Insurance Coverage for Construction Risks

By Timothy L. Pierce, K&L Gates, Los Angeles and Jacquelyn S. Bryan, K&L Gates, Pittsburgh

There are many different types of insurance available for construction risks. It is important for owners and contractors to think critically at the beginning of any construction project about the risks inherent to the project and the types of insurance available to them to protect against such risks. Additionally, it is imperative that policyholders understand the benefits and limitations of different insurance policies.

This presentation explores (i) the basic forms of insurance coverage available for construction risks, (ii) wrap-up programs -- owner controlled insurance programs (OCIP) and contractor controlled insurance programs (CCIP), (iii) common issues policyholders face when seeking coverage for a construction related loss under commercial general liability (CGL) policies, and (iv) practical considerations for the coverage construction lawyer.

To view the presentation, click here

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Welcome to the 26th Edition of K&L Gates' Arbitration World

Welcome to the 26th edition of Arbitration World, a publication from K&L Gates’ International Arbitration Group that highlights significant developments and issues in international and domestic arbitration for executives and in-house counsel with responsibility for dispute resolution. 

 
To view Arbitration World, click here

To download a printable PDF of the publication, open the link above and click on the fourth icon from the right in the magazine toolbar at the top of the page. 
 
In this edition, we report on the much-anticipated decision of the U.S. Supreme Court in BG Group PLC v. Republic of Argentina regarding the respective roles of courts and arbitrators in deciding threshold issues of arbitrability or jurisdiction. We review a recent decision of the Indian Supreme Court in the context of the wider changes in India regarding international arbitration in recent years, as well as a decision of the Full Federal Court of Australia regarding the implications of seeking to resist enforcement of an award after already unsuccessfully challenging the award at the seat of arbitration. 
 
We include articles on the new arbitration rules issued by the Japan Commercial Arbitration Association (JCAA) and the Vienna International Arbitration Centre (VIAC) and report on the interesting development of the introduction of “Optional Appellate Arbitration Rules” by the American Arbitration Association (AAA) / International Centre for Dispute Resolution (ICDR). 
 
We consider the potential issues that may arise with short-form ‘ad hoc’ arbitration clauses, and continue our series of articles on means of protecting foreign investments with a review of the means of access to relevant dispute resolution mechanisms. We also provide our usual updates on developments from around the globe in international arbitration and investment treaty arbitration. 
 
We hope you find this edition of Arbitration World of interest, and we welcome any feedback (email ian.meredith@klgates.com or peter.morton@klgates.com). 
 
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Federal Circuit Confirms that Government Has a Broad Duty of Good Faith and Fair Dealing and Declines to Shift Risk of Differing Site Conditions to Contractors

By Stuart B. Nibley and John P. Estep, K&L Gates, Washington D.C.

In what many will consider a victory for federal government contractors, the U.S. Court of Appeals for the Federal Circuit recently (i) clarified the standard for determining when there is a breach of the implied duty of good faith and fair dealing and (ii) held that certain contractual disclaimer language was insufficient to preclude a contractor from alleging a claim based on differing site conditions.

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Does the Lack of an Enforceable Contract under HICPA Spell No Recovery for Pennsylvania Contractors?

By Jacquelyn S. Bryan, K&L Gates, Pittsburgh

The Supreme Court of Pennsylvania is set to decide whether the Home Improvement Consumer Protection Act, 73 Pa. C.S. § 517.1-517.18 (“HICPA”), can bar a contractor from recovery under a theory of quantum meruit in the absence of a valid and enforceable home improvement contract under HICPA. See Shafer Elec. & Constr. v. Mantia, -- A.3d --, No. 276 WAL 2013, 2013 WL 5806466 (Pa. Oct. 29, 2013). In the Shafer case, the Superior Court of Pennsylvania reversed a lower court’s dismissal of a mechanics’ lien claim asserted by a contractor against the property of a homeowner on the grounds that the contractor lacked a valid agreement with the homeowner under HICPA. Shafer Elec. & Constr. v. Mantia, 67 A.3d 8 (Pa. Super. Ct. 2013) (relying in part on the Superior Court’s holding in Durst v. Milroy Gen. Contracting, Inc., 52 A.3d 357 (Pa. Super. Ct. 2012)).

