To learn more about the ways investors and new market entrants are attempting to develop what is emerging as a new single-family asset class, the regulatory changes that have caused banks to retreat from participation in the mortgage servicing business, and compliance challenges for existing and new servicers, click here to read the client alert entitled Trends in Single-Family Housing written by Craig A. deRidder, Peter G. Freeman and Joseph T. Lynyak, III.
Prohibition on Contract Awards to Companies That Were Formerly Based in the United States
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On January 29, 2013, a final rule was issued prohibiting the award of contracts to inverted domestic corporations. The final rule requires an offeror to represent that it is not an inverted domestic corporation and creates potential liability if the contractor’s legal status changes after the contract is awarded.
To learn more about this, click here to read the client alert that was written by John Jensen and Evan Wesser.
Denying Coverage Based on the Insured’s Lack of Cooperation – A Difficult Standard for Insurers to Meet
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An insured’s duty to cooperate with its insurer in the investigation and potential payment of claims is essential to the insurance relationship and is often a condition precedent to coverage. As the Supreme Court for the State of Washington recently affirmed, however, an insurer’s ability to deny coverage based on lack of cooperation is limited. Staples v. Allstate Ins. Co., No. 86413-6 (Wash. Jan. 24. 2013). To do so, the insurer must demonstrate a substantial and material breach by the insured of the cooperation clause that results in actual prejudice to the insurer. In other words, where the insured has substantially complied with the cooperation clause or there has been no prejudice to the insurer, a denial of coverage for breach of cooperation will not stand.
In Staples v. Allstate Ins. Co., a van belonging to the insured John Staples that contained a large collection of tools was stolen. Staples reported the theft to the police, telling them that the van was a work truck and the tools were worth $15,000. In submitting a claim to his insurer Allstate, Staples represented that the tools were worth $20,000 – $25,000, and were for his personal use. Based on these apparent inconsistent statements, Allstate requested certain documents from Staples, including proof of ownership and a sworn statement in proof of loss, among others. Allstate took two recorded statements form Staples, neither of which was under oath.
The sworn proof of loss and other information was not provided by Staples until nearly three months after the loss. Apparently unsatisfied with the information received, Allstate requested that Staples appear for an examination under oath, which it was entitled to under the cooperation clause of the policy. After difficulties scheduling the examination through a perceived lack of cooperation by Staples, Allstate denied the claim. In a suit by Staples against Allstate for breach of contract and bad faith, the trial court ruled in favor of Allstate on summary judgment, holding that coverage was barred because Staples breached the cooperation clause by failing to appear for an examination under oath. The Court of Appeals affirmed, and the case was appealed to the Washington Supreme Court.
The Washington Supreme Court reversed, finding material issues of fact as to (1) Staples’ compliance with the cooperation clause and (2) whether any prejudice was actually incurred by Allstate as a result of Staples’ alleged lack of cooperation. As to the first issue, the court held that “[b]reach of a cooperation clause is measured by the yardstick of substantial compliance.” Staples’ appearance for two recorded interviews and production of many of the documents requested by Allstate was enough to demonstrate a genuine question of material fact as to the adequacy of Staples’ “cooperation.”
The court further held that an insurer must show prejudice before it can rely on breach of a cooperation clause to deny a claim. A showing of actual prejudice requires “affirmative proof of an advantage lost or disadvantage suffered as a result of the [breach], which has an identifiable detrimental effect on the insurer’s ability to evaluate or present its defenses to coverage or liability.” Id. (quoting Dien Tran v. State Farm Fire & Cas. Co., 961 P.2d 358 (Wash. 1998)). The court explained that the burden to show prejudice is on the insurer, and is an issue of fact that will seldom be established as a matter of law. Prejudice will be presumed (as a matter of law) only in “extreme cases.”
In short, for an insurer to deny coverage based on breach of the cooperation clause, the insurer must show a substantial and material breach of the cooperation clause that results in actual prejudice.
California Contractors State License Board Confirms Asbestos Certification Does Not Authorize Universal Removal/Abatement
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Recently, the California Contractors State License Board (CLSB) issued an Industry Bulletin confirming that contractors may not perform abestos removal or abatement work if the work is not performed within the contractor’s license classification(s). An asbestos abatement certification by itself is not a CSLB contractor’s license classification. To obtain such a certification, the applicant is not required to have four years of experience, the minimum experience requirement for the CSLB to issue a contractor’s license.
Contractors who want to become certified to perform asbestos removal and/or abatement must be tested by CSLB and also register with the Department of Industrial Relations’ Division of Occupational Safety and Health (Cal OSHA). Once registered, the contractor must submit verification of the Cal OSHA registration to the CSLB. The CSLB will then add “ASB” on the license to indicate that asbestos removal/abatement can be performed within the contractor’s license classification(s).
To read the CSLB’s Industry Bulletin, click here, and to read the related legal opinion, click here.
Even Offerors Eliminated Before the Competitive Range May Have Protest Standing
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On January 14, 2013, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) held that an offeror had standing to challenge the exclusion of its proposal from a competition even prior to a competitive range, despite the offeror’s submission of an incomplete proposal. In Orion Technology, Inc. v. United States, the Federal Circuit clarified that a disappointed offeror that has been eliminated from a competition can show that it has standing as an “interested party.”
To learn more about this, click here to read the client alert that was written by Daniel Herzfeld and Evan Wesser.
