Federal Court Provides Soothing Comfort for Spa’s COVID-19 Business Income Claim

January 11, 2021
Michael S. Levine & Meagan R. Cyrus - Hunton Insurance Recovery Blog

On December 9, 2020, in Elegant Massage, LLC v. State Farm Mut. Auto. Ins. Co., No 2:20-cv-00265-RAJ-LRL (E.D.V.A. Dec. 9, 2020) , a Virginia federal court refused to dismiss a majority of the policyholder’s breach of contract claim and its request for bad faith damages, declaratory judgment and class certification, all stemming from the insurers’ denial of coverage for COVID-19 related business income losses. The policyholder, a spa, purchased an all-risk property insurance policy with coverage for, among other things, loss of business income and extra expense. The spa, a non-essential business, closed on March 16, 2020 as a result of state orders requiring all non-essential businesses to close due to the COVID-19 pandemic. It did not reopen until May 15. Once re-opened, however, the policyholder was required to implement operational controls and precautions to ensure the safety of the public and its employees. Following its closure, the policyholder sought coverage under its all-risk insurance policy. The insurer denied coverage for the claim, contending first that losses due to the COVID-19 pandemic and subsequent closure orders did not constitute “property damage” within the meaning of the policy and, second, even if the losses were because of “property damage,” the claim implicated various exclusions to coverage. The policyholder then initiated suit against its insurers.

Reprinted courtesy of Michael S. Levine, Hunton Andrews Kurth and Meagan R. Cyrus, Hunton Andrews Kurth

Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Cyrus may be contacted at mcyrus@HuntonAK.com

What Makes Building Ventilation Good Enough to Withstand a Pandemic?

Roof ventilation

Here’s what it takes to upgrade HVAC systems — and how to know if particular indoor spaces have done it.

January 11, 2021
Linda Poon - Bloomberg

In October, students at the University of Illinois, Urbana-Champaign, held an intimate jazz concert at a bar downtown, with an audience of about 20 peers and faculty members — all of whom held digital passes indicating they’d recently tested negative for Covid-19. Two jazz ensembles performed, sometimes with masks and coverings for their instruments, and other times without.

Behind the scenes, mechanical engineering professor Ty Newell tinkered with the airflow, turning the exhaust and recirculation fans on and off at different points during the night. His students monitored for changes in the air quality, using a special instrument to measure the concentrations of carbon dioxide and fine particulate matter, both key to determining if a building is well ventilated.

The experiment sought to highlight the significance of proper ventilation, something that Newell said hadn’t been paid enough attention, until now. As evidence suggesting Covid-19 can spread through aerosol transmission continues to mount, health experts are focused less on sanitizing surfaces and more on improving indoor air quality. In December, the U.S. Centers for Disease Control and Prevention finally put out its ventilation recommendations to combat Covid-19, based on standards set by ASHRAE, or the American Society of Heating, Refrigerating and Air-Conditioning Engineers.

Industry Groups Decry Jan. 6 Riot; DOT Chief Chao Steps Down in Protest

Businessman with hands on face as if worried

"North America’s Building Trades Unions call on President Trump to immediately step down and transfer power per the Constitution and the Presidential Succession Act of 1947,” NABTU President Sean McGarvey said.

January 11, 2021
Aileen Cho & Pam Radtke Russell - Engineering News-Record

Industry and business groups and labor unions universally denounced the actions of rioters who broke into the U.S. Capitol on Jan. 6, with statements going as far as calling for President Donald Trump to step down but others taking a more measured response.

