Construction Law Blog

Construction Business Owner Challenges Complying With New Employment and Labor Laws

Posted on Wed, Jan, 18, 2017

     Owners of New York based construction businesses are more likely to be mindful of construction law issues relating to contract performance and defective work. Many however are unaware they are also under increasing risks of liability in compliance with newly enacted requirements under New York Employment and Labor Laws.

     Without awareness of these new trends, business owners are unable to take steps in advance to prepare for such new regulations and take pro active steps to be in compliance.

     To share awareness of these new trends, the Nassau County Bar Association has published my article examining these issues 'Employment and Labor Compliance Challenges for Construction Contractors' in their January 2017 edition of the Nassau Lawyer.

    Owners of New York construction businesses are encouraged to familioarize themselves with these liability risks and consider if they are in compliance with these regulations before any claims filed.

 

Download Employment and Labor Compliance Challenges for Construction Contractors

 

     Your comments and future article topic suggestions are invited in thefield below.

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John Caravella, construction attorney      The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

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Tags: Long Island Contractors, Contractor Liability, Construction, New York Construction Law, construction risks, contractors, Long Island Builders, contractor regulation, regulations, Potential Liability, Construction law, Labor Law, contractor injury

Recent New York Litigation Highlights Increasing Risks to Contractors

Posted on Tue, Jan, 10, 2017

     Construction contracts require contractors and subcontractors to carry commercial general liability, or CGL, insurance and to name not only the contracting parties but additional third parties, such as project owners, as additional insured. Recent CGL litigation, however, suggests that contractors and subcontractors should review the language of their CGL policies carefully because third parties to the contract, even if they are contractually required to be additionally insured, may actually be excluded by the insurance policies.

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     CGL policies often contain additional insured clauses or endorsements that define who constitutes an additional insured, usually based on whether the insured contractor has a written contract requiring that person to be named as additional insured. When the person seeking coverage is a party to the contract, the courts interpret an additional insured clause to provide coverage, as the court did in Zurich American Insurance Company v. Burlington Insurance Company.[1] The insurance policy at question in that case provided that an additional insured would be “any person or organization for whom you have agreed in writing in a contract or agreement that such person or organization be added as an additional insured[.]”[2] Because the insured subcontractor had a written contract with the contractor, requiring that the contractor be named as additional insured, the court ruled that the contractor was covered under the subcontractor’s policy. [3]

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     A recent case, however, shows that third parties who are required to be named as additional insureds may be left without coverage. In Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire & Marine Insurance Company,[4] the court considered whether an additional insured endorsement in a contractor’s CGL policy extended coverage to a construction manager in a lawsuit by the project owner for structural damage to the project. The prime contractor had agreed with the project owner to name the construction manager as additional insured, but there was no contract between the construction manager and the contractor.[5] The CGL policy provided that “any person or organization with whom you have agreed to add as an additional insured by written contract” would be an additional insured. [6]

     The construction manager argued that it should be additionally insured, but the court disagreed. Finding that the language of the policy “clearly and unambiguously requires that the named insured execute a contract with the party seeking coverage as additional insured,” the court refused to extend coverage to the construction manager when it did not have a contract with the prime contractor, regardless of the language in the prime contract.[7] The key language seems to be “with whom you have agreed”, which triggered a requirement that the insured have a contract directly with the proposed additional insured for coverage to exist.

     This holding has troubling implications for contractors and subcontractors who are contractually required to name project owners and other parties as additional insureds but do not have contracts directly with them. The courts in cases such as Gilbane may not have been persuaded by the contents of the underlying construction contracts to extend coverage against the language of the policy, but the failure to obtain a compliant insurance policy may constitute a breach of contract, as the Gilbane court acknowledged in its decision.[8] Thus, it behooves construction contractors and subcontractors to review their CGL policies carefully and consult with counsel to identify potential gaps in additional insured coverage so that they can be addressed proactively, rather than discovered in litigation with potentially disastrous consequences.

     Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney      The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

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[1]  No. 651383/14, 2016 N.Y. Slip Op. 30568(U)(N.Y. CO. Sup.Ct. Apr.4, 2016)

[2] Id. at *2-3.

