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Posts Tagged ‘#construction’

The Foundation to Deny Coverage May Have Cracks

Posted on: September 26th, 2016

By: Bart Gary and Brian Lake

In Cypress Point Condo. Ass’n, Inc. v. Adria Towers, L.L.C., 226 N.J. 403 (2016), decided August 4, 2016, the Supreme Court of New Jersey affirmed a Court of Appeals decision that a condominium developer general contractor’s Commercial General Liability (CGL) policies provide coverage for consequential damages stemming from its subcontractor’s allegedly defective work. The underlying dispute arose after several residents of a condominium complex began to experience roof leaks and water seepage in their units. The condominium association brought suit against the developer, who also served as the general contractor, alleging negligent construction by the developer’s subcontractors, and sought declarations that its claims were covered under the developer’s CGL policies. The trial court, relying on Weedo v. Stone-E-Brick, 81 N.J. 233 (1979), granted summary judgment to the insurers, finding that there was no “property damage” or “occurrence,” as defined by the policies to trigger coverage. The Supreme Court, however, held that the alleged consequential damage caused by the subcontractors’ defective work constitutes “property damage,” because it is “physical injury to tangible property,” as well as an “occurrence” because it is an unexpected or unintended “continuous or repeated exposure to substantially the same general harmful conditions.”

The Cypress Point decision signals a departure from long-standing New Jersey case law allowing insurers to disclaim coverage for consequential damages in negligent construction cases. In distinguishing the 1979 Weedo case, one of the leading decisions on the issue, the New Jersey Supreme Court noted that the policies at issue in Cypress Point were based on the 1986 ISO standard CGL form, while Weedo interpreted the earlier 1973 ISO standard form. The 1973 version defined “occurrence” as “an accident . . . which results in . . . property damage neither expected nor intended from the standpoint of the insured.” In contrast, the 1986 form defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Giving the undefined term “accident” its plain meaning, the New Jersey Supreme Court held that the an “occurrence” contemplates unintended and unexpected harms caused by negligent conduct, such as the consequential damages caused by the developer’s subcontractor’s allegedly defective work. Additionally, the 1986 form also includes a “subcontractor’s work” exception to the business risk exclusions. The New Jersey Supreme Court pointed out that the inclusion of the subcontractor exception signified the insurer’s intent to cover damages caused by the insured’s subcontractor’s negligent work. Otherwise, the exception would be meaningless.

With this decision, the New Jersey Supreme Court joins the recent trend of courts interpreting the terms of standard CGL policies, specifically those defining “occurrence” and “property damage” in accordance with the 1986 ISO standard form, to provide coverage for consequential damages resulting from a subcontractor’s negligent work. The Georgia Court of Appeals has fast adopted the majority view in Weedo to hold that a contractor’s general liability policy was not implicated where the damage was to the contractor’s work itself, as opposed to the consequential damages resulting from the poor workmanship. Gary L. Shaw Builders, Inc. v. State Automotive Mut. Ins. Company, 355 S.E.2d 220 (1987). For nearly thirty years the Georgia courts have slavishly followed this rule despite changes in the industry-wide policies during that time. With the court that decided Weedo modifying its ruling, Georgia Courts may be forced to look at the newer policy provisions as well and expand coverage for defective construction works.

As always, please contact the attorneys and Freeman, Mathis & Gary, LLP to address any further questions you may have regarding these issues.

Is Florida’s Notice and Repair Process a Suit? Eleventh Circuit Asks Florida Supreme Court to Weigh In

Posted on: August 22nd, 2016

By: Bart Gary and Tim Holdsworth

Earlier this month, in Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Co., the Eleventh Circuit certified to the Florida Supreme Court the question of whether Florida’s statutory notice and repair process constitutes a suit under a commercial general liability (“CGL”) policy, triggering the insurer’s duty to defend. In this case, Altman Contractors, Inc. (“ACI”) served as the general contractor for the construction of a condominium. In 2012, the condominium served ACI with a notice of claim under Florida’s notice and repair statute, which establishes a process to resolve construction disputes between property owners and contractors, subcontractors, suppliers, or design professionals.

