Builder’s Risk Insurance: No Requirement for Policy Nonrenewal Notice to Compel Insurer to Cover Fire Damages Occurring after Policy Expiration |[MI CT APP]|

In 2009, a home owner contracted with a Michigan contractor to design and construct a new home. The contractor, on the owner’s behalf, obtained builder’s risk insurance through an agent who worked with, but not under, an insurance company. The insurance policy was a “one-shot” policy that, as expressed in the agreement, covered the period between 9 Sept., 2009 and 9 Sept., 2010. Regarding renewal, the policy provided the following provision: “If [the Insurer] decide[s] not to renew this policy, [the Insurer] will mail or deliver to the first Named Insured’s last mailing address known to us or our authorized agent written notice of the nonrenewal not less than 30 days before the expiration date.” In June 2010, the insurer mailed a letter with the following language to the insurance agent of the owner and contractor: “If renewal is needed, please issue the renewal endorsement…if you do not renew the policy, the policy will expire on the expiration date.” The owner and contractor testified that they never saw this letter.

On January 28, 2011, over four months after the policy expiration date, a fire destroyed the house. The construction work was 95% complete. Consequently, the agent filed an insurance claim on behalf of the owner and contractor. However, the insurer informed the agent that the policy had expired per the policy term and, therefore, no longer covered the builder’s risk.

This resulted in multiple claims, counterclaims, and cross-claims amongst the owner, contractor, agent, and insurer. Among the claims, the owner sued the insurer for breach of the insurance policy by failing to send written notice of nonrenewal. Specifically, the owner held that under the policy’s renewal provision, the insurer “will mail or deliver…written notice of nonrenewal not less than 30 days before the expiration date.” Against the owner’s claim, the Michigan trial court granted the insurer’s motion for summary judgment dismissing the owner’s lawsuit. The owner appealed.

In BROTHER CONSTRUCTION, L.L.C., v. Rathod, 2016 WL 4585810 (Mich. Ct. App. Sept. 1, 2016), a Michigan appellate court affirmed the trial court’s dismissal of the owner’s claim of the insurer’s breach of insurance policy for failure to provide notice of nonrenewal. Because an insurance policy is an agreement between parties, the court reviewed the policy under the canons of contract law. The court evaluated the plain language of the renewal provision and held that the provision applied when and only when the insurer decided (emphasis added) not to renew the policy. “If [the Insurer] decide[s]…” qualifies the circumstance in which notice for nonrenewal was required. Furthermore, the court cited the defined term limit of the policy (’09-’10) and the insurer’s interest in extending the policy as evidenced in its letter to the agent (“If renewal is need, please issue the renewal endorsement…”). Accordingly, the court ruled that notice of nonrenewal is not required when the insurance policy is going to expire and the insurer is willing to renew the policy. Under such circumstances, such nonrenewal was not based on the insurer’s decision rather an implicit offer rejection by the policyholder.

Best Practices:

1. Builder’s risk insurance is separate from commercial property insurance – Generally, commercial property insurance covers completed and occupied buildings. Builder’s risk insurance covers the risk of damage, such as fire, flood, vandalism, etc., to structures while under construction.
2. Who should purchase it? Contractor or Owner? – This will depend upon the risk allocated within the contract; however, it is more frequently purchased by the owner so that he or she may control the cost, scope, and limits of the builder’s risk insurance and subsequent commercial property insurance.
3. Include ‘Delay in Completion’ contingency clause – If it is uncertain whether or not completion will occur within a policy term, it might behoove a policyholder to create an exception to a policy term in the event that delays occur.
4. Create unqualified ‘Notice of Nonrenewal’ clause – Exclude qualifiers such as “if the insurer decides…” from notice of nonrenewal clauses so that in any instance in which the policy will not be renewed, notice must be given.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Power Siting Construction Certificate: County Forfeits Environmental Impact Argument in Amendment to Wind Farm Construction Certificate |[OH S CT]|