Reprinted courtesy of Aileen Cho, Engineering News-Record and Pam Radtke Russell, Engineering News-Record

Ms. Cho may be contacted at choa@enr.com
Ms. Russell may be contacted at Russellp@bnpmedia.com

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Auburn Woods Homeowners Association v. State Farm General Insurance Company

Gavel illustration

No Duty to Defend HOA and Property Manager Under Policy Liability and D&O Coverage Parts For Lawsuits Which Failed to Allege Damages and Did Not Include Property Manager as an Additional Insured

January 11, 2021
Michael Velladao - Lewis Brisbois

In Auburn Woods HOA v. State Farm Gen. Ins. Co., 56 Cal.App.5th 717 (October 28,2020) (certified for partial publication), the California Third District Court of Appeal affirmed the trial court’s entry of judgment in favor of State Farm General Insurance Company (“State Farm”) regarding a lawsuit for breach of contract and bad faith brought by Auburn Woods Homeowners Association (“HOA”) and property manager, Frei Real Estate Services (“FRES”) against State Farm and the HOA’s broker, Frank Lewis. The parties’ dispute arose out of the tender of two different lawsuits filed against the HOA and FRES by Marva Beadle (“Beadle”). The first lawsuit was filed by Beadle as the owner of a condominium unit against the HOA and FRES for declaratory relief, injunctive relief, and an accounting related to amounts allegedly owed by Beadle to the HOA as association fees. The second lawsuit filed by Beadle was for the purpose of setting aside a foreclosure sale, cancelling the trustee’s deed and quieting title, and for an accounting and injunctive relief against an unlawful detainer action filed by Sutter Group, LP against Beadle. The complaint filed in the second lawsuit alleged that Allied Trustee Services caused Beadle’s property to be sold at auction and that Sutter Capital Group, LP purchased the unit and obtained a trustee’s deed upon sale. Beadle claimed the assessments against her were improper and the trustee’s deed upon sale was wrongfully executed. Beadle sought an order restoring possession of her unit and damages.

The HOA and FRES tendered both lawsuits to State Farm. As respects the first lawsuit, State Farm denied coverage of the lawsuit based on the absence of alleged “damages” covered by the policy issued to the HOA affording liability and directors and officers (“D&O”) coverages. State Farm agreed to defend the HOA under the D&O coverage in the second lawsuit. However, State Farm denied coverage of FRES in both lawsuits as it did not qualify as an insured under the State Farm policy issued to the HOA. Subsequently, the HOA and FRES filed an action against State Farm arguing that a duty to defend was triggered under its policy for the first lawsuit and a duty to defend FRES was also owed under the D&O policy for the second lawsuit. After a bench trial, the trial court entered summary judgment in favor of State Farm based on the failure of the first lawsuit to allege damages covered by the State Farm policy under the liability and D&O coverages afforded by the policy. As respects the second lawsuit, the trial court held that FRES did not qualify as an insured and State Farm did not act in bad faith by refusing to pay the HOA’s alleged defense costs in the second lawsuit before it agreed to defend the HOA against such lawsuit.

Mr. Velladao may be contacted at Michael.Velladao@lewisbrisbois.com

Viewpoint: Firms Should Begin to Analyze Lessons Learned in 2020

Two stick figures teaching

There has never been a better time than now to become an agent of change in your firm.

January 4, 2021
Rich Friedman - Engineering News-Record

If there’s one phrase that describes 2020, it was not “business as usual.” How AEC firms fared last year depended upon their strategies for navigating an uncertain landscape. While we talk about finding a new normal, company leaders in 2021 will have to think more expansively about what they want that “normal” to look like.

Reprinted courtesy of Rich Friedman, Engineering News-Record

ENR may be contacted at ENR.com@bnpmedia.com

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The Biggest Trials Coming to Courts Around the World in 2021

Earth and space

Here are the most noteworthy cases going to trial in the Americas, Europe, Africa and Asia.

January 4, 2021
Anthony Lin - Bloomberg

Several former world leaders, a Hong Kong media tycoon, the CEO of Theranos and Jeffrey Epstein’s confidante — all are scheduled to have their day in court next year.

With vaccinations heralding a return to normalcy, the next year should see courtrooms around the world coming back to life. Ghislaine Maxwell, China critic Jimmy Lai and Samsung heir Jay Y. Lee are among those facing high-profile criminal cases in 2021. Some proceedings, including the fraud trial of Theranos founder Elizabeth Holmes, are resuming after being postponed by the pandemic. Another delayed case, UBS’s appeal of its $4.9 billion French government tax penalty, is among the many that will be heard by higher-level and supreme courts.

