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Inside This Issue:

  • Statutes of Repose Applicable to Construction Industry.
  • Architect Wins Entitlement to Damages, but Recovers Nothing, Because it Failed to Keep Adequate Cost Records.
  • Failure to Attend Pre-bid Site Visit Proves Fatal to Differing Site Conditions Claim.
  • Insurance Carrier Had No Duty to Defend Engineer in Wrongful Death Action Based on Trench Collapse.

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Survey of Statutes of Repose Applicable
to Construction Industry

An excellent, comprehensive survey of five major provisions of each state’s statute of repose limiting the time period to bring legal action against parties involved in construction projects is available in the Summer 2001 issue of the “Construction Lawyer,” published by the American Bar Association, Forum on the Construction Industry. This easy-to-use, two-page table covers all 48 states that have enacted statutes of repose, and includes: the type of action affected, length of actionable period, savings clause, triggering events, and class of people protected (e.g., architects, engineers, contractors, or other persons). Only New York and Vermont do not currently have such legislation. The table was prepared by attorneys Allen Holt Gwyn and Paul E. Davis of the law firm Conner Gwyn Schenck PLLC, P.O. Box 20744, Greensboro, NC 27420; Phone: 336-691-9222; e-mail: ahgwyn@cgsplc.com. The ABA Construction Forum contact is Carol Albrecht, Director, 312-988-5660.

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Architect Wins Entitlement to Damages, but Recovers Nothing, Because it Failed to Keep Adequate Cost Records

An architect performed both design and construction administration services under its contract with a school district. When the construction contractor completed the project eight months late, the architect alleged that it was entitled to recover compensation for the additional services it was forced to perform as a result of the contractor’s delay. The school district failed to pay, arguing that under the terms of the contract the architect was obligated to perform basic services until 60 days after substantial completion of the work. The court held that the architect had proved entitlement to payment for additional services due to the contractor’s failure to perform. However, the architect failed to prove the cost of its additional services, and, therefore, could recover nothing. The court explained that the architect’s computerized cost records showed the individual days and hours spent on the project, but identified them generally as, “Construction Contract Administration.” Because the architect failed specifically to identify the tasks performed, the court was unable to determine which were compensable additional services. Belot v. Unified School District, No. 497, Douglas County, 4 P.3d 626 ( Kan. App., 2000.)

* This article, and the one that follows, was written by Suzanne Harness, Esq., of the Seyfarth Shaw law firm, and originally published in the Spring 2001 issue of that firm’s Construction Practice Group newsletter, entitled: “Construction Law Report.” The firm has a national and international practice with emphasis on construction and governmental contracting. For further information: 815 Connecticut Ave., N.W., Suite 500, Washington, D.C. 20006, phone: 202-463-2400.

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Zurich N.A. Insurance

See Zurich Insurance for design professional insurance. Zurich is at the forefront of innovative insurance products and risk management programs for architects, engineers, contractors and design-builders. The Contractor’s Protective Professional Indemnity policy (CPPI), for example, provides first party as well as third party coverage for contractors that have claims against their A/E subcontractors due to professional acts, errors and omissions. For more information on this or other Zurich products, contact webmaster@constructionrisk.com

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Failure to Attend Pre-Bid Site Visit Proves Fatal to Contractor’s Differing Site Conditions Claim

A government repair and alteration contract required installing new shower units to existing supply piping. Upon demolishing the shower wall, the contractor discovered that due to the location of the existing supply lines it would have to remove and replace the pipes. The contractor, who had not attended the government’s pre-bid site visit, claimed a differing site condition and asserted that the condition would not have been visible at a site visit. Other contractors, however, who had attended the pre-bid site visit testified that the government had removed a portion of the shower wall exposing the condition in question. Given this testimony, the Armed Services Board of Contract Appeals found that the condition was neither unforeseeable nor unknown, thus preventing the contractor’s recovery for either a Type I or Type II differing site condition. American Construction & Energy, Inc., ASBCA No. 1770972 (November 27, 2000). (* Article by Suzanne Harness, Esq., Seyfarth Shaw law firm.)

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Insurance Carrier Had No Duty to Defend Engineer in Wrongful Death Action Based on Trench Collapse

By: J. Kent Holland, Jr.

An engineer’s general liability insurance carrier (“Utica Insurance”) refused to defend a suit against the engineer arising out of the death of a laborer (“Lindsley”) in a trench collapse. It contented that the claim was excluded from coverage. The trial court’s declaratory judgment in favor of the engineer against the insurance carrier was reversed on appeal because the court found the policy exclusion to be clear and unambiguous, particularly with reference to what constitutes professional services.

The survivors of the deceased laborer alleged that the engineer was negligent in that the engineer allegedly (1) failed to make daily inspections of excavations, failed to be present during all excavations and failed to make inspections after every rainstorm; (2) negligently designed the system for excavation, negligently drafted the plans and negligently failed to indicate in the slope of the spoil pile adjacent to the excavation; and (3) misrepresented its qualifications to prepare the safety requirements and design the excavation system, and misrepresented that it would properly inspect and monitor the excavation.

The engineer’s general liability policy contained the following exclusion: “This insurance does not apply to ‘bodily injury,’ ‘property damage,’ ‘personal injury’ or ‘advertising injury’ arising out of the rendering or failure to render any professional services by or for you, including: (1) The planning , approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications; and (2) Supervisory, inspection or engineering services.”

In an apparent effort to avoid this policy exclusion, the Lindsleys amended their complaint against the engineer to allege acts and omissions against non-engineering personnel as well as engineering personnel, with the intent of characterizing the services as nonprofessional. Although the trial court was apparently persuaded by this argument, the appellate court was not. It stated that the court must look at the facts alleged in the complaint rather than the legal theories alleged. The facts in the underlying complaint, says the court, were that the engineer negligently performed services that were explicitly defined in the policy exclusion as professional services, and thus the claim was excluded from coverage under Utica’s policy. Utica Lloyd’s of Texas v. Sitech Engineering Corporation, 38 S.W.3d 260 (Tex. App. 2001).

** Risk Management Note: This case provides a good example of the value gained from carrying design professional insurance if you are providing services as either a contractor, construction manager or design professional that may be deemed “professional services.”

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Disclaimer

This newsletter is independent of any insurance company, law firm, or other entity, and is distributed with the understanding that ConstructionRisk.com, LLC, and the editor and writers, are not hereby engaged in rendering legal services or the practice of law. Further, the content and comments in this newsletter are provided for educational purposes and for general distribution, and cannot apply to any single set of specific circumstances. If you have a legal issue to which you believe this newsletter relates, we urge you to consult your own legal counsel. ConstructionRisk.com, LLC, and its writers and editors, expressly disclaim any responsibility for damages arising from the use, application, or reliance upon the information contained herein.

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Copyright 2001, ConstructionRisk.com, LLC

Editor: J. Kent Holland, Jr., J.D.
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