The Superior Court rejected the homeowner’s argument that permitting contractors to assert causes of action on a theory of quantum meruit would evade HICPA’s goal of protecting homeowners. Instead, the Superior Court focused on section 517.7(g) of HICPA, which provides:

(g) Contractor’s recovery right.—Nothing in this section shall preclude a contractor who has complied with subsection (a) from the recovery of payment for work performed based on the reasonable value of services which were requested by the owner if a court determines that it would be inequitable to deny such recovery.

Shafer Elec. & Constr., 67 A.3d at 12. The Court noted that “the statute yields an absurd result of providing contractors with an equitable means of recovery under quasi-contract theory, but only whena written contract exists such that quantum meruit recovery is not needed nor allowed by law.” Id. at 13 (emphasis in original). Persuaded by the contractor’s argument that “if this were the intent of the drafters [of the HICPA], to require the contractor to comport with all of the requirements of [section 517.7(a)] to recover in [q]uantum [m]eruit, then the contractor does not need to recover on a [q]uantum [m]eruit theory, for the value of his services, because he would have a valid and enforceable contract on which to rely”, the Court held that the “the General Assembly’s obvious ‘purpose’ in drafting section 517.7(g) was to provide for an equitable remedy in situations where there was no valid and enforceable written contract under section 517.7(a).” Id.

The Supreme Court of Pennsylvania’s decision in Shafer could have important implications for contractors attempting to assert liens under Pennsylvania’s mechanics’ lien law, 49 P.S. § 1101, et seq., and should continue to be closely monitored.

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AAA Issues Optional Appellate Arbitration Rules

By J. P. Duffy, K&L Gates, New York

A significant set of new rules were issued by the American Arbitration Association (AAA) which will afford parties the ability to appeal arbitral awards to specialized appellate tribunals. The new Optional Appellate Arbitration Rules, which could apply to arbitrations concerning construction matters, are noteworthy for arbitrations as they offer an arbitral structure -- outside of judicial enforcement regimes -- for reviewing awards alleged to suffer from serious factual or legal defects. To learn more about the new rules, click here.

This article was originally published in the International Law Office Arbitration Newsletter on January 30, 2014. 

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Recent Article Offers Help in Navigating Forensic Schedule Analysis

By Ryan D. DeMotte, K&L Gates, Pittsburgh

For construction attorneys looking for guidance in navigating the often confusing world of forensic schedule analysis ("FSA"), Patrick Kelly's and William Franczek's article in the Fall 2013 edition of The Construction Lawyer, "Clearing the Smoke: Forensic Schedule Analysis Method Selection for Construction Attorneys" provides a useful overview. The article describes the controversies over the legitimacy of FSA, and then evaluates the pros and cons of the various FSA methods and discusses the factors that analysts and attorneys should consider in selecting an FSA method for a particular case.

The authors point out that FSA methods go by a number of different names, and they helpfully provide a four-family classification of the main methods: (1) as-planned vs. as-built, (2) contemporaneous period analysis, (3) retrospective time impact analysis, and (4) collapsed as-built.

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Texas Supreme Court Holds "Contractual Liability" Exclusion Inapplicable

By: Roberta D. Anderson, K&L Gates, Pittsburgh

In a highly anticipated decision issued on January 17, the Texas Supreme Court held that the standard commercial general liability (CGL) “contractual liability” exclusion does not void coverage for claims alleging that a contractor failed to construct a project in a “good and workmanlike manner” as required by the construction contract in Ewing Construction Company, Inc. v. Amerisure Insurance Company.

