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

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by a bill of particulars actually establishing the fact of the indemnitor's ultimate liability...but since this is an unpublished decision, take that with a grain of salt.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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While it doesn't exactly break any new legal ground, this case summarizes & applies the doctrine that an employer's waiver of workers compensation immunity -- a big issue in any construction agreement -- must be explicit and in writing. 

When a Boeing employee sued the City of Algona for personal injury sustained on its property, the City sought to obtain indemnity from Boeing under a 1992 letter agreement under which the property in question was developed.  The Court held that Boeing's promise to repair damage to the development fell short of an explicit promise to waive workers compensation immunity, and therefore dismissed the City's indemnity claim.

Copy of opinion also available here Download file

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With the rise of condo defect cases came the phenomenon of claims based on technical violations of plans or applicable codes without much in the way of resulting damage to the structure.  This case sheds some light on whether a plaintiff can still maintain a breach of contract action for money recovery under these circumstances.  The answer seems to be that a breach by itself is not enough.  Damage must be shown.

The case also has some pearls of wisdom on the following issues:

1. Who decides -- judge or jury -- the amount of legal fees to be awarded when the fees are sought as an element of "damages" under an indemnity clause rather than under a prevailing party fee clause?  Answer:  the jury.
2. What are the elements of an enforceable contract where -- as often seems to happen -- the deal arises out of informal communications without final mutual signatures?  Check out the discussion.
3. Does an indemnity clause covering "any and all claims" cover both tort and contract claims?  Answer: yep.

A copy of the opinion also available here Download file

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Yet another case in a stream of cases involving defunct subcontractors & whether they can sued or be sued after dissolution of the business entity (here, an LLC).  The answer, generally speaking, is no -- meaning in this case that the dissolved sub's indemnity claim against yet another sub on the same job was dismissed because the dissolved sub had no right to sue.

A copy of the opinion can also be accessed here Download file

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Yet another reminder that the best indemnity clause in the world won't necessarily protect you from a defunct - even shady -- obligor.  Here, the seller promised to indemnify the buyer for cleanup costs associated with arsenic pollution on a parcel on the Everett waterfront.  The buyer sued and won a judgment of $600,000 against the corporate obligor.  The court then refused to pierce the corporate veil, leaving the buyer without any recourse.  This is why bonds, personal guarantees and even set-asides are used to back up indemnity promises.

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Reversing the trial court in a condo defect case, Division 1 has held that an indemnity clause between GC and sub which requires the sub to protect the GC from "any and all claims" connected with services performed under the subcontract is broad enough to include contract as well as tort claims.

The Court rejected the sub's claim that the indemnity clause related only to tort claims because it excluded coverage for certain claims caused by the "sole negligence" or "concurrent negligence" of the indemnitee (GC).  Instead of seeing these carve outs as modifying the "any and all" language, the Court instead saw them as efforts to comply with RCW 4.24.115.

 

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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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