There are also a number of cases against former world leaders, including France’s Nicolas Sarkozy, Malaysia’s Najib Razak and South Africa’s Jacob Zuma. One of the most tantalizing questions will be whether a certain former U.S. president could find himself facing trial as well.

U.S. Housing Starts Rose For a Third-Straight Month in November

January 4, 2021
Olivia Rockeman - Bloomberg

U.S. new home construction rose more than forecast to a nine-month high in November, highlighting the strength of a residential housing market that’s been supported by strong demand amid low interest rates.

Residential starts rose 1.2% to a 1.547 million annualized rate from an downwardly revised 1.528 million a month earlier, according to government report released Thursday. The median estimate in a Bloomberg survey of economists called for a 1.535 million pace.

Is Privity of Contract with the Owner a Requirement of a Valid Mechanic’s Lien? Not for GC’s

Red pencil on Construction Contract

A recent case out of Fairfax County, Virginia examined the question of whether contractual privity between the general contractor and owner of the property at issue is necessary.

January 4, 2021
Christopher G. Hill - Construction Law Musings

As any reader of this construction law blog knows, mechanic’s liens make up much of the discussion here at Construction Law Musings. A recent case out of Fairfax County, Virginia examined the question of whether contractual privity between the general contractor and owner of the property at issue is necessary. As a reminder, in most situations, for a contract claim to be made, the claimant has to have a direct contract (privity) with the entity it sues. Further, for a subcontractor to have a valid mechanic’s lien it would have to have privity with the general contractor or with the Owner.

The Fairfax case, The Barber of Seville, Inc. v. Bironco, Inc., examined the question of whether contractual privity is necessary between the general contractor and the Owner. In Bironco, the claimant, Bironco, performed certain improvements for a barbershop pursuant to a contract executed by the two owners of the Plaintiff. We wouldn’t have the case here at Musings if Bironco had been paid in full. Bironco then recorded a lien against the leasehold interest of The Barber of Seville, Inc., the entity holding the lease. The Plaintiff filed an action seeking to have the lien declared invalid because Brionco had privity of contract with the individuals that executed the contract, but not directly with the corporate entity.

Mr. Hill may be contacted at chrisghill@constructionlawva.com

Four Ways to Instantly Improve Communication and Safety On Construction Sites

January 4, 2021
Derek Jones - Construction Executive

It is no secret that communication on construction sites directly affects the site's safety and incident numbers. Falls, electrocution and burns often lead the OSHA cited safety incidents, and also cause the most life-altering injuries on construction sites in the U.S. Per the CDC, 61% of workplace electrocutions occurred in the construction industry. It’s no wonder that safety precautions in the construction industry are often considered to be the bare minimum mandated by OSHA.

When a construction company takes on new employees or hires temporary site help, they assume the responsibility of keeping those new employees safe while they are on site. If an employee is injured due to inadequate or broken safety gear, that is the fault of the construction company, not the employee that is tasked with using the broken or damaged equipment. Although the employee should know that the use of broken or damaged safety equipment is a risk to their health, allowing broken and damaged safety equipment to remain on site is a dangerous game to play.

Reprinted courtesy of Derek Jones, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.

Congress Passes, President Signs Sweeping Energy Measure In Spend Bill

Passed text with green check mark

Renewables tax credits are extended but without prevailing wage provisions.

January 4, 2021
Corinne Grinapol, Tom Ichniowski, & Pam Radtke Russell - Engineering News-Record

The end-of-the-year spending package passed by Congress on Dec. 21 includes the first major energy legislation to be enacted in more than a decade.

Reprinted courtesy of Corinne Grinapol, ENR, Tom Ichniowski, ENR and Pam Radtke Russell, ENR

Mr. Ichniowski may be contacted at ichniowskit@enr.com
Ms. Russell may be contacted at Russellp@bnpmedia.com

Read the full story...

