Upcoming Webinar: How to Pick the Right Contractor for Your Construction Project

Join us for the second of our ongoing, complimentary webinars focusing on pertinent construction topics and updates. This webinar, presented by Foster Pepper attorney Greg Guedel, is titled “How to Pick the Right Contractor for Your Construction Project.”

Greg will take questions from the audience following the presentation. If you have a question you would like addressed, please email Price Herriage-Wilson at herrp@foster.com by Friday, March 27, 2015.

To see the materials or listen to a recording of Greg’s last webinar “How Long Can a Construction Claim Last?” click here.

CLE (attorney) credits pending.
Certificate of completion available for other organizations. 

Thursday, April 2, 2015
2:00 – 2:30 p.m. 

Greg Guedel, Foster Pepper PLLC 

Please RSVP to events@foster.com by Friday, March 27, 2015. 

Materials Available: "How Long Can a Construction Claim Last?" Webinar

On February 19, 2015 Foster Pepper attorney Greg Guedel presented a webinar titled "How Long Can a Construction Claim Last?" The webinar was the first in an ongoing series focusing on pertinent construction topics. Greg provided updated guidance on the statute of limitations for construction claims and discussed critical dates and events, specifically substantial completion and termination of services, which determine whether a claim on a construction project has expired under Washington state law. Greg used the case Dania, Inc. v. Skanska USA Building, Inc. to illustrate the complexities of filing a construction claim. 

If you missed the presentation, you can review the materials or listen to a recording of the webinar here. To find materials from other presentations on construction topics, click here and scroll to the bottom of the page. Greg's next webinar is on April 2, 2015 at 2:00 p.m. and is titled "How to Pick the Right Contractor for Your Construction Project." 

Upcoming Webinar: How Long Can a Construction Claim Last?

Join us for the first of our ongoing, complimentary webinars focusing on pertinent construction topics and updates. This webinar, presented by Foster Pepper attorney Greg Guedel, will provide updated guidance on the statute of limitations for construction contract claims. Greg will also discuss the critical dates and events that determine whether a claim on a construction project has expired under Washington state law.

Greg will also take questions from the audience following the presentation. If you have a question you would like addressed, please email Price Herriage-Wilson at herrp@foster.com by Friday, February 13, 2015.

CLE (attorney) credits pending.
Certificate of completion available for other organizations.

Thursday, February 19, 2015
2:00 – 2:30 p.m.

Greg Guedel, Foster Pepper PLLC

Please RSVP to events@foster.com by Friday, February 13, 2015.


Construction Project Schedule and Delay Claims Seminar, 11/21/2014 in Seattle

On Friday, November 21, 2014 at the Hilton Seattle, Foster Pepper is hosting a program featuring a diverse group of top Construction Law Professionals who practice in and understand the unique issues of construction project schedule and delay claims. This seminar will address topics including CPM concepts, delay analysis, schedule disruption, impact costs, and acceleration claims. The program agenda is as follows:

9:00 Introduction and Overview
W. Gregory Guedel, Program Co-Chair
Foster Pepper PLLC
Daniel G. Quackenbush, PA, Program Co-Chair
Quackenbush & Associates, Inc.

9:10 30 Minutes to CPM Proficiency
Activities & Relationships; Forward Pass; Backward Pass; Float; Critical Path; Impacts and a Quick Simplified Demonstration of How TIAs Are Impacted in a CPM Schedule
Daniel G. Quackenbush, PA
Quackenbush & Associates, Inc.

9:40 Basic Scheduling Concepts for Delay, Acceleration and Mitigation
Project Delay; Internal Delay; Acceleration; Mitigation; Disruption; Impact and Lost Productivity; Frustrated Early Completion; 8 Common Schedule Analysis Techniques - The Procedures and Assumptions Built into Each Technique
Daniel G. Quackenbush, PA
Quackenbush & Associates, Inc.

10:00 Primary Legal Concepts for Delay Claims
Contract Terms; Notice Provisions; The Spearin Doctrine; Excusable and In-Excusable Delays; Compensable and Non-Compensable Delays; No Damage for Delay Clauses; Limited Damages for Delay Clauses; Claim Presentation Provisions; Apportioning Delays; Concurrent Delays; Directed and Constructive Acceleration; Legal Burdens and Standards of Proof
Gregory A.V. Clark
Foster Pepper PLLC

10:45 Break

11:00 Cost Analysis for Schedule and Delay Claims
Analyzing Delay and Acceleration Damages; Calculating Home Office Overhead and Jobsite Overhead Daily Rates; Cost Audits Related to Delay Claims
Megan S. Wells
Director of Global Construction Practice
Navigant Consulting, Inc.

