THE RELEVANCE AND REASONABLENESS OF DESTRUCTIVE TESTING

shutterstock_617053133Destructive testing is a routine investigatory procedure in construction defect disputes.   The destructive testing is necessary to determine liability (causation), the extent of damage, and the repair protocol.   Destructive testing is designed to answer numerous questions:  Why did the building component fail?  Was the building component constructed incorrectly?  What is the magnitude of the damage caused by the failure? What specifically caused the damage?  What is the most effective way to fix the failure and damage?  There are different iterations to the same questions, but in many instances, destructive testing is necessary to answer these questions.

 

Claimants sometimes prohibit destructive testing.  Of course, destructive testing is intrusive.  In many instances, it is very intrusive.  But, this testing is a necessary evil.  Without this testing, how can a defendant truly analyze their potential exposure and culpability?  They need to be in a position to prepare a defense and figure out their liability.  This does not mean destructive testing is warranted in every single construction defect dispute.  That is not the case.   However, to say it is never warranted is irrational. 

 

Florida Statutes Chapter 558 (the pre-suit notice of construction defects process) addresses the issue of destructive testing when parties are participating in this obligatory pre-suit notice of construction defect process:

 

(a) If the person served with notice under subsection (1) determines that destructive testing is necessary to determine the nature and cause of the alleged defects, such person shall notify the claimant in writing.

(b) The notice shall describe the destructive testing to be performed, the person selected to do the testing, the estimated anticipated damage and repairs to or restoration of the property resulting from the testing, the estimated amount of time necessary for the testing and to complete the repairs or restoration, and the financial responsibility offered for covering the costs of repairs or restoration.

(c) If the claimant promptly objects to the person selected to perform the destructive testing, the person served with notice under subsection (1) shall provide the claimant with a list of three qualified persons from which the claimant may select one such person to perform the testing. The person selected to perform the testing shall operate as an agent or subcontractor of the person served with notice under subsection (1) and shall communicate with, submit any reports to, and be solely responsible to the person served with notice.

(d) The testing shall be done at a mutually agreeable time.

(e) The claimant or a representative of the claimant may be present to observe the destructive testing.

(f) The destructive testing shall not render the property uninhabitable.

(g) There shall be no construction lien rights under part I of chapter 713 for the destructive testing caused by a person served with notice under subsection (1) or for restoring the area destructively tested to the condition existing prior to testing, except to the extent the owner contracts for the destructive testing or restoration.

If the claimant refuses to agree and thereafter permit reasonable destructive testing, the claimant shall have no claim for damages which could have been avoided or mitigated had destructive testing been allowed when requested and had a feasible remedy been promptly implemented.

Florida Statute s. 558.004(2).

 

Under this pre-suit process, if a claimant refuses to permit reasonable destructive testing, the claimant shall have no claim for damages which could have been mitigated or avoided had destructive testing been allowed and had a feasible remedy been promptly implemented.  In my opinion, this has very little teeth as it raises too many factual issues such as 1) was the destructive testing reasonable, 2) what damages could have realistically been mitigated and how do you prove this, 3) what is a feasible remedy and how is one to know whether the defendant would have even proposed or implemented a feasible remedy, 4) is the feasible remedy a remedy that mitigates future damage or fully addresses the root of the problem, and 5) what is the quantum of damages that could have been mitigated or avoided.   Establishing the reasonableness of the destructive testing is likely easy as an expert would support this.  But the same expert would have to establish the other requirements as a basis to establish an affirmative defense that some of the claimed damages the plaintiff is seeking could have been mitigated had the claimant allowed pre-suit destructive testing.

 

Oftentimes, however, a defendant wants to undertake certain destructive testing after a lawsuit has been initiated.  What happens if the plaintiff refuses such testing in this scenario?  In a recent products liability case, Westerbeke Corp. v. Atherton, 42 Fla.L.Weekly D1741c (Fla. 2d DCA 2017), a defendant wanted to perform destructive testing on a gas generator that caused an explosion on a boat.  The plaintiff did not want this testing to be performed.   In support of the testing, the defendant relied on a federal district case that applied four factors to consider whether the destructive testing is warranted:

 

1) Whether the proposed testing is reasonable, necessary, and relevant to proving the movant’s case; 2) Whether the non-movant’s ability to present evidence at trial will be hindered, or whether the non-movant will be prejudiced in some other way; 3) Whether there are any less prejudicial alternative methods of obtaining the evidence sought; and 4) Whether there are adequate safeguards to minimize prejudice to the non-movant, particularly the non-movant’s ability to present evidence at trial.

 

 Westerbke Corp., supra, quoting Mirchandani v. Home Depot, U.S.A., Inc., 235 F.R.D. 611, 614 (D.Md. 2006).