In 2012, a wind farm developer, Buckeye Wind, L.L.C. (“the Company”), applied for a certificate to construct a wind farm as required under Ohio law for the construction of a fifty megawatt or greater electricity generating facility. The application included, among other things, the construction of 53 wind turbines, as well as access roads, construction staging areas, a substation, and a mixture of overhead and underground electrical collection lines. Under its authority, the Power Siting Board approved the application and granted the certificate to commence construction. A year later, the Company decided to construct an additional 52 turbines and, therefore, needed to amend the previous certificate. Specifically, it sought the following six amendments: to move all electrical collection lines underground, to relocate four previously approved access roads, to increase the size of the construction staging area, to relocate a separate staging area, to relocate the substation, and construct a new access road. The county in which the construction was to take place intervened and demanded a hearing under R.C. 4906.07(B). Under the statute, a public hearing is required if a proposed amendment to a power siting certificate constitutes either an increased environmental impact or a substantial change in location. In November 2013, an administrative law judge (“the ALJ”) determined that the first three amendments, such as the relocation of all the electrical lines underground, did not require a hearing under the law. The county did not object.

In January 2014, the Company brought the remaining amendments to a hearing before the ALJ. This time, however, individuals who neighbored the project site requested that the ALJ include first three amendments in the hearing. There, the county again made no objection. After the hearing, the Board approved the amendment. The county then applied for a rehearing. It claimed that amendments such as the relocation of all of the lines beneath ground constituted an increased impact to the environment and thus required a public hearing under R.C. 4906.07(B). The Board denied the rehearing request, and the county appealed.

In IN RE BUCKEYE WIND, L.L.C., 2016-Ohio-5664, 2016 WL 4699153 (Ohio Sept. 7, 2016), the Ohio Supreme Court upheld the Power Siting Board’s denial of the county’s rehearing request because it had forfeited its objections when it failed to make them during both the preliminary and actual hearings. Pursuant to previous power siting cases, the Court maintained that a party forfeits arguments for appeal if it deprives the agency or organization the opportunity to cure the problem. Here, the Court cited the county’s multiple chances to object and provide the Board with a chance to address the possible environmental impact of moving all electrical collection lines below the ground. First, the county failed to object when the ALJ determined that a hearing for the first three amendments was unnecessary. Then, the county remained silent when the neighbors objected to said amendments at the actual hearing. The Court gave the ALJ broad discretion in its determination of hearing necessity to which, the Court emphasized, a party must object in order to preserve its arguments for appellate action.

Best Practices:

1. Power Siting Board certificates required for constructing major utility facilities – Under R.C. 4906.04, no person, to include both owners and contractors, can commence to construct a major utility facility without obtaining a certificate. Under R.C. 4906.01, a major utility facility includes (1) electric generating plants and associated facilities designed for operation of 50 megawatts or more, (2) electric transmission lines, and (3) gas pipelines that are greater than 500 feet in length and seven inches in outer diameter.
2. Certificates required before ‘commencement’ not after – The Ohio General Assembly intended R.C. 4906.04 to apply to construction preparatory work such as ‘land clearing’ and ‘excavation work.’ Therefore, one must acquire the certificate before any groundbreaking work begins.
3. Exception for replacements – Under R.C. 4906.04, the replacement of an existing facility with a like facility does NOT require a certificate from the Power Siting Board.
4. Applying for a certificate – For more information on applications for power siting certificates, see the Power Siting Board state website for e-filing: http://www.opsb.ohio.gov/opsb/?LinkServID=742FAD3B-B57C-6997-DFBEB6BED8B2E8CB
5. Courts have broad discretion in determining the need for a hearing – As evidenced in Buckeye Wind, the Court gave the ALJ broad discretion in determining whether the amendments constituted an increased environmental impact thus requiring a hearing.
6. Object early – As the Ohio Supreme Court concluded, the county’s failure to object left the Court unable to consider the rehearing request. Had the county objected and preserved its arguments, the Court might have held otherwise.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Prevailing Wages: City Divided Up Project to Avoid Prevailing Wage Requirement |[KY CT APP]|