ACI then sent a demand letter to Crum & Forster Specialty Insurance Co. (“C&F”) notifying it of the notice of claim and demanding that C&F defend and indemnify ACI. C&F denied that it had a duty to defend ACI because the matter was “not in suit” as that term was defined in the insurance policies. The CGL policy defined “suit” as:

“Suit” means a civil proceeding in which damages because of “bodily injury”, “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

The policy did not define “civil proceeding.” ACI then filed a lawsuit against C&F seeking a declaration that C&F owed it a duty to indemnify and defend. The district court found that the policy language was unambiguous and the notice and repair process was not a “suit” because it did not meet Black’s Law Dictionary’s definition of “civil proceeding” (“[a] judicial hearing, session, or lawsuit in which the purpose is to decide or delineate private rights and remedies, as in a dispute between litigants in a matter relating to torts, contracts, property, or family law”).

The Eleventh Circuit found that the outcome of the case may have significant practical and policy implications for Florida. For example, C&F argued that imposing a duty to defend on insurers during the notice and repair process would fuel an insurance crisis in the state by increasing the cost of insurance and limiting its availability. Because of these possible implications and the lack of guidance from Florida courts on the issue, the Eleventh Circuit found it appropriate to certify the question to the Florida Supreme Court.

We will keep you updated on this matter once the Florida Supreme Court issues a decision. In the meantime, feel free to contact counsel at Freeman Mathis & Gary if you have any questions or would like guidance on these issues.

Georgia Supreme Court Holds that Sovereign Immunity Bars Software Vendor’s Claim that State of Georgia waived the contractually Required Completion Date for the Contract

Posted on: June 7th, 2016

By:  Bart Gary and Brian Lake

A software vendor entered into a written contract with the Georgia Department of Labor (GaDOL) to develop computer software. The contract required a certain completion date and contained a stipulation that amendments to the contract had to be in writing and executed by the vendor and the GaDOL. There were no written amendments to the contract. The completion date passed without the vendor delivering a functioning software product, but the parties continued to communicate and work together for the development of the software. Finally, about nine months after the contract’s required completion date had passed, the GaDOL gave notice of termination of the contract for the vendor’s failure to deliver a functioning product that complied with the contract. The vendor sued the GaDOL for breach of contract. At trial, the Court found in favor of the GaDOL, which had argued that the vendor failed to prove that the contractual completion date had been amended or extended by a writing executed by both parties, as required by the contract. The GaDOL framed its argument in terms of sovereign immunity under the Georgia Constitution, which provides that the state’s defense of sovereign immunity is waived “as to any action ex contractu for the breach of any written contract.”  Sovereign immunity comes to us from the ancient notion that the “King (or Queen) can do no wrong.”

The vendor appealed to the Georgia Court of Appeals, who reversed the trial court and held that the parties’ course of conduct created a question for the jury to resolve as to whether the parties waived or extended that contractually required completion date or the provision that the contract could be amended only in writing. The Georgia Supreme Court accepted the case for review and reversed the Court of Appeals. Specifically, the Supreme Court reasoned:

While private parties, however, may be able to modify and extend written contracts by manifesting their intent to do so even without a written agreement, the enforceability of a contract against the state is governed by the constitution and by statute. In order for sovereign immunity to be waived with respect to contract actions against the state, the contract must be in writing. The Court of Appeals erred in extending general common law rules of contract in a manner that creates contract liability against a state agency for an agreement that does not meet the in-writing requirement for waiver of sovereign immunity.

Thus the vendor had no basis to assert that the time requirements for its services had been waived or abandoned by the GaDOL’s conduct or communications that appeared to recognize the continued existence of a contract.

The case involved a software vendor, but the decision has greater implications for public construction projects—buildings, roads, and highways—for the state and counties in Georgia. Construction contracts have the same requirements for amendments to be in writing, especially for written change orders for additional work, changed conditions, and time extensions, among other reasons. Indeed, the Supreme Court distinguished or disapproved several earlier decisions by the Court of Appeals that held that the state or county waived written modification (change order) requirements by conduct.

