All posts by Ryan M. Charlson, Esq.

Ryan M. Charlson is a Partner in CSK’s Construction Group and practices in the Fort Lauderdale and Miami offices. Mr. Charlson focuses his practice on construction, products liability, real estate, and insurance coverage disputes. Prior to joining CSK, Mr. Charlson practiced at a national firm that specializes in construction litigation, and more recently, he worked as in-house counsel for one of the nation’s largest real estate developers.
25FEB 2018

Failing to plead damage to other property, even in the face of record evidence supporting damage to other property, can result in a ruling that there is no duty to defend.

In Florida, a commercial general liability (“CGL”) insurer’s duty to defend its insured is determined by examining whether the allegations in the complaint against the insured allege conduct and resulting damage contemplated in the subject policy.[1] This is so even if the allegations in the complaint against the insured are factually incorrect or without merit.[2] Generally, post-1986 CGL policies do not provide coverage to insureds in construction defect matters unless the complaint states: 1) the insured neither intended, nor expected, the damage; and 2) the contractor’s faulty work caused damage to completed, otherwise non-defective work.[3] Recently, in Core Construction Services, Inc. v. Crum & Forster Specialty Insurance Company,[4] the United States District Court for the Middle District of Florida addressed the issue of whether an insurer has a duty to defend its insured when there is record evidence of damage to other property, but when the operative pleading failed to set forth an allegation of such damages.

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14JAN 2018

The concept of betterment has long been used by defendants in cases involving defective design or construction to limit the damages awarded to a plaintiff.[1] The theory behind betterment is that: “if in [the] course of making repairs [an] owner adopts a more expensive design, recovery should be limited to what would have been the reasonable cost of repair according to original design.”[2] Betterment is often raised as an affirmative defense, requiring a defendant to prove that the plaintiff has received a good or service that is superior to that for which the plaintiff originally contracted. A recent South Florida case seems, at first blush, to suggest the burden of establishing the value of betterments may fall to the plaintiff, although a closer reading indicates the decision is likely to have limited applicability.

In Magnum Construction Management Corp. v. The City of Miami Beach, the Third District Court of Appeal was asked to review the damages award to the City for construction defects associated with the redesign and improvement of a park.[3] The completed project contained landscaping deficiencies, along with other “minor defects” in the playground’s construction.[4] After a unilateral audit, and without providing the contractor its contractually required opportunity to cure the defects, the City “removed, redesigned, and replaced the playground in its entirety.”[5] It did so despite no recommendation by the City’s own expert to perform such work.[6] During the bench trial, the “only measure of damages provided by the City was the costs associated with the planning, permitting, and construction of a park that is fundamentally different from the one it contracted with [the contractor] to build.”[7]

Thereafter, the trial court found the City’s complete removal and replacement of the playground to be excessive, and the court awarded the City approximately $1.3 million of its claimed $3 million in damages.[8] The trial court deemed the difference between the two “a ‘betterment,’ which the trial court defined as aspects of the City’s remediation plan which improved upon and differed significantly from the original designs and specifications in the contract documents.”[9] On review, the appellate court held not only that the City’s failure to provide the contractor with an opportunity to take corrective action per the contract precluded liability, but found the trial court’s determination of damages based on the exclusion of betterment costs “speculative,” because “the City ha[d] not cited to any evidence and [there was] no evidence in the record as to the value of the betterments . . . .”[10]

Defendants in construction defect cases could argue that the Third District Court of Appeal in Magnum viewed the valuation of betterment as a burden for the plaintiff to satisfy as part of its proof of damages. However, a closer reading reveals that the case does not expressly speak to the comparative burdens of proof, and the court was not attempting to articulate this as part of any fundamental re-alignment of the burden to prove the existence and value of betterment in construction defect cases, generally.

