of Connecticut is a reminder to contractors and developers that indemnification agreements tied to bonds usually heavily favor and give a large amount of discretion to insurers issuing bonds.  See Arch Ins. Co. v. Centerplan Constr. Co., LLC, No. 3:16-CV-01891 (VLB), 2019 WL 613375, — F.Supp. — (D. Conn. Feb. 13, 2019).  In Arch, the court granted summary judgment in favor of Arch Insurance Company (“Arch”) and required developer Centerplan Construction Company (“Centerplan”) to indemnify Arch…
Builder’s Risk Insurance Coverage for $3 Million Loss Denied Due to Failure to Adequately Secure Construction Site A recent Federal Court summary judgment decision provides a stark warning for contractors and owners to adequately secure their construction sites, or risk denial of insurance coverage.  See Praetorian Ins. Co. v. Axia Contracting, LLC, No. 17-CV-2034-WJM-KLM, 2019 WL 1002939 (D. Colo. Mar. 1, 2019).  In Praetorian, the Court ruled that the failure of an owner and its contractor to adequate secure the jobsite was a breach of the Builder’s Risk policy, thus preventing the owner and contractor from securing coverage for a…
Takeaways From Saul Ewing Arnstein & Lehr’s 2019 Construction Risk Management Symposium On February 8, 2019, Saul Ewing Arnstein and Lehr’s Construction Practice hosted a half day symposium that focused on important risk management issues facing the industry. From safety practices to cyber threats to labor and employment challenges, the risks faced by the construction industry are best managed by staying ahead of a rapidly changing environment. This was the central theme at the symposium, attended by nearly 100 professionals in construction, real estate and development, insurance, consulting, and recruiting. Click here to learn about the three key takeaways from…
Two Construction Companies Pay $3.6 Million Dollar to Settle SBA Fraud Allegations A United States Department of Justice investigation of two construction companies and their owners has resulted in a $3.6 million settlement following allegations that the companies defrauded the Small Business Administration (SBA).  The fraud resulted from false statements in the SBA bid process for federal government contracts.  The SBA program at issue has the stated goal of assisting small disadvantaged businesses that are applying for federal contracts by setting aside for them five percent of federal contract dollars.  Michael Vigil controlled 91 percent of VMJ Construction, LLC.  John…
The Scope of the Threat. Five or ten years ago, the most widely recognized cybersecurity threats involved the risk of compromises of personally identifiable information (PII) such as Social Security numbers, payment card information, and the like.  The high-profile data breaches frequently involved retailers, health care providers, or other consumer-facing companies and industries.  Many of the warnings about cybersecurity threats focused on these kinds of risks, and state data breach laws in the U.S. focused on the obligation to notify individuals if their PII had been breached. In recent years, however, the cybersecurity threat landscape has become increasingly complex, and…
PennDOT’s Union Work Requirement Violates Pennsylvania’s Constitution Absent Extraordinary Circumstances On January 11, 2019, the Commonwealth Court of Pennsylvania held that absent extraordinary circumstances, requiring contractors to execute a project labor agreement (a “PLA”) in connection with a bid for a public construction project violates the Pennsylvania Constitution and Commonwealth Procurement Code. See Allan Myers, L.P. v. Pennsylvania Department of Transportation, No. 314 C.D. 2018. Further, a bid that favors a particular general trade union constitutes discrimination against nonunion and other trade union contractors and violates the Commonwealth’s competitive bidding laws.      The Pennsylvania Constitution and Section 512(a) of the…
A recent decision by Florida’s Fifth District Court of Appeal on Florida’s “anti-indemnity” statute” is one that should catch the attention of lawyers who draft and negotiate construction contracts in Florida.   In CB Contractors, LLC v. Allens Steel Products, Inc., 2108 WL 6579215 (Fla. 5th DCA 2018), a Florida appeals court held that even though a subcontract indemnity provision did not fully comply with the requirements of Section 725.06 of the Florida Statutes, which requires limits on certain indemnity obligations in construction contracts, only the offending portion of the indemnity provision was void and unenforceable under the statute, not…
Wake-up call for Cybersecurity in the Construction Industry: Contractor Falls Victim to Cyber Attack The Wall Street Journal recently reported that cyber-attacks by foreign governments into the nation’s electric grid are utilizing what it called “the system’s unprotected underbelly,” the contractors and subcontractors that work for the utilities. According to the Journal’s reporting, a 15-person construction contractor in Salem, Oregon had fallen victim to a cyber attack, one that the Department of Homeland Security said was most likely carried out by a foreign government.  The contractor had been what cyber attackers often refer to as a “soft” or easy target…