Tag: New Jersey

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New Jersey Supreme Court Gives Supreme Win to Policyholders
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New Jersey Appellate Court Holds That Coverage Exists for Consequential Damages Caused By Subcontractors’ Defective Work
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Appellate Division of New Jersey Upholds Jury Verdict in Connection with Misrepresentations Made by Developer
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New Jersey Court Requires Materials Suppliers to Ascertain Source of Payments Made By Insolvent Subcontractors Under New Jersey Lien Law
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New Jersey Court Clarifies Trigger Dates for Statute of Repose in Construction Defect Actions
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Finding No Bad Faith, Court Enforces Termination for Convenience and Conversion Provisions Included in Parties’ Contract
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Self-Performance by General Contractor Forbidden under New Jersey Community College Contracts Law
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Claims Against Architectural Firm Fell Under Professional Services Exclusion Based on Allegations of Underlying Complaints
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Sureties Are Not Necessary Parties under FRCP
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Exclusion of Coverage for Claims Arising from Breach of Contract Includes All Claims with Substantial Nexus to Breach or Having “But For” Relationship with Breach

New Jersey Supreme Court Gives Supreme Win to Policyholders

By Frederic J. Giordano, Robert F. Pawlowski, Denise N. Yasinow, K&L Gates, Newark

On August 4, 2016, the Supreme Court of New Jersey unanimously affirmed the Appellate Division’s holding that consequential damages caused by a subcontractor’s faulty workmanship constitute “property damage” and an “occurrence” under the 1986 Insurance Services Office, Inc. (“ISO”) form commercial general liability (“CGL”) insurance policy.  This holding is welcome news to real estate developers, general contractors, and commercial policyholders who may seek coverage for damage caused by the faulty work of their subcontractors.

To read the full alert, click here.

New Jersey Appellate Court Holds That Coverage Exists for Consequential Damages Caused By Subcontractors’ Defective Work

By Denise N. Yasinow, Loly G. Tor, and Christopher A. Barbarisi, K&L Gates, Newark

This past summer, the Superior Court of New Jersey, Appellate Division issued a favorable decision for owners, real estate developers, and general contractors regarding insurance coverage for damages caused by the faulty work of their subcontractors.  In Cypress Point Condominium Association, Inc. v. Adria Towers, LLC,[1] the Court held that unexpected and unintended consequential damages caused by a subcontractor’s defective work constitutes “property damage” caused by an “occurrence” under a commercial general liability (“CGL”) insurance policy.  Thus, these types of consequential damages are recoverable.

The Cypress Point decision roundly rejected the Third Circuit’s opinion in Pennsylvania National Mutual Casualty Insurance Co. v. Parkshore Development Corp.,[2] which concluded that faulty workmanship performed by a contractor or a subcontractor that causes damage to the general contractor’s work is not an “occurrence.”

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Appellate Division of New Jersey Upholds Jury Verdict in Connection with Misrepresentations Made by Developer

By Christopher A. Barbarisi, Loly G. Tor, and Christopher J. Archer, K&L Gates, Newark

Builders and real estate developers should take note of a recent decision of the Appellate Division of New Jersey (the state’s intermediate appellate court), in which the Court upheld a jury verdict of $4,817,638.12 in connection with misrepresentations made by a developer in its marketing materials relating to the nature and quality of the views from high-rise riverfront condominium units.

Etelson v. South Shore Urban Renewal, L.L.C.[1], involved a group of sixteen purchasers of ten upper-floor condominium units (“Plaintiffs”) in the South Shore Club building in Jersey City, New Jersey. Plaintiffs contracted to purchase their pre-construction units in 2005. During sales negotiations, the developer (“Developer”), through its sales agents and marketing materials, represented to the Plaintiffs that their units—all east-facing and located on the 19th through 22nd floors—would enjoy unobstructed, panoramic views of the Manhattan skyline. At the time that the Plaintiffs entered into their sales contracts, there were no buildings in the area capable of obstructing the views of Plaintiffs’ units.

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New Jersey Court Requires Materials Suppliers to Ascertain Source of Payments Made By Insolvent Subcontractors Under New Jersey Lien Law

L&W Supply Corp. v. DeSilva, 429 N.J. Super. 179 (N.J. Super. Ct. App. Div. 2012)

In this case, a New Jersey appellate panel expands and clarifies a material supplier’s obligations to determine the source of payments made by purchasers of materials and allocate the payments properly under the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1, et. seq. (the “Lien Law”).

Pursuant to the Lien Law, a contractor or supplier who is owed payment for work or materials is permitted to file a lien against the real property on which the improvements were constructed. L&W Supply, 2012 WL 6599966 at *1.  The purpose of the Lien Law is two-fold. First, it ensures that suppliers are paid for materials supplied during construction.  Second, it protects owners from paying more than once for the same work or materials.  In order to facilitate the second purpose of the Lien Law, the value of a materials supplier’s lien fund is limited to the unpaid portion of the contract price for the contract for which the unpaid materials were utilized.