In most cases, the issue of whether the remediation undertaken by a plaintiff is a betterment is hotly disputed. Both parties are likely to present at least some evidence regarding whether the repairs undertaken were reasonable and appropriate. Such was not the case in Magnum. The City undertook a complete removal and replacement using a fundamentally different design without any testimony that it was required.  The defendants, in turn, proffered testimony that all of the defects in the playground could have been repaired.[11] Thus, the trial court concluded that the City’s costs did not represent “the reasonable cost of construction and completion in accordance with the contract” and that the difference between the City’s costs and the correct measure of damages was a “betterment.”[12]

What the appellate court appears to take issue with is not the trial court’s finding as to the existence of a betterment, but its attempt to calculate the value of that betterment to determine the City’s damages in the absence of any evidence of that value. It found a complete absence of evidence to support the trial court’s valuation of the betterment.  Thus, defendants in construction defect cases may attempt to use the Magnum court’s decision to require a plaintiff to present evidence that its alleged damages are reasonable and appropriate in view of the original contract, and that this is all the more critical when the repair is fundamentally different from the original design.  That being said, the decision in Magnum does not suggest any broader shifting of the burden for proving the value of a betterment to the plaintiff in all cases.

If you have any questions, please do not hesitate to contact Ryan Charlson, Esq., at 954-343-3919 or ryan.charlson@csklegal.com.

[1] See, e.g., Edgar v. Hosea, 210 So. 2d 233 (Fla. 3d DCA 1968); Grossman v. Sea Towers, Ltd. 513 So. 2d 686 (Fla. 3d DCA 1987).

[2] Temple Beth Sholom & Jewish Ctr., Inc. v. Thyne Constr. Corp., 399 So. 2d 525, 526 (Fla. 2d DCA 1981).

[3] No. 3D15-2239, 2016 LEXIS 18359 (Fla 3d DCA Dec. 14, 2016).

[4] Id. at *3.

[5] Id. at *4.

[6] Id.

[7] Id. at *10.

[8] Id. at *9.

[9] Id.

[10] Id. at *10 (emphasis in original).

[11] Id. at *4, n.1.

[12] Id. at *10 (emphasis in original) (citing Grossman Holdings Ltd. v. Hourihan, 414 So. 2d 1037, 1039 (Fla. 1982)).

04AUG 2017

The independent tort doctrine is a prohibition against tort actions that are calculated to recover solely economic damages for one in contractual privity with another. In other words, the doctrine is intended to prevent parties to a contract from circumventing the allocation of losses set forth in a contract by bringing an action for economic loss in tort.[1]

In 2013, the Florida Supreme Court issued its landmark decision in Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc.,[2] reducing the applicability of the economic loss doctrine[3] and holding that it is only applicable in the context of products liability cases, rather than all consumer lawsuits. After issuance of the Tiara majority opinion, many debated whether the opinion would have far-reaching consequences with respect to other types of actions, potentially opening the floodgates to multi-count tort/contract actions,[4] by perhaps having eliminated the independent tort doctrine.[5]

In Peebles v. Puig,[6] Florida’s Third District Court of Appeal has reaffirmed the independent tort doctrine and used it to reverse a judgment awarding damages in tort in a case where the damages resulted from a breach of contract, with no evidence of a tort or tort damages independent and distinct from the contract.

In Peebles, the plaintiff alleged, and the jury found, that the defendant made fraudulent misrepresentations that, to a certain extent, led the plaintiff to continue to perform her contractual employment duties by re-selling Bath Club units.[7]  The defendant’s company declined to pay the plaintiff’s commissions for those resales, and instead, retained these funds.[8]  There was no dispute that the plaintiff’s contract predated the defendant’s alleged misrepresentation s(therefore, fraud in the inducement to a contract was not at issue).[9]  There was also no dispute that the damages sought by the plaintiff and eventually awarded by the jury were the identical damages that the plaintiff sustained as a result of the defendant’s failure to pay her commissions for the resales.[10]

