Gravel2Gavel Construction & Real Estate Law Blog

BREAKING NEWS AUG. 15: SF-Oakland Bay Bridge to Open As Originally Planned, Sep. 3.

On July 8, the Toll Bridge Program Oversight Committee (“TBPOC”) announced that the opening of the new East Span of the San Francisco-Oakland Bay Bridge has been postponed. In mid-July 2005, Governor Schwarzenegger and the State Legislature, through Assembly Bill 144, created the TBPOC to provide project oversight and project control for the Bay Area’s Toll Bridge Seismic Retrofit Program, which includes the San Francisco-Oakland Bay Bridge East Span Replacement Project. The TBPOC’s project oversight and control activities include: (a) reviews of contract bid documents and specifications, ongoing capital costs, significant change orders and claims; (b) implementation of a risk management program; and (c) resolution of project issues.

As part of the TBPOC’s charge, it is investigating and resolving the challenge of the fractured A354 grade BD high-strength steel rods/bolts installed on the Self-Anchored Suspension (SAS) Bridge of the new East Span. 32 of the 96 A354 grade BD high-strength anchor rods on shear keys S1 and S2 on Pier E2 failed in March 2013 after being tightened to their specified tension levels. In response, TBPOC launched an investigation into why these rods failed and whether the 2,210 other rods on the SAS Bridge also are at risk. The TBPOC directed its staff to investigate and report on what led to the failure of the rods, what course of action is needed to address all the rod failures, and what implications the analysis, findings and recommendations from the investigation have on the TBPOC’s determination of the timing for opening the new East Span to traffic.

On the same day that it announced the delay in completion of the bridge, TBPOC released its 102-page Report on the A354 Grade BD High-Strength Steel Rods on the New East Span of the San Francisco-Oakland Bay Bridge With Findings and Decisions. The Report’s Summary of the TBPOC Investigation concludes that “Hydrogen embrittlement is the root cause for the failure of the A354 grade BD high-strength steel anchor rods at shear keys S1 and S2 (Item #1 in Table ES-1). As used in this report, hydrogen embrittlement is considered a short-term phenomenon that occurs in metals, including high-strength steel, when three conditions apply: a susceptible material, presence of hydrogen and high tensile stress (as shown in Figure ES-4). To trace what led to the rod failures, this summary calls out each of the three hydrogen embrittlement conditions, and then tracks the events and decisions that either caused or contributed to that condition. In their totality, these events and decisions led to the failure of the 2008 A354 grade BD rods in March 2013.” The Report discusses what retrofit strategy should be used to replace the lost clamping force of the rods, including that, after review of three retrofit design options, the “TBPOC unanimously approved selection of the steel saddle retrofit option after finding that it would meet all design requirements and objectives of the project. As shown in Figure ES-5, it also applies a direct preload to the lower housing via the radial forces that are developed from the main vertical post-tensioning force being applied as intended in the original design.”

It also reports that “[a]s for the remaining 2,018 A354 grade BD rods, none have failed, and all have been under tension from 91 to 1,429 days as of July 1, 2013. Because hydrogen embrittlement is a time-dependent phenomenon, also dependent on the level of sustained tension, these rods have low risk of hydrogen embrittlement. In contrast, approximately 30 percent of the anchor rods in shear keys S1 and S2 failed just 3 to 10 days after tensioning to their design loads, and more might have failed if that tension level had been maintained.” However, “[t]he longer-term concern is whether the remaining A354 grade BD rods are susceptible to stress corrosion cracking and, if so, when cracking may occur. Like hydrogen embrittlement, there are three factors that contribute to stress corrosion cracking — susceptible material, high tensile stress and hydrogen-related corrosion. Without any one of these three conditions, stress corrosion cracking will not occur.” The Report confirms that “[f]urther, stress corrosion testing is underway as part of Tests IV and V that will provide important data for further analysis and remediation of the rods.” To read the Report, click here.

There was a public briefing at a special meeting of the Bay Area Toll Authority on July 10 at 10 a.m. at the Metropolitan Transportation Commission offices at 101 Eighth Street in Oakland, Calif. Discussions took place and questions from the public, elected officials and the media were answered by members of the TBPOC and by members of the Seismic Safety Peer Review Panel. To hear the online audio-cast, click here.

Between the Brazilian national soccer team’s amazing victory over Spain in the final of the Confederations Cup last month in Rio de Janeiro and the massive protests that took place outside of the stadiums throughout the tournament, the country of Brazil has been making a lot of headlines recently. Here are a few that relate to construction and development as Brazil moves towards hosting the 2014 World Cup and the 2016 Summer Olympics:
• Bloomberg examines the $13 billion being spent by the government on the 12 World Cup stadiums and the possibility that these stadiums will become white elephants.
• Meanwhile, TriplePundit looks at the ways these stadiums will be more sustainable than their predecessors, including using a photocatalytic membrane on a roof to offset pollution, building a solar plant on site, and locating new stadiums within walking distance of hotels and housing.
• Romário, who led the Brazilian team to a World Cup victory in 1994 and is currently a Brazilian congressman, explains how this spending–for what will be the most expensive World Cup ever–has incited over a million Brazilians to protest.
• And finally, The Guardian details the rich and turbulent history of the most famous stadium in Brazil, the Maracanã, which hosted the Confederations Cup final last weekend and will host the World Cup final next year.

UPDATE: New 2014 Goals For Recycling Old Mercury Thermostats

On May 15, 2013, the California Department of Toxic Substances Control (CDTSC) adopted new regulations as the final part of the Mercury Thermostat Collection Act of 2008. The new regulations apply to (a) manufacturers, as described in tit. 22, C.C.R. § 66274.3; (b) HVAC contractors, as described in tit. 22, C.C.R. § 66274.3; and (c) demolition contractors, as described in tit. 22, C.C.R. § 66274.3.

