Washington Construction Law Blog : Washington Construction Lawyer & Attorney : Davis Wright Tremaine Law Firm : Serving Seattle, Spokane, Tacoma, Bellevue, Everett & Yakima

Here is Division 1's most recent analysis on the arcane but important issue of how many policy limits are available in a situation where a carrier issues multiple year-to-year CGL policies and the insured becomes legally obligated to pay for damage that occurs over those multiple year but results from the same continuous or repeated cause (i.e., water seepage). 

The answer, at least in this case with this policy language was:  1 policy limit, under the clause known as the anti-stacking provision.

Copy of opinion also available here Download file

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In a recent but unpublished opinion, the Court of Appeals reversed summary judgment in favor of a builder and remanded for further proceedings a residential buyer's claims that the builder had breached the implied warranty of habitability.  The decision contains a useful discussion of the implied warranty.  The decision, Haas v. Kartashev, can be accessed here.  Download file  We rarely discuss unpublished opinions here, but as DWT represented the buyer in the case, we thought it worthy of note.

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A fitting way to end the week...the latest dispatch from the Great Condo Wars:  Division 1's recent opinion in Ballard Residential v. Pacific Rim Framing establishes:

• Defect Causation:  The condo used prefabricated Tyvek panels for the exterior.  Pacific Rim did not install the Tyvek, but did list in its scope of work the obligation to "staple and tape ends of panelizer installed Tyvek vapor barrier."  Eventually, the Tyvek panels fell off and/or permitted water intrusion.  The Association sued Pacific Rim (the framer) for its alleged losses; in a decision that renews faith in the ability to get and defend a summary judgment even on a complex record, Division 1 sifted the evidence and concluded there was no breach by Pacific Rim of its limited duty to staple down the Tyvek that actually caused the Association's alleged losses.
•  Indemnity:  Just as its breach claim against Pacific Rim failed for lack of causation, so too the Association's claim that the framer was required to indemnify for the siding failure fell apart because the claim was not one "arising out of, resulting from or connected with" Pacific Rim's own scope of work.  The Court refused to treat the standard indemnity clause as a type of project-wide insurance.
• Tender of Defense:  The Court called the Association's notice of tender of defense to Pacific Rim "perfunctory" and suggested that for such a tender to be valid, the tender must be accompanied by a bill of particulars actually establishing the fact of the indemnitor's ultimate liability...but since this is an unpublished decision, take that with a grain of salt.

Copy of opinion also available here Download file

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The insurer in this new condo defect case received a tender of defense from a general contractor under its additional insured endorsement to a subcontractor's policy.  About 14 months later, the insurance company accepted defense under a reservation of rights but otherwise did nothing in that time to investigate the claim. Division 1 held this delay constituted bad faith sufficient to estop the carrier from denying coverage. 

For damages, the GC sought to hold the carrier liable for all of its exposure on the project, regardless of whether that exposure stemmed from the specific subcontractor at issue.  Division 1 rejected this argument.

Copy of opinion also available here Download file

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This new case from Division 1 arose out of a condo project.  After settling its claims with the developer, the GC sued several subcontractors for breach of contract and indemnity.  All but one of the subs settled with the GC.  The remaining sub went to trial and lost.  On the sub's appeal, the Court of Appeals held:

1. The GC's breach of contract claim vs. the sub accrued (and thus began to run, for purposes of the 6 year statute of limitation) at the earlier point when the sub itself performed the defective work, not at the later time of substantial completion of the overall project.
2. On the GC's indemnity claim, the Court of Appeals refused to give the sub an offset based on the settlements the GC had achieved with the other subcontractors, because the sub failed to prove that the other settlements paid the GC for damages caused by its work.
3. The Court held that the way the trial court apportioned responsibility for the GC's legal fees -- apportioning 1/13 of the total to the sub because there were a total of 13 subs on the project -- was arbitrary and without basis.

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Anecdotal though it is, this new case confirms my general impression that it is getting easier to obtain defense summary judgment in those free-for-all, multi-party defect cases (where the plaintiff names all parties under the sun) by pointing out the lack of evidence supporting plaintiff's conclusory allegations.  The bench, in other words, may be wising up to the game.

Copy of opinion also available here Download file

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This case arose from poor workmanship by a flooring subcontractor.  When the GC withheld payment, the sub sued for the contract balance.  The GC counterclaimed for costs incurred due to defects and rework.

At trial, the sub moved to dismiss the GC's counterclaim on the theory that only the project owner had standing to sue because only the project owner had sustained damage.  The trial court granted that motion.

On appeal by the GC, Division 2 reversed and clarified that:

1.     The sub's poor work exposed the GC to liability to the owner, and thus the GC had standing to sue for compensable damages.

2.     The owner need not be joined as a party in the dispute because the owner ordinarily has no right of action against a sub and the GC can adequately protect whatever incidental interest the owner has in making sure that sufficient funds are recovered by the GC to make whole the problem.

Copy of opinion (Floor Express v. Daly) also available here Download file

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Turning largely on the rule that an owner is generally not held to be the third-party beneficiary of the GCs agreements with its subcontractors (unless otherwise stated in the subcontracts), this case results in summary judgment dismissal of defect claims made by an owner against flooring and tile subs hired by the GC.  The GC was not sued -- and there's no explanation in the opinion why that was the case.

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On a school renovation project, the general contractor hired a subcontractor to apply stain to a newly installed concrete floor which had been sealed with a silicone product specified by the architect.  The stain failed to adhere -- washing off after an accidental water spill. 

After settling with the owner and subcontractor, the general contractor brought product liability claims against t he manufacturer and seller of the stain. 

Division 1 first held that the claim under the WPLA (Washington Product Liability Act) was no good because the general contractor suffered only economic loss (failure of the stain itself) which is not covered by the WPLA rather than loss to something else such as the underlying concrete floor or the health & safety of students.

The Court of Appeals gave the green light, however, to the general contractor's UCC warranty claims.  While the defendants claimed the failure was due to improper application or the wrong sealant, the Court held that a trier of fact might well find the stain itself failed to comply with the implied or express warranties under the UCC.

 

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An association of townhome owners lacks authority to bring suit against a developer to recover for  alleged defects contained within the individual homes (as opposed to the common elements).  So sayeth the Oregon Court of Appeals in this new case.

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Also on tap in the January term is Lakemont Ridge Homeowners Ass'n v. Lakemont Ridge Ltd. P'ship, which will decide whether a homeowner's obligation under RCW 64.50.020 to provide notice of claim before filing a defect suit against a "construction professional" is contingent upon the construction professional having first informed the homeowner of the prelitigation notice requirement. See RCW 64.50.050. The Court of Appeals said no such contingency existed, and thereby barred the owner from bringing claim without first providing the statutory notice. Download file. Oral argument in March 2.

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Indemnity. Given the complexity of major projects -- where the intersection of multiple parties can yield unanticipated and costly problems -- there may be no single clause in a construction contract more essential than the indemnity provision.

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