[3] Id. at 8-9.

[4] 143 A.D.3d 146 (1st Dep't 2016).

[5] Id. at 148

[6] Id. at 149.

[7] Id. at 151-52.

[8] Id. at 153.

 

Tags: Contractor Liability, Construction, construction risks, contractors, regulations, Construction law

Post Contract Signing Considerations For The New York Contractor

Posted on Wed, Jan, 04, 2017

     Contractors and subcontractors frequently consult with their attorneys in the negotiation of construction contracts before they are signed, but counsel’s involvement generally ends at that point until and unless litigation arises down the road. Nevertheless, additional consultation with attorneys after execution of contracts can ensure that contractors and subcontractors meet their respective obligations and may confer savings that far offset the costs.

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     To give one common example, contractors are served with litigation involving its subcontractor, only to discover that the subcontractor lacked commercial general liability insurance in the amount required by their subcontract. Just because a subcontractor may agree to obtain required coverage does not ensure that it will do so, and Without compliance to confirm, the contractor may be exposed to liability to its surprise. As the focus moves from legalities to. Additional input and coordination from counsel can prevent the fumbling of major compliance issues once the contract is signed. The cost savings and potentially improved bonding capacity that can be achieved in exploration of contract compliance and risk management procedures can be critical to long term business planning.

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     As a consequence of lacking a procedure to ensure that its subcontractor maintained adequate insurance coverage, the contractor in my example was faced with a significant gap between the subcontractor’s coverage limit and the prospective judgment, which in turn threatened the goodwill between the contractor and the project owner. Situations like this are often preventable with some guidance regarding risk management procedures.

     Construction law attorneys frequently deal with issues of risk management and can provide contractors and subcontractors with valuable guidance. In the case of the insurance coverage gap I just discussed, legal counsel can help firms establish procedures to ensure that insurance policies are received, verify adequate coverage, and schedule follow ups prior to policy expirations. Consequently, the risk of insufficient coverage or lapsed policies can be eliminated. 

     The costs of any Post-execution consultation with an attorney should not be excessive, and the benefits can substantially outweigh the costs in addition to scenerios as well. Aside from ensuring the quality of your services, which translates into goodwill and repeat business, you can also anticipate financial benefits. Insurance carriers encourage clients to implement procedures that minimize risk—after all, it saves them money when clients are more careful—so developing internal risk management practices may result in lower insurance and bonding premiums. 

John_Caravella_construction_lawyer.jpgMr. Caravella is a former project architect and currently a practicing construction attorney who represents architects, engineers, contractors, subcontractors and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. Mr. Caravella has been selected to serve as a member of the Construction Industry Panel of Neutrals to the American Arbitration Association.

 For more information on The Law Offices of John Caravella, P.C., visit www.LIConstructionLaw.com

 

 

Tags: Construction Contract, Contractor Liability, construction risks, construction contract administration, aia agreements, contractors, subcontractor, construction risk management, Construction law

Architects Will See Greater Demand in Services as More Construction Projects Get Underway

Posted on Wed, Nov, 16, 2016

John Caravella, a Construction Attorney at The Law Offices of John Caravella, P.C. and a former architect, says a recent report showing a lower demand for architects’ services last month is part of the business cycle and that, in some parts of Long Island, demand has been steady, especially for the construction of high-end and luxury homes. He adds that the improving economy will mean architects will be in greater demand as more money will be spent on construction projects.

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 The American Institute of Architects (AIA) recently reported that the Architecture Billings Index (ABI) — a leading economic indicator of construction activity — fell to 49.7 last month, compared to the mark of 51.5 in July. This is the second time this year and the first time in seven months that demand for design services declined. Any score below 50 indicates fewer requests for architectural services. The ABI measures demand for commercial and industrial facilities such as hotels, office buildings, multi-family residential buildings, schools, hospitals and other institutions.

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 The report cited a labor shortage in the construction sector in which 25,000 jobs were lost in the second quarter of 2016, and fewer contractors being able to hire or retain skilled workers.