 

The trial court did not apply these four factors and denied the defendant’s request to perform destructive testing on the gas generator.  On appeal (through a petition for writ of certiorari), the appellate court reversed.  Unfortunately, the appellate court punted without providing specific guidance as to what standard the trial should follow when granting or denying a request for destructive testing.  The appellate court simply held that the four factors above may provide guidance to the trial court, but are not controlling in Florida.  The appellate court further summarily pointed to the Florida’s Rules of Civil Procedure to address the issue:

 

The Florida law regarding discovery in general provides that a party in a civil case is entitled to discover evidence that is relevant to the subject matter of the case and that is admissible or reasonably calculated to lead to admissible evidence. Fla. R. Civ. P. 1.280(b)(1); Allstate Ins. Co. v. Langston, 655 So. 2d 91, 94 (Fla. 1995). In addition, “[a]ny party may request any other party . . . to inspect and copy, test, or sample any tangible things that constitute or contain matters within the scope of rule 1.280(b) and that are in the possession, custody, or control of the party to whom the request is directed.” Fla. R. Civ. P. 1.350(a)(2). “The discovery rules . . . confer broad discretion on the trial court to limit or prohibit discovery in order to ‘protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.‘ ” Rasmussen v. S. Fla. Blood Serv., Inc., 500 So. 2d 533, 535 (Fla. 1987) (citing Fla. R. Civ. P. 1.280(c)). We conclude that the trial court departed from the essential requirements of the law in failing to apply the proper discovery standard…..

 

 

The four factors outlined above are reasonable factors that comport with Florida law – whether the testing is relevant to the subject matter of the case. The factors provide guidance as to how to determine relevancy of destructive testing during the course of a lawsuit.  Plus, the court can always impose limitations or restrictions to reduce any intrusion and protect the claimant’s interests while allowing testing to be performed.   By the appellate court punting and not even ruling on whether the destructive testing would be relevant in the underlying action, the court is simply inviting another appeal.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

SUBCONTRACTOR’S LIABILITY INSURER’S DUTY TO DEFEND THE “ADDITIONAL INSURED” GENERAL CONTRACTOR

shutterstock_306317915Construction projects can lead to insurance coverage disputes.  One such dispute arises when a general contractor is sued for construction defects and resulting property damage and it tenders the defense of the claim / lawsuit to an implicated subcontractor’s liability insurer.  A general contractor does this because it (hopefully) will be an additional insured under the subcontractor’s liability policy.  Being identified as an additional insured under a subcontractor’s liability policy is imperative for a general contractor as part of its normal risk assessment. The issue will typically come up in any construction defect lawsuit because if the general contractor is an additional insured it will, and should, tender the defense of the lawsuit to implicated subcontractors’ insurers. 

 

Sometimes, a subcontractor’s liability insurer will deny the duty to defend the general contractor.  Yes, this happens.  When it does, the general contractor’s insurer will provide a defense to the general contractor but may pursue the subcontractor’s insurer for reimbursement of fees and costs based on the general contractor being an additional insured under the subcontractor’s liability policy.

 

For example, in Travelers Property Casualty Co. of America v. Amerisure Ins. Co., 161 F.Supp.3d 113 (N.D.Fla. 2015), the general contractor’s liability insurer (Travelers) sued a stucco subcontractor’s liability insurer (Amerisure) where the underlying issue was whether the general contractor was an additional insured under the subcontractor’s liability policy.  The subcontractor’s insurer refused to defend the general contractor in an underlying construction defect lawsuit.  The general contractor’s insurer provided a defense in the underlying lawsuit and sued the subcontractor’s insurer for reimbursement.  

 

Under Florida law, a liability insurer’s duty to defend extends to an entire lawsuit if any claim in the lawsuit may come within the policy’s coverage.”  Travelers Property Casualty Co., 161 F.Supp.3d at 1137.    The underlying complaint against the general contractor alleged property damage caused by defective stucco installation.  This meant that the complaint triggered the duty to defend and the Court held the general contractor was an additional insured under the subcontractor’s liability policy.  For this reason, the Court maintained that the subcontractor’s insurer (Amerisure) owed the general contractor’s insurer (Travelers) the reasonable attorney’s fees incurred in the defense of the general contractor in the underlying lawsuit:

 

When Amerisure [subcontractors’ insurer] failed to step up, Travelers [general contractor’s insurer] did what Amerisure should have done: Travelers provided Yates [general contractor] a defense. The attorneys Travelers hired chose to defend the case not only by answering the claims but also by asserting third-party claims against subcontractors, including Jemco [stucco subcontractor]. Travelers paid the fees and costs incurred in connection with the third-party claims, apparently concluding that this was the best strategy for defending the claims and that its duty to defend Yates thus obligated it to pay for the third-party claims as well. There is support for that view. 

***

Had Amerisure provided a defense as it should have done, the attorneys it hired might or might not have made the  same strategic decision as the attorneys hired by Travelers. But now Amerisure can complain, at most, about unreasonable decisions, not about decisions that reasonably could have gone either way. As a leading commentator has put it, when an insurer breaches its duty to defend,

the insured is justified in assuming the defense of the action and is released from the contractual obligation to leave the management of the case to the insurer. Not only does the insurer lose the power to control the defense or dictate to the insured how the case should be handled, but the insurer cannot complain about the conduct of the defense by the insured or the negligent handling of the case by the insured’s attorney.

