Lamson, Dugan and Murray, LLP, Attorneys at Law

Best Practices in Construction– What are Yours?

Posted in Best Practices
Craig Martin, Construction Attorney, Lamson Dugan & Murray, LLP

Risks on Construction Projects

The latest Engineering News Record had an interesting article on Best Practices  in Construction written by Deron Cowan of Zurich Services Corporation. In the articles, Mr. Cowan emphasizes the importance of best practices and the methodology to develop them.

As Mr. Cowan notes, best practices are intended to eliminate, reduce and manage risks and all construction companies should be fully engaged in correctly executing and accomplishing risk analysis to meet the demands of their practices.

Mr. Cowan sets forth the process to assess and implement risk management:

  • The problem situation must be identified and then analyzed.
  • When the analysis is complete, it leads to determining a potential solution.
  • The solution is then communicated and implemented to the workforce.
  • Follow-up on the best practice to determine whether it was beneficial.

By following a protocol to identify risks and best practices to avoid them, construction companies can reduce the probability and severity of accidents in the workplace.

Authored by Craig Martin, Lamson Dugan and Murray.

Labor Shortage Confirmed Through AGC Poll

Posted in Labor Shortage
Craig Martin, Construction Attorney, Lamson Dugan & urray, LLP

Help Wanted in Construction Industry

Over 1,000 contractors participated in Associated General Contractors’ (“AGC”) survey asking whether they were facing a labor shortage. AGC crunched the numbers and provided an Analysis of its survey.

The survey revealed that 83% of construction firms were having trouble finding qualified workers. This survey certainly confirmed comments from construction firms in and around Omaha.

AGC also provided a regional analysis and below are some of the highlights for the Midwestern region.

  •  30% of employers reported having a hard time filing all key professional and craft worker positions.
  • 71% of employers reported trouble filling carpenter position; 66% reported trouble finding equipment operators; 60% reported trouble finding plumbers; and 59% reported finding cement masons.
  • 55% have increased pay and/or benefits to retain and/or recruit construction craft workers.

Take Away: As the construction industry continues to recover from the recession, qualified employees will likely be in shorter supply and demand increased compensation.

Minimum Wage on Federal Construction Projects is $10.10

Posted in Uncategorized
Craig Martin, Construction Attorney, Lamson Dugan & Murray LLP,

The Department of Labor’s regulations can impact your construction project.

The Department of Labor issued its final regulations to implement President Obama’s Executive Order raising the minimum wage to $10.10 per hour for workers on federal construction projects. The new minimum wage will not be effective until January 1, 2015, and will apply to most workers and most federal projects.

Covered Contracts

Executive Order 13658 applies to four major categories of contractual agreements:

  • procurement contracts for construction covered by the Davis-Bacon Act (DBA) that exceed $2,000;
  • service contracts covered by the Service Contract Act (SCA) that exceed $2,500;
  • concessions contracts, including any concessions contract excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b); and
  • contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

Excluded Contracts

The final rule contains certain narrow exclusions from coverage for the following types of contractual agreements:

  • grants;
  • contracts and agreements with and grants to Indian Tribes under Public Law 93-638, as amended;
  • any procurement contracts for construction that are not subject to the DBA (i.e., procurement contracts for construction under $2,000); and
  • any contracts for services, except for those otherwise expressly covered by the final rule, that are exempted from coverage under the SCA or its implementing regulations.

Excluded Workers

The new minimum wage will not apply to certain workers, including:

  • Apprentices, and messengers;
  • Full-time Students; and
  • Exempt employees under the FLSA, those working in a bona fide executive, administrative, or professional capacity

Take Away: The regulations implementing President Obama’s Executive Order exceed 250 pages. The Department of Labor published a Fact Sheet that summarizes the rules. But, given the very low contract values and limited exclusions, it is likely that this rule will apply to your workers engaged on federal contracts.

 

Court Again Defines Extent of Contractor’s Insurance Coverage

Posted in Insurance coverage
Craig Martin, Construction Attorney, Lamson Dugan & Murray LLP,

Construction insurance coverage can be confusing and counsel may be necessary to review coverage decisions.

The ever changing landscape of insurance coverage for contractors continues to be clarified in Texas. The Fifth Circuit Court of Appeals applied Texas law in Crownover v. Mid-Continent Casualty Company, concluding that contractors do have insurance coverage to cover claims that a project was not constructed in a good and workmanlike manner.

In this case, the Crownovers hired a contractor to build a house. The contract contained a warranty-to-repair clause. Shortly after construction was completed, cracks began to appear in the walls and foundation, and there were problems with the heating and air conditioning system. The Crownovers demanded that the contractor repair the problems and the contractor refused. The Crownovers brought an arbitration proceeding against the contractor and prevailed, obtaining a judgment that the contractor must pay for repairs to the foundation and HVAC system. The contractor then filed for bankruptcy and the bankruptcy court allowed the Crownovers to pursue their claim against the contractor’s insurer.