 “The billing index and the construction industry are cyclical,” Mr. Caravella says. “The periods of expansion, contraction and additional expansion are typical and much of the basis of future forecasts. For a period of contraction, however, the relatively slight amount of the contraction speaks to the overall underlying strength and demand in the sector.”

 One bright spot in the report is that the index for design contracts went up in August to 52.7, compared to 51.8, meaning more construction firms are looking to work with architects or architectural firms in the coming months. Further, the report showed more balanced levels of design activity among the commercial/industrial, institutional and residential sectors, with scores of 50.8, 50.7 and 50.9, respectively. Mr. Caravella says that an improvement in the economy will spur demand for architectural services, citing Long Island as an example.

 “In many areas of Long Island, especially in the East End communities, such residential demand and activity is at consistent levels,” Mr. Caravella says. “Some areas of high-end or luxury residential construction have increased, but those are not reflected in the ABI.”

 Mr. Caravella is a former project architect and currently a practicing construction attorney who represents architects, engineers, contractors, subcontractors and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. Mr. Caravella has been selected to serve as a member of the Construction Industry Panel of Neutrals to the American Arbitration Association. The Law Offices of John Caravella P.C. has locations in Manhattan, Uniondale and Fort Lauderdale, Florida.

 For more information on The Law Offices of John Caravella, P.C., visit www.LIConstructionLaw.com

Nassau County Bar Association Offers Alternatives To Litigation

Posted on Mon, Oct, 24, 2016

     Construction disputes are not going away any time soon, so every contractor will eventually be faced with the prospect of deciding whether to go to court to get paid for its work. Litigation in the court system has been the traditional collection method for contractors, but the length and costs of litigation mean that recovering might take years and absorb a chunk of your recovery, and the backlog in the court system has led courts to encourage litigants to seek other means of getting paid. Mediation and arbitration are viable alternative methods of resolving construction disputes, and the Nassau County Bar Association Alternative Dispute Resolution, or ADR, program offers both services from qualified neutrals at competitive prices.

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     Mediation is useful because it dispenses with the time-consuming, costly discovery practice and trial that are required in litigation. In mediation, the parties mutually select an impartial person from a pool of approved mediators with special training and, with the aid of the mediator, attempt to negotiate a binding agreement to resolve their differences. Rather than issuing a binding decision regarding who is right or wrong, a mediator facilitates communication and provides an impartial viewpoint to assist the parties in coming to their own resolution, so that the parties have flexibility in determining a mutually agreeable outcome.

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     Arbitration, meanwhile, has the benefit of a shorter process much like mediation, but like litigation it involves a neutral third-party hearing each side’s case and issuing a binding decision in much the same manner as a judge. The procedure is streamlined, which saves costs, and the arbitrator’s decision, or award, can be enforced like a court’s judgment. Thus, arbitration is a good alternative for parties who want the benefit of a judgment on the merits of their cases without going to the time and expense of litigation.

     Traditionally, organizations such as the American Arbitration Association (the AAA) have dominated the provision of mediation and arbitration services, but the AAA’s administrative fees for an arbitration can run in the thousands of dollars (for example, $3,000 for a $75,000-$150,000 claim),[1] plus the hourly fees for the arbitrator. The Nassau County Bar Association’s fees, on the other hand, consist of a $500 administrative fee for each case, plus a set $300 per hour charge for the arbitrator or mediator. The Nassau County Bar Association panel of mediators and arbitrators consists of attorneys with a minimum of 10 years’ experience, qualified by a Judiciary Committee of the Nassau County Bar Association itself. The parties select their mediator or arbitrator, so they even have the opportunity to choose someone with knowledge of construction law and the unique issues it presents.

      The bottom line for contractors is getting paid in the quickest and least expensive manner, so the Nassau County Bar Association ADR services are worth considering. You can learn more about the benefits of mediation and arbitration by consulting with a construction law attorney, and you can learn more about the ADR programs offered by the Nassau County Bar Association by visiting its web site, www.nassaubar.org, or by calling (516) 747-4070 or emailing info@nassaubar.org.

 

John_Caravella_construction_lawyer.jpgThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

This is a general information article and should not be construed as legal advice or legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for specific advice on their concern.

