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It’s standard fare for contractors and subs to be required to provide certificates of insurance (COI) verifying that the insurance requirements specified in their contracts, e.g., the type of coverage, the coverage policy limits, have been met prior to starting work. According to an April 21, 2011 Administrative Letter issued by Virginia’s State Corporation Commission Bureau of Insurance, in Virginia there’s a “widespread misunderstanding regarding the proper use of [COIs], as well as intentional misuse of such certificates.” In particular, the letter states that “some private and public entitles are requesting insurers and producers to issue certificates of insurance that are inconsistent with the underlying insurance policy or contract.” Examples include “indicating that a person is an additional insured contrary to the terms of the policy” and “that a party will be notified if the underlying policy is cancelled if that party is not entitled to notice under the terms of the policy.” The Administrative Letter can be found here. Legislation passed in March is designed to address these issues.

The new legislation amends the Unfair Trade Practices chapter in Title 38. Insurance of the Code of Virginia and adds a new section on certificates of insurance, § 38.2-518. Specifically, the new section prohibits a person from (1) issuing or delivering a COI that attempts to confer any rights upon a third party beyond what the referenced policy of insurance expressly provides; 2) issuing or delivering a COI (except when the COI is required by a state or federal agency) unless it contains a statement substantially similar to this: “This certificate of insurance is issued as a matter of information only. It confers no rights upon the third party requesting the certificate beyond what the referenced policy of insurance provides. This certificate of insurance does not extend, amend, alter the coverage, terms, exclusions, or conditions afforded by the policy referenced in this certificate of insurance.” It prohibits a person from 3.)knowingly demanding or requiring the issuance of a certificate of insurance from an insurer, producer, or policyholder that contains any false or misleading information concerning the policy; and 4.) knowingly preparing or issuing a COI that contains false or misleading information or that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy. Further, 5.) no COI may represent an insurer’s obligation to give notice of cancellation or nonrenewal to a third party unless the giving of the notice is required by the policy. These provisions apply to all certificate holders, policy holders, insurers, insurance producers, and COI forms issued as statement or summary of insurance coverages on property, operations, or risks located in Virginia. The new legislation also authorizes the State Corporation Commission to regulate issuers and requesters of COIs for the first time. Click here for the text of the bill as passed.

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Established in 1934 by an executive order and then made an independent agency in the Executive Branch by Congress in 1945, the Export-Import Bank is the official export credit agency of the United States whose mission is to assist in financing the export of U.S. goods and services to international markets. In 2011 alone, Ex-Im financed approximately $32 billion in U.S. exports, sustaining 290,000 American jobs. Because of the fees and interest it charges borrowers, Ex-Im is a self-sustaining entity which, since 2005, has returned a profit to the U.S. Treasury.

On May 15, 2012, Congress passed the Export-Import Bank Reauthorization Act of 2012 (H.R. 2072), which extends Ex-Im’s authority for an additional three years and, by 2014, will raise the bank’s credit exposure ceiling from $100 billion to $140 billion. President Obama is expected to sign the Act into law before May 31, 2012, when the bank’s charter is scheduled to expire.

To learn more about this, click here to read the client alert that was written by Jessica R. Berenyi.

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Effective July 1, 2012, all of the existing statutes governing mechanics liens, stop notices and payment bonds in California will be repealed and replaced by updated statutes. The law will also result in new statutes governing stop notices (on both public and private works), payment bonds and related claims. The law relocates and renumbers the Mechanics Lien Law, but many of the provisions are substantively the same. Pillsbury attorneys prepared a handy chart that will assist those of you familiar with the old statutory scheme to retool for the new layout. To learn more about this, click here to read the client alert and chart.

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Maybe this is the ying to the yang of the American Society of Civil Engineers report that Paul Levin blogged about earlier this week. The Urban Land Institute and Ernst & Young just published Infrastructure 2012: Spotlight on Leadership, in which they detail how state and local governments have decided not to wait for funding from the federal government. It has become like Waiting for Godot (or perhaps Waiting for Guffman). In a Presidential election year the federal government is even more gridlocked than normal — if you can believe that.