In re-affirming the independent tort doctrine, the Peebles court stated, “[i]t is well settled in Florida that, where alleged misrepresentations relate to matters already covered in a written contract, such representations are not actionable in fraud.”[11] The Court continued, “[i]t is similarly well settled that, for an alleged misrepresentation regarding a contract to be actionable, the damages stemming from that misrepresentation must be independent, separate and distinct from the damages sustained from the contract’s breach.”[12] According to the Court, “[b]oth of these legal principles are rooted in the notion that, when a contract is breached, the parameters of a plaintiff’s claim are defined by contract law, rather than by tort law.”  In a footnote, the court then makes clear that it did not evaluate this case under the economic loss rule and Tiara,[13] thereby reaffirming the independent legal authority of the independent tort doctrine.

To further solidify its point, the Third District stated clearly, that when, as in Peebles, “a contract has been breached, a tort action lies only for acts independent of those acts establishing the contract’s breach.”[14]

The result of this ruling is that there now appears to be further clarity regarding the continued viability of the independent tort doctrine in Florida. As such, Peebles will continue to provide Florida state courts with the basis for, and foundation to, dismiss a tort action that is merely a recitation of damages suffered as a result of the breach of a contract.  Conversely, the wise plaintiff can carefully craft a complaint which positions its alleged damages as the result of an independent tort in order to survive the dismissal of its tort claim (at least at the motion to dismiss stage). Therefore, although the economic loss rule is no longer applied to actions between parties in privity of contract, the independent tort doctrine remains applicable and in the hands of a skilled defense attorney, can still be used to thwart a plaintiff’s attempts to recover tort damages if and as it becomes apparent that the damages sought in tort are identical to the damages for breach of contract.

If you have any questions about the economic loss doctrine, independent tort doctrine, or the Third District Court of Appeal’s decision in Peebles, please do not hesitate to contact Haldon Greenburg at haldon.greenburg@csklegal.com or a member of CSK’s Construction Group.

[1] Indemnity Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532 (Fla. 2004), overruled in part by Tiara Condo. Ass’n v. Marsh & McLennan Cos., 110 So. 3d 399 (Fla. 2013); see, e.g., Ginsberg v. Lennar Fla. Holdings, Inc., 645 So. 2d 490, 494 (Fla. 3d DCA 1994) (“Where damages sought in tort are the same as those for breach of contract a plaintiff may not circumvent the contractual relationship by bringing an action in tort.”).

[2] 110 So. 3d 399 (Fla. 2013).

[3] The economic loss doctrine is a judicially created rule which prohibits the recovery of monetary damages based on a tort theory, unless there was also physical property damage or personal injury.

[4] Among those who believed the Tiara majority opinion would have such effects was Justice Canady, who, in his dissenting opinion, opined that “[w]ith today’s decision, we face the prospect of every breach of contract claim being accompanied by a tort claim.” Id at 411. (Canady, J., dissenting).

[5] Further muddying the waters was a position left out of the majority opinion in Tiara, but included in Justice Pariente’s concurring opinion, which explicitly stated that the majority’s conclusion did not undermine Florida’s contract law, and that in order to bring a valid tort claim, a party still must demonstrate that all of the required elements for the cause of action are satisfied, including that the tort is independent of any breach of contract claim. Id. at 407-10 (Pariente, J., concurring).

[6] 42 Fla. L. Weekly D1080 (Fla. 3d DCA May 10, 2017).

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id. (citing La Pesca Grande Charters, Inc. v. Moran, 704 So. 2d 710, 712-13 (Fla. 5th DCA 1998) (explaining the difference between fraud in the inducement and fraud in the performance, the latter not constituting a separate cause of action from that of a concurrent breach of contract action)).

[12] Id. (citing Rolls v. Bliss & Nyitray, Inc., 408 So. 2d 229, 237 (Fla. 3d DCA 1981)).

[13] Id. at n.4.

[14] Id. (citing Ginsberg, 645 So. 2d at 494).

