Contractor’s Common Law Indemnity Claim Against Architect and Engineer Fails

Posted by: Hilger Hammond On: 16th October 2014 | no responses.

wood constructionBy Aileen Leipprandt

A general contractor’s common law indemnification claim against the project architect and structural engineer was dismissed where the general contractor could not establish that it was liable for the wrongdoings of either the architect or structural engineer. Sachse Construction & Development Co, LLC v AZD Associates, et al (Mich Ct. Appeals 2014). 

In this case, Sachse Construction & Development was the general contractor for a condominium project located in Royal Oak. The condominium association sued Sachse claiming numerous construction defects. Sachse, in turn, sued the project architect and the structural engineer asserting a variety of theories including (1) common-law indemnification; (2) third-party beneficiary; (3) unjust enrichment; and (4) negligence.

As to its common law indemnity claim, Sachse argued that the damages sought by the condo association were the result of the malpractice of the architect and engineer, not Sachse. The trial court disagreed with Sachse, ruling that the evidence presented did not establish any claim by the condominium association for damages caused by the architect or engineer. Instead, the association had sued Sachse for construction defects solely related to Sachse’s work. The trial court dismissed Sachse’s indemnity claim and Sachse appealed.

The Court of Appeals upheld the trial court’s ruling, affirming the longstanding principle that in order to prevail on a claim for common law indemnification, the party seeking indemnity must show: (1) that it has been held liable for the acts of another, and (2) that it is “free from fault in the underlying wrongful act that gave rise to the liability at issue.”

Hammond Presents at the 32nd IRMI Construction Risk Conference

Posted by: Hilger Hammond On: 4th January 2013 | no responses.

By Benjamin H. Hammond

In mid-November of 2012, I attended the 32nd annual IRMI Construction Risk Conference held in Orlando, Florida.  At this conference, I was both a speaker and an attendee of multiple sessions.  My presentations concerned navigating construction defect claims, and specifically, the insurance coverage issues that arise for general contractors and subcontractors when faced with these types of claims.

The conference was well attended with well over 1,000 insurance, legal, and construction professionals from across the country in attendance.  Approximately 300 people attended my presentation, and I was very pleased with the interest level and questions raised throughout and after the presentation.  Whether a construction defect constitutes an “occurrence” under the CGL policy remains a hotbed of litigation across the country.  Courts across the country are split as to whether there should be coverage for a construction defect, and my presentation highlighted the differences among the states with regard to this matter.

In addition, I talked at great length about the “subcontractor exception” found in most CGL policies and how there could be insurance coverage for a general contractor whose subcontractor performed defective work based on the proper application of the “subcontractor exception.”  If you would like more details on this particular subject, please give me a call.

Other topics of discussion and presentations concerned contractors professional liability insurance, design build projects on public projects, what is working and not working with wrap-ups, managing subcontractor default risks, trends in subcontractor default insurance, trends in additional insured coverage, and other updates on construction and insurance law.

The handouts for the presentations are available at IRMI.com.  If you have any specific questions, I would be happy to speak with you on any of these topics.

Building Inspector Not Responsible for Defective Construction

Posted by: Hilger Hammond On: 14th January 2011 | no responses.

Even If “A” Cause of the Damage

by Benjamin H. Hammond

Inspectors construction
Homeowners frequently question why they cannot sue a building inspector who issued a certificate of occupancy for a home that was clearly not built in accordance with the building code.  The answer is that a building inspector, as a government official, has what is known as governmental immunity.  This special immunity requires there to be an elevated standard of negligence, gross negligence, in order to bring a cause of action against such an individual.  Prior case law has confirmed that this is a difficult burden to sustain in most cases.

Recently, in the case of Gordon v Jim Lippens Construction, Inc., the plaintiffs contracted to have a home built.  The defendant inspector observed the home as it was being built and approved the framing in 2004.  He issued a certificate of occupancy in 2005, and in early 2006, the plaintiffs noticed significant deflection in the slope of their roof.  Experts concluded that the framing and structure had not been built according to the plans, specifications or the applicable building code.

In the lawsuit against the building inspector, the court ruled that while the actions of the building inspector may have been a proximate cause of the damage, it was not “the one most immediate, efficient, and direct cause” of the damages.  Since the township building inspector’s conduct was not “the” proximate cause of the damage, he was entitled to governmental immunity and dismissal from the lawsuit.

While this news is difficult for a homeowner to understand and accept, particularly in a circumstance where the general contractor is out of business and/or not collectible, it is helpful to be aware of this information during construction so that the homeowner can take adequate measures to protect itself against any defective construction of the home by the contractor.


Defective Chinese Drywall Trial Result

Posted by: Hilger Hammond On: 1st August 2010 | no responses.

by Benjamin H. Hammond

 

The Miami Herald is reporting that the nation’s first Chinese drywall jury trial yielded a $2.4 million result on Friday, June 18th. Defective drywall, installed by Banner Supply Co., was found to produce sulphuric odors, create corrosion problems, and possibly cause breathing problems and headaches. Banner has been accused of concealing information about the problems, including manufacturer recommendations that it should not be used.

 

Banner took responsibility for the defective materials, but argued it should only be responsible for reimbursement of direct expenses only, which totaled $705,000. However, the six-person jury determined that the family should receive $1.7 million for loss of enjoyment of life and $60,000 for stigma damages, in addition to the renovation costs.

 

The decision in Florida is the largest award for one home in a Chinese drywall case to date. The result could set a precedent for thousands of similar cases in active or pending litigation across the southeastern states.