Archive for the ‘Warranties’ Category

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

Warranties and Chinese Drywall

In previous posts, we have discussed the New Home Warranty Act and how it relates to Chinese Drywall damages.  However, this Act only applies to new homes.

As to the thousands of post-Katrina renovations and re-models that did not involve a new structure, homeowners must find remedies against their builders elsewhere.

Generally Speaking…Contractors Are Responsible for Defects in Materials and Workmanship

In construction contracts, Louisiana law implies that the contractor will construct the work in a good and workmanlike manner, the work will be suitable for its intended purpose, and the work will be free from defects in workmanship or materials.   Peterson Contractors, Inc. v. Herd Producing Company, Inc., 811 So.2d 130 (2 Cir. 2002).

An owner seeking to recover from a contractor bears the burden of proving: 1) both the existence and nature of the defects; 2) that the defects were due to faulty materials or workmanship; and 3) the cost of repairing the defects.  Guy T. Williams Realty, Inc. v. Shamrock Construction Company, 564 So.2d 689 (La. 5 Cir. 1990).

Therefore, under Louisiana law, the general rule is that a contractor is responsible for defects in workmanship and/or materials.

Articles 2762 and 2969

Aside from the general concept that contractor’s are responsible for the quality of its workmanship and materials, the Louisiana legislature has given us two articles that set forth a contractor’s liability for its work.

Article 2762:  Liability of contractor for damages due to badness of workmanship

If a building, which an architect or other workman has undertaken to make by the job, should fall to ruin either in whole or in part, on account of the badness of the workmanship, the architect or undertaker shall bear the loss if the building falls to ruin in the course of ten years, if it be a stone or brick building, and of five years if it be built in wood or with frames filled with bricks.

Article 2769:  Contractor’s liability for non-compliance with contract

If an undertaker fails to do the work he has contracted to do, or if he does not execute it in the manner and at the time he has agreed to do it, he shall be liable in damages for the losses that may ensue from his non-compliance with his contract.

Applying The Rules to Chinese Drywall

Application of these rules and articles to Chinese Drywall is not too difficult.

Although we’re not yet certain as to what exactly is causing the damages associated with Chinese Drywall, it is apparent that Chinese Drywall is a defective material, and that it is causing the ruin of property.

Accordingly, homeowners should be capable of seeking remedy against builders for damages and ruin associated with Chinese Drywall, regardless of whether the drywall was supplied or installed by a subcontractor of the builder (art. 2768), and regardless of whether the builder knew or had reason to know of the defect.

Warranty Provisions in Contracts

While the New Home Warranty Act cannot be waived or limited, this is an exception to the general rule in Louisiana that allows limitations and waivers.

Art. 2503 allows parities to increase, exclude or limit warranties.   In Degeneres v. Burgess, the Court stated that the right to limit or waive stautory warranties extends to articles 2762 and 2769.

Therefore, it’s important for homeowners to review the contracts with their builder to determine the exact warranty period and terms applicable to their contract.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.

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Times Picayune Reports that Louisiana Homeowners Turning to Builders for Chinese Drywall Recovery

On the Chinese Drywall Blog, we’ve frequently  forecasted that homeowners will begin bringing suit directly against their builders for Chinese Drywall recovery.

This morning, the New Orleans Times Picayune reported that this is beginning to happen.

The article, titled Homeowners saddled with tainted Chinese Drywall are increasingly suing local builders for damages, suggests that “Louisiana home builders have increasingly become targets of litigation.”   And the article profiles a Covington, Louisiana homeowner, Eric Carter, who sued his homebuilder Sunrise Homes.

Over the next few days here on the Chinese Drywall Blog, we will specifically analyze builder liability for Chinese Drywall claims, reviewing the relevant aspects of the New Home Warranty Act and other general builder warranties.

Remember also that Wolfe Law Group’s Scott Wolfe will be presenting at a Chinese Drywall seminar in New Orleans, LA on July 31, 2009.  The seminar is for attorneys, builders, engineers, homeowners and anyone else affected or interested in the crisis.   Read more about the seminar, and how to attend, here.

In the meantime, here are a few posts from our Chinese Drywall Blog reviewing builders’ exposure to imported drywall claims, and explaining the differences between class action litigation and ordinary litigation:

Posted in:     Chinese Drywall, Warranties  /  Tags: , , ,   /   1 Comment