10JUL 2017

As part of Florida’s increasing efforts to achieve energy efficiency in new construction, changes have been made to the methodology of measuring dwelling air leakage and tolerable measurements. In June 2015, the Florida Legislature amended Section 553.998, Florida Statutes, to require additional testing for newly constructed buildings to verify air leakage figures. Residential construction must now undergo a Mandatory Residential Air Infiltration (“Blower Door”) Test. Florida companies were granted a two-year “grace period” to allow the construction industry to prepare and plan for the changes, which became effective on July 1, 2017.

The new language of the statute increases the maximum tested air leakage unit to “not exceeding 7 air changes per hour,” increasing the limit from the previous leakage measure “not exceeding 5 air changes per hour.” Dwellings shall not require mandatory mechanical ventilation unless the air infiltration rate is less than 2 air changes per hour when tested with a blower door in accordance with Section R402.4.1.2 of the Florida Building Code, 5th Edition (2014).

Under the new Mandatory Residential Air Infiltration, or Blower Door testing, local enforcement agencies shall accept duct and air infiltration tests performed by the following individuals:

  • Class A air-conditioning contractor as defined in section 489.105(3)(f), Florida Statutes;
  • Class B air-conditioning contractor as defined in Fla. Stat. 489.105(3)(g);
  • Class C air-conditioning contractor as defined in Fla. Stat. 489.105(3)(h)l
  • “Energy Auditor” as defined by Fla. Stat. 553.993(5); or
  • “Energy Rater” as defined by Fla. Stat. 553.993(7).

Additionally, per the Blower Door testing regulations, mechanical ventilation is not required unless the air infiltration rate in a dwelling is less than 3 air changes per hour when tested with a blower door in accordance with R402.4.1.2 of the Florida Building Code, 5th Edition (2014).

These changes apply to construction permitted after July 1, 2017. It is important that individuals and companies involved in design and construction of new projects are aware of these new requirements to ensure their projects are properly designed and meet all new testing standards.

If you have questions regarding these standards and the implications for your business, please reach out to CSK’s Construction Group.

05NOV 2016

Engineers in Florida are subject to a comprehensive regulatory scheme enacted by the Florida Legislature with further regulations implemented by the Florida Board of Professional Engineers.  Professional engineers have a legal (and professional) obligation to remain apprised of any changes in the laws and rules in order to ensure compliance with the latest regulations.  Recently, the Florida Board of Professional Engineers enacted changes to the Rule governing the Minimum Requirements for Engineering Documents that will impact its engineer-licensees in their Florida practices.

Rule 61G15-30.003, Florida Administrative Code sets minimum requirements for issuance of engineering documents issued by a licensed Florida professional engineer.  The prior rule only required engineering documents to represent their compliance with the Florida Building Code and applicable laws, ordinances, rules and regulations.  The new language requires the documents to comply with the currently enacted “laws, ordinance, rules and regulations in effect the date the documents are signed and sealed.”  If the engineering documents are intended to comply with any Federal, State or Municipal or County standard, code, ordinance, law or rule other than those currently in effect in the relevant jurisdiction, the documents must clearly state the regulation, edition and effective dates of the regulation to which the documents are intended to conform.  The change is to assist the end user as well as building departments and other regulatory agencies in clearly understanding the engineer’s intent when issuing the engineering documents.

Another minor change to Rule 61G15-30.003 requires engineers to list their name and business address on all preliminary or conceptual drawings.  Previously, this requirement only applied to final signed and sealed drawings.

It is crucial for all Florida Professional Engineers to comply with the currently enacted laws and rules governing their profession.  Failure to comply could result in administrative disciplinary action against the engineering license and possibly expose the engineer to civil liability.

Cole, Scott & Kissane, P.A.’s Construction Group remains informed of rule changes impacting our engineering clients.  If you have any questions about these recent rule changes, please contact Robert Crabill at robert.crabill@csklegal.com or (321-972-0019), David Salazar at david.salazar@csklegal.com or (305-350-5363), or George Truitt at george.truitt@csklegal.com or (305-350-5331).

