June 2010

Our newsletter, Law and Mortar, is intended to be a source of information relating to the management of construction contracts, risks and business practices for our clients, friends and others doing business in the construction industry. Please note the disclaimer below regarding the general content of this newsletter. We encourage you to forward this newsletter to your colleagues.

Make Periodic Review of Your Commercial General Liability Policy Coverage Part of Your Risk Management Program


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A standard Commercial General Liability (“CGL”) policy is not “one size fits all” and most likely will not provide a contractor with all of the coverage it needs for its particular operations. Therefore, it is important that a contractor’s risk management program include a periodic review of its CGL policy in order to identify any “gaps” in coverage for the risks that are inherent in the contractor’s particular work and operations.  Any “gaps” identified during a review can be filled by purchasing additional coverage through endorsements or by modifying certain exclusions.  For example, an exclusion in a CGL policy for damage to a crane’s boom in excess of 25 feet should be modified if the contractor uses a crane with a boom in excess of 25 feet.  Modifying the exclusion would have the effect of reinstating coverage for damage to a crane boom that exceeds 25 feet. 

In addition, changes in the nature of a contractor’s work, equipment, technology or target markets may necessitate procuring coverage for any new risks that come with such changes.  

There may also be fundamental gaps in coverage as a result of the law of a particular state.  For example, under Pennsylvania law, faulty workmanship is not an “occurrence” under a CGL policy.  Consequently, property damage resulting from faulty workmanship will most likely not be covered when Pennsylvania law applies to the interpretation of the policy language.  Additional coverage endorsements can be purchased to fill such a gap for an additional premium.

An insurance broker or agent can review your current CGL policy, identify “gaps” in coverage that should be filled based on the risks that are inherent in the nature of your work and operations, and prepare and submit specifications to the insurer detailing the additional coverage and/or modifications to exclusions that are needed or required.  It is advisable to perform such a coverage review periodically as part of your risk management program instead of learning there is no coverage after a claim arises or an accident occurs.

We can provide referals for qualified insurance agents or brokers upon request.

Suspension of Work: If an owner issues a contractor a written notice to suspend work on a project, the contractor should take the following actions to preserve and protect its rights:
I.          Consult the Contract Documents
First, the contractor should consult the contract documents to determine its contractual rights and obligations in the event the owner issues a suspension of work notice. The American Institute of Architects ("AIA") and ConsensusDOCS contract forms have general conditions which include specific provisions addressing suspensions of work. Also, federal construction contracts have regulations addressing suspensions of work.
II.         Stop Work and Mitigate
Second, the contract documents typically require the contractor to stop its work and take reasonable steps to mitigate its expenses and damages during the suspension.  This means the contractor must reallocate labor and equipment to other projects, return rented equipment, protect its work and materials, and take other similar type actions to minimize its losses. 
III.        Document Damages
Finally, it is imperative that the contractor document and track its costs attributable to the length of the suspension because the following types of damages may be recoverable under the contract documents:  lost time, price escalation, equipment, labor, overhead, profits and direct and indirect jobsite costs. With respect to lost time, a time extension is almost always available and typically includes the amount of time the suspension lasted plus remobilization. Therefore, the contractor should immediately request an extension of time once the suspension begins and then notify the owner of the actual number of days lost when the project starts up again. As for labor, in addition to labor rate increases, the labor spent during the suspension for demobilizing and remobilizing and for protecting the contractor’s work may also be recoverable.  A contractor may also be able to recover supervision costs incurred during the period of suspension. Direct jobsite expenses are those expenses incurred by the contractor as a result of remaining on the jobsite during a suspension (e.g. phone lines, trailer etc.) and indirect jobsite costs are those such as lost profits to due to the freezing of capital and bonding capacity limitations.


VP&W Bulletin Board

1. In October of 2010, Sam L. Warshawer will be speaking to the Higher Education Real Estate Lawyers (HEREL) group in Princeton, New Jersey on matters of importance to higher education real estate and construction counsel.

2. Howard D. Venzie, Jr. has been named as a 2010 Pennsylvania Super Lawyer in the categories of Alternative Dispute Resolution and Construction/Surety Law and is featured in the 2010 issue of Pennsylvania Super Lawyers.

