California Court of Appeal Holds That the Right to Repair Act Prohibits Class Actions Against Manufacturers of Products Completely Manufactured Offsite
February 06, 2019 —
Gus Sara - The Subrogation StrategistIn Kohler Co. v. Superior Court, 29 Cal. App. 5th 55 (2018), the Second District of the Court of Appeal of California considered whether the lower court properly allowed homeowners to bring class action claims under the Right to Repair Act (the Act) against a manufacturer of a plumbing fixture for alleged defects in the product. After an extensive analysis of the language of the Act, the court found that class action claims under the Act are not allowed if the product was completely manufactured offsite. Since the subject fixture was completely manufactured offsite, the Court of Appeal reversed the lower court’s decision. The court’s holding establishes that rights and remedies set forth in the Right to Repair Act are not available for class action claims alleging defects in products completely manufactured offsite.
In Kohler Co., homeowners instituted a class action against Kohler, the manufacturer of water pressure and temperature regulating valves that were installed into their homes during original construction. The class action was filed on behalf of all owners of residential dwellings in California in which these Kohler valves were installed as part of original construction. The complaint asserted, among other claims, a cause of action under the Act. Kohler filed a motion for anti-class certification on the ground that causes of actions under the Act cannot be certified as a class action. The trial court denied the motion with respect to the Act but certified its ruling for appellate review. Kohler filed a petition with the Court of Appeals, arguing that certain sections of the Act explicitly exclude class action claims under the Act.
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Gus Sara, White and Williams LLPMr. Sara may be contacted at
sarag@whiteandwilliams.com
California Commission Recommends Switching To Fault-Based Wildfire Liability Standard for Public Utilities
June 25, 2019 —
Lawrence J. Bracken II, Sergio F. Oehninger, Paul T. Moura & Alexander D. Russo - Hunton Insurance Recovery BlogA state-appointed panel advised last week that California should change the standard for determining whether utilities are liable for wildfires. Under the current system, California’s Public Utilities Code § 2106 provides a private right of action by any person or entity that has suffered loss, damages, or injury caused by prohibited or unlawful acts of a public utility. Relying on this statute, property owners have asserted wildfire-related claims directly against allegedly culpable electric utility companies. Public utilities in California also face inverse condemnation claims arising out of wildfires. Under inverse condemnation, where private property is taken for public use and later damaged by the state or its agency, the state or agency is strictly liable to the property owner.
In an effort to reduce the financial impact on public utilities resulting from wildfires—as exemplified by Pacific Gas and Electric Co.’s recent filing for Chapter 11 protection in January—the California Commission on Catastrophic Wildfire Cost and Recovery recommended changing the current laws to reflect a fault-based standard. According to the panel, this change would reduce the risk of bankruptcy and decrease the cost of capital. The commission also recommended establishing a wildfire victims’ fund and setting up an electric utility wildfire board to handle the prevention and mitigation of utility-related wildfires.
Reprinted courtesy of Hunton Andrews Kurth attorneys
Lawrence J. Bracken II,
Sergio F. Oehninger,
Paul T. Moura and
Alexander D. Russo
Mr. Bracken may be contacted at lbracken@HuntonAK.com
Mr. Oehninger may be contacted at soehninger@HuntonAK.com
Mr. Paul may be contacted at pmoura@HuntonAK.com
Mr. Alexander may be contacted at arusso@HuntonAK.com
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Supreme Court of Wisconsin Applies Pro Rata Allocation Based on Policy Limits to Co-Insurance Dispute
February 18, 2019 —
Brian Margolies - TLSS Insurance Law BlogIn its recent decision in Steadfast Insurance Company v. Greenwich Insurance Company, 2019 WL 323702 (Wis. Jan. 25, 2019), the Supreme Court of Wisconsin addressed the issue of contribution rights as among co-insurers.