Of particular note, the Supreme Court abrogated the 53-year old decision of the Court of Appeals in State Hwy. Dept. v. Wright Contracting Co., 107 Ga. App. 758 (1963), which applied contracting principles to hold that where the public owner verbally orders extra work on a construction project with notice that the contractor expects additional compensation, the owner waives the contract’s requirement for a written change order and the contractor may recover compensation. Wright stood for many years to allow recovery for extra work even where the parties did not promptly attend to the required paper work. The Court reasoned that Wright was decided before the principle of sovereign immunity became a part of the State Constitution in 1974. Now those contracting with a state agency or department, a county, or other government authority need to “get it in writing” or risk losing a claim to sovereign immunity.

Georgia Dept. of Labor v. RTT Associates, Inc., Case No. S15G1780 (May 23, 2016)

Georgia Adopts Protection for Design Professionals from Hold Harmless Clauses

Posted on: May 11th, 2016

By: Bart Gary

Georgia recently adopted legislation that declares an indemnity or hold harmless agreement in connection with or collateral to a contract or agreement for engineering, architectural, or land surveying services against public policy and void and unenforceable.  The legislation excepts, and therefore permits, indemnification for losses and damages, “to the extent caused by or resulting from the negligence, recklessness, or intentionally wrongful conduct of the indemnitor” (the party obligated to indemnify the other) or his or her employee or agent.

In the convoluted way statutes are written, this new law voids indemnity clauses in agreements for services by an architect, engineer or land surveyor, unless the clause is confined to instances, or “to the extent,” caused by the negligence, recklessness, or misconduct of a party. The important language is the phrase “to the extent of,” which is already used in many form indemnity clauses, and has been interpreted to call for a comparison of the negligence or  fault of an indemnitor with that of the party to receive indemnity protection  or third parties .  In other words, the indemnitor is only responsible for that portion of the loss it caused.  The new law is written to apply to any party to the design contract, but is mainly for the benefit of the designer.

Georgia still outlaws indemnity clauses in construction-related agreements that purport to indemnify one for his or her own sole negligence, and care needs to be used in drafting contracts in light of that law. Now in contracts for design services prudent drafting dictates that the indemnity clause should expressly adopt the exception in the new law with inclusion of the “to the extent of” language for the actual fault of the designer.

One question that the new law does not address is the status of design/build contracts where a single party, usually a general contractor or construction manager, is responsible for both the design and construction of a building or structure. Since design/build contracts include architectural and engineering services, the indemnity agreement in the contract could be made unenforceable even if the loss was unrelated to the design services. In any event, the extent of the indemnity coverage for the project owner in a design/build contract may be less that under current law.

The new legislation is codified in Section 13-8-2 (c) of the Georgia Code and goes into effect on July 1, 2016. The new law does not affect existing agreements, but would apply to those coming into existence after July 1, 2016.

Pre-Trial Ruling Gives SawStop an Edge Over Bosch

Posted on: March 11th, 2016

By: Daniel Nicholson

SawStop and Bosch continue to litigate over Bosch’s proposed 2016 release of Reaxx table saws, but SawStop received a favorable ruling from the U.S. International Trade Commission last month.

In 2015 SawStop filed a lawsuit against Bosch for patent infringement as Bosch’s Reaxx table saws utilize similar flesh-detecting injury mitigation technology that SawStop brought to the market in 2004. SawStop technology allows the table saw to detect when flesh touches the saw blade and triggers an automatic braking system which stops the blade within five milliseconds. While the user may receive a serious cut on his/her finger, the technology prevents the kind of full amputation which an estimated 4,000 Americans will suffer this year while using this kind of tool.