Had the Court answered “yes” to the Fifth Circuit’s certified question, there would have been a radical expansion of the standard contractual liability exclusion that would have been unsupported by — indeed, would have been contrary to — the court's 2010 decision in Gilbert.  The implications to the construction industry may have been severe.  Coverage for a wide range of construction defects and other mistakes would have effectively disappeared under Texas law.  Many contractors would have faced the concern of potential uninsured liability resulting from the contract work.  And many consumers would have been left without realistic compensation for construction mistakes.

Fortunately, the Court correctly answered “no.”

To read the full alert, click here.

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Pennsylvania Appeals Court Confirms Insurance Coverage for Product Liabilities and Distinguishes "Faulty Workmanship"

By: Joseph C. Safar & Kimberly L. Karr, K&L Gates, Pittsburgh

Whether a construction defect constitutes a covered “occurrence” under a commercial general liability (“CGL”) policy has been the subject of a national debate among state courts in recent years.  Armed with a small minority of seemingly pro-insurer decisions finding no coverage for a contractor’s “faulty workmanship,” some insurers have sought to broaden the coverage-divesting implications of such cases by arguing that the defective design or manufacturing of products should also be deemed “faulty workmanship,” and thus, not covered.  This expansive view of what constitutes “faulty workmanship” disregards important distinctions made in earlier cases and significantly degrades, if not completely undermines, the broad products liability coverage commonly recognized to exist under CGL policies.  For example, if taken to its logical conclusion, this would mean that product manufacturers whose off-the-shelf products unexpectedly cause property damage or bodily injury to others would not be able to obtain coverage—thereby defeating the very purpose of securing CGL coverage.

To read the full alert, click here.

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Welcome to the 24th Edition of K&L Gates' Arbitration World

Welcome to the 24th edition of Arbitration World, a publication from K&L Gates’ International Arbitration Group that highlights significant developments and issues in international and domestic arbitration for executives and in-house counsel with responsibility for dispute resolution.

To view Arbitration World in our online magazine format, click here.

To download a printable PDF of the publication, open the link above and click  on the far right icon in the magazine toolbar at the top of the page.

This edition focusses on Africa, a continent that offers significant opportunities across a number of business sectors, and which is seeing remarkable GDP growth rates in many of its nation states.  We include a commentary on the means of mitigating risks arising from disputes when concluding business transactions in Africa.  We review the recent changes in the arbitration landscape in Africa and their potential impact.  We also include a comparative review of Maghreb’s arbitration laws, with particular focus on Morocco, Algeria and Tunisia.

We provide our usual update on developments from around the globe in international arbitration and investment treaty arbitration.  We look at recent U.S. court decisions on the evolving issue of class arbitration, continue our series of articles on means of protecting foreign investments with a review of the fair and equitable treatment protection standard, and consider the approach to multi-tiered dispute resolution provisions in different jurisdictions.  We hope you find this edition of Arbitration World of interest, and we welcome any feedback (email Ian.Meredith@klgates.com or
Peter.Morton@klgates.com).

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Attributes of a Good Construction Contract

By Richard Paciaroni, K&L Gates, Pittsburgh

In April, I participated as a panelist for a program titled Failure is an Option, which addressed best practices for developing a construction project.  Being the only lawyer on the panel among seasoned construction professionals, I was prepared to tackle the topic from a lawyer’s perspective.  I was told to expect the following questions: 1) Is there such a thing as a “good” construction contract?; 2) Can a “good” contract increase the likelihood of success?; and 3) What are the attributes of a “good” construction contract?

After nearly 30 years of handling construction claims and disputes, I felt that I was qualified to address these points.  Specifically, my answers to the first two questions were “yes.”  A good analogy that I can offer is that a “good” construction contract is like a well-constructed ship—it will get you safely through rough water.  Conversely, a “bad” construction contract is analogous to a poorly constructed ship—in rough water, it is likely to capsize, resulting in disaster.

To read the full article, click here.

This article was originally published in the Summer, 2013 edition of The Voice—The Official Magazine of the Construction Users Roundtable.

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