The Crownovers sued the contractor’s insurer and the insurer took the position the comprehensive general liability (“CGL”) policy did not cover the Crownovers’ claim because any liability of the contractor was based on the contract with the Crownovers and thus the contractual-liability exclusion applied. The trial court agreed and the Crownovers appealed to the Fifth Circuit Court of Appeals.

The Fifth Circuit Court of Appeals initially decided the case in June, affirming the trial court’s decision. The Crownovers asked the court to look at the issue again, and the court reversed itself this past October.

In ruling in favor of the Crownovers, the court found that the contractual-liability exclusion applied only in those instances where the contractor assumed additional responsibilities beyond those found at common law. Because common law establishes a duty for contractors to repair work that was not carried out in a good and workmanlike manner, the contractual-liability exclusion did not apply.

Take Away: CGL policies may very well provide coverage for faulty work. But, each state’s laws will control how the insurance policy is interpreted and whether coverage will be found.

 

Owner’s Web of Deception Foiled by the Court

Posted in Uncategorized

Can an owner use a related entity to purchase the construction loan from the lender and then foreclose on that loan to wipe out a contractor’s construction lien? Not in Florida.

Craig Martin, Construction Attorney, Lamson Dugan & Murray LLP,

Nebraska construction projects can involve webs of difficulties and even deceit.

In CDC Builders, Inc. v. Biltmore-Sevilla Debt Investors, LLC, the Florida appellate court refused to allow an owner to avoid a construction lien through the owner’s web of deception. In this case, the owner created two related entities for the project and hired CDC Builders, Inc. to build homes in Florida. The entities failed to pay for several homes and defaulted on the construction loan. The contractor recorded two construction liens to preserve its payment rights.

The owner then created another entity to purchase the defaulted construction loan and the loan was assigned to the new entity. The assignment, in theory, allowed the new entity to step into the shoes of the construction lender’s superior lien position. The new entity then foreclosed on the construction loan in an effort to wipe out the contractor’s construction liens.

The trial court allowed the owner’s new entity to foreclose on its construction loan and wiped out the construction liens. The contractor appealed and the appellate court reversed the trial court, finding that:

[I]nvestors cannot grant mortgages, contract for the improvement of the property mortgaged, and then use a network of companies to purchase and foreclose the mortgage for the primary purpose of extinguishing the construction liens that increased the value of the property.

Take Away: There are three points to this case. First, contractors have to be careful about who they do business with. Second, developers cannot use corporate shells to avoid lienors of their right to payment. And, third, sometimes the trial court does not get it right and the matter have to be appealed.

Article written by Craig F. Martin, Nebraska construction attorney, Lamson Dugan & Murray, LLP.

 

Can a Contractor be Liable to Second Buyers of Homes for Construction Defects?

Posted in Construction Claims
Craig Martin, Construction Attorney, Lamson Dugan & Murray LLP,

Looking for assistance with a construction problem?

Whether a contractor will be liable to a second purchaser, even though the contractor never contracted with the second purchaser, varies state to state. The Pennsylvania Supreme Court, in Conway v. The Cutler Group, is the latest court to rule that a subsequent purchaser lacks privity and cannot pursue an action against the builder.

In that case, the Conways purchased a home from the original owner. After living in the home for about two years, the Conways discovered water leaking around the windows. The Conways sued the builder, alleging breach of the implied warranty of habitability.

The builder defended the claim, asserting that it had not contracted with the Conways and thus had not provided any warranties to the Conways. The trial court agreed and dismissed the claim. The first level of appellate court reversed the trial court, holding that the warranty of habitability was intended to level the playing field between the builder and purchaser of a home and it should be extended to subsequent purchasers. The Pennsylvania Supreme Court disagreed and refused to extend any warranties to subsequent purchasers.

Nebraska and Iowa courts may rule differently. Iowa courts have extended the warranty of workmanlike construction of new homes to second and subsequent purchasers. Speight v. Walters Development Co., Ltd., 744 N.W.2d 108 (Iowa 2008). Nebraska courts have also extended the warranty to perform in a workmanlike manner to second purchases despite no contractual relationship in Moglia v. McNeil Company, Inc., 700 N.W.2d 608 (2005).

Take Away: Contractors may still be on the hook for construction defect claims brought by a second buyer. Although the outcome will be state specific, Nebraska and Iowa courts will likely allow the claim.

Article written by Craig F. Martin, construction attorney, Lamson Dugan & Murray, LLP.

 

General Contractors Can Be Sued by a Subcontractor’s Injured Employee

Posted in General Contractor Concerns
Craig Martin, Construction Attorney, Lamson Dugan & Murray LLP,

Looking for assistance with a construction problem?

General contractors that exercise control over the worksite can be sued by a subcontractor’s injured employee. The Nebraska Supreme Court’s recent opinion, Gaytan v. Wal-Mart, should serve as a reminder that general contractors may be responsible for the safety of all workers on a job site.