In Henderson, Kentucky, a Labor Cabinet claimed that the city utility commission divided a project into multiple projects in order to avoid paying prevailing wage as required under Kentucky law. The commission owned a coal-fired power plant that required periodic power outages to complete inspection, repairs, reconstruction, and major maintenance tasks to keep the plant’s boilers operating safely and effectively. The commission, however, had contracted with a private company to operate and maintain the plant. It was through the company that the commission had reviewed and approved plant outage schedules and work budgets. From 2005 to 2008, the company awarded bids for work during scheduled outages under one project and included all the contracts under prevailing wage rates.

In Spring 2010, the commission decided to split the two million dollars’ worth of work into nineteen separate projects of which only four were over the $250,000 threshold for coverage under the Kentucky Prevailing Wage Act. These projects included inspecting the cooling tower and performing necessary repairs, replacing fill in three cooling tower cells, washing the precipitator, replacing the precipitator outlet ducts, repairing the refractory in the boiler, replacing various blowers, grinders, and mist eliminators, and performing other related tasks such as building scaffolding and operating cranes. Under Kentucky law, a public authority must include prevailing wage rates in construction projects estimated at greater than $250,000. The law additionally prohibits public authorities from dividing projects into smaller components to avoid paying prevailing wage rates. In response to the commission’s division of the project, the Labor Cabinet notified the city utility commission that it was in violation of the Act. The commission filed a suit seeking a declaration that it had not violated the Act. The lower court ruled that the commission was in violation. The commission appealed.

In CTY. OF HENDERSON UTIL. COMM’N v. DONTA, 2016 WL 3574651 (Kentucky Ct. App. June 24, 2016), the court of appeals affirmed the trial court’s decision holding that the commission’s scheduled outage at the power plant constituted a single integrated public works project subject to prevailing wages. In its determination, the court noted that the many components were unified by a central purpose. Although the outage involved numerous components, the court said that they were all coordinated, planned, and scheduled during the same time period. A condensed time period for multiple construction components, the court noted, can be indicative of their integration as one project. Financially, the court noted that the commission identified all of the necessary repairs under one, specific budget. Finally, but likely most persuasive, the court viewed the commission’s previous treatment of work during past plant outages as one project as evidence of the commission’s intent to divide the project in order to escape prevailing wage requirements. In conclusion, the court held that the condensed time, similar budgeting, and historic treatment were evidence sufficient to show that the outage constituted a single integrated public works project and, thus, required prevailing wage rates.

Best Practices:

1. Current Ohio Prevailing Wage threshold – The threshold for building (not related to roads and bridges) construction is $250,000 for new construction and $75,000 for reconstruction, enlargement, alteration, repair, remodeling, renovation, or painting. – Ohio Department of Commerce, Prevailing Wage Threshold Levels Important Notice, (Jan. 7, 2016), http://www.com.ohio.gov/documents/dico_prevailingwagethresholds.pdf
2. Ohio law on subdividing public improvement project into multiple components – Under O.R.C. 4115.033, no public authority can subdivide a public improvement project into component parts or projects to reduce the cost of the overall project beneath the prevailing wage threshold. This is the same law that the Kentucky court penalized the commission for violating.
3. Exceptions to Ohio subdivision law – public authorities may subdivide projects if they are (1) conceptually separate and (2) unrelated to each other. In the Kentucky case, the court noted that a difference in relation can arise when multiple owners exist (i.e. a private board financing part of a public institutions construction on top of the public authority’s work)
4. General purpose of Prevailing Wage rates – By requiring government contractors or contractors involved in government contracts to pay their employees the prevailing wage in the local area, the prevailing wage laws protect community wage standards and ensure that local contractors and laborers have an opportunity to compete for publicly-funded projects.
5. No Prevailing Wage requirement for maintenance work – In Ohio, maintenance is not considered construction for the purposes of prevailing wage law in Ohio. Some case law has distinguished construction from maintenance, for the purposes of prevailing wage law, as work that is a non-routine, physical improvement.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Construction Company Mixes Balances Between Two Clients on Same Site |[OH CT APP]|

