Archive - 2014

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Cover Me
2
Sophisticated Parties May Shorten the Statute of Limitations for Construction Defect Claims
3
Riverside County Superior Court To Designate One Courtroom To Handle Complex Litigation
4
An Architect Owes A Duty Of Care To Future Homeowners Where The Architect Is The Principal Design Professional On The Project
5
An Additional Insured’s Reasonable Expectations may be Different from the Named Insured’s and Must be Considered to Determine whether the Additional Insured is Entitled to Defense from the Insurer of a Commercial Excess & Umbrella Liability Policy
6
Salespersons Acting Under the Broker Have the Same Fiduciary Duty to the Buyer and the Seller as the Broker When a Broker is a Dual Agent of Both the Buyer and the Seller in a Real Property Transaction
7
Builder’s Alternative Non-Adversarial Pre-Litigation Procedures Are Enforceable And Homeowner Compliance Is Required Prior To Initiation Of Litigation
8
Important Appellate Decisions Impacting Builder’s Right To Repair Act – SB800

Cover Me

The Transfer of Risk Through Express Indemnity does not Always Lessen Uncertainty when a Claim Arises

By: Daniel A. Cribbs and Ravi R. Mehta
November 30, 2014
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The transfer of risk through express indemnity does not always lessen uncertainty when a claim arises

Additional insured endorsements and express indemnity provisions are common risk transfer mechanisms, but they have generated uncommonly complex and difficult-to-reconcile judicial holdings. Litigation concerning priority-of-coverage disputes that include consideration of the vertical and horizontal exhaustion doctrines is necessarily complex, but it is part of an evaluation of the risks, rights, and obligations of clients engaging in commercial contracts. Courts must consider the insurance policies of the parties as well as the agreements between the insureds to determine the order in which each party’s policies must respond to a given loss. As one court has observed, “[E]stablishing a pecking order among multiple insurers covering the same risk…has been characterized as ‘a court’s nightmare.…’”1

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Sophisticated Parties May Shorten the Statute of Limitations for Construction Defect Claims

Brisbane Lodging L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249

By: Jon A. Turigliatto and David A. Napper
November 19, 2014

The recent decision by the First District Court of Appeal in Brisbane Lodging L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249 is now final and is citable authority in California as the appellant did not petition the decision for review by the California Supreme Court. The decision is noteworthy for contractors and builders across the State as the Court has held that parties can contractually agree to limit the statutory limitations period for construction defect claims and the date on which the limitations period commences. Despite some limitations set forth below, the Court established important precedent by enforcing certain contract language in a standard AIA form general contract to shorten the statute of limitations for construction defect claims to four (4) years from the date of substantial completion of the project. A brief synopsis of the facts, court’s reasoning, and impact is set forth below.

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Riverside County Superior Court To Designate One Courtroom To Handle Complex Litigation

By: Richard H. Glucksman and David A. Napper
November 12, 2014

Riverside County Superior Court expects to consolidate complex civil litigation into one courtroom by early 2015. Many other counties, including Los Angeles, Orange, San Francisco, Sacramento, Alameda, and Santa Clara already have designated complex civil litigation courtrooms. Riverside Court Superior Court currently distributes the complex cases among 10 civil judges, most of which are handled by seven judges at the Main St. Riverside courthouse location.

Riverside Judge Sharon Waters stated that “[i]t’s been something that I personally have felt has been long overdue” and that “[t]he idea is that put it with one judge and let him or her develop the expertise.” Judge Waters believes “[t]he potential value of establishing a complex litigation courtroom [is that] it allows the judge to focus on the cases full time.”1

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An Architect Owes A Duty Of Care To Future Homeowners Where The Architect Is The Principal Design Professional On The Project

Beacon Residential Community Association v. Skidmore, Ownigs, & Merrill LLP 2014 No. S208173 (Cal. Sup. Ct)

By: Richard H. Glucksman, Jon A. Turigliatto and David A. Napper
July 10, 2014

In a seminal ruling the California Supreme Court issued its decision on July 3, 2014 that an architect owes a duty of care to future homeowners where the architect is the principal architect on the project. The Court further held that the duty of care exists even when the architect does not actually build the project or exercise ultimate control over construction.

Design professionals Skidmore, Owings & Merrill LLP and HKS Inc. (collectively “Design Professionals”) provided architectural and engineering services for construction of The Beacon residential condominiums in San Francisco, California (“Project”). The Beacon Residential Community Association (“Association”) eventually brought a construction defect action against various entities including the Design Professionals. The Design Professionals were the only architects on the Project and played an active role throughout the construction process, coordinating the design and construction teams, conducting weekly site visits and inspections, recommending design revisions as needed, and monitoring compliance with design plans. The Design Professionals demurred, contending they owed no duty of care to the Association. They further contended that even if the architect initiated the substitutions, changes, and other elements of design, so long as the final decision rested with the owner there is no duty owed by the design professionals to the future condominium owners.

