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  • And over in Mexico, while this building may not be designed to grow, the modules on the facade “are coated with a special pigment that, when hit by ambient ultraviolet light, reacts with urban air pollutants, breaking them down into less noxious compounds like carbon dioxide and water”…in other words, it eats smog.

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In a previous post, we reported that the American Society of Civil Engineers (“ASCE”) released its 2013 Report Card for America’s Infrastructure. America’s cumulative GPA for infrastructure was a D+. One of the categories in this report focused on ports, which received a C grade. Now a new report goes into more depth on one particular part of our infrastructure: Ports. The question, it seems, is: CapEx or Capsize. More, after the jump.

ASCE reported that, according to U.S. Army Corps of Engineers estimates, more than 95% of the volume of overseas trade imported or exported by the United States moves through our ports. The report stressed the importance of improving our nation’s ports in order for the nation to maintain its competitive edge in the global economy: “To sustain and serve a growing economy and compete internationally, our nation’s ports need to be maintained, modernized, and expanded. While port authorities and their private sector partners have planned over $46 billion in capital improvements from now until 2016, federal funding has declined for navigable waterways and landside freight connections needed to move goods to and from the ports.” The inability of the federal government and state governments to fund the necessary improvements to our ports makes a strong case again for the importance of public-private partnerships (“P3s”) in improving our country’s infrastructure.

According to the recent North American Port Analysis report, published by Colliers International in April, America must secure $3.6 trillion in funding by 2020 for the country’s infrastructure in order to improve U.S. ports and to stay competitive in the global market. This is especially true since, as stated in the report, the Panama Canal Expansion is altering global trade patterns, and major trade is shifting from Asia to Latin America, and from America’s West Coast to East Coast/Gulf ports. In subtitling the report CapEx or Capsize, the economists for Colliers International are driving home the importance of investing in the nation’s infrastructure and ports now rather than delay such an essential undertaking. P3s will definitely contribute to this investment.

As exemplified by past projects, ports can greatly benefit from P3s. One example of a very successful P3 project was the 2004 expansion of the Port of Galveston in Galveston, Texas. The Port of Galveston Cruise Terminal Development (the “Project”) was a partnership between the Port of Galveston and several private partners, including CH2M Hill, Royal Caribbean International and Carnival Cruise Lines. In 2002, the private partners submitted an unsolicited proposal to expand the cruise ship services and facilities. The public and private sectors then worked together to fund the project and to provide the necessary facilities on time and within budget. The Port of Galveston benefited from the project because of the increased revenue from growth in related employment and commercial revenues. And the private partners benefited because a greater number of their cruise ships can now utilize the improved port to increase customers and revenues.

On the whole, like many P3 projects, it was a win for both sides. The National Council for Public-Private Partnerships awarded the Project the 2004 NCPPP Infrastructure Award Winner. A more detailed description of this exemplary project can be found here.

Overall, P3s can play a vital role in improving our nation’s infrastructure and assisting our nation to secure the $3.6 trillion necessary to raise our infrastructure GPA from a D+ to a B. P3 projects have proven time and time again that they can be much more efficient and can lower costs. This certainly is a winning combination to turn around our nation’s infrastructure.

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I occasionally give a presentation called “That’s not what I meant!” which is subtitled “Usually the drafter’s precision carries the day, but sometimes the litigator’s creativity trumps it.” Our legal system generates seemingly endless material for this presentation and last week the Eighth Circuit gave us more in Union Electric v. AEGIS Energy Syndicate. The policy had a mandatory arbitration provision, but an endorsement specified that Missouri law governed and a Missouri statute prohibits mandatory arbitration of insurance disputes, so while the carrier wanted to compel arbitration, Judge Jean Hamilton refused and the Eighth Circuit affirmed her decision. So, the drafters may have intended that any disputes would be arbitrated, but if so, they should have done some more homework.

There are a couple of lessons here. First, read the entire policy, including the endorsements. The endorsements are like change orders to construction contracts and until you’ve read them, you don’t know what the policy provides for. Second, just because a policy (or any other contract, for that matter) says something doesn’t mean it has to be. Many common contractual clauses are rendered unenforceable by either caselaw or statutes. Third, because insurance policies are governed by state laws, and in light of the differing interpretations and statutory schemes amongst the states, there can be wide variations of the procedural and substantive effect of policies depending on what state’s law governs. So, do your homework.

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For a visual tour of the construction of New York’s Second Avenue Subway line, the Big Apple’s first major expansion of its subway system since 1932, check out CBS Sunday Morning’s video, NYC’s subway, still under construction.

