Archive for the ‘Damages’ Category

Hurricane Isaac – Landfall

Hurricane Isaac made landfall today in Louisiana over Plaquemines parish and then it took a turn to the west whereby it went back over open water. As of 11:30 CST the storm is still over the water and the rain bands are pelting the city of New Orleans and surrounding areas.

For those who own commercial and residential property in New Orleans, Metairie and other metropolitan areas of South Louisiana, you must ride out the storm and make it a priority to get your property secure. Next is to assess the damage. Make a proper claim with your property and flood insurance carrier. You will need to file a “sworn proof of loss” which requires an estimate of damages that is signed off on by you the insured.

Do not simply rely on your insurance company and/or agent. Be proactive and get an estimate. If you can afford it make the repairs and keep proof of all costs expended for the repair. Insurance will only indemnify you which means pay you back for what you spent to repair.

Be weary of out-of-state or unlicensed contractors who are not qualified to do repairs to your property. Get your own public adjuster to battle with the insurance adjuster. Get your own contractor to battle with the estimate of the insurance company. Make quality repairs and demand that your insurance fully indemnify you as is required by law and under the policy.

As of Midnight CST the Weather Channel has New Orleans reporting 2.40 inches of rain between 7pm and 10pm. More to come as this situation progresses.

Posted in:     Construction News, Damages, Hurricane, Louisiana  /  Tags: , , , , , , , , , , , , , , , , ,   /   Leave a comment

David v. Goliath – The Difficult Task of Fighting Your Insurance Company

I was recently speaking with a client about the posture of a pending case and the client was surprised to know that nearly all of the insurance companies that were originally brought into the suit had whittled their way out due to policy limitations, lack of coverage and policy exclusions. Most laymen, including contractors and homeowners, believe that if they purchase a policy or file suit against another party’s insurance policy that there will be a windfall payout all the way up to the policy limits. This is simply not the case. Insurance companies are constantly, from year to year, changing the language of policies and inserting exclusions so as to limit exposure if there is an occurrence.

A prime example of how far insurers will go to limit exposure is apparent in a recent Louisiana 5th Circuit of Appeal decision where the appeal court put aside technicalities to let common sense prevail. The case appeal opinion is in the Mason v. Bankers Insurance matter coming out of the 24th JDC for Jefferson Parish. Basically the homeowners, Mason and Bankers filed concurrent Motions for Summary Judgment and the trial court ruled in favor of Bankers Insurance, finding no coverage and dismissing the case. On appeal the ruling was vacated and remanded, basically deemed improper.

This happens all the time in law and is not the uncommon or disturbing part. The interesting part is how the facts and law are blended together in such a manner that the trial court was not able to find coverage under the policy. To sum up the facts, the Mason’s experienced plumbing issues whereby their toilet would back up, raw sewerage would enter the home and a subsequent bacterial contamination was the end result. Upon investigation, there was a breach in a sewerage line in the slab causing the damage. The Mason’s incurred over $14,00o in damages and then made a claim against their homeowners insurance, just as we would all do in this instance.

Bankers did as most insurers do, they denied the claim as not being covered, therefore the Mason’s were forced to file suit to recover their damages. Bankers argued and the trial court agreed that the underground (in the slab) plumbing system of the home was not a property that is covered under the policy. Bankers claims that the plumbing system is not attached to the dwelling! The main crux of this argument is that a structure needs to be habitable in order for it to be covered. Bankers wanted the court to rule that any attached structure (to the main structure) be habitable. Of course a plumbing system is not habitable, neither is an HVAC system or a roofing structure. This is just one of many clever ways insurance company lawyers attempt to avoid coverage.

Although, the Appeal Court ruled in favor of the homeowner here, it did leave the door open for Bankers to win at trial if it can prove certain exclusions that it is asserting. The reason why the trial court erred is because there are facts in dispute. All lawyers know that if there are facts in dispute, Summary Judgment is not proper. The Mason’s are not out of the woods yet and from the looks of it have a long fight ahead dealing with Bankers.

Cases and situations like this are not the exception, but rather the norm when claimants are battling their insurance companies. It is an unfortunate status quo that has been created. Most insureds do not even make it to court and simply let the insurance company win by either doing nothing or taking pennies on the dollar to resolve the claim. Know these facts as true when deciding to sue or make a claim against your insurance company: 1) insurers will do all that they can do exclude or preclude coverage, 2) insurers have the resources to fight it out to the bitter end, and 3) the only way to make insurance companies pay what they are supposed to, is to get represented and fight back!

Posted in:     Construction News, Damages, Insurance, Litigation, Louisiana, Warranties  /  Tags: , , , , , , , , , , , , , ,   /   Leave a comment

Construction Lien Removal Suit in Louisiana

Attention all home owners or property owners, there is only one surefire way to have that annoying illegal lien (in Louisiana called a statement of claim and privilege) removed from the title of your property, a Mandamus action. In Louisiana and other states, a Mandamus can be used for a number of things (listed out in La R.S. §44:114) and it is a summary proceeding, meaning that it should go faster than ordinary litigation.

