Attorneys Aileen Leipprandt and Suzanne Sutherland Present “The Art & Law of Living Neighborly,” to NAWIC

Attorneys Aileen Leipprandt and Suzanne Sutherland will present “The Art & Law of Living Neighborly,” to the National Association of Women in Construction, in Grand Rapids, Michigan on February 14, 2018.

Aileen Leipprandt practices in the areas of commercial and real estate litigation and construction law. Her clients include owners, developers, design professionals, contractors, suppliers, manufacturers, and insurers/sureties. Aileen assists clients with transactional and litigation matters, including negotiations, contract review, preparation,  and pre-suit claims evaluation and facilitation.  For more than 20 years, Aileen has been a lecturer and author on many topics involving contract and construction law including Construction Contract Clauses, Sustainable (LEED) Construction, Building Information Modeling (BIM), and MIOSHA Compliance.

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Contractor Stung By Liquidated Damages

The recent case of Abhe & Svboda Inc. v MDOT (Court of Appeals, August 2017), underscores the difficulty in challenging Liquidated Damages, particularly where a contractor does not comply with delay claim provisions.

This case arose from the late completion by Abhe & Svboda, Inc (ASI) of a contract with the Michigan Department of Transportation (MDOT) to clean and paint part of the Mackinac Bridge. The contract specified Liquidated Damages (LDs) of $3,000 a day for each day of late completion. The contract also gave ASI the right to seek a time extension for bad weather, provided that ASI asserted the request within the time period required by the contract. ASI did not timely complete the project and the State assessed LDs of about $1.9 million for being 644 days late.

ASI sued the State challenging the LDs assessment for a number of reasons. For instance, ASI argued that the LDs should not apply to 362 days of the planned winter shutdown during which it was impossible for MDOT to suffer any losses and that the LD clause was void for failing to be a good-faith effort to estimate losses. ASI also argued that MDOT’s dilatory behavior in approving ASI’s scaffolding plan caused 56 days of delay. ASI argued that 459 days of work were caused by environmental circumstances beyond its control. The trial court rejected all of ASI’s arguments and granted summary disposition to the State. ASI appealed.

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Engineer Loses Claim for Coverage as an Additional Insured

Being an additional insured on someone else’s insurance policy does not guaranty protection. Such was the lesson learned by an engineering firm in Orchard Hiltz & McCliment Inc. v Phoenix Ins. Co. and Federated Mutual Ins. Co., (U.S. 6th Circuit Court of Appeals, Jan. 2017).

In Orchard Hiltz, the Village of Dexter hired the design firm, Orchard Hiltz & McCliment (OHM), to oversee upgrades to Dexter’s wastewater treatment plan. While contractors were removing a lid on a digester tank, sparks from a torch ignited methane gas causing an explosion. One worker was killed and another was injured. The injured worker and the family of the deceased worker sued OHM in state court, claiming that OHM breached the standard of care by failing to ensure that the contractors followed the plans and specifications and by failing to ensure that the contractors implemented safety measures. OHM’s professional liability insurance carrier, XL Specialty Ins., provided a defense to OHM in that state court case.

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AIA 2017 – What’s New About The Old?

In April 2017, the American Institute of Architects (AIA) released the 2017 editions of its flagship agreements, including the Owner-Contractor Agreement (A101), Owner-Contractor Agreement, Cost Plus a GMP (A-102), the General Conditions of Contract (A201) and the Contractor-Subcontractor Agreement (A401).  Significantly, AIA also created a new comprehensive insurance and bonds Exhibit (Exhibit A) to be used with these agreements.

Some interesting changes to note:

Liquidated Damages. Liquidated Damages are now expressly identified with a new provision.  In prior revisions, LDs were merely suggested in a “prompt” as an insertion. Furthermore, the Owner is not required to file a Claim to impose liquidated damages.  Prior AIA versions were silent on whether Owner was required to file a formal claim; courts addressing the question reached differing results.
Captive Insurance Costs.  Contractor must obtain Owner’s prior approval of Contractor’s costs for insurance provided through a captive insurer owned or controlled by Contractor.
Allocation of GMP.  Adopting a revision commonly made by the parties, if a GMP is given, allocation of the GMP does not constitute a separate GMP for each individual line item on the Schedule of Values.

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