One topic that came up in my practice recently was a contractor’s potential exposure to liability for punitive damages under New York law. As the name suggests, punitive damages are awarded above and beyond their contract or property damages, ‘where the wrong done was aggravated by circumstances of violence, oppression, malice, fraud, … on the part of the defendant, and are intended to address the plaintiff’s mental anguish or other aggravation, to punish the defendant for its behavior.’ Black’s Law Dictionary 390 (6th Ed. 1991).
Are contractors responsible for the impacts of their work on neighboring residents? Oftentimes, they are. This is especially true in densely populated urban areas where literally hundreds of people could be affected by a project only fifty feet away. Some of the principles in these cases are outlined below.
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 commercial general liability 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.
Traditionally, New York Construction Law sets separate rules of engagement for public projects (where the owner is a public entity) and those that are private construction projects (where the owner is a private individual or corporation). Given these two distinct camps, it has been easy to classify a project as either a public project or a private one. For contractors, subcontractors and suppliers, knowing which rules of engagement pertain to them is essential to avoid making costly mistakes.
Many contractors and subcontractors go about their work feeling protected from claims for damages because their agreements contain certain exclusions. Some of these agreements will even have language stating ‘Not responsible for [X, Y, and Z]’. But the ruling handed down February 14, 2012, by the Supreme Court, Nassau County serves as a reminder that contractual indemnity provisions are more of a privilege than a right, and are not subject to enforcement automatically.
CLAIMS AGAINST CONTRACTORS AND ARCHITECTS FOR CODE VIOLATIONS
In my construction law practice, I’m often confronted with instances of building code violations and questions of whether building code violations should subject a contractor or architect to liability.
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.
Many homeowners who consult with me regarding construction disputes are not only financially damaged but emotionally distressed, and understandably so. Our homes are not only our biggest financial investments but our sanctuaries, and misconduct by unscrupulous contractors that damages those sanctuaries makes us feel that we have no place of safety and, in some instances, makes us worry that we may be homeless altogether. Thus, the question is often posed to me whether homeowners can collect damages for emotional distress that results from construction contract disputes, in addition to their economic damages.
Like the strings of a marionette puppet, after the completion of a New York construction project, there are various legal theories that serve as ties between the builder and the owner. For the builder, the sooner these lingering ties can be removed the less exposure they face for claims of defects. For the owners, the longer they are able to establish these connections, the longer they may have legal recourse against the builder for defects.
Recently, a contractor asked me how to create a good contract. After further discussion, I understood that this contractor was not licensed, but wanted advice on obtaining a good contract. Well, what is a good contract after all?
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