Want a peek into some beautiful homes? (Tues Tip)

Posted on September 21, 2010 by Melissa Dewey Brumback

There are several home tours coming up in the Triangle in the next several weeks, so get out your calendar and make plans to check one or more of them out. Stunning architecture is promised. Who can resist taking a peek?

First up, the 14th annual Triangle Modernist Houses Tour “Exceptional Modernist Houses from the 1950’s to today”. The TMH tour is Saturday, September 25th in Raleigh. [Did you know: the Triangle area of North Carolina has the third largest concentration of modernist houses in America?].

Next up, the first ever AIA Homes Tour on the East Coast, the AIA Triangle Homes Tour is scheduled for October 2nd. The homes featured are all the result of the collaboration between an architect and homeowner. Each home was designed with the specific needs of the homeowner in mind, integrating the family’s personality, preferences and lifestyle, and illustrates the range of projects, styles and budgets that architects work with.

Finally, the annual Home Builders Association of Raleigh – Wake County Parade of Homes is scheduled for Oct. 2-3, Oct. 8-10, and Oct. 15-17. Details on home specifics will be forthcoming, so keep a watch on their website.

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Photo “Eye See You” by Cayusa via Flickr/Creative Commons License.

What is Indemnity, and why should you care?

Posted on September 16, 2010 by Melissa Dewey Brumback

If you have ever asked a lawyer to review your construction contracts (and you should have), you may have noticed that lawyers get very excited over the indemnity provisions that may or may not be in the contracts you are contemplating signing. What are indemnity provisions, and why should you care?

What is it?

Quite simply, an indemnity provision is a statement that one of the parties agrees to pay any sums the other party might otherwise be legally required to pay to a third party. Now that I’ve mentioned picking up someone else’s tab, I hope I have your attention. As you might imagine, an indemnity provision can be a costly item, so you should have a thorough understanding of what such a provision means.

In general, indemnity provisions are contractual, and contract rules concerning them apply. What that means is, if the contract says you will pay for the owner/builder/developer/designer’s legal liabilities to others, you may have to open the checkbook.

Common Indemnity Provision

An example of one type of indemnity provision is AIA A201 3.18.1, which states:

To the fullest extent permitted by law the Contractor shall indemnify and hold harmless the Owner, Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. . . .

When is it not legal?

There are some exceptions to the general applicability of indemnity provisions in North Carolina—most noticeably: you cannot be indemnified against your own negligence. If an indemnity provision purports to indemnify one party against that person’s own negligence, public policy and state law prohibit such an indemnification in North Carolina The applicable statute N.C. Gen. Stat. §22B-1, which reads:

§ 22B-1. Construction indemnity agreements invalid

Any promise or agreement in, or in connection with, a contract or agreement relative to the design, planning, construction, alteration, repair or maintenance of a building, structure, highway, road, appurtenance or appliance, including moving, demolition and excavating connected therewith, purporting to indemnify or hold harmless the promisee, the promisee’s independent contractors, agents, employees, or indemnitees against liability for damages arising out of bodily injury to persons or damage to property proximately caused by or resulting from the negligence, in whole or in part, of the promisee, its independent contractors, agents, employees, or indemnitees, is against public policy and is void and unenforceable. Nothing contained in this section shall prevent or prohibit a contract, promise or agreement whereby a promisor shall indemnify or hold harmless any promisee or the promisee’s independent contractors, agents, employees or indemnitees against liability for damages resulting from the sole negligence of the promisor, its agents or employees.
[Emphasis added].

However, construction indemnity clauses indemnifying a party for its own negligence can be valid and enforceable so long as the offending portion of the indemnity clause can be redacted (that is, stricken from the paragraph). Vecellio & Grogan, Inc. v. Piedmont Drilling & Blasting, Inc., 183 N.C.App. 66, 644 S.E.2d 16 (2007). In the example of the AIA A207 provision above, the phrase “To the fullest extent permitted by law” acts to keep the phrase within the permissible parameters of North Carolina law. Therefore, if you signed a contract with such a provision, you may be on the hook.

Be Careful with Indemnity Provisions

Not all indemnity provisions are equal. Some, such as in the above example, make attorney fees part of the expense which is passed along. Others expressly exclude attorney fees. Some provisions include a “duty to defend” on behalf of the other party, while others are silent on that issue. What is most important is that you recognize that such language is extremely important and should be discussed in detail with your knowledgeable construction lawyer.

As with getting your hair cut, you could do it yourself, but should you?

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Photo “Barber Shop Pole” by MyEyeSees via Flickr/Creative Commons License.

What is “green design” ?

Posted on September 10, 2010 by Melissa Dewey Brumback

What is included in “green design”? Green design (also known as sustainable design or environmental design) is the concept of construction built with principles of economic, social, and ecological sustainability. The most well-known green design, by far, is the LEED green building certification process of the US Green Building Council.

Yesterday, I had a chance to attend Phil Kabza (“SpecGuy”)’s presentation “Specifying LEED Requirements: The Best of Green from Masterspec” at the GreenNC trade show.

According to Phil, there are 4 general LEED credit requirements for construction, including:

1. Refrigerant & clean agent removal

2. Construction waste management

3. Construction indoor air quality management

4. Measurement & verification (post construction)

As Phil emphasized, LEED specs must be project specific, and should not simply be cut and pasted from previous projects.