The owner of an industrial building leased part of its space to a tenant with a provision requiring that it construct certain improvements and alterations to the leased space. The lease included, however, a requirement for the owner to provide certain additional improvements to the space. A construction company (the “company”) contracted with both the owner and the tenant to complete various work on the leased space. Upon satisfactory completion, the company, based on the owner’s request, sent an invoice for work completed under both contracts to the owner with an amount of $147,772.20. The owner reduced the amount it believed to owe and sent an invoice to the tenant for the remainder. The tenant did not pay the company. The company brought suit for breach of contract, among other things, against the tenant and attached its invoice for job number 3273. Additionally, it placed a mechanic’s lien on the premises. The company also sued the owner because, as it assured the owner, it was a “formality” that would not cost the owner anything.

Prior to trial, all parties convened to settle the dispute over who owed what to the company. Entering mediation, the company asked the owner to pay $30,000 to leverage the tenant to pay more. The mediation resulted in a tentative agreement for the tenant to pay $110,000 and the owner $35,000. Afterwards, the owner and company agreed that the owner would pay $30,000 instead, and that the mechanic’s lien would be lifted. When the owner’s counsel delivered the $30,000 payment to the company’s counsel, he was handed a letter identifying an additional $54,000 that was due from the owner and required the owner’s counsel to write “confirm” on the letter. Days later, the owner informed the company that there was no agreement to pay an additional $54,000. The parties filed for motions to enforce the mediation settlement and entered into a Mutual Release of All Claims. The Release reiterated the terms of the mediation record, but excluded “any existing obligation of [the owner] to [the company]…as between those two parties.” The owner conceded that it still owed the company money, but there was disagreement over the amount. While the owner argued that its $30,000 payment went toward its balance with the company, the company claimed that that money went toward its tenant’s balance.

The case proceeded to trial where the court found the language within the Release to be ambiguous and permitted the owner to bring extrinsic evidence. The owner testified that it believed that any payment it made was toward its balance since the company assured it that the lawsuit would not cost the owner anything. Furthermore, the owner stated that the company’s request of the owner to agree to pay $30,000 at mediation to leverage the tenant was distinctly separate from the tenant’s obligations. The trial court concluded that the $30,000 was credited toward the owner’s balance with the company. The company appealed.

In SPG, INC. v. FIRST ST. DEV., L.L.C., 2016-Ohio-2824, 2016 WL 2346989 (Ohio Ct. App. Stark County May 2, 2016), the court of appeals affirmed the trial court’s decision. The company contended that the Release unambiguously demonstrated that the $30,000 payment was made in consideration for the dismissal of the case against the tenant, not the owner. To support its assertion, the company brought the appellate court’s attention to the different charges based on different job numbers. The company assigned job number 3273 to the tenant and 3269 to the owner. The appellate court, however, rejected considering the evidence because it was not brought up at trial. Thereafter, it found no definition or explanation of the meaning of “any existing obligation” in the Release and subsequently found it to be ambiguous.

The company also contended that the subsequent meeting between its counsel and the owner’s counsel constituted a post-mediation settlement agreement requiring the owner to pay an additional $54,000. It claimed that by writing “confirmed” on the letter identifying the $54,000 payment, the owner agreed to the new settlement term. In rebuttal, the owner’s counsel claimed that he was pressured into writing something for which he was not authorized. The appellate court found that the trial court did not abuse its discretion by finding that the meeting did not constitute a settlement.