With this patent litigation SawStop is seeking an order to prevent Bosch’s Reaxx table saws from reaching U.S. Shores. According to a 2015 SawStop press release, “after years of denying the need for active injury mitigation technology on table saws via their industry trade group (Power Tool Institute, Inc.), Bosch has announced that it intends to release a table saw that incorporates numerous inventions developed and patented by SawStop. As part of the lawsuit, SawStop is asking the ITC to exclude Bosch’s infringing table saws from entry into the United States, and to order Bosch to stop advertising and selling infringing products in the United States.”[1] Bosch maintains that the Reaxx technology patents are not conflicting with SawStop. Currently SawStop is the only producer of such technology applied to table saws in the United States.

The Administrative Law Judge made the favorable pre-trial ruling on the meaning of key phrases used in SawStop’s patent at the conclusion of the parties’ Markman Hearings. Bosch and SawStop disagreed as to the construction of terms like “detection system,” “reaction system,” and “cartridge.” Bosch argued that the “claim terms mean what they say in lay English, as set forth in [SawStop’s] proposed constructions,” meaning that the terms should be narrowly construed to their plain English meanings on the paper.[2] SawStop countered that “[Bosch] failed to provide a legitimate basis for departing from the general rule that claims should be given their plain and ordinary meaning as understood by a person of ordinary skill in the art when read in the context of the specification and prosecution history.”[3] The court agreed with SawStop, finding no justifiable reason to narrow the claim terms, and on all ten disputed term constructions applying the general “plain and ordinary meaning” standard.[4]

While it may seem insignificant, in the world of patents the words used are incredibly important. “It is a ‘bedrock principle’ of patent law that ‘the claims of a patent define the invention to which the patentee is entitled the right to exclude;’”[5] in effect, the terms used in a patent are the terms by which the patent is defined, and therefore the terms by which the owner can protect it. If the terms on a competitor’s patent too closely match the words of your previous patent then you have a better argument that your competitor’s patent infringes on your own.

This may seem like a simple problem to avoid, but during the patent writing process several parties will influence what words end up on the final patent application, including the inventor, technical writers, patent attorneys, and even the patent examiner. Their goal is to write sufficiently specific enough to satisfy the terms of the Patent Act, but still provide enough broad language to cover any future changes that might occur. Sometimes this can lead to a “too many cooks in the kitchen” problem with unintended legal consequences. Future inventors should be aware of such issues as it is not uncommon to find that the final patent is worded significantly different from the inventor’s initial description.

While a victory at a Markman Hearing is noteworthy, it is only one step in a complicated process. Patent litigation starts well before this hearing, with attorneys working to research the opposing patents and patent law, drafting and submitting complaints and answers, and conducting extensive discovery (the process by which the parties exchange information related to the facts of the case). The parties will come together and determine what issues exist related to claim construction, specifically what constructions they agree on, and which ones will need to be settled by the Court at the Markman Hearing. A win here means SawStop can put the pressure on Bosch, but it doesn’t guarantee a successful outcome, pending any appeals, a slog of pre-trial motions, and if necessary mediation, arbitration, settlement, or trial.

If SawStop is successful in their overall claim, Bosch and other manufacturers will have to re-think working with SawStop in order to produce safer table saws. In a recent article we discussed how major litigation wins by injured workers may indicate that companies who do not implement flesh-detecting injury mitigation technology put themselves at increased risk of liability.[6] Manufacturers would be stuck between having to cautiously implement their own technology, and having to purchase SawStop’s in order to keep their market shares, an expensive outlook for the industry.


[1] http://www.businesswire.com/news/home/20150716006581/en/SawStop-Files-Lawsuits-U.S.-International-Trade-Commission

[2] Certain Table Saws Incorporating Active Injury Mitigation Technology and Components Thereof., 2015 WL 8492236 (U.S.Intern.Trade Com’n)

[3] Certain Table Saws Incorporating Active Injury Mitigation Technology and Components Thereof., 2015 WL 8492233 (U.S.Intern.Trade Com’n)

[4] Certain Table Saws Incorporating Active Injury Mitigation Technology and Components Thereof (Inv. No. 337-TA-965). Order No. 7. February 9, 2016. Accessed from: http://www.itcblog.com/images/order7in965.pdf

[5] Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005)