Steadfast and Greenwich issued pollution liability policies to different entities that performed sewer-related services for the Milwaukee Metropolitan Sewerage District (MMSD) at different times. MMSD sought coverage under both policies in connection with underlying claims involving pollution-related loss. Both insurers agreed that MMSD qualified as an additional insured under their respective policies, but Greenwich took the position that its coverage was excess over the coverage afforded under the Steadfast policy, at least for defense purposes, and that as such, it had no defense obligation.
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Brian Margolies, Traub LiebermanMr. Margolies may be contacted at
bmargolies@tlsslaw.com
What is a Subordination Agreement?
May 06, 2019 —
Bremer Whyte Brown & O'Meara LLPPut simply, a subordination agreement is a legal agreement which establishes one debt as ranking behind another debt in the priority for collecting repayment from a debtor. It is an arrangement that alters the lien position. Without a subordination clause, loans take chronological priority which means that a deed of trust recorded first will be considered senior to all deeds of trusts recorded after. As such, the oldest loan becomes the primary loan, with first call on any proceeds from a sale of a property. However, a subordination agreement acknowledges that one party’s claim or interest is inferior to that of another party in the event that the borrowing entity liquidates its assets. Further, shareholders are subordinate to all creditors.
The junior debt is referred to as a “subordinated debt”, and the debt which has a higher claim to any assets is the senior debt. Often, the borrower does not have enough funds to pay all debts, and lower priority debts may receive little or no repayment. For example, if a business has $400,000 in senior debt, $100,000 in subordinated debt, and a total asset value of $420,000, upon liquidation of the company, only the senior debtholder will be paid in full. The remaining $20,000 will be distributed among the subordinated debtholders. Subordinated debts are, therefore, riskier and lenders will require a higher interest rate as compensation.
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Bremer Whyte Brown & O'Meara LLP
No Coverage for Sink Hole Loss
June 18, 2019 —
Tred R. Eyerly - Insurance Law HawaiiThe federal district court found there was no coverage under the commercial property policy for loss suffered by the insured condominium association due to a sink hole. Bahama Bay II Condo. Ass'n. v. Untied Nat'l Ins. Co., 2019 U.S. Dist. LEXIS 67487 (M.D. Fla. April 11, 2019).
The plaintiff condominium association had thirteen buildings inside their complex. On December 9, 2016, a sinkhole appeared near Building 43. The building was vacated and declared unsafe. Plaintiff's board excused Building 43 owners from paying association dues.
Plaintiff submitted a claim to the insurer for benefits under the policy. The insurer inspected and accepted coverage for Building 43 under the policy's Catastrophic Ground Cover Collapse (CGCC) provision and issued a check for $290,000 for immediate repairs. The insurer denied coverage for Buildings 42, 44, and 45; repairs to the foundation of all buildings, the retaining wall and outdoor fences; land, landscaping, and patios, uncollected association dues, and condominium unit owner property.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Court Finds That SIR Requirements are Not Incorporated into High Level Excess Policies and That Excess Insurers’ Payment of Defense Costs is Not Conditioned on Actual Liability
April 22, 2019 —
Christopher Kendrick & Valerie A. Moore – Haight Brown & Bonesteel LLPIn Deere & Co. v. Allstate Ins. Co. (No. A145170, filed 2/25/19), a California appeals court held that the insured was not required to pay additional self-insured retentions (SIRs) in order to trigger higher level excess coverage because the retained limits applicable to the first layer of coverage did not also apply to the higher-layer excess policies.
In Deere, the insured was sued for injuries from alleged exposure to asbestos-containing assemblies used in Deere machines. In a declaratory relief action against its umbrella and excess insurers, the case was tried on: (1) whether the higher-layer excess policies were triggered once the first-layer excess policy limits, which were subject to an SIR paid by Deere, had been exhausted; and (2) whether the insurers’ indemnity obligation extended to Deere’s defense costs incurred in asbestos claims that had been dismissed. The trial court found in favor of the insurers, concluding that the retained limits in the first layer of coverage also applied to the higher-layer excess, which was not triggered until Deere paid additional SIRs. The court also concluded that the insurers were not obligated to pay defense costs when underlying cases were dismissed without payment to a claimant either by judgment or settlement.