Best Practices:

1. Contractors, beware of requests to send invoices to one owner when multiple clients are individually paying for your services on the same site – It is a safer practice to send invoices to each individual client paying for services on the same site. Depending upon one of them to disburse invoices creates additional points where relationships can breakdown.
2. Keep separate job numbers for separate owners and include all when seeking payment – The court might have been more willing to find the Release to be unambiguous had the company brought evidence of the separate job numbers at trial.
3. Specify included and/or excluded obligations, if any, in release agreements amongst parties – Although it might seem clear to you which obligations exist between others and yourself, your counterpart might not see it the same. Throughout contracts, it is beneficial to specify terms as a general practice. In release agreements, it is imperative that anything you wish to exclude from such a release is specified.
4. Construction lawyers, do not agree to terms for which you are not authorized – It is common knowledge amongst lawyers that one is bound by the authority granted by clients. However, pressures from either side can easily affect your common sense.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Roofer’s Unworkmanlike Service Maybe Could Have Been Avoided |[OH CT APP]|

During a mobile home owner’s sale of her mother’s home to a self-employed roofer, she mentioned to him that she was having leak problems with her roof. The home owner claims that she told the roofer how the $3,500 to $4,000 roofing quotes she had received were too expensive. According to her, the roofer offered to replace the roof and a door for half the price, and that the two entered into an oral contract to replace the roof for $2,000 and a door on the owner’s home for $200. After the roofer finished the roof, the owner paid him $2,200. Although the roofer brought a new door to the home, he did not install it. He then asked the owner to pay $940 that he claimed was due. The owner refused to pay the additional amount and the roofer sued for breach of contract. The case was originally set for a small claims court. The owner filed a counterclaim for breach of contract due to unworkmanlike quality and sought $5,675 to recover the money she paid the roofer and for the cost of replacing the defective roof. Because the damages exceeded $3,000, a transfer of the case to a municipal court was required.

At trial, the owner presented expert evidence that the roof was installed in an unworkmanlike and defective manner. A roofing expert testified to and providing photos of an uneven and improper sealing of shingles, a failure to install an ice guard as required on a low-pitch roof, and a failure to replace all of the rotted roofing. The expert concluded that the defective work would cause the roof to leak. The roofer conceded that he “maybe” should have installed an ice guard, but he argued that it was not necessary to replace all of the shingle because it “seemed satisfactory” based on his understanding of the contract. After hearing the evidence, the trial court ruled in the owner’s favor. The roofer appealed.

In BRETZ v. NAGY, 2016-Ohio-3008, 2016 WL 2869954 (11th Dist. Ohio Ct. App. May 16, 2016), the court of appeals affirmed the trial court’s decision and found no merit in any of the roofer’s assignments of error. The roofer contended that the trial court erred in finding his installation unworkmanlike and in rejecting the balance he claimed the owner owed. The court disagreed with the roofer’s subjective opinion that he performed in a workmanlike manner. Workmanlike manner, as the court explained, is not determined by the individual expectations of the parties but rather the trade customs within the same community and the same type of work. Based on the expert’s testimony, the appellate court found that the trial court’s decision was not against the manifest weight of the evidence. Regarding the roofer’s balance argument, the appellate court found that it was within the trial court’s discretion to determine the contract price based on the persuasiveness of the evidence presented. Specifically, the appellate court highlighted the owner’s testimony that other roofers’ quotes were too high and, knowing her budget, the roofer agreed to work for half the previous quotes.

Best Practices:

1. Memorialize all construction work in writing–regardless of how small the work might seem – Payment is easier to enforce and issues therefrom are easier to resolve when construction agreements are written down.
2. Workmanlike manner is based on customary standards NOT individual expectations – Generally, the manner of your work is compared to the customs within your trade and community. Regardless of what you think, a court will generally compare your work to those similarly situated to determine if it was done in a workmanlike manner.
3. A contractor cannot waive his or her duty to perform in a workmanlike manner – Unlike many duties assigned to parties contractually, a contractor or builder’s duty to perform in a workmanlike manner always exists. This duty cannot be waived in a contract.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

No Intent to Remove Safety Device in Employer Intentional Tort Claim|[OH CT APP]|