14JUL 2016

 

It seems that lemons are front page news these days.   Beyonce just released a chart-topping[1] album all about what to do when life hands you lemons. In today’s vernacular, we use the term “Lemon” to describe a person or thing that is unsatisfactory, disappointing, or feeble.[2] In Florida, there is a “Lemon Law” that provides a way for consumers to receive a replacement or full refund for vehicles found to have defects which may affect the vehicle’s safety, value or use.[3] While there is no “Lemon Law” for construction projects, in Gray v. Mark Hall Homes, Inc.,[4] Florida’s Second District Court of Appeal cited to Florida Supreme Court precedent in holding that a home builder was on the hook for the entire contract value of a home he contracted to build for the Plaintiff, when it was revealed the home was a “Lemon”, or as the evidence at trial showed, “valueless.”

In 2005, Angela Gray (“Gray”) contracted with Mark Hall Homes, Inc. (MHH) to construct a single-family home on her property. Gray agreed to pay $168,144.00 in a series of installation payments for construction of the home. Soon after moving in, Gray discovered a number of defects which she brought to MHH’s attention. MHH attempted to remedy the defects, and Gray paid a general contractor $16,000.00 to replace the balcony, but eventually Gray filed suit for breach of contract.

Many witnesses testified at trial on Gray’s behalf, detailing the home’s condition. The jury was told that among the defects was a lack of flashing which resulted in moisture penetration and led to significant wood rot throughout the home. The general contractor hired by Gray testified that when he first evaluated the home, he suggested that Gray “get a bulldozer” and start over. A real estate agent testified that he contracted with Gray to sell the house, and that when he first saw it, he advised Gray that the house was worthless and should be torn down. He described it as the worst house he’d seen in thirty-eight years in the real estate business and that given the home’s condition, a bank would not finance it. Further, the home had received no offers after being listed for a year. Lastly, the structural engineer/home inspector who reviewed and approved the construction plans for the home, and inspected it prior to trial, testified that there was water damage, mold, and wood rot so bad that some of the doors would not open properly. He was of the opinion that the home was not a suitable rental, uninsurable, and while it could be salvageable, such a process would be cost-prohibitive.

MHH moved the trial court for a directed verdict, arguing that the only concrete evidence of damages was the $16,000 paid to the contractor to replace the balcony. The jury returned a verdict for $168,000, but the trial court reduced the award to $16,000.

In its opinion, the Second District cited Grossman Holdings Ltd. v. Hourihan,[5] in which the Florida Supreme Court adopted the Restatement (First) of Contracts’ Position on the measure of damages for a construction defect. That measure of damages is described as “all unavoidable harm that the builder had reason to foresee when the contract was made, less such part of the contract price as has not been paid and is still not payable, determined as follows”: For defective or unfinished construction, the plaintiff can get judgment for either, 1) the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste; or 2) the difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste.

Finding that the jury could have concluded that the house as constructed had absolutely no value, in other words, a “Lemon”, and applying the formula announced in Grossman, the court held that the amount awarded by the jury’s verdict was a sustainable measure of damages, and reversed the trial court’s limitation on the amount of damages awarded to the Plaintiff.

One takeaway is, if you find yourself having to defend a claim that your construction project was a “Lemon,” make sure the law firm you hire, isn’t.

