Construction Law Signal

Construction Law Signal

Insights & Information on Current & Emerging Developments affecting the Construction Industry

The Early Contractor Gets the Worm: The Active Process of Preserving Construction Claims

Posted in Construction, Contract

timeforactionIn the world of construction, the old legal saying “equity aids the vigilant, not those who slumber on their rights” rings true. A weary contractor risks more than an OSHA violation – when a contractor fails to protect its legal rights, it can wake up near the end of the project only to find that it has lost a substantial amount of money with little ability to recover.

From the moment a contractor is awarded a job, it should take the necessary steps to protect its rights. The goal is to be in a position that allows a contractor to act immediately and preserve its claims when a problem arises. This is an active, ongoing process, and the following tips will aid in that process.

Document, then Document Some More.

Lawyers love records. Contractors should too, and for the same reason. Active and organized record-keeping from the start of the project allows parties to reconstruct problem projects accurately years later. Standard and objective record-keeping, even when there are no visible problems, support a party’s credibility, and well-preserved records can offer a lot of leverage when issues do arise. A contractor should have its boots-on-the-ground representatives keep daily logs documenting weather, the amount of labor, costs, overtime, and equipment usage, among other things. Maintaining these records in the “ordinary course of business” has an added bonus—in court, business records are admissible as evidence and speak for themselves, under a special rule.

Recognize the Notice Requirements.

Most contracts contain specific provisions for providing parties up the chain with notice of claims. These often require a contractor to act within a certain period of days. A contractor who fails to comply with the time limits may inadvertently “waive” an otherwise legitimate claim. For this reason, a contractor should study the contract at the very onset and take note of what is required for notice. When an issue arises, a contractor should strictly comply with the notice provisions and provide formal, written notice of its issue. The more notices provided, the better protected the contractor.

Carve Out Releases.

Payments, change orders and contract modifications often come with releases. These releases are usually broad and apply to all claims that have accrued at the time of execution. When a contractor is presented with a release and knows of a claim, the contractor should specifically exclude the claim directly on the release. The contractor should also do this with every subsequent release, unless it intends to forego its claim.

A vigilant contractor is most likely to get paid. A contractor who suddenly finds itself in a problem project can become vigilant. Contractors need to act early to preserve their claims and to ultimately get the worm.

Christopher D. Carusone is a Partner in the Firm’s Harrisburg office, where he serves as Chair of the Government Law & Regulatory Affairs and Energy & Utilities Groups, as well as Co-Chair of the Internal Investigations Group.

Matthew R. Skaroff is an Associate in the Firm’s Construction Group and concentrates his practice in construction litigation. 


NJ Supreme Court Gets it Right! Consequential Damages Caused by a Subcontractor's Defective Construction Work is Insured

Posted in Construction, Insurance, New Jersey
[Note from the Editor: Due to an inadvertent editing error, omitted from our post entitled NJ Supreme Court Gets It Right! Consequential Damages Caused By A Subcontractor’s Defective Construction Work Is Insured was the fact that the property damage at issue occurred after the project was completed.  The insurance coverage at issue in the case was completed operations coverage included in the commercial general liability form.  The corrected article appears below.] 

Consultant presenting insurance concept and risk managementThe New Jersey Supreme Court’s August 4, 2016 decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC opened the door for general contractors to obtain insurance coverage under their commercial general liability (CGL) policies for property damage caused by their subcontractor’s defective work after the project was completed.

In Cypress, a condominium association sued the general contractor and several of its subcontractors, alleging that water infiltration in roofs, windows, and common areas after the project was completed caused damage to the structural steel, sheathing, drywall, insulation and floors of the newly-constructed building. The association claimed that the damages were caused by the subcontractors’ faulty construction. When the general contractor’s CGL insurance companies denied coverage, the association joined the insurance companies into the lawsuit. Continue Reading

Contractor Payment Rights on Public Projects affected by PA Supreme Court Decision

Posted in Litigation, Pennsylvania, Prompt Payment Act

Engineer with flag on background series - PennsylvaniaContractors doing work on publicly-owned projects in Pennsylvania may find it more difficult to recover statutory penalties and attorneys’ fees if the owner withholds funds in bad faith. Pennsylvania’s Procurement Code, which governs bidding on public projects and payment to prime contractors and subcontractors, is intended to “level the playing field” between government and contractor. Similar, but not identical to the private prompt payment act, the statute provides for the award to the contractor of interest, a penalty in the amount of 1% of the unpaid balance per month, and attorneys’ fees if the public entity acts in bad faith by refusing payment that is due to the contractor. Pennsylvania courts previously interpreted this statute to mean that if a jury determined that the public entity acted in bad faith, then an award of penalties and attorneys’ fees was required.