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An Additional Insured’s Reasonable Expectations may be Different from the Named Insured’s and Must be Considered to Determine whether the Additional Insured is Entitled to Defense from the Insurer of a Commercial Excess & Umbrella Liability Policy

Transport Insurance Company v. Superior Court (2014) 222 Cal.App.4th 1216.

By: Richard H. Glucksman, Jon A. Turigliatto, and Kacey R. Riccomini
June 4, 2014

The Second District Court of Appeal’s recent decision, Transport Insurance Company v. Superior Court (2014) 222 Cal.App.4th 1216, immediately affects builders and contractors (collectively “builders”) who are often named as additional insureds (AIs) to contractors’ general liability policies. The decision is an important tool for builders’ counsel because the builder’s reasonable expectations can alter the interpretation of ambiguous terms in policies issued to subcontractors. Essentially, the builder’s intent is relevant to the interpretation of policy terms because the subcontractor’s intent in requesting additional coverage depends on the agreement it made with the builder. The salient aspects of the facts, the Appellate Court’s reasoning, and practical considerations are discussed below.

Transport Insurance Company (Transport) issued a commercial excess and umbrella liability policy (Policy) to Vulcan Materials Company (Vulcan), naming R.R. Street & Co., Inc. (Street) as an AI for its distribution of a solvent. The Policy provided that Transport would indemnify and defend the insured for loss caused by property damage if (1) it was not covered by “underlying insurance” but was within the terms of coverage of the Policy, or (2) if the limits of liability of the “underlying insurance” were exhausted during the Policy period due to property damage. The Policy included a Schedule of Underlying Insurance (Schedule) that listed policies issued to Vulcan. Thereafter, Vulcan and Street were named as defendants in several environmental contamination actions (Underlying Actions).

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Salespersons Acting Under the Broker Have the Same Fiduciary Duty to the Buyer and the Seller as the Broker When a Broker is a Dual Agent of Both the Buyer and the Seller in a Real Property Transaction

Horiike. v. Coldwell Banker Residential Brokerage Co. 2014 WL 1384226 (Cal.App. 2 Dist.)

By: Richard H. Glucksman, Jon A. Turigliatto, and David A. Napper
June 4, 2014

The Second District Court of Appeal held that when a broker is the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer and the seller as the broker.

In 2006, a salesperson at Coldwell Banker Residential Brokerage Company (“Coldwell Banker”) listed a Malibu property on a multiple listing service. The salesperson stated the home offered approximately 15,000 square feet of living areas and created a flier stating the same. In March of 2007, a couple made an offer to purchase the property. The salesperson provided a letter from the architect stating the size of the house was approximately 15,000 square feet and suggested the couple hire a qualified specialist to verify the square footage. The deal eventually fell through when the seller would not extend the time for an inspection of the property. The salesperson subsequently changed the approximate square footage of the living areas to be “0/O.T.” meaning zero square feet and other comments.

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Builder’s Alternative Non-Adversarial Pre-Litigation Procedures Are Enforceable And Homeowner Compliance Is Required Prior To Initiation Of Litigation

The McCaffrey Group, Inc. v. Fresno County Sup. Ct. 2014 WL 1153392 (Cal.App.5 Dist.)

By: Jon A. Turigliatto and David A. Napper
April 14, 2014

There have recently been several appellate decisions avoiding the application and enforcement of the Right to Repair Act, California Civil Code §895 et seq. (“SB800”). Generally, SB 800 applies to all new residential construction sold after January 1, 2003. SB 800 provides builders with the right to inspect and repair construction defects before homeowners are permitted to initiate litigation. Similarly, SB 800 allows homeowners to seek repairs by a builder without having to initiate litigation.

The Fifth District Court of Appeal held that homeowners must comply with the builder’s alternative non-adversarial pre-litigation procedures prior to initiating construction defect litigation. , which include providing notice of the claim, giving McCaffrey an opportunity to repair and correct, and participating in nonbinding mediation.

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Important Appellate Decisions Impacting Builder’s Right To Repair Act – SB800

By: Jon A. Turigliatto and David A. Napper
March 17, 2014

EXECUTIVE SUMMARY:

As an update to our recent article regarding the Fourth District Court of Appeal’s decision in Liberty Mut. Ins. Co. v. Brookfield Crystal Cove LLC (2013), within the period of two days, two separate divisions of the Second District Court of Appeal issued opinions regarding the application of the Builder’s Right to Repair Act commonly referred to as SB800, and examining the Liberty Mutual decision. In Liberty Mutual, the Fourth District Court of Appeal held that SB800 is not a homeowner’s exclusive remedy for construction defects and that the statutory scheme does not eliminate a property owner’s common law rights and remedies where actual property damage has occurred.

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