Amidst the obligatory interviews on the surface with planners, engineers, and inconvenienced neighbors, the video offers interesting glimpses of the excavation and construction of the first phase of the $4.5 billion project. Phase 1 of the planned four phase, two-track line will provide service from 96th to 63rd Streets and is expected to be complete in December 2016. The new line, once all four phases are completed, is to shuttle commuters up the East Side from Hanover Square to 125th Street.

If you don’t have time for the six and half minute video, skip to the photo gallery, Building NYC’s Second Ave. Subway, for photos and renderings of the project and equipment. For more detailed information on the project, including monthly project updates, go straight to the horse’s mouth at MTA.info.

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The Second Circuit’s recent decision in Scottsdale Insurance Company v. R.I. Pools, Inc., Case No. 11-3529, 2013 WL 1150217 (2d Cir. March 21, 2013) should be welcome news for Connecticut contractors insured under CGL policies with Broad Form Property Damage Coverage, seeking coverage for losses to their work caused by their subcontractors. In RI Pools, the Second Circuit vacated the district court’s grant of summary judgment in favor of an insurer, including a ruling that the insurer was entitled to a return of funds it spent on the insured’s defense, after concluding that the district court erred when it ruled that a swimming pool contractor’s liability for cracked concrete could not be covered by its insurance. The district court relied on the “your work” exclusion, but in doing so, it read the “subcontractor exception” out of the policy. The Second Circuit put it back in.

RI Pools is a swimming pool installer that uses subcontractors to supply and shoot concrete into the ground. In 2009, nineteen different customers complained of cracking, flaking and deteriorating concrete in pools installed by RI Pools in 2006. RI Pools tendered to its CGL carrier, Scottsdale, which initially furnished a defense. Scottsdale later filed suit seeking a declaration that it had no duty to defend or indemnify and seeking reimbursement for defense costs already expended.

Relying on the Second Circuit’s 1992 decision in Jakobson Shipyard, Inc. v. Aetna Casualty & Surety Co., 961 F.2d 387 (2d Cir. 1992), the district court reasoned that the cracks in the concrete were defects in the insured’s work that could not be “accidents,” and thus the loss could not be covered and the insurer had no duty to defend or indemnify. In a subsequent ruling the district court ordered the insured to reimburse the insurer for defense costs the insured had paid.

The policy form at issue covers loss caused by “an occurrence,” defined as “an accident” and includes a “your-work exclusion” with a “subcontractor exception” to the “your-work exclusion.” The district court construed the policy form not to afford coverage for the loss from the cracked concrete. In doing so, according to the Second Circuit, the district court “essentially read the subcontractor exception out of the policies.”
In Jakobson, the court ruled that loss defective steering mechanisms in tug boats built and sold by an insured shipyard was not caused by occurrence, and thus not covered under the insured’s CGL policies. But, as the RI Pools court reports, because the policy in Jakobson did not include a subcontractor exception to the “your work” exclusion, the reasoning there does not apply here. Rather to the court, the inclusion of the subcontractor exception in the policy signals that defective work can be an occurrence and that the loss may be covered:

Whereas Jakobson held that the insured’s faulty workmanship could not be a covered occurrence under the policy, the present policies expressly provide that in some circumstances the insured’s own work is covered. As coverage is limited by the policy to “occurrences” and defects in the insured’s own work in some circumstances are covered, these policies, unlike the Jakobson policy, unmistakably include defects in the insured’s own work within the category of an “occurrence.”

Id. at *3. Ultimately, “the question whether the insured’s liability for defects in its own work is covered turns on whether the subcontractor exception applies.” Because the district court never considered this “crucial question,” the court vacated the judgment and remanded the case.

Additionally, the court determined that Scottsdale was not entitled to any reimbursement for the defense costs it previously expended. This was so because, in light of the subcontractor exception to the your-work exclusion, it was “apparent that the damage to the pools caused by the cracked concrete ‘falls…possibly within the coverage” of the policies.'” Id. The duty to defend being broader than the duty to indemnify, that possibility of coverage was enough to trigger Scottsdale’s duty to defend, which duty exists “up until the point at which it is legally determined that there is no possibility for coverage under the policies.”

For another recent decision regarding the recoupment of defense costs, see National Surety Corp. v. Immunex Corp., Case No.86535-3, March 07, 2013. In National Surety, the Supreme Court of Washington last month ruled that Washington law does not allow an insurer to recoup defense costs incurred prior to a determination of non-coverage.

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Do you really need that progress payment lien release notarized? It’s such a pain in the rear, isnt’ it? Isn’t a signature enough? After all, you don’t get your contracts notarized–well, not most of them.

This was the discussion around our water cooler the other day, initiated while some of our lawyers were re-writing a standard form subcontract for a client who does work in many states. Notarizing documents certainly seems like something from a bygone era–when there were horses, buggies, and buggy-whips. Maybe notaries will be like those notorious buggy-whip makers a century ago. After all, the federal government has long accepted un-notarized declarations in lieu of notarized affidavits. See 28 USC § 1746.