But that gridlock doesn’t slow down the rate of decay of our infrastructure, so state and local governments are finding ways to get’r done. These range from old fashioned taxes and bonds to Public Private Partnerships. Of course, no one likes taxes and some object to public private partnerships as selling off our infrastructure. But remember, when a private company finances a road, they can’t roll it up and take it home.

If you don’t have time to read the 70 page report, you can see a condensed writeup about it here.

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A Bloomberg Law search reveals that more than 1,000 lawsuits have been brought in the past decade for breaches of settlement agreements. To craft a settlement that has staying power, and to avoid buyer’s remorse, both clients and their counsel should learn how to avoid the most common settlement traps. Two of our litigators, Fred Brodie and Bruce Ericson, just wrote an article about five tips that everyone should keep in mind. The article can be found here.

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The American Society of Civil Engineers (ASCE) just released a report titled “Failure to Act, the Economic Impact of Current Investment Trends in Electricity Infrastructure” and no, the results are not pretty. According to the report, the gap between the amount actually spent on infrastructure across America and the amount that needs to be spent to maintain the system will reach $107 billion by 2020 and $732 billion by 2040. The Southeast and the Western portions of the country are particularly vulnerable to infrastructure underinvestment, making up approximately half of the country’s infrastructure deficit. Furthermore, don’t forget about the 2003 blackout across large sections of the East Coast, including New York City, that showed the grid’s vulnerability. This report comes on the heels of ASCE giving the United States a grade of “D+” in the Energy category in 2009. D+ seems pretty generous.

The ASCE report predicts that disruption and inconsistent service resulting from faulty electricity infrastructure will lead to a reduction in U.S. GDP of almost $500 billion and half a million fewer jobs in America by 2020. The calculations implicit in this report are simple: if we can spend $100 billion to address this problem over the next decade, the country on the whole will be half a trillion dollars better off. It seems so simple.
However, the crunch of budget deficits at both the federal and state levels means that these profitable long-term investments lose out to short-term cost cutting. President Obama, however, has championed doubling overall infrastructure spending that would also help spur job growth and make up for years of underinvestment, but it is not enough.

Public-Private Partnerships will play an important role in bridging this funding gap by leveraging private investment over the long-term. The private sectors sees this $500 billion in potential savings and the United States needs to think creatively to spur further infrastructure development.

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California’s ambitious plan to build a high-speed rail system linking San Francisco and Los Angeles has been getting quite a lot of attention lately. Although the plan has some high-powered supporters in Secretary of Transportation Ray LaHood and California Governor Jerry Brown, the level of enthusiasm in Congress has been mixed, as reported by the San Francisco Chronicle’s Carolyn Lochhead.

Earlier this month the California High Speed Rail Authority approved a revised business plan, slashing its previous $98.5 billion estimate by nearly a third to $68.4 billion, with much of the savings coming from “blended infrastructure.” Translation: rather than construct new track for the entire route, the CHSRA’s revised plan now includes upgrades to existing track at the San Francisco and Los Angeles ends of the route.

Despite these budget reductions, the California Legislative Analyst’s office recommended that the California Legislature not approve Governor Brown’s proposals for $5.9 billion in additional funding for the project, including $2.6 billion in bond funds and $3.3 billion in matching funds from the federal government. The Legislative Analyst’s recommendation was based in part on the fact that only $11.5 billion in funding has currently been committed, and that about $39 billion of an assumed $42 billion to be funded by the federal government has yet to be secured.

Earlier this year, the CHSRA released the shortlist of design-build companies that will be allowed to bid on the first segment in the Central Valley once the RFP is released. The RFP was scheduled to be released this past March, but while the terms and conditions have been approved, the RFP remains unissued. Since the funding is still in a state of flux, this is not altogether surprising.