11:45 Midday Break

1:00 Addressing Project Delays – Public Sector Perspective
Project Schedule Planning; Implementing Contract Provisions to Address Delay; Mechanisms for Resolving Delay Disputes in Traditional and Alternative Public Works Contracts
Mary DeVuono Englund
Senior Deputy Prosecuting Attorney
King County Office of the Prosecuting Attorney

1:45 Contracting Strategies for Schedule Issues
Key Terms and Concepts for Construction Contracts to Prepare for, Account for, and Allocate the Risks of Potential Completion Delays
Karin L. Nyrop, Senior Counsel
UW Division of WA State Attorney General’s Office

2:30 Break

2:45 Interesting Projects and Lessons Learned
Strategies for Managing Project Delays
W. Gregory Guedel, Moderator
Foster Pepper PLLC
Karin L. Nyrop, Senior Counsel
UW Division of WA State Attorney General’s Office
Daniel G. Quackenbush, PA
Quackenbush & Associates, Inc.
Christie True
King County Department of Natural Resources and Parks

4:00 Dispute Resolution and Arbitration of Schedule & Delay Claims
Adjudicating Schedule & Delay Claims – View from the Decision Makers; What Actually Works When Trying to Persuade the Decision Maker; Dos and Don’ts in Presenting Claims; What an Arbitrator or DRB is Looking for in Assessing Claims
Christopher J. Soelling
Christopher J. Soelling PLLC

5:00 Adjourn

More information about the program and registration may be accessed HERE.


Insurers Can Be Liable For Damages Even In The Absence Of Coverage

The U.S. District Court for the Western District of Washington recently issued an important decision confirming that insurers can be held liable for damages even in the absence of coverage.  This decision underscores the importance of: (1) making sure insurers make proper coverage determinations; and (2) making sure insurers make coverage determinations in a timely, proper manner.  While the decision addressed coverage under a commercial general liability policy, the insurer’s duty to make proper coverage determinations in a timely, proper manner applies to every type of insurance: commercial general liability, builder’s risk, professional liability, property, title, and homeowners alike.

In City of Bothell v. Berkley, the insurer issued a commercial general liability policy to a general contractor that was hired to build a new driveway for a church located in the City of Bothell.  The City was to be named as an additional insured under that insurance policy. 

In July 2011, a bicycle accident occurred after the contractor failed to slope the driveway properly.  The injured individual made a claim against the City.  The City tendered the claim to the insurer, but the insurer denied coverage by claiming that the insurance policy only covered accidents that occurred during ongoing operations and that the accident occurred after the contractor’s operations were completed.  Two years later, when the injured individual filed suit, the City re-tendered the claim to the insurer, but the insurer failed to respond.  A month later, the City sent a follow-up letter to the insurer, but the insurer again failed to respond.  The City sent a second follow-up letter to the insurer, and the insurer finally responded, but denied coverage for the same reason the insurer initially denied coverage.  The insurer later asserted two additional reasons for denying coverage: (1) because there was no written agreement signed by the contractor requiring that the City be named as an additional insured; and (2) because the injured party was using the driveway for its intended use.

The City filed suit against the insurer for breach of contract and bad faith.  The Court quickly dismissed the insurer’s first two reasons for denying coverage because: (1) the lawsuit did not allege that the accident occurred after the contractor’s operations were completed; and (2) the contractor and the City had a written agreement requiring that the City be named as an additional insured.  However, the Court concluded that the insurer ultimately had no duty to defend the City because: (1) the insurance policy excluded coverage for injuries that occur after the portion of the work giving rise to the injury has been put to its intended use; and (2) the lawsuit alleged that the driveway had been put to its intended use at the time of the accident.

Even though the insurer ultimately asserted a legitimate basis for denying coverage, the insurer’s conduct was not without repercussion.  Notably, the Court held that the insurer acted in bad faith by failing to timely respond to the City’s communications, by misrepresenting requirements under the insurance policy, and by asserting serial justifications for denying coverage without adequate investigation and/or in contravention of Washington insurance law.  Similarly, the Court held that the insurer’s actions (and inactions) violated the Insurance Fair Conduct Act and Consumer Protection Act (which subjected the insurer to treble damages).

Jay Donovan is a member of Foster Pepper who focuses on representing policyholders (including general contractors, retailers, homeowners, transportation providers, and non-profits) in their pursuit of insurance coverage for a variety of claims (including claims for construction defects, title defects, property damage, and intellectual property claims). 