 


[1] Caulfield, Keith, “Beyonce Earns Sixth No. 1 Album on Billboard 200 Chart with ‘Lemonade”, Billboard Magazine, (May 1, 2016), http://www.billboard.com/articles/columns/chart-beat/7350372/beyonce-earns-sixth-no-1-album-on-billboard-200-chart-with-lemonade.com.
[2] “Lemon.” Merriam-Webster Online Dictionary. 2015. http://www.merriam-webster.com (May 5, 2016).
[3] Florida Statute § 681 (July 2011).
[4] 185 So. 3d 651 (Fla. 2d DCA Feb. 5, 2016).
[5] 414 So. 2d 1037 (Fla. 1982).
15APR 2016

The United States District Court for the Middle District of Florida recently rendered a decision in Auto-Owners Insurance Company v. Elite Homes, Inc.[1] addressing the duty to defend when a “your work” exclusion exists in Commercial General Liability (CGL) policy. In Elite Homes, Joseph and Emily Crozier sued Elite Homes, Inc. (“Elite”) in state court for damages arising out of window leaks in their home. Elite tendered the defense of the claim to Auto-Owners Insurance Company (“AOIC”) seeking coverage for liability and damages. AOIC disclaimed coverage under the policy it issued to Elite (“Policy”) on the grounds that the window leaks only implicated issues with Elite’s scope of work; therefore, any claims were subject to the your work exclusion in the Policy. AOIC filed a declaratory judgment action in federal court, and moved for summary judgment on the issue of its duty to defend.

AOIC’s Motion relied on the Policy’s definition of “your work,” which excluded claims for damage to (1) work or operations performed by the insured or on its behalf; and (2) materials, parts, or equipment furnished in connection with such work or operations. The term “your work” also included (1) warranties or representations made at any time with respect to the fitness, quality, durability, performance, or use of “your work”; and (2) the providing of or failure to provide instructions. AOIC took the position that because Elite was the contractor who built the entire home, any damage to components of the home would constitute damage to its scope of work and would fall under the “Damage To Your Work.[2]Continue reading

20APR 2015

David Salazar and Craig Distel recently published an article titled “Goodnight Contractors – Sanislo v. Give the Kids” analyzing the Florida Supreme Court’s February 12, 2015 decision in Sanislo v. Give the Kids the World, Inc.[1] and its potential impact on the construction industry. Their article will be appearing in the upcoming edition of The Lawyer Issue, an international publication providing updates to the legal and business community throughout the world.  The Sanislo opinion resolved a conflict regarding the enforceability of exculpatory agreements between the First, Second, Third, Fourth and Fifth District Courts of Appeal and determined that the terms “negligence” or “negligent acts” are not necessary to have an enforceable exculpatory provision. To read more about the Sanislo decision and its potential impact on the construction industry, please follow this link: http://www.lawyerissue.com/good-night-contractors-sanislo-v-give-the-kids/.

[1] No. SC12-2409 (Fla. Feb. 12, 2015) (note: the final opinion has not been released for publication in the permanent law reports and until release, it is subject to revision or withdrawal).

01APR 2015

The flow of construction stormwater legislation and rulemaking from Washington D.C. and Tallahassee has been steady in recent years.  With another construction boom underway in many parts of the state, stakeholders must remain vigilant of the Florida Department of Environmental Protection (“FDEP”) regulations governing construction dewatering and stormwater runoff promulgated in February of 2015.

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16MAR 2015

Recently, the First DCA addressed the issue of dual employment as it relates to a contractor and subcontractor. See Roof Painting by Hartzell, Inc./Summit Holdings Claim Center v. Andres Hernandez, Colors Construction, Inc., and Guarantee Insurance Company, 2015 WL 641199, (Fla. 1st DCA 2015).

Dual employment occurs when a single employee is under a contract of hire with two separate employers. See Interstate Industrial Park v. Afterdeck Restaurant, 478 So. 2d 852, 854 (Fla. 1st 1985). Under the separate control of each employer, the employee performs services for each employer that are largely unrelated to the services it performs for the other.  Under the dual employment doctrine, two employers may be liable for workers’ compensation separately or jointly depending on severability of the employee’s activity at the time of injury. When the employee’s activities are separable and can be clearly identified with one employer or the other, the particular employer whose work was being done at the time of injury will be held exclusively liable.

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