August 27, 2007 – Construction Law

General Contractor Not Required to Provide Insurance Covering Project Owner’s Own Negligence Absent Clear Contract Language Requiring Such Coverage

Aug 27 2007

Gale v. New Jersey Iron, Inc., 2007 WL 2385948 (N.J. Super. Ct. App. Div. Aug. 23, 2007)

This case arose after an employee of a sub-subcontractor sued the project owner, the general contractor (“GC”) and the subcontractor for negligence over personal injuries he sustained after falling from a steel beam at the construction site. All issues settled except for the owner’s cross-claim against the GC alleging that the GC breached its contract when it failed to obtain insurance coverage that protected the owner from its own negligence.

The Appellate Division affirmed the trial court’s dismissal of the claim. Initially, the court determined that the “insurance” section of the contract did not specifically require such insurance and was more consistent with the industry standard requiring a GC to provide insurance to indemnify an Owner against acts of negligence by the GC or a subcontractor. Moreover, the "indemnity” section of the contract merely required the GC to indemnify the owner only to the extent caused by the GC, a subcontractor or anyone employed by them.

Court Upholds City’s Product Specification for Construction Project, but Notes that City Does Not Have Unfettered Discretion In Prohibiting Products

Aug 27 2007

Advanced Drainage Sys., Inc. v. City of Portland, 214 Or. App 534, 166 P.3d 580 (2007)

A pipe manufacturer sought a declaratory judgment that the city had violated its state and federal constitutional rights to equal treatment when it rejected the use of a certain type of pipe for a city contract. The city counterclaimed, asserting that it had complete discretion to choose products for its construction projects. The trial court agreed with the city. The court of appeals affirmed, but with a modification.

The city tried to argue that the manufacturer was not a citizen under the Oregon constitution and therefore lacked standing. The appellate court left that issue for another day, deciding that it would determine standing as an issue of justiciability and not as a matter of constitutional interpretation. The appellate court then determined that the city’s ordinances which prohibited certain types of pipe materials but not others passed any applicable tests of rationality based upon asserted claims regarding safety and maintenance. However, the appellate court also determined that, contrary to the city’s argument, the city did not have unfettered discretion in prohibiting certain types of products and hence manufacturers. Thus, the city could not prohibit products made by “Catholics or Norwegians," for example.

Archive:August 27, 2007