7 Big Mistakes To Avoid In Residential Construction


1. Being Too Casual About Jobsite Safety

Even the most Responsible Developer knows that the odds are high that their company will experience a jobsite injury.  In Washington, it can be an emotional and costly experience.  You, as the general contractor, are ultimately charged with responsibility for jobsite safety.  You need to draft and maintain a comprehensive written safety program, enforce and fully document it, and fine or terminate workers who violate it.  Also, be sure to keep good records and make sure your premiums are paid.        

2. Use of Impractical Building Design and LOLs

Avoid eye-catching but problematic designs like steep roofs, small roof overhangs, high ceilings, stucco exteriors, west or south facing window walls, enclosed decks and porches that will be difficult to build and incredibly expensive to maintain.  In for sale projects, expect that many of your buyers will simply not maintain their homes, or will make an attempt, but will perform it poorly.  Later, when that bad design causes property damage or injury, you will be blamed, not your designer.  Best practice is to work with your designers on trouble shooting designs with the goal of agreeing on practical and enduring designs that require minimal maintenance.  Also, do not execute a contract with a designer who insists on limiting their liability to their fee.  Negotiate a more realistic agreement based on the risks posed for that particular project.         

3. New and To-Good-To-Be-True Building Products

If some new building product touts itself as saving you a ridiculous amount time, labor, or money, be suspicious.  Vet it with your peers and designers first.  Refuse to be some product manufacturer’s test subject.  Products that work in the Southwest and Southeast may not perform it the windy and rainy areas of Western Washington.  You veteran builders will recall the numerous product claims against cladding manufacturers, Simpson, Weyerhaeuser, CertainTeed, Louisiana Pacific, Georgia Pacific, Dryvit, Sto, etc.   

4. Workmanship Defects

Someone very wise said “it takes longer to be better.”  That wise person could have been a really good, reliable subcontractor.  That is the type of sub you should be contracting with.  Your nightmare is the sub that was scheduled to be onsite for three weeks, but completed its work in only ten days, including the weekend when your super was not present.  No one can produce quality work when working too fast.  You also cannot expect the city or county building inspector to do any in-depth level of inspection of that subcontractor’s work, because most jurisdictions do not have the staffing to do that, and they are likely immune from liability.  Here are some examples of defective workmanship we’ve run into recently which demonstrates this point: 

  • Roofing fasteners under driven and nowhere in the vicinity of the manufacturer’s installation instructions, which resulted in significant shingle blow off on 20, 2 story buildings;
  • Sticky flashings reversed lapped at wall penetrations in an entire subdivision;
  • An expensive rain-screen siding system where only 30% of the battens were actually nailed into the wall studs.  One-hundred percent of siding had to be removed, all for lack of due diligence and refusal to use a $10.00 stud finder to snap nailing lines.  This occurred in four different multifamily projects with first-class design oversight of the subcontractor’s work in progress.  

5. Outdated Contracts

Your purchase and sale and lease agreements, subcontracts, and supplier-purchase-order contracts should be well worded in order to mitigate your liability.  Like building designs, construction materials, methods and products, the law regarding residential construction liability also evolves. So every 2-3 years, make sure you gather your existing contracts and get them updated to conform to ever-changing Washington law, which often favors buyers and tenants.      

6. Insurance

A good insurance policy can be your safety net, your ace in the hole, and your get-out-of-jail-free card - if you did not go cheap.  Before you purchase insurance, meet with a good risk manager or broker who knows the residential insurance market.  Put the same emphasis on this purchase as you would for new, high-quality tools, equipment, and vehicles.  Buy the best because you want it to perform when you really need it to.

7. Insurance Companies and Claims

The nice person from the insurance brokerage that placed that policy for you with Lloyds of Hackensack Contractors Indemnity Company may not be there for you when you have a claim.  A claims adjuster will be assigned to your claim, but a primary goal of adjuster is to find a way to deny your claim, in whole or in part, to save her company money.  The adjuster knows way more about her industry and that policy than you do, and if you take her on alone you have little or no hope of prevailing.  Instead, you will have to hire someone that knows the law and is fluent in “Insurance-ese.”  Yes, in a major claim, you face a choice of two evils, but if you actually expect to get a reasonable sum of money from your insurer, you will have to bite the bullet on this.

In sum, the author hopes you will never actually have to experience any of these problematic building and construction issues.  But, like your parents probably told you, hope for the best, but always be prepared for the worst.  If most builders embraced this philosophy, claims would be rare and claims adjusters and lawyers would be underemployed.