The design-build companies can perhaps take heart from one segment of the Legislative Analyst’s report, however. Recognizing that the Legislature might want to approve some funding to keep the project moving, the Legislative Analyst suggested that in that case the Legislature could approve funding for the first contract (estimated at $1.5 to $2 billion) and scheduled for award this December.

As someone who has spent many, many hours of my life on Interstate 5 between those two cities, and waiting in one airport when my flights to the other have been delayed, I will continue to follow this project with more than casual interest. If the final product even comes close to the statutorily mandated 2 hour and 40 minute non-stop between Los Angeles and San Francisco, that would beat my average driving time by more than half, and could be a genuine competitor for me with air travel.

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We reported last month that Maryland was on the verge of modernizing its statutory framework for P3s, legislation heavily backed by Governor O’Malley’s administration. The proposed legislation was projected to increase the State’s capital budget by as much as $315 million and create as many as 4,000 jobs.

Continue Reading ›

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A federal court in Louisiana denied a subcontractor’s coverage action against Ace Insurance because the subcontractor did not enroll in the Contractor Controlled Insurance Program. The case is Williams v. Traylor-Massman-Weeks, LLC, et al., EDLA No. 10-2309 and you can look at the pdf of the opinion here: Williams v. Traylor-Massman-Weeks.pdf

The Corps of Engineers entered into a contract with Shaw, which had a Contractor Controlled Insurance Program (known as a “CCIP” which is a type of “wrap up” because its “wraps up” various types of insurance into one place. Shaw entered into a contract with Eustis and at the time, Shaw planned to sponsor a CCIP, but had not created it yet. So, Shaw’s subcontract directed Eustis to enroll — presumably when the CCIP was created.

The trouble was, Eustis didn’t enroll. And wouldn’t you know it, of all the projects where they forgot to enroll in the CCIP, that was the one where they had a lawsuit? Eustis came up with several creative theories for coverage, but couldn’t escape its fundamental problem: It simply didn’t enroll in the CCIP.

Aside from the obvious lesson here — if you are a potential enrollee on a wrap up, make sure you have actually enrolled — there are other less obvious lessons. If you sponsor a CCIP, do two things: (a) try to make sure your subs get their paper work in; and (b) structure your contracts so that if they don’t, the risk to you is minimized.

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On March 30, 2012, New Jersey’s Appellate Division issued a ruling in the case of New Jersey v Perini Corp. which explains how New Jersey’s 10 year statute of repose applies to projects using phased construction.

New Jersey’s statute of repose essentially provides that no action may be brought to recover damages for any deficiency in the “design, planning, surveying, supervision or construction” of a project “more than 10 years after the performance or furnishing of such services and construction.” Earlier cases have already established that the statute of repose runs from the date that one’s services for the project are substantially complete. So, the statute of repose will prohibit a claim against an early trade subcontractor once 10 years has elapsed after that subcontractor completed its work on the project even though the entire project may not yet be substantially complete for more than 10 years. However, the general contractor will remain on the hook until 10 years has elapsed from the date of substantial completion for the entire project.

The Perini case required the court to apply these concepts to phased construction. The state sued the general contractor, designer and pipe supplier for problems that developed with the underground hot water piping at a new state prison. The suit was filed on April 28, 2008. By contract, the prison was constructed in three separate phases – each with its own contractual substantial completion date. By April 27, 1998, 10 years before the state filed suit, the state had issued substantial completion certificates for the entirety of the first two phases of the project and for all but two buildings included in the third phase – a garage and a housing unit located outside the main perimeter. However, no certificate of substantial completion was issued specifically for the hot water system.

The court held that “multiple phases of a construction project that are clearly identified and documented can trigger separate periods of repose, even for the general contractor and other contractors that continue to work on the entire project.” However, the court rejected the notion that there can be “separate trigger dates of repose for components of a project, whether multi-phase or not, that are not clearly identified in the documentary record as distinguishable improvements.” In this case, the court found that the hot water system was not a clearly distinguishable component of the construction and was not substantially complete by April 27, 1998. As such, the state’s claim was not untimely under the statute of repose.