New CA Law Refines Law About Who is a “Contractor” to Bolster Consumer Protection
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Assembly Bill 2237, which took effect January 1, 2013, confirms that anyone, including a consultant to an owner-builder, who provides or oversees bids for construction, arranges for subcontractor work and schedules, and/or has oversight for a home improvement project is, in fact, acting in the capacity of a contractor and must be state-licensed for any project that is more than $500 in combined labor and material costs. “Consultant” is defined as “a person, other than a public agency or an owner of privately owned real property to be improved, who meets any either of the following criteria as it relates to work performed pursuant to a home improvement contract as defined in [Business & Professions Code section] 7151.2: (A) Provides or oversees a bid for a construction project. (B) Arranges for and sets up work schedules for contractors and subcontractors and maintains oversight of a construction project.” To read A.B. 2237, click here.
The CSLB sponsored the bill as “a valuable consumer protection measure.” CSLB Registrar Steve Sands commented: “All too often, people who don’t have a state contractor license call themselves construction consultants and encourage property owners to take on a home improvement project as the owner-builder. The so-called consultant collects a fee and many times leaves the homeowners with all of the project responsibility and liability.”
The new law addresses to some extent California’s Second District Appellate Court’s decision in The Fifth Day, LLC v. Bolotin, 09 C.D.O.S. 4019 (March 30, 2009), clarifying the definition of “consultant.” The Fifth Day court, in a case of first impression, considered whether an entity that provided construction management services to a private owner was required to be licensed under the California Contractor’s State License Law, Business & Professions Code section 7026. In a 2-to-1 decision, the Fifth Day court concluded that the services contemplated under the agreement in question did not cause the construction management company to fall under section 7026’s definition of “contractor.” To read our Client Alert entitled California Appellate Court Confirms that Certain Construction Managers Need Not Be Licensed Contractors, click here.
For additional information about several other laws affecting consumers, contractors, and the construction industry take that took effect January 1, 2013 click here.
CA Employment Development Department Now Authorized to Share New Employee Information
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With the passage of Assembly Bill 1794, effective January 1, 2013, accurately and timely reporting new employees is now even more important. The new law authorizes the Employment Development Department (EDD), until January 1, 2019, to provide the specified new employee information to the Joint Enforcement Strike Force on the Underground Economy, the Contractors’ State License Board (CSLB), and the State Compensation Insurance Fund (SCIF).
Efficient information-sharing among state offices is expected to ensure that employers are accurately reporting their employee payroll to their insurance carriers for establishing their workers’ compensation insurance premiums.
This new law specifically enables the EDD, the CSLB, and the SCIF to establish a memorandum of understanding to audit, investigate, and prosecute those who violate tax withholding requirements and commit premium insurance fraud. With the newly shared information, the CSLB is expected to take disciplinary action against contractors who fail to accurately report new employee information within 20 days of the established hire date, as required by California Unemployment Insurance Code section 1088.5(d). To read the CSLB’s Press Release on A.B. 1794, click here, and to read A.B. 1794, click here.
Challenge Problems in Solicitation Amendments Before Award: A Friendly Reminder from the Federal Circuit
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On December 7, 2012, the U.S. Court of Appeals for the Federal Circuit issued its first decision determining that government contractors need to challenge any obvious errors, improprieties, or ambiguities on the face of a solicitation amendment before award (extending its previous rule that such challenges to the initial solicitation generally must be challenged before award). In COMINT Systems Corp. & Eyeit.com, Inc., JV v. United States, the Federal Circuit found that Comint missed an opportunity to challenge an obvious – or patent – error in an amendment to the solicitation. By signing the amendment and waiting until after award to protest the allegedly problematic amendment, the government contractor waived any right to challenge the terms of the amendment to the solicitation.
To learn more about this, click here to read the client alert that was written by Daniel Herzfeld.
Perspectives on Real Estate Newsletter (Fall 2012 Edition)
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The 22nd edition of Pillsbury’s Newsletter: Perspectives on Real Estate features articles on energy consumption data reporting (AB1103 and 531), construction and risk management, new foreign tax withholding forms, chapter 9 and public-private partnerships.
Articles include:
- Energy Consumption Data Reporting in California — AB 1103 and 531
- Real Estate and Construction Risk Management: Tips to Ensure Your Status As An Additional Insured
- Attention: New Foreign Tax Withholding Forms
- Resolving Municipal Distress: Chapter 9 and Public-Private Partnerships
The Fall 2012 Edition of Perspectives on Real Estate is edited by: Laura Hannusch, Peter Freeman, Christine Roch and Noa Clark and can be downloaded in its entirety by clicking here.
Beware of Scam Targeting Contractor Licensees and Applicants
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On November 20, 2012, the California Contractors State License Board posted an Industry Bulletin alerting licensees and applicants alike to a recent scam involving fraudulent calls asking licensees or applicants for their credit card information over the phone in connection with renewing their licenses, obtaining continuing education credits, or taking licensing exams. CSLB Registrar Steve Sands has confirmed that at least one “unscrupulous company” has used information from the CSLB’s website to contact licensees or applicants “to mislead and scam them.” The CSLB confirmed that it “will never ask for credit card information over the phone, nor will they process any payment over the phone.” CSLB fees are only payable through the mail via check or at CSLB headquarters via cash, check, or credit card. Moreover, there are no continuing education requirements to renew a CA CSLB license.
The CSLB confirmed that although California Business and Professions Code § 7080.5 requires it to make public the name and address of every accepted application for a license, and that it intends to continue to post this information, it could change its process if applicants continue to be preyed upon by unscrupulous companies. To read a copy of the Industry Bulletin, click here. To read additional CA CSLB 2012 Industry Bulletins, click here.