|
|
|
|
|
        |
|
|
 |
FALL (Q4) 2003 I. LEGISLATIVE/REGULATORY
UPDATE Toxic Mold Protection Act Update The Toxic Mold Protection Act (SB 732), enacted on January 1, 2002, charges the California Department of Health Services (DHS), assisted by a task force of volunteer stakeholders, to undertake a series of complex tasks, including determining the feasibility of adopting permissible exposure limits for indoor molds and developing new standards and guidelines. Such standards and guidelines would be used in assessing the health threat posed by the presence of indoor molds, determining valid methods for fungal sampling and identification, providing practical guidance in regard to water intrusion and mold removal and abatement, disclosing the presence of mold growth in real property at rental or sale, and assessing the need for standards for mold assessment and remediation professionals. DHS staff members are currently collecting contact information for those who are interested in serving on the task force. The funding for the implementation of SB 732 is entirely dependant upon voluntary contributions. DHS proposes to implement the work plan so long as sufficient donations are made. It anticipates a need for $964,000 to operate its two phases of overlapping tasks covering a 2.5 year period. Although the plan utilizes the task force as advisory, as required by SB 732, and proposes contract staff and consultants to implement some of its tasks, the plan is not dependent upon the source(s) of voluntary donations for direction. Senate Bill 1013 (Ackerman) is still under consideration by the Senate Judiciary Committee. SB 1013 would revise service deadlines for motions for summary judgment to narrow the deadline from 75 days back to 28 days. The bill would also provide that the statute of limitations for an action for assault, battery, or injury to, or for the death of, an individual caused by the wrongful act or neglect of another is one year, rather than 2 years, except for the victims of the September 11, 2001 terrorist attacks. II. JUDICIAL UPDATE Depending on the theory of recovery, a lawsuit alleging a latent defect in the construction of an improvement to real property must be brought within three or four years after the plaintiff discovers the defect, or should have done so. However, a 1971 statute established a further general rule that no action for latent construction defects may be commenced more than 10 years after “substantial completion” of the construction project. This “absolute” 10-year limitations period was to apply regardless of when the defect was discovered. Pre-1971 cases held that the discovery-based limitations period for a latent-defect suit alleging breach of an express or implied warranty is “tolled” – that is, halted and (continued on page 3)suspended in progress – while the defendant’s promises or attempts to honor the warranty by repairing the defect are pending. Relying heavily upon these earlier authorities, and in suits not confined to warranty theories, two Court of Appeal cases concluded that the alternate 10-year statute of limitations of California Code of Civil Procedure section 337.15 is also subject to tolling for repairs. However, a more recent Court of Appeal decision disagreed (FNB Mortgage Corp. v. Pacific General Group). In Lantzy v. Centex Homes, the California Supreme Court agreed with the holding in FNB Mortgage Corp., that California Code of Civil Procedure section 337.15’s 10-year statute of limitations for latent construction defects is not subject to a general rule of equitable tolling while promises or attempts to repair are pending. The Court opined that a broad tolling-for-repairs rule would contravene the Legislature’s clear intent, at the time it adopted section 337.15, to ensure a generous but firm cutoff date for latent-defect suits. However, the Court did not foreclose application of the distinct doctrine of equitable estoppel. Thus, a defendant whose conduct induced plaintiffs to refrain from filing suit within the 10-year period might, under the Court’s ruling, be equitably estopped to assert that the 10-year statute of limitations had expired. Homeowners Association Had No Duty to Notify Its Members of the Filing of Litigations In Ostayan v. Nordhoff Townhomes Homeowners Association, the defendant Association obtained summary judgment on a complaint alleging that the Association had been negligent and had breached its fiduciary duty to former Association member and plaintiff Sam Ostayan. Ostayan claimed that he was entitled to a share of the litigation proceeds received by the Association after Ostayan sold his condominium because he had not been informed of the Association’s litigation against its insurer prior to the sale. Ostayan claimed that the Association had breached its duty to notify its members that it had filed litigation against its insurance carrier. The Court of Appeal held that the Association had no duty to notify its members of the filing of the litigation pursuant to the CC&Rs, and that even if the Association had any duty of notification, it complied with that duty by previously informing its members of its dispute with the insurer. General Contractor Entitled to Coverage as "Additional Insured" Under Policy of Subcontractor Because of Causal Connection of Work to Accident In Vitton Construction Co., Inc. v. Pacific Insurance Co., the Court of Appeal concluded that the facts set forth a sufficient “minimal causal connection” to trigger coverage for the general contractor (Vitton) as an “additional insured” under an insurance policy held by one of its subcontractors, Pacific Erectors, Inc. (PEI). Pursuant to its subcontract with Vitton, PEI laid decking for the roof of a warehouse and cut holes in the decking for skylights and HVAC equipment. PEI completed its work and left (continued on page 4)the jobsite. After PEI left, Vitton employees attached “wood nailers” and “curbs” to the roof openings, but did not cover