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State Budget Problems Threatening Public Construction Projects: 5 Key Points to Remember

Posted in Construction, New Jersey, Pennsylvania

Countdown FiveOver the past year, many states experienced budget crises that threaten public works spending and, in some cases, caused entire project shut downs. In Pennsylvania, a stalemate over the budget for Fiscal Year 2016-2017 lasted almost nine months, causing companies and non-profit grant recipients who had contracts with the Commonwealth to suspend their services or temporarily close. In New Jersey, Governor Christie and the legislature deadlocked over taxes, including an increase to the gas tax that would fund the Transportation Trust Fund (“TTF”). As a result, Governor Christie issued Executive Order No. 20, which shut down all construction projects funded by the TTF that were not “absolutely essential for the protection of the health, safety, and welfare” of New Jersey citizens. The Executive Order was issued on June 30, 2016, a list of projects subject to shut down was published on July 6, 2016 and the projects were shut down by July 8, 2016. Continue Reading

It's Good to be King: Time to File a Lawsuit Does Not Run Against the Pennsylvania Government

Posted in Litigation, Pennsylvania

In the recent case of Township of Salem v. Miller Penn Development, LLC, the Pennsylvania Commonwealth Court invoked the often overlooked doctrine of nullum tempus occurrit regi. Read literally as “time does not run against the king,” as a general rule, nullum tempus allows the Pennsylvania state government or agencies to sue government contractors at any time, regardless of a statute of limitations defense. Nullum tempus also applies to claims brought by local governments, such as school districts, municipalities and counties, but only if the local government 1) brings its claims in its governmental capacity and 2) seeks to enforce an obligation imposed by law, as distinct from one arising out of a voluntary agreement.

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5 Simple Ways Construction Companies Can Reduce E-Discovery Costs

Posted in Construction, Litigation

EDiscovery LaptopAlmost any construction project carries the potential for disputes, which all too often lead to litigation and associated costs. As litigation costs increase, they eat into potential recovery or limit defense strategies. Finding ways to lower litigation expenses helps eliminate cost as a barrier to a favorable outcome. One area ripe for such measures is e-discovery—the process in any litigation where, as court rules require, the parties collect and exchange electronically stored documents and data. That process necessarily is affected by the way those documents and files are stored and managed. Even before litigation begins, construction companies can take simple steps to reduce their e-discovery costs.

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$113M in Construction Financing Approved for One of Washington D.C.'s Most Ambitious Projects – the "Wharf"

Posted in Construction, District of Columbia, Real Estate

The developers of the Wharf, an ongoing waterfront development at 1100 Maine Avenue SW in Washington, D.C., recently announced that they have secured $113 million of debt financing for the project. PN Hoffman and Madison Marquette, the project’s developers, will use the financing to pay for the construction of two new hotels, the 175-room Canopy by Hilton and the 237-key Hyatt House hotel, scheduled to open later next year. SunTrust Bank and M&T Bank will provide the financing.

The announcement is the latest step in an ambitious plan to transform approximately 25 acres along a mile of waterfront of the nation’s capital into a desirable, livable destination complete with hotels, condos, rental housing, retail, and restaurants.

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Lights Out for Maryland's Power Plant Construction Subsidy Program

Posted in Construction, Energy, Maryland

IOil and gas industry - refinery, factory, petrochemical plantt’s not every day that a decision by the United States Supreme Court has the potential to impact the construction industry. But the Court handed down a decision last month that could hinder the pace of power plant construction around the country. In Hughes v. Talen Energy Marketing, LLC, the Court unanimously struck down a Maryland regulatory program that provided subsidies to incentivize new power plant construction in the state. According to the Court, the program intruded on the federal government’s authority to regulate the interstate wholesale market for electricity. Because several other states have similar programs, more cases challenging state power plant construction incentives could be on the horizon.

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Does your Employee Handbook stand up to the Supreme Court's latest decision about accommodations for pregnant workers?

Posted in Business, Compliance, Labor & Employment

In a recent U.S. Supreme Court case about pregnancy discrimination, Justice Breyer asked: “Why, when the employer accommodated so many, could it not accommodate pregnant women as well?”  As an employer, that is a question you should now be asking when preparing, reviewing, or updating your company’s accommodation policies.

Many employersEmployee Benefits have policies and practices to ensure accommodation of disabled workers or those with temporary injuries or disabilities. However, employers may be overlooking their legal obligations to accommodate another group of workers: pregnant women who have pregnancy-related work limitations.

In Young v. United Parcel Service, the Court addressed whether UPS’s treatment of a pregnant employee constituted pregnancy discrimination. Its decision effectively broadens the range of accommodations employers must provide to a pregnant employee.

Peggy Young was a UPS delivery driver. When Young became pregnant, her medical providers instructed her not to lift more than 20 pounds. As a result, Young was unable to fulfill UPS’s standard 70-pound lifting requirement. Young was not assigned to light duty or an alternate position, but was required to take a leave of absence while the lifting restriction remained in place. She was forced to take unpaid leave and lost her medical coverage during that time. Continue Reading

Attention Philadelphia Employers: New and Important Changes to the "Ban The Box" Law

Posted in Labor & Employment, Pennsylvania

Philadelphia’s 2011 “Ban the Box” lawemployment-applications.jpg, which restricts an employer’s ability to inquire into a job applicant’s criminal history at the initial stages of the application process, is “old news” – but the recent changes that went into effect on March 14, 2016 are anything but. Our firm will be getting into the details of this recent development at its 8th Annual Labor and Employment Seminar (April 27, May 4, and May 12).

In short, every Philadelphia employer needs to make the necessary changes to its job application procedures to comply with the broader requirements of the law that former Mayor Michael Nutter signed into law before leaving office in December 2015.

The 2011 Version

As enacted in 2011, Philadelphia employers with 10 or more employees could not include the “box” on a job application asking about criminal records. Employers were not permitted to ask about criminal records at an initial interview, but could do so after the first interview. And, when asking about a criminal background, employers were prohibited from asking about arrests or anything other than criminal convictions. Violations of the law carried up to a $2,000 penalty.

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