 1] Information retrieved from https://www.adr.org/aaa/ShowPDF?doc=ADRSTAGE2031504

 

The Home Improvement Licensing Rule: A Shield And Not A Sword

Posted on Tue, Oct, 18, 2016

 

            If you have read previous articles of this blog, you may be aware that New York construction contractors can be barred from suing or enforcing a mechanic’s lien if they do not possess required home improvement licenses, which has resulted in the dismissal of many contractors’ claims. On the other hand, project owners sometimes argue that a contractor’s failure to possess a license should not only prevent the contractor from recovering more money but should require the contractor to return all monies already paid for the work. Courts’ responses to this argument have been mixed.

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            Many courts have ruled that project owners cannot recover money they have already paid to a contractor, even if the contractor is unlicensed. In Host v. Gauntlett,[1] a homeowner sued an unlicensed contractor for the return all of the money that she had paid him, basing her request only on the absence of a home improvement license, but did not allege that the work had been defective. The court found in favor of the contractor, noting that ordering the return of all monies might unfairly enrich the homeowner at the contractor’s expense.[2] A similar result was reached in Voo Doo Contracting Corp. v. L & J Plumbing & Heating Co., Inc.[3]

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            Nevertheless, it seems that the courts will order the return of monies if the project owner can prove that the work was not performed properly. In Maltese v. New England Contractors,[4] homeowners hired a contractor to perform construction work, including electrical and plumbing, on their Brooklyn property, but the contractor was not licensed. The homeowners sought the return of the money they had paid to the unlicensed contractor, and they provided proof that the unlicensed electrical and plumbing work were defective and needed to be redone.[5] Relying on the “disparity between the sums paid and value received,” the court ordered the return of the homeowners’ payments.[6]

             Judging from these cases, the return of payments made to an unlicensed contractor is not automatically mandated by the consumer protection laws. While the unlicensed provision of home construction work must not be encouraged, the courts will not be persuaded that a homeowner should benefit from acceptable construction work without paying, either. The difference will therefore depend upon proof of the quality of the work and the costs of correction.

John_Caravella_construction_lawyer.jpgThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

This is a general information article and should not be construed as legal advice or legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for specific advice on their concern.

 

[1] 73 Misc. 2d 96 (N.Y. City Civ. Ct., Queens Co. 1973).

[2] Id. at

[3] 264 A.D.2d 361 (1st Dep’t 1999).

[4] No. 21884/06, 17 Misc.3d 1134(A), 2007 N.Y. Slip Op. 52259 (Sup. Ct. Kings Co. Nov. 28, 2007).

[5] Id. at *2.

[6] Id. at *4.

Invalidating Choice of Law or Forum Selection Clauses

Posted on Tue, Sep, 06, 2016

          Contracts commonly provide for a specific state’s law to apply (choice of law) or for disputes to be litigated or arbitrated in another state (forum selection). Unfortunately, out-of-state contractors often make subcontracts with New York subcontractors on New York projects subject to the laws of, and requiring disputes to be resolved in, other states, using the added expense and inconvenience as a means to dissuade subcontractors from pursuing claims. This unfair side effect of choice of law and forum selection clauses begs the question: must a New York subcontractor pursue his remedies in another state or under another state’s law where its contract says so? The answer may be no.

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             Courts frequently grapple with the enforceability of choice of law and forum selection clauses. With respect to choice of law, New York courts follow a general rule that parties are free to make the contract subject to the law of whatever state they want, but the law of the state with the most “significant contacts” with the contract should ultimately be applied.[1] Applying this rule, a federal court in S. Leo Harmonay, Inc. v. Binks Manufacturing Company, a lawsuit by a New York subcontractor against an Illinois contractor involving a New York construction project, refused to enforce an Illinois choice of law because the only contact with Illinois was the home state of the contractor, while the work was performed in New York, the prime contract was subject to New York law, and the subcontractor was a New York corporation.[2] This situation is remarkably similar to the situation of many New York subcontractors faced with an out of state choice of law, so such a clause will probably not be enforceable in most situations.