Governor's Executive Order Requires Consideration Of Clean Energy, Life-Cycle And Operating Costs In Public Works Contracting

Governor Inslee has issued Executive Order 13-03 requiring any entity in Washington state that receives funds from the state’s capital budget to consider operating costs, life-cycle costs, and the inclusion of clean energy systems in any project funded from the state’s capital budget. The Order takes immediate effect.

New requirements for public works projects include:

• Utilizing life-cycle cost analysis as a primary consideration in the selection of building design;
• Consideration of life-cycle and clean energy experience in selection of architects and engineers;
• Including life-cycle, operating cost, and energy efficiency experience in selecting GC/CM and Design-Build contractors under RCW 39.10.

The purpose of the Order is to achieve more cost-efficient results for building construction and operation, and to increase the use of clean energy systems in public facilities. The Office of Financial Management will issue regulations implementing the Order within 180 days, after which agencies will need to submit life-cycle and project capitalization data to OFM prior to commencing construction on projects funded with capital budget dollars. The Order does not indicate a retroactive applicability to projects that are already in progress.


How to Enforce Liquidated Damages

Construction (thankfully) is once again booming.  So Developers, Contractors and their lawyers are furiously drafting construction contracts including terms that assign liability for claims, like Project delay.  

Every Developer/Owner knows what liquidated damages are:  the fixed damages the Owner will assess the Contractor for each day that substantial completion is delayed;  the dollar amount the Parties agreed to in the AIA A-102 at Article 4; and the sum used to multiply by the number of days to calculate the Owner's total damages for delay.

The Responsible Developer/Owner knows what documentation needs to be in place before that contract number is inserted into the contract.  A separate document that was carefully drafted to support the calculation for the daily liquidated sum. 

Readers, your question may be, why would you try to calculate liquidated damages in advance, if you knew that, you would just assert actual delay damages after the fact, right?

Not exactly.

First, in any litigation the Owner is going to have to demonstrate that the liquidated damages number has a reasonable relationship to actual damages.  So before the contract is executed, the Owner should create a written record of the anticipated cost of the Contractor's delay in completing the Project.  You can probably look at your budget to derive most of these costs (administrative costs, temporary facilities, rentals, additional designer and consultant fees, lost rents, loss of use, extended financing and if a public project, regulatory fines).

Second, estimate these anticipated costs per day, add interest and place it into your project file.

Third, if or when your Contractor disputes the calculation of your liquidated damages, compare your pre-project to your actual damages.  

Owners:  You also need to know this as the failure to substantiate or timely assert liquidated damages can result in waiver of your claim.  To avoid this from happening to you in arbitration or litigation, here are some "must do" steps to avoid waiving your rights to liquidated damages. 

When it first appears the Contractor will not timely achieve substantial completion, place them on written notice with a reservation of rights to impose liquidated damages per the contract.  Make sure you factor in the days for any Owner caused delay (due to change orders or delays for any Owner supplied materials or equipment).  Insist on a date certain by which you will assess liquidated damages and establish the modified date for final completion. 

Finally, demand an updated schedule by a reasonable date.  If that day comes and goes without an updated schedule, further notify the Contractor you are going to hire a scheduling consultant and the cost will be deducted from the Contractor's fee.

The Responsible Developer/Owner takes all of these steps for two important reasons, to avoid claims, and failing that, to prevail.

Happy Contracting!




Washington Supreme Court: Insurer's Communications with Coverage Counsel Now Presumptively Discoverable

The Washington Supreme Court recently issued a landmark decision barring insurance companies from relying on the attorney-client privilege to avoid disclosure of communications with outside counsel related to the investigation, evaluation, negotiation or processing of bad faith insurance claims. Cedell v. Farmers Insurance Company of Washington, 295 F.3d 239 (2013). Because national insurance companies frequently rely on the expertise of local Washington coverage attorneys to adjust construction defect claims only to hide behind the cloak of attorney-client privilege after denying coverage, this decision will benefit all in the construction industry – contractors, subcontractors, and developers alike – by exposing insurance companies’ bad faith practices and subjecting them to liability under Washington’s Insurance Fair Conduct Act. 


*          *          *


The policyholder in this case, Cedell, suffered a loss in 2006. The insurance company, Farmers, delayed its coverage determination and eventually retained coverage counsel to assist with the handling of Cedell’s insurance claim. Eight months after the loss, Farmer’s coverage counsel sent Cedell a “one-time offer of $30,000” to settle Cedell’s insurance claim; an amount significantly less than the $105,000 exposure Farmers initially estimated. Cedell accordingly filed suit alleging, among other things, that Farmers acted in bad faith in handling his insurance claim.