Mr. Kendrick may be contacted at ckendrick@hbblaw.com
Ms. Moore may be contacted at vmoore@hbblaw.com
Reprinted courtesy of
Christopher Kendrick, Haight Brown & Bonesteel LLP and
Valerie A. Moore, Haight Brown & Bonesteel LLP Read the court decisionRead the full story...Reprinted courtesy of
Do You Really Want Mandatory Arbitration in Your Construction Contract?
June 25, 2019 —
Christopher G. Hill - Construction Law MusingsIf you are in construction, you have likley run across (or even drafted) a dispute resolution provision into your construction contract. If you’ve been building for any length of time, you’ve read dispute resolution provisions containing mandatory arbitration clauses. These clauses can be found in the AIA documents and in many of the contracts that I review for my clients in my role as construction lawyer and counselor. More often than not, these arbitration clauses require arbitration (read “private court”) and refer to one of several sets of rules, though most likely the American Arbitration Association (“AAA”) Construction Industry rules. In Virginia, as in most of the United States, these clauses are read liberally and enforced by courts except in limited cases such as waiver.
The main justification for requiring arbitration over litigation is to avoid the fees and expense of the litigation process. In the right circumstances, arbitration does just that. With a carefully drafted arbitration clauses and with the right case that requires expertise in construction that a judge does not have (they have to liten to all manner of disputes so are necessarily generalists), arbitration can and should be a streamlined and less expensive version of litigation.
However, in my time as a construction attorney, I have more often run into situations where the arbitration process is at least equally expensive and frankly not much more streamlined. The additional administrative burden coupled with the possibility of paying for at least half of the hourly charges of one to three arbitrators is often not worth the additional expertise of those arbitrators. Many construction claims simply come down to non-payment and whether the work was performed properly. In my opinion, the fine judges in the Commonwealth of Virginia are more than capable of hearing this evidence and making a ruling.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
SCOTUS Opens Up Federal Courts to Land Owners
July 15, 2019 —
Wally Zimolong - Supplemental ConditionsFor nearly 36 years, the United States Supreme Court’s decision in Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985) severely frustrated, if not all but foreclosed, a property owner’s right to bring a claim in federal court based on a regulatory taking. Under the Fifth Amendment, a property owner whose land has been “taken” by the government is entitled to just compensation. There are two types of takings direct or “inverse” or regulatory takings. A direct taking is where the government declares that it needs your land for public use and offers to pay you compensation. You might disagree with the amount offered – and that often is the case. But, a mechanism exists whereby a neutral third party – a condemnation board – will arrive at the compensation that is owed. On the other hand, an inverse condemnation or regulatory taking occurs when the government takes some action that restricts the use of the land in such a way as to severely impact it beneficial economic use. For example, if you own a strip of commercial property and intend to develop it and then the municipality comes along and suddenly changes the zoning classification of the parcel such that you can no longer develop it in a beneficial way, then you might have a regulatory takings case.
Under the Court’s Williamson County decision, property owners falling within the later category were required to exhaust state remedies before proceeding to federal court under a claim that their Fifth Amendment rights were violated. The problem with this is that, as the Supreme Court explained, it creates a Catch-22. If property owners exhaust their state remedies and the state remedies result in an unfavorable outcome, the federal court is powerless to overturn that decision under the doctrines of res judicata and the full faith and credit clause of the Constitution.
Well, yesterday, the Court overturned Williamson County, in Knick v. Township of Scott, 588 U.S. _____ (2019). There the Court held unequivocally a “property owner has suffered a violation of his Fifth Amendment rights when the government takes his property without just compensation, and therefore may bring his claim in federal court under Section 1983 at that time.”
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