3. Howard D. Venzie, Jr. has also been named one of Philadelphia's Best Lawyers in the categories of Alternative Dispute Resolution and Construction Law in the 2010 edition of Philadelphia's Best Lawyers.

4. Sam L. Warshawer has been named as a 2010 Pennsylvania Super Lawyer in the categories of Construction Litigation and Construction/Surety Law and is featured in the 2010 issue of Pennsylvania Super Lawyers.

5. Bruce L. Phillips has been named as a 2010 Pennsylvania Super Lawyer in the categories of Construction Litigation and Construction/Surety Law and is featured in the 2010 issue of Pennsylvania Super Lawyers.

 

   

Venzie, Phillips and Warshawer is a proud member of the following industry associations:

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An E-Newsletter From
Venzie, Phillips & Warshawer
For the Construction Industry

Editors

 Jeffrey C. Venzie, Esq.
 Stephen A. Venzie, Esq.
 Howard D. Venzie, Jr., Esq.

Do You Want to Learn More?

As a further service to our clients and friends, we offer seminars, in-house training programs and counseling workshops specifically developed to fit your most immediate business practice needs. Please don’t hesitate to inquire further by contacting our office manager, Florence Anderson.

For additional publications by our attorneys and other construction industry resources visit our website at www.venzie.com

Venzie, Phillips & Warshawer is a law firm located in Philadelphia, Pennsylvania serving all facets of the construction and surety bond industries since 1975. The firm engages in both the prosecution and defense of construction contract and other commercial litigation before the state and federal courts in the Commonwealth of Pennsylvania and the State of New Jersey, as well as those of other jurisdictions, and has substantial experience in the arbitration and mediation of construction industry claims and disputes before the American Arbitration Association and in the settlement of such claims and disputes through various forms of Alternative Dispute Resolution.

Recent Headlines

1. Sam Warshawer and Jeff Venzie recently represented a general contractor in the prosecution of a claim for damages against a school district arising out of delays to the site grading caused by the excessive moisture content of the subgrade soil.  Mr. Warshawer and Mr. Venzie were successful in defeating the school district’s motion for partial summary judgment arguing, among other things, that the school district actively interfered with the general contractor’s work by issuing the notice to proceed during the winter months even though it knew, based on an erosion and sediment plan narrative in its possession, that the soil type was unsuitable for winter grading.

2. The City of Philadelphia has created a new, paperless bid announcement procedure. All bids will be emailed to only one representative per company. You can email your company's information to bid.info@phila.gov.

3. A potential legal issue has recently surfaced with respect to how the New Jersey Department of Transportation (NJDOT) may pay contactors for additional work on NJDOT contracts. More specifically, NJDOT may have been making payments to contractors for extra work by utilizing contract pay items that will not be used on a project, or that may be used at the end of a project, or by increasing a contract pay item. This payment for extra work using an existing contract pay item may be a violation of both the Federal and State “False Claims Act” which can result in severe sanctions. In fact, the Federal Highway Administration (FHWA) has audited several federally funded NJDOT projects and has determined that this practice is illegal. Contractors with NJDOT contracts should alert their field personnel about this matter and only perform extra work under an executed change order.

4. On April 13, 2010, the Federal Acquisition Regulation (FAR) Council issued a "final rule" to implement President Obama's Executive Order 13502 (issued Feb. 6, 2009). The Executive Order pushes federal agencies to mandate the use of anticompetitive project labor agreements (PLAs) on federal contracts that are "large scale construction projects" (having a total cost to the federal government of $25 million or more). Under the Executive Order, the executive agency may, on a project-by project basis, require the use of a PLA by a contractor (binding all subcontractors). With PLAs, labor for construction projects must be supplied by union hiring halls, nonunion employees must pay union dues, and contractors must adhere to union work rules and contribute to union benefit and pension plans on behalf of its employees.

 

 

 

Venzie, Phillips & Warshawer, P.C., 2032 Chancellor Street, Philadelphia, PA 19103
Tel: (215) 567-3322 / Fax: (215) 864-9292 / www.venzie.com

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