The Louisiana Private Works Act codified in La. R.S. §9:4801 et seq., is the origin of the rules which govern construction liens for private projects in this state. The specific statue that allows for an individual to request a Court to order the Clerk of Court to cancel a lien is La. R.S. §9:4833. The statute reads in pertinent part:

If a statement of claim or privilege is improperly filed or if the claim or privilege preserved by the filing of a statement of claim or privilege is extinguished, an owner or other interested person may require the person who has filed a statement of the claim or privilege to give a written request for cancellation in the manner provided by law directing the recorder of mortgages to cancel the statement of claim or privilege from his records.” La. R.S. §9:4833(A).

The best part about this statute is that if all of the proper notice requirements are followed and the illegal lien is not removed from the mortgage records by other means than this Mandamus proceeding, the property owner who brings the Mandamus suit is entitled to attorney fees and costs. This is huge because, this type of proceeding can cost a homeowner thousands just in legal fees. Here at Wolfe Law Group, we charge a flat rate of $3,500 for this type of proceeding, which covers all things from notices, to the actual Mandamus suit, to the trial.

Liens can be very technical and there are many instances where the letter of the law is not followed. In those instances, an owner can have the lien removed and even against the will of the party who filed the lien. As a contractor, filing a lien is very important to preserve rights against parties it did not contract with who may be liable for payment. Here at Wolfe Law Group we file liens all the time, but if your are like most contractors, funds are short and hiring an attorney can be too costly. Companies like Zlien.com are excellent resources for all things related to liens. Fortunately for lawyers and unfortunately for services like Zlien.com, enforcement of a lien and/or a Mandamus suit for removal of an illegal lien can only be filed by an attorney (or individual if self represented). I recently posted a Petition for Mandamus recently drafted and filed by Wolfe Law Group on JDSupra.com.

Bottom line: owners should file suit to have illegal liens removed from the mortgage records. If not then selling or refinancing the property will be impossible with the cloudy title. If you file suit and receive a judgment then you will be entitled to attorney fees and costs, which are provided by statute.

Posted in:     About Our Services, Construction News, Damages, Dispute A Lien, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , , , , , , ,   /   1 Comment

Contractors Get Good Insurance & Use It!

More and more in my everyday practice I encounter issues with contractor general liability insurance (GL). Whether I am defending a contractor or going after one, there tend to be issues with GL carriers. Here are some tips on coverage and others for contractors who have issues.

First and foremost, contractors need to get a solid policy, pay the policy premium form year to year and do not let it lapse. This is typically where contractors get it right. The bad thing is, that most think this is all they need to do in order to be “covered” in the event of a loss or occurrence. Unfortunately, I represent contractors all the time who never take it past this step.

Next, the most important and most often overlooked aspect is notifying the insurer when trouble starts. Every policy has notice requirements within it that must be strictly followed. If you are an electrician and a fire happens on the job, the first person you should call is the insurer and/or your insurance agent and put them on notice. This way you put the ball in the insurance company’s court, and legally they must do certain things in response, such as decline coverage and/or adjust the claim. If you ever have a lawsuit filed against you put the insurer on notice immediately! This is a must, and I’ve had insurers get out of cases the insurance company was not noticed timely.

A lot of contractors do not want to make claims to the insurance because they feel they policy premium will rise. While this may be an end result, the potential downside of litigation is much more harsh than an increased policy premium. Do not be afraid to make the claim because the insurer will not hesitate to deny your claim and/or fight you regarding coverage.

One huge benefit of notifying insurers when problems occur, is the insurers duty to defend. Even if there is the slightest possibility there may be coverage under the policy, the insurance company has s duty to defend a contractor in litigation. This aspect alone could save you thousands of dollars in legal fees. Insurers will defend the insurable interest, so it may be wise as a contractor to get separate counsel to assure that all of your interests will be covered. The counsel you retain personally can work in conjunction with the one provided by the insurer, whereby you get double the legal manpower for half the price.

Finally, most contractors know and all should know that GL policies do not cover bad work or defective workmanship. This would be covered in a totally different policy called builders risk. Courts here in Louisiana have decided on a number of occasions that GL policies do cover damage that is a result of bad workmanship. ie… a GL policy does not cover a poorly installed leaky roof, but it will cover all the water damage the house suffers as a result.

The moral of this story for contractors to not only get GL coverage, but to use it. There is no point in paying thousands of dollars each year for a premium, if you are not going to use the benefits of it. If you think the insurance company is going return the favor if an issue does arise, you will be sadly mistaken.

Wolfe Law Group fights for the rights of owners/contractors who are having issues with insurance companies and other players in the construction industry.

Posted in:     Business Matters, Damages, Insurance  /    /   1 Comment

Litigation Topics for Prime / Subcontractor Contracts

I had a speaking engagement today here in Kenner, Louisiana (a suburb of New Orleans) whereby I had the pleasure of speaking to a group of contractors and architects regarding construction contracts. The bulk of the discussion focused on the most contested provisions within construction contracts.