After filing suit, Cedell issued discovery requests to Farmers.  Farmers produced a heavily redacted claims file and refused to answer interrogatories on grounds that the information sought was privileged. Cedell accordingly moved to compel the disclosure of that information and the superior court ordered that Farmers produce the documents it previously withheld or redacted. 


The Court of Appeals reversed the superior court ruling, but the Washington Supreme Court granted review. In siding with Cedell, the Washington Supreme Court established a four-step process by which insurance companies must abide to avoid disclosure of communications which may otherwise be protected by the attorney-client privilege: 


Ø      First, the Washington Supreme Court established that there is a “presumption that there is no attorney-client privilege relevant between the insured and the insurer in the claims adjusting process, and that the attorney-client and work product privileges are generally not relevant.”


Ø      Second, “the insurer may overcome the presumption of discoverability by showing its attorney was not engaged in the quasi-fiduciary tasks of investigating and evaluating or processing the claim, but instead in providing the insurer with counsel as to its own potential liability; for example, whether or not coverage exists under the law.”


Ø      Third, if the insurance company makes such a showing, the insurance company is entitled to an in camera review of the questioned communications and “to the redaction of communications from counsel that reflected the mental impressions of the attorney to the insurance company, unless those mental impressions are directly at issue in the quasi-fiduciary responsibilities to its insured.”


Ø      Finally, if the court finds the attorney-client privilege applies, “then the court should next address any claims the insured may have to pierce the attorney-client privilege,” such as the fraud exception.


The Washington Supreme Court’s four-step process was established to protect two fundamental public policy pillars: (1) that insurance companies have a good faith, quasi-fiduciary duty to their policyholders under Washington law; and (2) that insurance policies, practices, and procedures are highly regulated in Washington and of substantial public interest. Those two fundamental public policy pillars apply to first-party insurance policies and third-party liability insurance policies alike; in fact, those two public policy pillars have even greater import in the context of third-party liability insurance policies because third-party liability insurers have an enhanced duty of good faith under Washington law. Thus, while insurers will likely argue the Cedell decision only applies to bad faith insurance claims involving first-party insurance policies, the four-step process established by the Washington Supreme Court necessarily applies to first-party insurance policies and third-party liability insurance policies alike.


Accordingly, insurance companies defending against bad faith claims in Washington can no longer rely on the attorney-client privilege to avoid disclosure of communications with outside counsel related to the investigation, evaluation, negotiation or processing of a policyholder’s insurance claim. As the Washington Supreme Court aptly noted, “[t]o permit a blanket privilege in insurance bad faith cases because of the participation of lawyers hired or employed by insurers would unreasonably obstruct discovery of meritorious claims and conceal unwarranted practices.” Id. at 245. 


Jay Donovan

Foster Pepper PLLC

Seattle, Washington

Complimentary Seminar/Webinar - Women In the Built Industry

Women in the Built Industry

Thursday, May 30, 2013 | 9:30 a.m. – 2:45 p.m.
Foster Pepper PLLC | 30th Floor Conference Center
1111 Third Avenue | Seattle, Washington

Foster Pepper invites you to participate in this complimentary seminar and webinar on May 30, 2013 as it focuses on success strategies for female professionals in all areas of the construction industry. Women business owners, managers, technical and trades professionals are fundamental to the construction industry, yet confront unique challenges in creating business opportunities and career pathways in both the private and public sectors. This seminar features presentations and discussion with industry leaders, who will share their experiences and guidance for achieving individual and organizational goals within the many construction disciplines, and provides the opportunity for direct networking with the speakers and guests.

Topics and Presenters

Women in the Built Industry – Challenges and Opportunities
Allison Raduziner | Pilchuck Business Consulting

Winning Projects: From the Initial Contact to the Interview
Karen Johnston | Johnston Training Group, Inc.

Current Legal Developments in the Construction Industry
Kelly Lennox | Foster Pepper PLLC

Getting It Done: The Process of Delivering Value through Contemplative Action
Darbi Krumpos | Built Works LLC CMS

Legal Issues in the Workplace – Employment Law, Discrimination and Policy Solutions
Katie Carder McCoy | Foster Pepper PLLC

Pathways For Success – Lessons Learned from Industry Leaders
Liz Evans | Associated General Contractors of America

CLE (Attorney) credits pending | Certificates of Completion available for other organizations

9:30 a.m. Registration
10:00 a.m. - 2:45 p.m. Program/Q&A (Lunch provided for in-person attendees)