Read the Property Insurance Policy to be Sure You are Complying with Post Loss Obligations

Man and woman reading book

It is imperative for an insured to comply with post loss obligations in a property insurance policy.

January 4, 2021
David Adelstein - Florida Construction Legal Updates

I have discussed this before in prior postings, but it is worth repeating. It is imperative for an insured to comply with post loss obligations in a property insurance policy. Not doing so gives the insurer the argument that its insured forfeited coverage under the policy. Naturally, this is never what an insured wants as this is contrary to submitting an insurance claim to begin with. To avoid this situation, an insured should consult with counsel and read the policy including endorsements issued to the policy to be sure that post loss obligations are complied with and, if they are not, there is a basis supported by case law.

In a recent case, Goldberg v. Universal Property and Casualty Ins. Co., 45 Fla. L. Weekly D2118b (Fla. 4th DCA 2020), the property insurance policy for hurricanes and windstorms contained the following through an endorsement issued to the policy:

You must give notice of a claim, a supplemental claim, or reopened claim for loss or damage caused by the peril of windstorm or hurricane, with us in accordance with the terms of this policy and within three years after the hurricane first made landfall or the windstorm caused the covered damage. For purposes of this Section, the term “supplemental claim” or “reopened claim” means any additional claim for recovery from us for losses from the same hurricane or windstorm which we have previously adjusted pursuant to the initial claim. . . .

Mr. Adelstein may be contacted at dma@kirwinnorris.com

Relief Bill's Highway Funds Could Help Construction Projects

Legislation word on paper in typewriter

Trump's slow approval had clouded overall measure's timetable, outlook.

January 4, 2021
Tom Ichniowski - Engineering News-Record

Among the many provisions in the coronavirus relief bill, one key item is $10 billion to help state highway agencies make up for losses in state fuel taxes and other revenue due to the pandemic-caused falloff in traffic this year. Construction is one of a list of several eligible uses for the money—one of only a few construction funding provisions in the relief measure.

Reprinted courtesy of Tom Ichniowski, Engineering News-Record

Mr. Ichniowski may be contacted at ichniowskit@enr.com

Read the full story...

AI in AEC Conference 2021

January 4, 2021
Aarni Heiskanen - AEC Business

Artificial Intelligence in Architecture, Engineering and Construction is a virtual two-day conference taking place on March 24-25, 2021. The program is published, and early bird registration is open until January 15, 2021.

The seed for this conference was planted with the preparation of the IABSE AI Workshop 2020. The high international interest towards the 2020 event showed that AEC industry has clear lack of this kind of global conference. Our industry is now ready to take the next step in AI deployment and move from building the foundation towards creating the value from data and AI.

March 24th-25th, 2021
Virtual Conference

Mr. Heiskanen may be contacted at aec-business@aepartners.fi

Latin America’s Biggest Corporate Crime Gets a Worthy Epic

Woman flexing muscle

Page after page, “The Organization” brilliantly captures Odebrecht SA’s rise and fall and the tawdry reality of an all-too-Brazilian way of doing business.

January 4, 2021
Mac Margolis - Bloomberg

As much as pouring cement and building towers, Brazilian construction dynasty Odebrecht was famed for its political panache. “I get down in the mud with the pigs but come out the other side clean in my white suit,” Norberto Odebrecht, founder of the legacy contractor, liked to boast back in the 1970s and 1980s. The catchphrase was shorthand for what became a patently Brazilian way of doing business – the art of buying influence and coming away unsoiled, or at least unincarcerated – among porcine politicians and bribe-truffling officials.

In half a century and over three generations, the family firm from northeast Brazil grew into a multinational engineering colossus, hurling up grand public works from the Andes to Angola. Shady pacts with political grifters and bagmen were just part of the deal behind the build-up and seemingly nothing a little Brazilian bonhomie and contract skimming couldn’t tidy up. Until it didn’t.