So why do we still need notaries? Because some people are liars. Or, more accurately, forgers. Check out this nightmare.
Sadly, one good reason to have your lien releases notarized is to provide a last check that the party who supposedly executed it doesn’t say their signature was forged. Forgery.jpgOf course, a forged lien release is a lot different than a forged performance bond–but they’re both likely to land someone in the pokey.

But the first answer to the question is much less interesting: Many states require notarized lien releases by statute. Of course, those can change too.

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The American Society of Civil Engineers (“ASCE”) has released its 2013 Report Card for America’s Infrastructure. The Report Card assigns a letter grade to sixteen major categories of infrastructure – such as bridges, dams, and roads – based on capacity, condition, funding, future need, operation and maintenance, public safety, and resilience. The individual categories ranked by the Report Card range from a high of B- for solid waste to a low of D- for inland waterways and levees. The 2013 Report Card gives the nation’s infrastructure a D+ GPA and estimates that $3.6 trillion in investment will be needed by 2020 to maintain a state of good repair.

The D+ rating is up only slightly from the D GPA given by the ASCE’s last Report Card in 2009. And the study is replete with grim statements. For example, it notes that, “much of our drinking water infrastructure is nearing the end of its useful life,” “one in nine of the nation’s bridges are rated as structurally deficient,” and “[f]orty-two percent of America’s major urban highways remain congested, costing the economy an estimated $101 billion in wasted time and fuel annually.”

The ASCE’s President, Gregory E. DiLoreto, notes that much of the nation’s infrastructure was put into place over fifty years ago and is simply “overwhelmed or worn out.” Mr. DiLoreto notes the current backlog of infrastructure projects and deferred maintenance, and he stresses the need for innovative solutions and increased investment. According to Mr. DiLoreto, failure to address these projects will cost American families an estimated $3,100 per year in personal disposable income.

So how does America improve these abysmal grades? According to the ASCE, the solution is simple – “when investments are made and projects move forward, the grades rise.” With many cash-strapped states now looking to public-private partnerships to address their infrastructure needs, perhaps the 2017 Report Card will be an improvement.

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On March 1, 2013, President Obama ordered the implementation of across-the-board cuts – sequestration – primarily directed to military and domestic discretionary spending because the White House and congressional leaders could not agree to an alternative. The Balanced Budget and Emergency Deficit Control Act of 2011 requires this sequestration, which means that the executive branch must implement $85 billion in cuts over the remaining months of Fiscal Year 2013. This alert provides background on the expected cuts and how the sequestration may affect contractors. Notably, the sequestration is separate from the continuing resolution funding the federal government that ends on March 27, 2013. If Congress does not act to fund discretionary spending for the remainder of Fiscal Year 2013, then the government will shut down. We have also prepared pointers for federal contractors in the event of a shutdown.

To learn more about this, click Sequestration is Here – Now What Happens to Government Contractors to read the client alert.

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Ah, Paris – arguably the most romantic place in the world (although my vote would be for MetLife Stadium). In a recent twist on Parisian public displays of affection, locals and tourists alike have taken to affixing locks to some of the city’s bridges and throwing the keys into the Seine. While city leaders debate whether the “lovelocks” are graffiti or a boon to tourism, one thing is absolutely certain – they represent a lot of dead load (or would they be considered live load?) that was never factored into the bridge design. Let’s hope these bridges don’t collapse under the weight of all that love.

The smell of love is in the air – or is it raw sewage? Take your special someone on this Valentine’s Day tour and they’re one and the same. Just remember the hand sanitizer. And, if anyone actually proposes during the tour, please upload it to YouTube!

Finally, for all you cynics out there, here’s a story that has absolutely nothing to do with love. Leave it to the hometown of Microsoft (and grunge music) to build a bridge that has record-setting brawn and a whole lot of electronic brains. Seventeenth century physics will keep the world’s largest floating bridge from sinking to the bottom of Lake Washington but its remote sensors and construction methods will sport a decidedly more modern feel. The new pontoons will be affixed with over 1,000 water sensors which will send a signal through a programmable logic controller to the 24 hour maintenance facility whenever water leaks are detected. Rebar will be protected from corrosion by low-voltage DC electricity. And, in a nod to security concerns, the bridge will be outfitted with multiple security cameras, intrusion detectors and sharks with laser beams attached to their backs will patrol the depths below – just kidding about that last one – or am I?

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In January, President Obama signed the National Defense Authorization Act for Fiscal Year 2013 (“NDAA”), which includes numerous new procurement policies directed at contractors and how they bid on and perform government contracts.

To learn more about this, click here to read the client alert.