The decedent was a laborer working for a construction employer on a highway bridge project on I-70 near Newark, Ohio. To remove a sixty-foot I-beam from the bridge’s frame, the deceased elevated himself up to the bridge with an aerial lift and cut the beam. After he rigged the I-beam with slings connected to a crane, the deceased retracted the aerial lift to permit the crane to carry away the I-beam. Although the employer had clevis shackles at its shop approximately forty-five minutes away, none were used on the crane during this operation. During removal, the crane’s sling cable slid out of its hook, causing one side of the I-beam to fall on the aerial lift. The deceased crashed to the ground and suffered fatal injuries.

After OSHA issued citations against the employer for its failure to stop operations when danger was apparent, the administratrix of the deceased’s estate filed an employer intentional tort complaint claiming that the employer forced the deceased to work in the absence of required safety guard which amounted to a deliberate intent to injure pursuant to R.C. 2745. Specifically, the administratrix claimed that the failure to use a clevis shackle was a deliberate removal of a guard necessary to ensure the deceased’s safety. The Licking County Court of Common Pleas granted the employer’s motion for summary judgment. The administratrix appealed.

In BREITENBACH v. DOUBLE Z CONSTRUCTION CO., LLC., 2016-Ohio-1272, 2016 WL 1188696 (5th Dist. Ct. App. March 24, 2016), the court of appeals affirmed the trial court’s ruling after finding no evidence that the employer deliberately intended to injure the deceased. Under R.C. 2745, a plaintiff can prove specific intent by way of an employer’s substantial certainty that injury will occur or its deliberate removal of an equipment safety guard required for an employee’s safety. Although such removal of a safety guard creates a presumption that the employer intended to harm, the court found that a clevis was not an equipment safety guard and that the employer’s conduct did not constitute deliberate removal for the purposes of the law. The court defined an equipment safety guard as a device that is designed to shield an operator from exposure to or injury by a dangerous aspect of the equipment. Conversely, the court held that a clevis, though safety-related, is not specifically designed to shield crane operators. Regarding the employer’s conduct, the court found no indication of intent to injure. Against the administratrix’s argument that the beam was improperly rigged and nevertheless removed, the court ruled that reckless conduct was insufficient for an employer intentional tort claim. Moreover, the availability of a clevis at the employer’s office overcame the claim of deliberate removal. Lastly, the court denied evidence of intent citing the OSHA violations as proof. OSHA citations alone do not demonstrate an intent to injure for purposes of R.C. 2745.

Best Practices:

1. Ensure equipment is operated with all safety guards required by manufacturer or law – Checklists or reminders placed conspicuously on equipment can increase safety and reduce claims of deliberate removal.
2. Continue to provide safety training – Although the court found that a failure to provide safety training as insufficient for an employer intentional tort claim, it maintained that such conduct may amount to gross negligence or recklessness.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Contractor’s Withholding of Payments Excuses Sub’s Performance |[OH CT APP]|

A general contractor and subcontractor entered into a contract to perform construction work on a public school building. The sub contracted with the contractor to supply materials and services related to the installation of aluminum window systems, as well as window and door frames. During construction, the sub submitted monthly pay applications. Although an eight percent labor cost retainage provision existed within the contract, the contractor withheld thirty-six percent of payments received from the owner that were designated for the sub. Amidst disputes over work billed for and subsequent payments, the sub walked off the job. To complete the project, the contractor hired a replacement.

The sub brought a breach of contract suit against the contractor claiming failure to pay labor and material costs which included $11,095.01 in custom-made “storefront materials” acquired by the sub. Additionally, the sub asserted a prompt-pay claim for failure to make payments. The contractor counterclaimed arguing that the sub breached by walking off and forcing the contractor to find a replacement. At trial, the court determined that the contractor breached the contract by failing to pay in accordance with the contract and that, following the breach, the sub’s performance was excused.