Mr. Margolis may be contacted at mmargolis14@bloomberg.net

Mechanics Lien Release Bond – What Happens Now? What exactly is a Mechanics Lien and Why Might it Need to be Released?

Question mark in maze

Attorney William L. Porter explains the nuances of the Mechanics Lien Release Bond.

January 4, 2021
William L. Porter - Porter Law Group

Mechanics Lien Release Bond – What Happens Now? What exactly is a Mechanics Lien and Why Might it Need to be Released?

California law entitles unpaid contractors, subcontractors, and material suppliers to record a mechanics lien on property where they performed work or supplied materials. The mechanics lien attaches to the real property as a legal interest and secures the right to payment for the work performed and materials supplied. If payment is not forthcoming the mechanics lien allows the property where the work was performed and materials supplied to be sold under court order to satisfy the debt. It is a powerful remedy against owners and their agents who do not pay for work performed and materials supplied to improve the owner’s property.

A Mechanics Lien Release Bond Frees Property from a Mechanics Lien

Owners typically do not wish to have their property sold out from under them. Fortunately for owners, there is a method by which a mechanics lien can be substituted for another interest and sale of the property thereby avoided. This method is through the use of a mechanics lien release bond. California Civil Code §8424 allows a property owner or contractor effected by a mechanics lien to record a mechanics lien release bond equal to 125 percent of the lien amount with the County Recorder where the mechanics lien has been recorded. The effect of this is to substitute the mechanics lien release bond for the mechanics lien itself, thereby relieving the property from the possibility of that property being sold to satisfy the debt. Instead, any payment made will come from the release bond.

Mr. Porter may be contacted at bporter@porterlaw.com

Withholding Payment or Having Your Payment Withheld Due to Disputes on Other Projects: Know Your Rights to Offset

Jar of money and coins spilled

This article provides an overview of the extent and limits of the right to offset varies from state to state and with federal government contracts about the extent and limits of the right of offset.

January 4, 2021
Christopher C. Broughton, Jones Walker LLP - ConsensusDocs


The right to offset refers to the common sense ability to reduce or eliminate your payment obligations to a party who owes you money on another contract. With offsets, common law largely tracks common sense. The right of offset is recognized by statute and court decisions in many states as well as under federal law and the U.S. Bankruptcy Code. The right to offset can also be established in the contract or subcontract.

But like many things that may seem simple, the right to offset can easily become complex. This article provides an overview of the extent and limits of the right to offset varies from state to state and with federal government contracts about the extent and limits of the right of offset. Construction trust fund statutes add another layer of complications.

These variations may not be obvious or intuitive, but they have a tremendous impact on your right to get paid or your right to withhold payment. Because of the variations, you must always confirm the law applicable to your contract or subcontract, which may not be where the project or you are located.

Mr. Broughton may be contacted at cbroughton@joneswalker.com

Federal Court Remands COVID-19 Case Presenting Novel and Important Issues of State Insurance Law

January 4, 2021
Tred R. Eyerly - Insurance Law Hawaii

The federal district court exercised its discretion under the Declaratory Judgment Act, declining jurisdiction over a case presenting claims arising from COVID-19. Marc Daniel Hospitality, LLC v. AmGuard Ins. Co., 2020 U.S. Dist. LEXIS 191956 (D. N.J. Oct 16, 2020).

Plaintiff operated an upscale sit-down restaurant and whiskey bar offering a full menu. In March 2020, state and local orders limited the scope and hours of operations of all restaurants in the state due to the COVID-19 pandemic. Subsequent orders mandated that New Jersey residents remain at home except under certain exceptions. Plaintiff had to temporarily close its restaurant.

Mr. Eyerly may be contacted at te@hawaiilawyer.com

Winter COVID-19 Relief Bill: Overview of Key Provisions

Review button on keyboard

The firm White and Williams LLP provides a brief overview of several pieces of the legislation.