In this case, a roofing subcontractor’s employee died after falling through the roof of the under-construction Wal-Mart. The deceased employee’s estate sued Wal-Mart and Gram Construction, the general contractor, alleging that they were negligent in maintaining a safe worksite.

The court initially acknowledged that an owner, the employer of an independent contractor, does not typically owe a subcontractor’s employee a duty because the owner typically has no control over the manner in which the work is to be done by the contractor. This general rule, however, has exceptions, such as where the owner retains control over the contractor’s work. But, for the exception to apply, the owner must have (1) supervised the work that caused the injury, (2) actual or constructive knowledge of the danger that caused the injury, and (3) the opportunity to prevent the injury.

Here the deceased employee’s estate argued that Wal-Mart controlled the general contractor’s work. The court found otherwise, relying on the contract which stated that Wal-Mart had no right to exercise control over the general contractor, its employee, or agents, and the lack of evidence that Wal-Mart actually exercised any control over the construction site.

The court also analyzed whether the general contractor exercised control over the roofing subcontractor. The contract between the general contractor and roofing subcontractor revealed that the general contractor had the general right to (1) supervise the subcontractor’s work, (2) require compliance with applicable law and the general contractor’s safety program, and (3) resolve safety issues. The court also found it significant that OSHA had penalized the general contractor, noting that even though the general contractor’s employees were not exposed to the roofing hazard, the general contractor had explicit control for the overall safety and health of the work site. Finally, the evidence revealed that the general contractor had monitored whether the roofing contractor’s employees were wearing personal protection equipment and had developed a fall protection plan for the subcontractor. The general contractor countered this last point by noting that none of its employees were allowed to access the roof.

Based on this evidence, the court found that the general contractor had a duty to monitor and control the safety of the worksite and had actually done so, even though its employees did not access the roof. Thus, the general contractor could be found liable for the injuries suffered by the roofing subcontractor’s employee.

Why You Should Care: This case is an excellent example of how both the general contractor’s contract and practices can create a duty to maintain a safe work place for all workers on the job site, even in those areas that the general contractor does not allow its own employees to access.

 

A Winning Procedure to Develop a Request for Compensation — Lunch & Learn

Posted in Construction Claims

Thanks to everyone that attended last week’s Lunch & Learn on preparing claims. We had Construction Worker Ecstaticsome great discussion from both the ranks of general contractors and subcontractors.

For those of you that missed the meeting or didn’t pick up the handout, A Winning Procedure to Develop a Request for Compensation, send me an e-mail and I’ll send it to you.  My e-mail address is cmartin@ldmlaw.com.

In a nutshell, to develop a winning request for compensation, you must:

  • Select the Right Team
  • Identify the Issues
  • Review the Contract
  • Come Up with a Plan
  • Review the Schedule
  • Review ALL Job Docs, including change orders and correspondence
  • Review Costs
  • Determine Legal Entitlement
  • Determine Funding Source

Submitting a claim is always difficult, but if you have a procedure in place, it can make the process easier and more successful.

 

 

Arbitration—No Opportunity for Appeal

Posted in Arbitration

Last week I presented to the Great Plains Chapter of the American Society of Professional Estimators on arbitration and litigation. Some of the questions related to the difficulty of appealing an arbitrator’s decision. A Florida appellate court recently confirmed this difficulty.

In Village at Dolphin Commerce Center, LLC v. Construction Service Solutions, LLC, a contractor filed an arbitration claim against the owner to get paid for its work. The owner claimed that the contractor could not maintain the claim to get paid because the contractor was not licensed. Apparently, there is a law in Florida that a contractor unlicensed at the time of the contract cannot maintain an action in Florida for unpaid work.

The arbitrator appears to have ignored the Florida law that an unlicensed contractor could not maintain an action to get paid for its work and ruled in favor of the contractor.

The owner appealed to the state court, arguing that the arbitrator misapplied Florida law. The court refused to hear the case, finding the parties had willingly submitted their claim to the arbitrator and they were bound by the results. In essence, the parties to the arbitration could not appeal the arbitrator’s decision.

Why You Should Care: Arbitration can be effective to resolve a claim, but you will likely be stuck with the arbitrator’s decision without a chance for an appeal.

Union THUGS Plead Guilty

Posted in Unioin Campaign

Behind BarsSome time ago, I wrote about union THUGS (The Helpful Union Guys) that tormented merit shops to force contractors to use union labor on projects. The THUGS set fire to equipment, beat contractors with baseball bats, and picketed apartment complexes where contractors lived.

Recently two of the ten union members plead guilty to arson-related charges, including two counts of maliciously damaging property by means of fire, extortion, and RICO conspiracy charges.

For their actions, the union members are looking at up to 110 years in prison and over $1 million in fines.  The judge is expected to sentence them in early 2015.