 

Travelers Property Casualty Co. of America, 161 F.Supp.3d at 1138-39 (internal citations omitted).

 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

“IS THE DEFECTIVE WORK COVERED BY INSURANCE?”

shutterstock_81862846I have been asked this question quite a bit from owners, in particular:  “The contractor committed defective work, but it has insurance.  Doesn’t the insurance cover this defective work?”    Ugh, NO!    There is this misconception that liability insurance, specifically, is the be-all-and-end-all when it comes to defective work.  This could not be further from the truth.  Don’t get me wrong – liability insurance is important; it is very, very important.   However, liability insurance does not cover the risk of an insured’s defective work.  Rather, liability insurance is designed to cover the risk of resulting damage:  damage resulting from defective work.  This is a significant distinction and one that is often overlooked.  This is also why anyone encountering defective work should be working with an attorney to maximize insurance coverage or realize that the issue is not covered by insurance. 

 

Let’s give easy examples to summarize this application:

 

Example 1 – My windows are defectively installed.   They all need to be removed and replaced.   Insurance should cover this defective installation, right?  Ugh, NO!   Remember, insurance does not cover the risk of an insured’s defective work.   Removing and replacing the windows would not be covered by insurance.

 

Example 2- My windows are defectively installed and this defective installation has resulted in water intrusion and extensive water damage.  Insurance should cover the defective installation and water damage, right?  Yes and No.  As mentioned, insurance is still not going to cover the defective work.  But, the insurance should cover the water damage resulting from the defective work. 

 

Example 3 -  A spalling piece of concrete that was defectively installed fell  and substantially damaged a vehicle.  Insurance should cover the damage to the vehicle, right?  Insurance should cover this damage because the third-party damage was the result of the defective work.

 

Example 4 – The balcony waterproofing was defectively installed resulting in water getting into the balcony system.  In order to fix this defective waterproofing, the balcony concrete topping needs to be ripped out.  Insurance covers remediating the waterproofing, right?  Yes and no, perhaps.    Again, insurance is not going to cover the defective waterproofing.  But, there may be an argument that insurance should cover the removing and replacing of the concrete topping since this work had to be ripped out in order to repair the underlying defective waterproofing.

 

 

These are just easy examples to illustrate the application of insurance in different contexts.   Of course, these are not all of the contexts and most contexts are more challenging.  But, the point is that insurance, contrary to what many may believe, is not designed to insure defective work.   Insurance is more complex than it may seem and, again, it is important to consult with a practitioner that understands insurance, how to maximize insurance, and to to advise you when the issue in reality is not an insurance-coverage issue. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

SPEARIN DOCTRINE AS AN AFFIRMATIVE DEFENSE

images-1The Spearin doctrine, referred to as the implied warranty of constructability doctrine, is oftentimes utilized as an affirmative defense by a contractor being sued for construction defects.  Under the Spearin doctrine (recognized in the government contract setting), a contractor is NOT liable for defects in the plans and specifications furnished by the owner if the contractor constructs the project pursuant to the plans and specifications.  This is because the owner impliedly warrants the constructability of the plans and specifications it furnishes to the contractor.  Hence, the contractor should not be liable for defective construction caused by the owner furnishing defective plans and specifications.

 

As with any affirmative defense, the contractor asserting the Spearin doctrine has the burden to prove the merits of the defenseSpecifically, the contractor has the burden to prove that there was an error in the plans or specifications and that such error was the proximate cause of the defective construction.  The contractor needs to prove this in order to sustain the Spearin doctrine as an affirmative defense.  See, e.g., Underwater Engineering Services, Inc. v. Utility Board of the City of Key West, 194 So.3d 437, n. 4 (Fla. 3d DCA 2016) (“By raising this defense [of the Spearin Doctrine] Underwater [contractor] had the burden to prove not only that there was a defect in the specifications, but that the defect in the specifications was the proximate cause of the failure of the eight [concrete] collars.”); see also Rick’s Mushroom Service, Inc. v. U.S., 521 F.3d 1338, 1344-45 (Fed.Cir. 2008) (“‘When the government provides a contractor with defective specifications, the government is deemed to have breached the implied warranty that satisfactory contract performance will result from adherence to the specifications, and the contractor is entitled to recover all of the costs proximately flowing from the breach.’”) quoting Essex Electro Eng’rs, Inc. v. Danzig, 224 F.3d 1283, 1289 (Fed.Cir.2000).

 

Asserting the Spearin doctrine as an affirmative defense is one thing, but proving it is another.  If relying on this defense, make sure to prove through expert testimony that there was (i) a defect in the plans or specifications furnished by the owner and (ii) that this defect proximately caused the defects or failures being asserted by the plaintiff (e.g., owner).   

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.