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             On the other hand, forum selection clauses are upheld by the courts unless it can be shown that “enforcement would be unreasonable or unjust or that the clause is invalid because of fraud or overreaching, i.e., a trial in the contractual forum would be so gravely difficult and inconvenient that the challenging part would, for all practical purposes, be deprived of his or her day in court.”[3] In Bell Constructors, Inc. v. Evergreen Caissons, Inc., the court refused to invalidate a forum selection clause requiring a construction contract dispute to be litigated in New York, even though the contract was performed in Colorado and the defendant subcontractor was a Colorado corporation and would face expense and loss of business time in litigating the dispute in Colorado.[4] Thus, absent extremely unusual circumstances, forum selection clauses have been upheld by New York courts, a rule that has led to unfair results and created substantial expense and inconvenience for New York subcontractors.

             More recently, however, the New York State Legislature has taken action to protect the rights of New York subcontractors by enacting the Prompt Payment Act.[5] The Prompt Payment Act contains provisions relating to timing of payments that go beyond the scope of this article, but importantly the Prompt Payment Act declares that contract provisions that impose the law of another state or that require dispute resolution to be conducted in another state are void and unenforceable,[6] meaning that a New York subcontractor under a contract subject to this law cannot be required to litigate in another state or under another state’s law. The Prompt Payment Act does not govern all contracts, and only an experienced construction law attorney can review your subcontract to determine whether the Prompt Payment Act applies, but it may nevertheless provide a means to avoid oppressive forum selections and choices of law by out-of-state contractors that would otherwise be enforced by the courts.

John_Caravella_construction_lawyer.jpgThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

 [1] See, Compania de Inversiones Internacionales v. Industrial Mortgage Bank of Finland, 269 N.Y. 22, 198 N.E. 617 (1935); Haag v. Barnes, 9 N.Y.2d 554, 175 N.E.2d 441 (1961).

[2] 597 F. Supp. 1014, 1025-26 (S.D.N.Y. 1984).

[3] Bell Constructors, Inc. v. Evergreen Caissons, Inc., 236 A.D.2d 859, 860, 654 N.Y.S.2d 80, 81 (4th Dep’t 1997).

[4] Id.

[5] N.Y. Gen. Bus. Law. §§ 756 et seq.

[6] N.Y. Gen. Bus. Law § 757.

Top 5 Mechanic's Lien Waiver Pitfalls for Contractors and Subs

Posted on Mon, Apr, 11, 2016

     For contractors and subcontractors in New York, Mechanic’s Lien Waivers are a part of life, but the potential risks to the contractor in waiving more than intended or understanding of the terms are not always as common. Owners (and often their lender) require that the project be kept lien free through progression of the work to final completion. This means that, as a contractor or subcontractor, you will undoubtedly be asked to execute a Mechanic’s Lien Waiver at some time or another, often in conjunction with applying for payment. If you do so however without paying attention to the specific language of the Waiver, you might lose more than you bargained for.

     In general, there are two types of Mechanic’s Lien Waivers: those that are part of a contract, and those that are seperate and executed later during the progress of your work (i.e. with the receipt of progress payments). As a practical matter, you don’t need to worry about waiving your right to file Mechanic's Liens pursuant to contract terms, as any contract seeking to limit (or pre empt) a contractor's right to file liens would be unenforceable under New York construction law.

In High Tech Enterprises & Electrical Services of N.Y., Inc.,[1] a subcontractor sued a prime contractor to recover for breach of contract and to collect under a bond that had discharged its mechanic’s lien. The court dismissed the contractor’s counterclaim for attorneys’ fees, which was based on a clause of the subcontract which provided that the subcontractor would not file any lien and would reimburse the contractor for attorneys’ fees in the event that one was filed, stating that this clause was “unenforceable as against public policy.” New York Lien Law Section 34 is clear that “any contract, agreement or understanding whereby the right to file or enforce any [mechanic’s] lien is waived, shall be void as against public policy and unenforceable.”