The CDTSC estimates that 10 million mercury thermostats are still in California homes and businesses. Since January 1, 2006, California law has banned the sale of mercury-added thermostats for most uses.

Among other things, the regulations establish annual performance goals for the collection of mercury-containing thermostats and a methodology for calculating the number of such thermostats that become waste annually. They also require manufacturers to collect and recycle more than 32,500 mercury thermostats in the second half of 2013, or 30 percent of the estimated number of the devices that become waste. Recycling goals will increase for the next five years. They also establish identification requirements for persons delivering thermostats to collection centers and annual reporting requirements for thermostat manufacturers. For more information, click here.

Thermostat Recycling Corporation, a nonprofit, industry-funded entity, operates roughly 350 collection sites in California that accept and recycle these thermostats. To find a location, click here.

After more than a decade in the “no” column, West Virginia can now be counted among – as its highest court reports — the majority of states that recognize that defective construction causing bodily injury or property damage is an “occurrence” under standard CGL policies. Cherrington v. Erie Ins. Property & Cas. Co, Case No. 12-0036, available here: http://www.courtswv.gov/supreme-court/docs/spring2013/12-0036.pdf In this June 2013 decision, the court expressly overruled its prior pronouncements on this issue in Erie Ins. Property & Cas. Co v. Pioneer Home Improvement, Inc., 206 W.Va 506 (1999); Corder v. William W. Smith Excavating Co., 210 W. Va. 110 (2001); Webster County Solid Waste Auth’y v. Brackenrich & Assoc’s, Inc., 217 W. Va. 304 (2005); as well as McGann v. Hobbs Lumber Co., 150 W. Va. 364 (1965) and their progeny.

Cherrington is a case involving coverage for defective construction of a home under the general contractor’s CGL policy and under its principal’s homeowner’s and umbrella policies, all issued by Erie Insurance Property & Cas. Company. In the underlying complaint against Pinnacle Group, the general contractor, Cherrington, the homeowner sued for negligent construction and breach of fiduciary duty and sought to recover for emotional distress as well as for damages resulting from defects in her home discovered after completion – defects resulting from the work of Pinnacle’s subcontractors. The trial court had granted summary judgment in favor of third party defendant insurer, Erie, concluding, inter alia, that allegations of emotional distress without physical manifestation was not “bodily injury” under the policies, that no “occurrence” had caused the damages alleged, and that nevertheless certain exclusions, specifically the “your work” (Exclusion L), “damage to impaired property or property not physically injured” (Exclusion M) and “sistership” (Exclusion N) exclusions, all barred covered. Additionally, the trial court determined that the coverage was barred under the homeowner/umbrella policies issued to Pinnacle’s principal under a “business pursuits” exclusion. On appeal, the Supreme Court of Appeals affirmed the trial court as to bodily injury and the “business pursuits” exclusion, but reversed as to whether defective construction constitutes an occurrence and the applicability of the cited CGL exclusions.

On the first issue of whether defective construction constitutes an occurrence under standard CGL policies, the court reported that “many cases have emerged since this Court’s 2001 definitive holding in Corder” in which it previously held that defective construction does not constitute an occurrence. (The opinion collects cases in the minority and the majority, and also cites states where legislative amendments have been made to the state’s insurance statutes regarding the definition of “occurrence.”) As the court explained, “With the passage of time comes the opportunity to reflect upon the continued validity of this Court’s reasoning in the face of judicial trends that call into question a former opinion’s current soundness.” Evoking Justice Frankfurter, the court added “[w]isdom too often never comes, and so one ought not to reject it merely because it comes late.”

In addition to recognizing ” a definite trend in the law”, the court grounded its ruling that defective construction can constitute an “occurrence” — defined in the CGL policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions” — on the meaning of “accident”, which itself is not defined in the policy. As the court explained, to be an “accident” the circumstances giving rise to the claimed damage or injuries must not have been deliberate, intentional, expected, desired, or foreseen by the insured. According to the court, common sense cuts against finding defective workmanship to be that: “had Pinnacle expected or foreseen the allegedly shoddy workmanship its subcontractors were destined to perform, it would not have hired them in the first place”; “[n]or can it be said that Pinnacle deliberately intended or even desired the deleterious consequences” as “[t]o find otherwise would suggest that [the contractor] deliberately sabotaged the very same construction project it worked so diligently to obtain.”

The court reported that its conclusion was further supported by the express language of Exclusion L, which by exception, provides coverage for work performed by subcontractors. Finally, said the court, its “prior proscriptions limiting the scope of the coverage afforded by CGL policies to exclude defective workmanship” were “so broad” “as to be unworkable in their practical application.”

The court went on to reverse the trial court on its ruling that no property damage had been alleged, citing “an extensive list of damaged items in her home resulting from the allegedly defective construction and completion work.” It also reversed the trial court on the applicability of Exclusion L, M and N to bar coverage, concluding first that Exclusion L, by its express terms, does not operate to preclude coverage for work performed by Pinnacle’s subcontractors. As to Exclusion M, the court would not read it to directly conflict with Exclusion L. And, Exclusion N — applicable to the products recalled or withdrawn from the market — did not apply on the facts in this case.

The court affirmed the trial court’s ruling of no coverage under the homeowners and umbrella policies of Pinnacle’s principal. Those policies both included exclusions for bodily injury, property damage or personal injury “arising out of business pursuits of anyone we protect.” Although it was unclear what role Mr. Mamone played in the construction, the court found that he was both the president and agent of Pinnacle, and that his actions fell squarely within the business pursuit exclusions of both policies issued to him, and did not fall under any exceptions.