The information is very helpful to contractors and can be used a resource when a contractor begins the contracting phase of a construction project to help get a better understanding of what is going on within the contract documents.

Prime/Subcontractors Contracts

Contracts between prime/general contractors and their subcontractors make up a vital link in the construction project chain. Here both parties need to negotiate terms to better protect when a dispute arises. A well crafted contract can better protect a prime and/or a sub when default arises. Typically subcontractors are at the mercy of the prime. A good subcontractor will have his attorney review any agreement to make sure that the deal is an even one.

AIA – American Institute of Architects is the most common standard form contracts in the construction industry. AIA contracts are a good starting point and offer contracts for Prime/sub relationships, Architect/owner, Owner/Prime, and any other design professional/contractor relationship that may exist.

• Commonly litigated subcontract provisions

There are a number of provisions which could be contained in a prime/subcontractor contract that need to raise a red flag when present and should be negotiated by either party so as to keep the contract from becoming one-sided.

1. Incorporation by Reference Clauses: (flow-up & flow-down provisions)

  • a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract;
  • conversely, a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract;
  • Many times parties enter into these agreements with out ever seeing the referenced document making them susceptible to unknown provisions;
  • Enforcement depends on the reciprocality of the provisions and lack of ambiguity

2. Scope of Work Provisions

  • Prime contractors want a broad scope of work provision with subs so that they can pin other work to them later on if needed;
  • Subs should demand very specific scope of work provisions so as to know exactly what work is expected and what exactly they have bid on;
  • This provision can incorporate other documents such as plans and specifications;
  • Provision needed for extra work or change order if work called for is outside of the scope;

3. Change Order and Extra Work Provisions

  • Very popular area for dispute in construction contracts – changes are always happening
  • There should be a clear provision in the contract outlining the process whereby CO’s are made and approved;
  • Define change order – modification to work already contemplated by the agreement; (ie different materials)
  • Define extra – item of work beyond the original scope of work that is added during construction;
  • MAKE SURE change orders and/or extras are in writing;

4. Notice Provisions

  • Found in various places within a prime/sub contract
  • Very important risk-shifiting devices – can determine a win or loss regarding a claim

5. Indemnity Clauses

  • Typically these trickle down the line Owner -> Prime -> Sub
  • These are generally enforceable, Subs should be careful and not allow indemnity for negligence of another party
  • Insurance can be purchased by prime or sub to cover the indemnity obligation

6. No Damages for Delay Clauses

  • Owners and Primes try to insert “no damage for delay” provisions in contracts for protection against unforeseen delays
  • Parties want to check all referencing documents to see if this provision is in there

7. LD’s – Liquidated Damages Provisions

  • Very helpful provisions because the pre-determine delay damages, usually on a per day basis;
  • Enforceable unless determined to be a penalty or if they are a “one- size fits all” provision;
  • LD’s are a good way to measure delay damage but can enhance the need for Contractor/Sub to accelerate work to avoid further damage, leading to defects and workmanship issues;
  • For LD’s to apply the contractors work must be a substantial factor in the delay;

8. Lien Waivers

  • reduce the chance for encumbrances to be placed on the title of the property;
  • Usually not enforceable if lien waiver required before work performed;
  • A good tool for Prime and Owner to reduce exposure;
  • Can be used in an incremental fashion as payments are distributed

9. “Pay-when-paid” v. “Pay-if-paid”

  • Pay-if-paid is defined as a subcontractor gets paid by the general contractor only if the owner pays the general contractor for that subcontractor’s work.” Requires a condition precedent.
  • Pay-when-paid in contrast to the pay-if-paid; a pay-when-paid clause does not establish a condition precedent, but merely creates a timing mechanism for the general contractor’s payment to the subcontractor.

10. Retainage

  • Typically 5%-10% of each payment will be withheld by the Owner/Prime until a later date, such as substantial completion
  • Its purpose is to keep a pool of money to remedy any defects in workmanship by that sub

11. Termination provisions

  • Termination for Cause
  • Usually nonpayment, excessive delay, insolvency, or convenience are reasons to terminate the contract

12. ADR Clause (Arbitration/Mediation clauses)

  • Arbitration (most popular) – binding way to avoid litigation;
  • Mediation – non-binding way to avoid litigation;
  • Both can be effective, typically arbitration can be more intimidating due to its binding and no (very limited) ability to appeal

13. Attorney fee provisions

  • Very popular as no one likes to pay an attorney!
  • Many provisions will say that the unsuccessful party must pay attorney fees but others to be careful will put the burden on one party
  • Primes and subs should include an attorney fee provision in all contracts
  • Good to be specific on the provision and include for litigation and ADR

14. Forum selection & choice of law

  • If working out of state, make sure you know which venue a dispute will be held in;
  • This can be a very costly provision

(list partially obtained from the ABA’s Fundamentals of Construction Law)

 

Posted in:     Arbitration & ADR, Change Orders, Construction Contracts, Construction News, Damages, Delays, Dispute A Lien, Disputes, Insurance, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , ,   /   2 Comments