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    Wisconsin Supreme Court Holds that Subrogation Waiver Does Not Violate Statute Prohibiting Limitation on Tort Liability in Construction Contracts

    October 21, 2019 —
    In Rural Mut. Ins. Co. v. Lester Bldgs., LLC 2019 WI 70, 2019 Wisc. LEXIS 272, the Supreme Court of Wisconsin considered whether a subrogation waiver clause in a construction contract between the defendant and the plaintiff’s insured violated Wisconsin statute § 895.447, which prohibits limitations of tort liability in construction contracts. The Supreme Court affirmed the lower court’s decision that the waiver clause did not violate the statute because it merely shifted the responsibility for the payment of damages to the defendant’s insurance company. The waiver clause did not limit or eliminate the defendant’s tort liability. This case establishes that while § 895.447 prohibits construction contracts from limiting tort liability, a subrogation waiver clause that merely shifts responsibility for the payment of damages from a tortfeasor to an insurer does not violate the statute and, thus, is enforceable. In Rural Mutual, the plaintiff’s insured, Jim Herman, Inc. (Herman), entered into a contract with Lester Buildings, LLC (Lester) to design and construct a barn on Herman’s property. The contract included a provision that stated the following: Both parties waive all rights against each other and any of their respective contractors, subcontractors and suppliers of any tier and any design professional engaged with respect to the Project, for recovery of any damages caused by casualty of other perils to the extent covered by property insurance applicable to the Work or the Project, except such rights as they have to the proceeds of such property insurance and to the extent necessary to recover amounts relating to deductibles of self-insured retentions applicable to insured losses. . . . This waiver of subrogation shall be effective notwithstanding allegations of fault, negligence, or indemnity obligation of any party seeking the benefit or production [sic] of such waiver. Read the court decision
    Read the full story...
    Reprinted courtesy of Gus Sara, White and Williams
    Mr. Sara may be contacted at sarag@whiteandwilliams.com

    Insurer Must Cover Portions of Arbitration Award

    October 14, 2019 —
    The court determined that there was coverage in a construction defect case for portions of an arbitration award. Liberty Surplus Ins. Corp. v. Century Sur. Co., 2019 U.S. DIst. LEXIS 116093 (S.D. Texas July 12, 2019). Descon Construction contracted with the City of Edinburg, Texas, to build a library. Descon subcontracted with McAllen Steel Erectors to install the library metal roof. The roof began to leak within two months of occupancy. The leaks continued for seven years. Edinburg sued Descon. The matter was arbitrated. The arbitration panel found that the library roof was defective, the exterior stucco system was defectively installed and certain work, including fire-caulking, had not been performed. The panel concluded that Descon was liable for breach of contract and breach of warranty. The panel determined that Edinburg was entitled to replacement of the existing roof. Further, McAllen was found to have breached its subcontract with Descon by defectively installing the roof, entitling Descon to recover $762,537 from McAllen. Read the court decision
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    Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
    Mr. Eyerly may be contacted at te@hawaiilawyer.com

    NYC Design Firm Executives Plead Guilty in Pay-to-Play Scheme

    June 18, 2019 —
    Two former top executives of New York City-based engineer HAKS pleaded guilty in city court May 13 to bribe charges related to efforts to gain municipal water infrastructure contracts, according to court filings, an attorney for its ex-chief financial officer and plea agreements provided to ENR by the Manhattan district attorney's office. Read the court decision
    Read the full story...
    Reprinted courtesy of Engineering News-Record
    ENR may be contacted at ENR.com@bnpmedia.com

    N.J. Appellate Court Confirms that AIA Construction Contract Bars Insurer's Subrogation Claim

    September 10, 2019 —
    On April 4, 2019, the Appellate Division of the New Jersey Superior Court confirmed that the waiver of subrogation provision in a commonly used form construction contract, American Institute of Architects (AIA) form A201 — 2007 General Conditions of the Contract for Construction, precluded an insurer’s claims against a subcontractor. In Ace American Ins. Co. v. American Medical Plumbing, Inc., the court considered Ace American Insurance Company’s (Ace) subrogation claim against a plumbing subcontractor who was allegedly responsible for a water main leak that caused approximately $1.2 million in damages to Ace’s insured, Equinox Development Corporation (Equinox). In March 2012, Equinox entered into a contract with Grace Construction Management Company, LLC (Grace) to build the “core and shell” of a new health club. Equinox and Grace used AIA form A201 for their contract. Grace then hired American Medical Plumbing, Inc. (American) as a plumbing subcontractor for the project. In April 2013, the water main failed, flooding the health club. Read the court decision
    Read the full story...
    Reprinted courtesy of Saxe Doernberger & Vita, P.C.
    Saxe Doernberger & Vita, P.C. may be contacted at coverage@sdvlaw.com