the openings themselves. Shortly thereafter, an employee of a roofing subcontractor, Aaron Anderson, was working on the roof of the warehouse and fell through one of the uncovered holes cut in the roof decking. Anderson sustained serious injuries in the fall and sued. Vitton claimed that it was an additional insured under PEI’s insurance policy with Pacific Insurance Company (Pacific), and thus, Pacific should have contributed to the settlement with Anderson, which it had not. Pacific argued that Vitton was not an additional insured covered by the policy because Vitton’s liability for the Anderson accident did not “arise out of” the work performed by PEI. In finding coverage for Vitton for the Anderson accident as an additional insured under the Pacific policy, the court noted that the Pacific policy extended coverage to liability resulting from PEI’s “completed operations,” and that PEI’s work – cutting holes in the roofing material – created the very condition that led to Anderson’s fall and resulting injury. "Other Insurance" Clause in Liability Insurance Policy Held Unenforceable In Century Surety Company v. United Pacific Insurance Company, the Court of Appeal reviewed the enforceability of an “other insurance” clause in a liability policy issued by Century Surety Company (Century). The clause provided that Century’s coverage for its insured would be “excess” to the coverage of other “valid and collectable insurance.” Century was one of four successive insurers that had provided coverage to a common insured over a five-year period. After the common insured tendered defense of a suit for damages that had been filed against it, the three other insurers besides Century accepted the tender and agreed to provide, and did provide, a defense under a reservation of rights. Ultimately, those insurers settled the case. Century, however, rejected the tender and refused to provide a defense, claiming that its coverage was “excess” to that of the other insurers. Century claimed that it had no duty to participate as the underlying claim never threatened to exhaust the primary coverage of the other three insurers. When those insurers made demand upon Century for contribution, it filed suit. In affirming the trial court’s summary judgment in favor of the three other insurers, the Court held that the proper resolution of the dispute was to ignore Century’s excess clause and compel an equitable proration among all four of the insurers. Based upon equitable principles, Century was liable to contribute on some equitable basis to the defense and indemnity expenses of the other three insurers. The Court also found that the Century “other insurance” clause and the pro rata clauses of the other three insurers were mutually repugnant, in that, if the court enforced Century’s clause, then it could not enforce the clauses of the other primary insurers. Further, equitable pro rata apportionment between the four insurers was consistent with the public policy disfavoring escape clauses, whereby promised coverage evaporates in the presence of other insurance. Premises Owner Has No Liability to Employee of Independent Contractor for Dangerous Condition on Property Created by a Contractor In Kinsman v. Unocal Corporation, the Court of Appeal concluded that a premises owner has no liability to an independent contractor’s employee for a dangerous condition a contractor has created on the property unless the dangerous condition was within the property owner’s control and the owner exercised this control in a manner that affirmatively contributed to the employee’s injury. A premises owner’s liability to employees of independent contractors depends upon the knowledge and acts of the owner. Homeowners Found Not Entitled to Insurance Coverage for Repairs to Deck in State of Imminent Collapse In Rosen v. State Farm General Insurance Company, the California Supreme Court held that the insurance policy at issue specifically defined “collapse” as “actually fallen down or fallen to pieces.” The Court of Appeal had previously concluded that sound public policy required coverage for imminent, as well as actual, collapse, lest dangerous conditions go uncorrected. The Supreme Court disagreed, finding that the lower courts had failed to apply the plain, unambiguous language of the policy. “We do not rewrite any provision of any contract, [including an insurance policy], for any purpose.” Plaintiff had submitted a claim to defendant, his homeowners insurance carrier, for the cost of repairing two decks attached to his home. Plaintiff repaired the decks upon the recommendation of a contractor who had discovered severe deterioration of the framing members supporting the decks. Plaintiff believed his decks were in a state of imminent collapse, entitling him to policy benefits. Defendant denied plaintiff’s claim on the ground, among others, that there had been no collapse of his decks within the meaning of the policy, in that its coverage was expressly restricted to actual collapse. Under the policy, collapse was defined as having “actually fallen down or fallen to pieces,” and not “settling, cracking, shrinking, bulging, expansion, sagging or bowing.” In finding that the unambiguous language of the policy provided no coverage for the repairs to plaintiff’s decks, the Supreme Court stated that by agreeing to the contract of insurance, the insurer made certain promises, and the insured paid premiums, against the risk of loss. “To rewrite the provision imposing the duty to indemnify in order to remove its limitation to actual collapse would compel the insurer to give more than it promised and would allow the insured to get more than it paid for, thereby denying their freedom to contract as they please.”
If you would like to discuss these or any other construction
law matters, please contact a construction law specialist
in Klinedinst's Construction Law Department.
|
|
Want to Automatically Receive These Construction Law Updates?
|
 |
 |