Click me      A contractor, subcontractor, material supplier, or laborer however can be required to execute and deliver a Waiver at the same time as, or after, payment is made.[2] For that reason, you can be required to waive and release your lien rights when payment is made to you. The problem in those cases becomes satisfying your owner without waiving more of your rights than you should. Here are some tips to avoid common contractor pitfalls with respect to New York Mechanic's Lien Waivers

  1. Use your own Waiver of Mechanic’s Lien form. Whenever possible, submit your own Waiver of Mechanic’s Lien, which you can develop with your attorney’s advice to guard you against these and other pitfalls. This allos the contractor to retain control over your waiver of lien rights and ensure that you keep your Waiver language narrow enough to preserve other potential claims.

  2. Be wary of waiving subsequent lien rights in connection with partial payments. In all fairness, when you release lien rights in connection with progress payments, you should only be releasing your right to lien for the work that you have already completed. However, some owners use forms which contain wording to the effect that you waive claims that you “now or hereafter may have” to a lien on the property. This language, unfortunately, can be construed to waive your right to all liens—even those lien rights which arise due to subsequent outstanding payments. This language should be avoided in most situations. (another good reason to have and use your own waiver of mechanic’s lien form).

  3. Make the Waiver conditional. Although the economy has greatly improved over recent history, it is still not impossible that your project owner could go bankrupt sometime after paying you. This becomes an issue, however, if your project owner files for bankruptcy within 90 days of your payment clearing, because, in that case, the payment might be looked upon as a “preference”—unfairly paying one creditor at the expense of others on the eve of a bankruptcy—and can be cancelled, requiring you to repay the money. In that case, you would have waived your right to lien, but you would also not have the money. A better route is to insist on language in your Waiver of Mechanic’s Lien that makes your Waiver conditional not only on the receipt of the money, but also conditioned upon the owner not filing for bankruptcy within 90 days of funds clearing.

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  4. The Waiver should apply only to lien rights. Ideally, you want to appease your owner (and their lender) with a Waiver of Mechanic’s Lien while preserving as broad rights as possible to allow other potential claims. For that reason, avoid signing a Waiver of Mechanic’s Lien that waives your right to “any and all claims” or that releases the owner from “all liability”. A better Waiver of Mechanic’s Lien language for contractors and subcontractors in New York would waive only lien rights while also preserving contractor's other potential claim rights.

  5. The Waiver should relate to payment, not performance. To explain, a Payment Waiver waives your lien rights only to the amounts for which payment is acknowleged (in other words, the amount of the payment that you’re receiving at the time of the waiver), while a Performance Waiver relates to all work performed up to a certain date. One concern for the contractor with a Performance waiver is that it could be interpreted to waive your right to lien for retention on the progress payment, among other things. Your best bet for a Waiver of Mechanic’s Lien is to acknowledge receipt of your current payment and waive and release your lien rights in an amount equal to that payment: look for a specific dollar amount, and be wary of Lien Waivers that refer instead to “all work up to” a certain date. Contractors should also be wary of signing and delivering a Waiver of Lien indicating contractor's receipt of payment when if in fact contractor has not actually recieved the claimed payment as if payment is not actually provided the contractor may no longer be able to claim a lien for such payment.

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     When executing Mechanic’s Lien Waivers, following these steps and understanding what is being waived is essential for the New York contractor. Although courts do sometimes find a way around lien waivers on behalf of contractors and subcontractors, the result is not guaranteed and not a place a contractor wants to be defending their claim for payment. Starting off on the right foot is the best way for the contractor to take control of their lien rights and be positioned for a better outcome. The language in legal documents can be tricky; if a project owner will not allow you to use the Waiver of Mechanic’s Lien form that you’ve developed, having legal review of the proposed language may be requried to protect your rights.

     Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

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[1] 113 A.D.3d 546, 980 N.Y.S.2d 387 (1st Dep’t 2014).
 

[2] Id.


Tags: Construction Litigation, New York Lien Law, New York Construction Law, Defective Liens, New York Construction Liens, New York Contractor Liens, lien rights, Validity of Lien, Partial Waiver and Release of Mechanics Lien, Lien Waiver, Conditional Lien Waiver, Partial Waiver of Mechanics Lien, Partial Waiver and Release of Lien

Homeowner Liability for Contractor Injuries in New York

Posted on Mon, Apr, 04, 2016

Can homeowners be held responsible for injuries that may occur to contractors while work is being done on their property? Many homeowners enjoy having work done to their homes. Whether it is minor yard maintenance, painting, window installation or it is major construction work being performed. Homeowners reach out to landscapers, painters and contractors of all sizes for assistance. What happens if such a worker is injured while working? Who is responsible for their medical and other costs?