    Release Language Extended To Successor Entity But Only Covered “Known” Claims

    August 06, 2019 —
    A recent case contains valuable analysis that has impact on whether a “successor” entity will be bound by a settlement agreement it was not a direct party to. This case contains arguments for contractors that can be raised in a number of different contexts if it is sued by a successor or related entity. The same case discusses the difference between releasing a party for “known” claims without releasing the same party for “unknown” claims. This is an important distinction because unknown claims refer to latent defects so a release that only releases a party for known claims is not releasing that party for latent defects. In MBlock Investors, LLC v. Bovis Lend Lease, Inc., 44 Fla. L. Weekly D1432d (Fla. 3d DCA 2019), an owner hired a contractor to construct a project. At completion, the owner transferred the project to an affiliated entity (collectively, the “Owner”). The contractor sued the Owner for unpaid work, the Owner claimed construction defects with the work, and a settlement was entered into that released the contractor for KNOWN claims. Thereafter, the Owner defaulted on the construction loan and agreed to convey the property through a deed in lieu of foreclosure to an entity created by the lender (the “Lender Entity”). Read the court decision
    Read the full story...
    Reprinted courtesy of David Adelstein, Kirwin Norris, P.A.
    Mr. Adelstein may be contacted at dma@kirwinnorris.com

    How A Contractor Saved The Day On A Troubled Florida Condo Project

    November 18, 2019 —
    Enough isn’t said about general contractors on rocky, out-of-control projects who take the lead in solving problems they didn’t create. That’s what I found troubleshooting projects for a Chicago bank. A good example is a $200-million Florida apartment complex being built in 2007, when labor was as tight as it is now and in some places even tighter. Reprinted courtesy of John Zander, Engineering News-Record ENR may be contacted at ENR.com@bnpmedia.com Read the full story... Read the court decision
    Read the full story...
    Reprinted courtesy of

    Construction Cybercrime Is On the Rise

    May 26, 2019 —
    At the end of April, just as St. Ambrose Roman Catholic Church in Brunswick, Ohio, neared the close of a five-month-long, $5.5-million renovation, Father Bob Stec, the parish pastor, was surprised to hear that the contractor, Marous Brothers Construction, Willoughby, Ohio, had not received a $1.7- million payment. Reprinted courtesy of Tom Sawyer, Engineering News-Record and Jeff Rubenstone, Engineering News-Record Mr. Sawyer may be contacted at sawyert@enr.com Mr. Rubenstone may be contacted at rubenstonej@enr.com Read the court decision
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    Reprinted courtesy of

    Construction Contract Provisions that Should Pique Your Interest

    September 30, 2019 —
    Construction contracts are a big part of my legal practice and the drumbeat here at Construction Law Musings. Why? Because not only does your construction contract set the expectations and “rules of the game” for a construction project, it will be read strictly and literally by the Virginia courts should there be a dispute. For these reasons, construction professionals need to be alert for the language in certain key clauses in a construction contract to assure that these clauses are as balanced as possible and also well understood. Here are my “Top Five”:
    1. “Pay if Paid”- These clauses are almost always in the subcontracts between a general contractor and a subcontractor and are enforceable in Virginia if drafted correctly and under the proper circumstances.
    2. Change Orders- Whether work is subject to a change order and the required payment for any changed work are often a key source of contention (read legal fees). A properly drafted and followed change order provision can help avoid much of this contention.
    3. Indemnity- Much has been made in recent years about indemnity provisions and their enforceability. All parties in the construction payment chain can and should be aware of how to best draft their indemnity provisions to make them enforceable. Failure to do so can be catastrophic.
    Read the court decision
    Read the full story...
    Reprinted courtesy of The Law Office of Christopher G. Hill
    Mr. Hill may be contacted at chrisghill@constructionlawva.com