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New Jersey Court Clarifies Trigger Dates for Statute of Repose in Construction Defect Actions

New Jersey v. Perini Corp., 425 N.J. Super. 62 (N.J. Super. Ct. App. Div. 2012),

In this case, a New Jersey appellate panel clarified the trigger date for the ten-year statute of repose for construction litigation, N.J.S.A. 2A:14-1.1.  The Court held that the statute of repose is triggered upon substantial completion of the project, however, the Court recognized that there can be separate trigger dates for subcontractors that have substantially completed all of their work on the project prior to the completion of the project as a whole.  For these subcontractors, the Court held that the statute of repose “runs from the completion of that contractor’s entire work on the ‘improvement,’ not from discrete tasks” performed by the subcontractor.  New Jersey, 2012 WL 1057939 at *6.

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Finding No Bad Faith, Court Enforces Termination for Convenience and Conversion Provisions Included in Parties’ Contract

Stony Brook Constr. Co. v. Coll. of N.J., 2008 WL 2404174 (N.J. Super. Ct. App. Div. June 16, 2008)

This appeal arose out of a lawsuit filed by a contractor, Stony Brook Construction Co. and its surety, Fidelity & Deposit Company of Maryland (F & D), against The College of New Jersey (TCNJ), in connection with the construction of a new three-story building on the TCNJ campus.  In August 1998, TCNJ entered into multiple prime contracts for the construction.  TCNJ retained Stony Brook to perform the general construction work for its bid price of $3,783,565.  The anticipated completion date for the project was August 17, 1999.  TCNJ retained a construction management firm, CMM, to coordinate and schedule the project.  Two TCNJ employees (Rogers and Bressler) were also designated as project supervisors.  Due to numerous delays and disagreements between the parties, the project remained unfinished as of the anticipated completion date.

In October 1999, TCNJ terminated its contract with Stony Brook for nonperformance.  On November 5, 1999, TCNJ and F & D executed a takeover agreement, by which F & D agreed to complete the work in exchange for the unpaid balance of the contract price.  Problems continued, and in September 2000, F & D ceased performance, claiming that TCNJ breached the takeover agreement.  TCNJ hired another contractor to complete the general construction. Read More

Self-Performance by General Contractor Forbidden under New Jersey Community College Contracts Law

D.A. Nolt, Inc. v. Camden County Coll., 2008 WL 2277095 (N.J. Super. Ct. App. Div. June 5, 2008) (Unpublished) 

In this case, a general contractor sued its client for breach and sought declaratory judgment when the college refused to allow the general contractor to self-perform work that had been assigned to a Small Business Enterprise (SBE) in the construction bid.  The trial court granted summary judgment in favor of the college and dismissed the complaint.  On appeal, summary judgment was affirmed.  The appellate court upheld the trial court’s conclusion that self-performance is equivalent to substitution of another sub-contractor because the result is the same – the subcontractor on the bid does not perform the work.  Moreover, both outcomes would thwart the aim of New Jersey County College Contracts Law (“CCCL”) to foster competitive bids by disallowing bid shopping.  As substitution of another contractor is not permitted under the CCCL, then similarly, self-performance by the general contractor is likewise not permitted.

Claims Against Architectural Firm Fell Under Professional Services Exclusion Based on Allegations of Underlying Complaints

Wimberly Allison Tong & Goo, Inc. v. Travelers Prop. Cas. Co., 2008 WL 2357863 (D.N.J. June 5, 2008)

In this case, plaintiff architectural firm sued commercial general liability (CGL) and excess liability insurers seeking damages and a declaratory judgment that insurers had a duty to defend it in the underlying suits, which arose from the collapse of a parking garage designed by plaintiff.  Both insurers denied coverage under provisions that excluded from coverage injuries arising out of plaintiff’s provision of professional services.  Both sides moved for summary judgment.  The court granted summary judgment for the defendants finding that all the claims filed against plaintiff in the wake of the garage collapse fell within the professional services exceptions of both policies, based on the factual pleadings of each of the complaints.

Sureties Are Not Necessary Parties under FRCP

D&D Assocs., Inc. v. N. Plainfield Bd. of Educ., 2008 WL 2277121 (D.N.J. June 2, 2008)

In this case, the court addressed whether a surety company was a necessary party under Fed. R. Civ. P. 19(a) and whether a motion to amend the pleadings to include the surety was untimely, prejudicial and futile.  D&D Associates had sued the Board of Education to recover the contract balances owed in connection with work on a school construction project.  Almost five years after commencing the lawsuit, the Board sought to amend their answer to join the surety, American Motorists Insurance Company, to the litigation.  The court denied the motion on the grounds that sureties are not necessary parties, and because it was untimely, prejudicial, wasteful and futile to join the party at such a late stage of litigation.

Exclusion of Coverage for Claims Arising from Breach of Contract Includes All Claims with Substantial Nexus to Breach or Having “But For” Relationship with Breach

N. Plainfield Bd. of Educ. v. Zurich Am. Ins. Co., 2008 WL 2074013 (D.N.J. May 15, 2008)

In this case, the Board of Education had been sued by various contractors and subcontractors for breach of contract and various tort claims, and sought specific performance from Zurich American Insurance Co. to defend against the claims under their insurance policy.  Zurich denied coverage, citing the policy provision excluding from coverage all claims arising from breach of contract.  The court found that that this exclusion covered any action that alleged a breach of duty, neglect, error, misstatement or omission and that grew out of or had substantial nexus with breach of contract, or any injury that would not have occurred but for the contract breach.  Thus, Zurich was justified in refusing coverage and indemnity for those claims, and the court granted Zurich’s motion for summary judgment against the Board.

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