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With respect to homeowner liability for contractor injuries in New York, owners of one or two family dwellings  are exempt from liability from any contractor injuries suffered while work performed on their property under labor law § 240 & § 241, unless he or she has directed or controlled the work being performed. Jumawan vs. Schnitt, 35 A.D. 3d 382 (2006).

Under New York State Law §§ 240 and 241 a homeowner can be found liable for any resulting contractor injuries only if their contractor can show the homeowner provided specific instruction as to how work is to be performed or the homeowner provided certain tools or equipment to be used. Tilton vs. Gould, 303 A.D. 2d 491, 756 N.Y.S. 2d 757. Incidental homeowner interactions are not sufficient to invoke homeowner liability for injuries, a showing of more of a role in directing the actual work performance is necessary. Mai Rem Jiamg v. Yeit, 95 A.D. 3d 970 (2012).  

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Homeowners in New York are also well advised to not provide substantial direction and involvement in how work should be performed. Let the contractor decide how the work is to be performed. Otherwise excessive homeowner involvement and directing work itself can lead to homeowner liability for contractor injuries suffered while on your property.  Working with a construction attorney in advance to verify these issues, as well as review and approval of all contract terms greatly increase the chances of homeowner satisfaction with the project, and decreases the chances of misunderstandings or disputes.

Homeowners, prior to signing any agreements for construction or home improvement services, should request  copies of any proposed contractor’s insurance(s) and license(s) as required. Owners should be provided proof of :

  • (i) Contractors Commercial General Liability (“CGL”) policy,
  • (ii) Workers Compensation coverage, and
  • (iii) and any required licenses required for the proposed project.

While these general recommendations may apply to many homeowners, all project considerations and requirements vary by project.  Working with a construction attorney in advance to verify these issues for any particular project, as well as review and approval of all contract terms greatly increase the chances of homeowner satisfaction with the project and decreases the chances of contractor misunderstandings.

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.
 
This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

 

 

 

Tags: Construction Contract, Construction, New York Construction Law, Construction Contract Drafting, Home Renovation, contractors, owner requested changes, Construction law, Labor Law, homeowner liability, contractor injury, homeowner recommendations

Protections Provided to Contractors and Architects Under New York's Economic Loss Rule

Posted on Thu, Oct, 15, 2015

        In a nutshell, the  “economic loss rule” is a rule that courts use to prevent a plaintiff from against a defendant for a tort (usually negligence) when the essence of the claim is for failure to live up to the terms of a contract. This doctrine does, however, have exceptions, and it becomes tricky when applied to service contracts such as construction contracts. Nevertheless, there are circumstances when the economic loss rule might eliminate a contractor or subcontractor’s liability entirely.

        First, some explanation is in order: what constitutes “economic loss”? Economic loss includes damage to the value of a product (such as costs to replace or repair the product), lost profits and business opportunities, loss of use of the product, and a product’s failure to perform as expected. One court has said that “the essence of economic loss is that it is occasioned by the failure of the product to perform at the level of performance expected by the buyer, resulting in a loss of the bargain.”[1] Personal injury is not considered economic loss,[2] so this rule does not apply to lawsuits where people have been hurt by a contractor’s alleged error. Also, damage to “other property” is not considered economic loss, but the definition of “other property” is narrow and does not, for example, include the premises in which a product was installed.[3] In the context of construction contracts, the real estate that is improved will therefore generally not be “other property”, and the economic loss rule would bar recovery for negligence claims for damage to that property.

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        The economic loss rule is typically applied in the context of product liability claims involving the manufacture and sale of goods, but it also comes up in the context of service contracts such as construction contracts. New York law, however, recognizes exceptions to its application to service contracts.[4] The courts of New York have consistently said that professionals—such as architects and engineers—have a separate legal duty imposed by the law and may be sued for malpractice for a failure to exercise reasonable care in performing their contract duties.[5] This duty is considered separate from the duties which the professional assumed under the contract and supports a negligence-based cause of action even where the plaintiff’s injury is considered economic loss.