In H&H GLASS, INC. v. EMPIRE BLDG CO., LLC., 2016-Ohio-3029, 2016 WL 2968071 (1st Dist. Ct. App. May 18, 2016), the court of appeals in Hamilton County upheld the breach of contract ruling and affirmed all of the trial court’s findings. Regarding the material nature of the breach, the court held that the contractor’s consistent withholding of a sum not contractually permitted amounted to a breach in an essential purpose of the agreement. That breach released the sub from any further performance obligation which consequently eliminated the contractor’s set-off damages resulting from rehiring. Also, because of the sub’s custom-made material had no general utility, and therefore could not be repurposed, the court affirmed the trial court’s damages ruling.

Concerning the sub’s prompt-pay claim, the court found the claim inapplicable due to the nature of the dispute. According to R.C.4113.61(A), a contractor shall pay a sub an amount equal to the percentage of the sub’s completion within ten calendar days after receipt of payment from an owner or construction manager. Failure to pay shall result in a prejudgment interest at an annual rate of eighteen percent. However, a prompt-pay prejudgment interest is only warranted when the general withholds payments in bad faith for performance of labor or furnishing of materials. The court held that the contractor withheld money because of contested disputes rather than bad faith and therefore rejected the claim.

Best Practices:

1. Pay applications should be consistent with contract-based retainage – Absent clear and obvious errors in billed work, an owner or general contractor should honor pay applications from sub-contractors in accordance with contract retainage provisions.
2. Consistent conduct not supported by contract can result in a material breach – Wrongfully and consistently withholding a contractor’s payment for labor costs can be characterized as a breach going to the essence of the parties’ agreement.
3. Seek comparable subs to replace walk-offs – But for the contractor’s material breach, the court in H&H would have likely been awarded it set-off damages. However, if regardless of a contractor’s certainty of fault, it should mitigate losses by hiring comparably priced subs to the best of its ability.
4. Be cautious of ten-day prompt pay requirement – Although the Prompt-Pay Act does not apply to disputes over whether a sub had completed work billed for, disputes over materials, or withholding of monies to cover costs to hire another sub, it applies to payments withheld in bad faith. Additionally, the Act removes the contractor’s right to retainage after fifty percent of the project is completed. This can complicate sub-contracts for work only conducted during the front- and back-end of a project (i.e. excavation or flooring subcontracts).
5. Purchase custom-made material from excused sub – If a sub has acquired materials unique to the project and walks off, the contractor should try to purchase those materials to mitigate losses.

– Christian H. Robertson II

All materials have been prepared for general information purposes only to permit you to learn more about construction law. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Welcome to the Ohio Construction Law blog! I am excited to break ground with this first post and begin our conversation on the ever-evolving field of construction law. While advancements in technology have simplified many trades and processes in construction, these same advancements bring new challenges to builders and legal practitioners alike. The purpose of this blog is to inform players in the construction industry, such as builders, contractors, engineers, architects, tradesmen, and construction lawyers, of the new developments in construction law. Through summary and analysis, this blog seeks to dig deep into construction cases around the country. Hopefully, it will keep you and your practice up-to-date on the legal developments in construction.

Having grown up personally and professionally in the construction industry, I have had extensive exposure to the field. My interest in construction comes from my father, Christian H. Robertson Sr., founder and owner of Robertson Construction Services, Inc. located in Central Ohio. From pouring footers to laying shingles, my father taught me how to take a project from start to finish and deliver a quality product.

Now as a law student, I have melded my construction interests with my passion for the law. Specifically, I have taken an interest in reading cases deciding matters in or related to construction. With this newfound interest, I have decided to create this blog. Personally, my goal is to learn more about the field through research and writing. However, I also hope that I can provide practitioners with scholarly snapshots of the developments in construction law. And like I said, this is a conversation. I encourage readers to share their thoughts and personal experiences to enhance the discussion. So let’s start the conversation! – Christian H. Robertson II

For more about me, check me out on LinkedIn: Christian H. Robertson II | LinkedIn