January 4, 2021
White and Williams LLP

In a much needed holiday gift for businesses and individuals who continue to be affected by COVID-19, Congress finally approved a $900 billion aid package follow-up to the CARES Act (the Winter Covid-19 Relief Bill), the several trillion dollar stimulus that was enacted early in the pandemic. The bill, part of the larger annual spending bill, will hopefully be signed into law by President Trump in the coming days although the President has indicated his disappointment about the small amount of direct relief to individuals included in the bill. The bill was passed by both houses of Congress by a veto proof majority and is expected to become law whether or not the President chooses to exercise his veto power.

White and Williams has and will continue to provide more detailed updates on important components of the legislation, some of which address matters beyond COVID-19-related relief and support, including a new Paycheck Protection Program and tax deductibility of expenses paid for with PPP funds, extension and expansion of the employee retention tax credit, direct payments to individuals, additional unemployment assistance, restrictions on surprise medical billing, rental assistance and extension of the eviction moratorium, education funding, vaccine distribution, testing and tracing, and other healthcare funding. In the meantime, here is a brief overview of several pieces of the legislation:

Paycheck Protection Program

The Winter COVID-19 Relief Bill provides for $284 billion of funding for a new round of the popular Paycheck Protection Program (PPP), which was established by the CARES Act and allowed borrowers to receive forgivable loans to be used to retain employees and cover certain other basic operating expenses. New and existing businesses may participate in the program. However, eligibility for PPP Part II is more restrictive and targeted then the original PPP.

Washington Trial Court Narrows Definition of First Party Claimant, Clarifies Available Causes of Action in Commercial Property Loss Context

Lawyer talking to judge illustration

Attorneys Kathleen A. Nelson and Jonathan R. Missen discuss Eye Associates Northwest, P.C. v. Sedgwick et. al.

January 4, 2021
Kathleen A. Nelson & Jonathan R. Missen - Lewis Brisbois

The law in the State of Washington, albeit clear on issues regarding first party claimants, was recently challenged in the matter of Eye Associates Northwest, P.C. v. Sedgwick et. al. However, despite this challenge of first impression, the court limited the application of the term “first party claimant” (a term of art akin to “insured”) based upon the wording of a loss payee clause, as well as taking into consideration and harmonizing the wording of the leases, other provisions in the policy regarding tenant improvements, and the simple fact that Eye Associates was not named in the policy whatsoever.

In Eye Associates, the plaintiff leased office space in a high-rise medical office building, insured by three separate insurance companies. A water loss caused damage to the plaintiff’s leased space, and the plaintiff brought suit against the owner of the building, its insurers, the property manager, a third-party administrator (TPA), and two individual adjusters assigned to inspect and adjust the water loss claim.

Reprinted courtesy of Kathleen A. Nelson, Lewis Brisbois and Jonathan R. Missen, Lewis Brisbois

Ms. Nelson may be contacted at Kathleen.Nelson@lewisbrisbois.com
Mr. Missen may be contacted at Jonathan.Missen@lewisbrisbois.com

Roadway Contractor Owed Duty of Care to Driver Injured Outside of Construction Zone

Report of Work Injury

Attorney Garret Murai analyzes Shipp. v. Western Engineering, Inc.

January 4, 2021
Garret Murai - California Construction Law Blog

For the roadway contractor it appeared to be an open and shut case:

Plaintiff car driver was stopped at a standard one-way “reversing lane closure” traffic control in which traffic going in one direction would be stopped while traffic going in the other direction was allowed to proceed, and then the procedure would be reversed.

Plaintiff, while stopped at the traffic control, was rear-ended by another vehicle driven by George Smithson. Smithson testified that he “must have looked off to the side” at some point prior to the collision because he did not see plaintiff’s vehicle before hitting it. He also testified that the primary reason the accident happened was that he was not paying attention and that he knew of no other cause of the accident.

For the roadway contractor you couldn’t ask for a better admission. And it ended in the trial court just the way you thought it would, with a win for the roadway contractor. That is, until it was appealed.

Mr. Murai may be contacted at gmurai@nomosllp.com


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