Want to see a LEED specification in action? Check out an example of a LEED Spec on Sustainable Design Requirements (01 81 13) here.

Interested in learning more about LEED and its requirements? Check out the mother of LEED, the USGBC .

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Photo “Platinum LEED” by Seth Anderson via Flickr/Creative Commons License.

Joint & Several Liability in NC (law note)

Posted on August 26, 2010 by Melissa Dewey Brumback

If a client has been sued, he wants to know how much is at risk if he loses at trial. This is especially true where more than one person or company have been sued. How is any damage award apportioned?

The answer is not one clients generally like to hear: your company can be on the hook for 100% of any damages. This is true even if your company is really only liable for a tiny fraction of what caused the damages in the first place. You can thank “joint and several liability” for that.

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For example, in a fairly typical construction dispute, an owner sues a contractor and the architect for construction defects. The contractor uses unsuitable substitutions, and the architect approves the unsuitable substitutes. Both contractor and architect may be held liable for the resulting damages. If a jury awards the owner $500,000, then both contractor and architect are liable for the entire $500,000 to owner. That’s the “severability” part of the law. As between the two, of course, they both share in the damages, and if the owner executes on the entire judgment against the architect (perhaps due to the architect’s insurance coverage), the architect can then go after the contractor for an equal share and get paid back $250,000 in “contribution.” (That’s the “joint” nature of such an award). This is, however, assuming the contractor has those funds. Essentially, whoever has the funds when a judgment hits might end up paying for the entire award. If the contractor doesn’t have $250,000 for the architect to be paid back, the architect is out of luck.

Does the result change if the jury finds the architect was only 5% liable for the damages and 95% were attributed to the contractor? Nope. In North Carolina, where the parties’ actions together contribute to one indivisible injury, there is no apportionment. “In for a penny, in for a pound” as the old saying goes.

Exceptions to the Rule?

Are there exceptions? But of course! If the owner is also negligent, he can get no recovery at all since North Carolina is a pure contributory negligence state. If one party is actively negligent and one passive, than the passively negligent party can seek indemnity from the active party. If one party settles before trial, things become more complicated. More on these subjects in future posts. I’m also told that in other states apportionment is more the rule, so you may have better luck with your out of state projects in a similar situation.

As a general rule of thumb, however, for your North Carolina project, just assume that the entire amount of claimed damages may be presented to you for payment. Unfair? Many times, yes. That’s the nature of the beast. It is also one of many, many good reasons to make sure you are doing business with people you trust and, more importantly, that other professionals are appropriately insured or bonded on any project you are working on.

If you have any questions about joint and several liability, drop me a line or a comment below.

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Photo “Shiny pennies” by David Pillbro (Flickr Creative Commons license)

Tolling the Statutes of Limitation & Repose? (Law note)

Posted on August 19, 2010 by Melissa Dewey Brumback

A blog reader recently raised the question of to how to handle construction defect claims while repair attempts are being made on a defective building. In part, the answer to this question will depend on how close you are to the statute of limitations or the statue of repose from running. The closer you are, the more you need to be concerned about this issue. Just because all parties are working together to solve construction issues does not mean that the statutes are not running. They can. [There are, as usual, exceptions for equitable reasons.] And once statues run, there’s no getting them back.

One prudent approach to dealing with the statutes is to have all parties involved enter into a “Tolling Agreement.” What a properly drafted tolling agreement can do is to stop the running of the statue of limitations and/or repose while the parties attempt to fix the defects or otherwise settle their issues with one another. Note that the tolling agreement does not give a party any greater rights than they would have at the time it is signed– that is, if the statute has *already* run, then it would be of no use. But the tolling agreement can act as a “time out” on the running of the clock.

A good example of a tolling agreements is found in the Court of Appeals opinion in Charlotte Motor Speedway, Inc. v. Tindall Corporation, 195 N.C. App. 296, 672 S.E.2d 691 (2009). The Speedway case involved the infamous collapse of a pedestrian walkway during the NASCAR Winston Cup. The walkway which collapsed had been substantially completed by October 1995, and the collapse occurred in May 2000. Speedway (the project owner) and Tindall (which constructed the walkway) entered into a tolling agreement:

“to toll and suspend any applicable statute of limitations, repose or time, whether created by statute, contract, laches or otherwise, within which any cause, claim action, cause of action, or suit must be made, or commenced by the parties against any one of them concerning the [pedestrian] claims, including any and all claims for indemnification and contribution.” Id. at 298, 672 S.E.2d at 693.

Tindall attempted to argue that the statute of limitations barred Speedway’s claim for indemnification of monies paid prior to three years before it filed its complaint, but the Court found that the Tolling Agreement, which remained effective “through and including January 1, 2006” tolled the action, and Speedway brought suit on July 17, 2007, less than two years after the Tolling Agreement expired. Likewise, the Court held that the statute of repose did not bar the action, because the Tolling Agreement was entered into less than six years after substantial completion, and the lawsuit was brought during the pendency of a second funding [tolling] agreement between the parties.

If you are considering a tolling agreement (or think you don’t need one because you “have time”), it is always smart to get a professional opinion on the matter.

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Comments? Let me know. I welcome the opportunity to discuss how the statute of limitations and repose may be tolled in your specific situation.