        With respect to non-professionals, such as contractors and subcontractors, there is no hard-and-fast rule. A close inspection of the facts of an individual case is required to determine whether the economic loss rule might bar negligence and other tort claims. As a rule, however,  the breach of a duty imposed by a contract only gives rise to a suit for breach of contract. Courts hearing lawsuits by plaintiffs alleging negligence and related claims against defendants look into whether the law imposes a separate duty, the type of damage which the plaintiff has suffered, and the manner in which the injury occurred.[6] Courts have allowed negligence claims to stand alongside or replace breach of contract claims where there was personal injury or damage to property, and where the damage occurred by accident in an “abrupt, cataclysmic occurrence”.[7] The failure of a contractor to act in accordance with regulations governing his or her conduct might also give rise to a separate duty which would support an action for negligence.[8] Ultimately, only an attorney can review the facts of your specific case and advise you whether the economic loss rule might apply, but situations in which a negligence cause of action exists between the parties to a contract remain the exception rather than the rule.

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        At this point you may be wondering how this matters to you. After all, if a homeowner can’t sue you for negligence, he can still sue you for breach of contract, can’t he? Actually, where the plaintiff is not a party to your contract, the economic loss rule might defeat his case. A plaintiff in a breach of contract action has to establish either that he was a party to the contract or that the contract was intended to benefit him.[9] This rule applies both to breach of contract suits against contractors or subcontractors and breach of contract or malpractice suits against architects.[10] This defense might benefit a subcontractor or an architect who is hired by a general contractor and therefore did not directly have a contractual obligation to the homeowner, barring a lawsuit entirely.

        In sum, New York contractors and subcontractors should be aware of the economic loss rule in the event that they find themselves defending against lawsuits by property owners, as, in general, a negligence action against a contractor or subcontractor only exists if a personal injury occurred as a result of the contractor’s alleged failure(s). The rule is less applicable to architects, although the traditional defense that a plaintiff was not a party to the contract with the architect still exists in some instances. Only an attorney can advise you in any given instance whether the economic loss rule applies to the facts of your circumstances and, if it does, what benefit it might confer.

      Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney        The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608–1356 or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

[1] Arell's Fine Jewelers, Inc. v. Honeywell, Inc., 170 A.D.2d 1013, 1017, 566 N.Y.S.2d 505, 509 (4th Dep’t 1991).

[2] Amin Realty, LLC v. K & R Const. Corp., 306 A.D.2d 230, 231-32, 762 N.Y.S.2d 92, 93-94 (2nd Dep’t 2003).

[3] Washington Apts., L.P. v. Oetiker, Inc., 43 Misc. 3d 265, 978 N.Y.S.2d 731, 736 (Sup. Ct. Erie Co. 2013).

[4] See, Consol. Edison Co. of New York, Inc. v. Westinghouse Elec. Corp., 567 F. Supp. 358, 364 (S.D.N.Y. 1983) (reviewing case law).

[5] 17 Vista Fee Associates v. Teachers Ins. & Annuity Ass'n of Am., 259 A.D.2d 75, 83, 693 N.Y.S.2d 554, 559-60 (1st Dep’t 1999).

[6] Sommer v. Fed. Signal Corp., 79 N.Y.2d 540, 552, 593 N.E.2d 1365 (1992).

[7] Id.

[8] Id.

[9] Ralston Purina Co. v. Arthur G. McKee & Co., 158 A.D.2d 969, 970, 551 N.Y.S.2d 720, 722 (4th Dep’t 1990).

[10] See, e.g., Key Int'l Mfg., Inc. v. Morse/Diesel, Inc., 142 A.D.2d 448, 453, 536 N.Y.S.2d 792, 795 (1988).

Tags: Construction Litigation, Long Island Contractors, Architect Liability, New York Construction Law, Contractors and Architects, Economic Loss, Economic Loss Rule, Construction Contracts, Design Professionals, Design Professional Liability, Negligent Design, Construction law, Construction Attorney