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Throughout the world, the popularity of “green roofs” is on the rise. ENR.com reports that green roofs are being used to mitigate various environmental problems facing urban areas, most notably, storm water management. According to the EPA, green roofs also help combat a problem known as “Heat Island Effect” by removing heat from the air through evapotranspiration. This process reduces temperatures of both the roof surface and the surrounding air, allowing the surface temperature of a green roof to be lower than the surrounding air temperature on a hot day. Other benefits of green roofs include corrosion protection, noise reduction, energy efficiency, and improved air quality. And the uses for green roofs vary widely from practical to pure entertainment. The ENR.com article notes that the largest green roof project currently underway in the United States – the Croton Water Filtration Plant in Bronx County, New York City – will include a 36,512-sq-m golf driving range.

Green Roofs for Healthy Cities, one of a number of groups advocating for the increased use of green roofs in construction, defines a green roofing system as an “extension of the existing roof which involves a high quality water proofing and root repellant system, a drainage system, filter cloth, a lightweight growing medium and plants.” Green roofing systems may be modular (with drainage layers, filter cloth, and growing plants already prepared in movable, interlocking sections), or the elements of the system may be installed separately. Green roofs can be used on a wide variety of buiildings, from private residences to industrial complexes, and the vegetation sustained thereon can range from simple groundcover to tall trees.

While typically more expensive to install than a traditional roofing system, proponents say that green roofs pay for themselves in terms of increased property value, aesthetic appeal, reduced heating and cooling costs, and extended life of the roofing materials. Many cities throughout the U.S. and abroad (particularly in Europe) already promote the use of green roofs – either through mandates or incentives. And the use of green roofs is only expected to increase as green infrastructure continues to gain political support.

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It is the rule in many jurisdictions that an insurer which assumes defense of its insured without issuing a reservation of rights can be estopped from later denying coverage based on rights or defenses in the insurance contract. This general rule was rejected by the Supreme Court of Wisconsin in Maxwell v. Hartford Union High School District, 814 N.W.2d 484 (Wis. 2012). The court in Maxwell held that an insurer which defends without reserving the right to deny coverage has not waived its ability to rely on coverage clauses in the policy allowing for such a denial.

In Maxwell, the policyholder – a school district facing a wrongful termination suit from an ex-employee – tendered a claim to its liability insurer which defended the school district in the ensuing litigation without issuing a reservation of rights letter. It was not until a judgment in excess of $100,000 was awarded against the school district that the insurer denied coverage based on language in the policy excluding liability for damages due under the employment agreement and for lost benefits or lost wages. That the policy indeed excluded coverage for the damages at issue was not in dispute. The issue presented to the court was whether, because the insurer failed to issue a reservation of rights, it had waived or could be estopped from asserting its defense of no coverage. In rendering its decision, the court held that waiver or estopped could not supply coverage to an insured that was not provided in the policy itself. Ruling otherwise, the court stated, would force an insured to pay for a loss for which it had not received a premium.

The court clarified that waiver or estoppel did not apply to the present case because it involved a coverage clause, as opposed to a forfeiture clause (such as a notice or cooperation clause). It noted that an insurer must act timely on a forfeiture defense and stated that providing a defense may be grounds for establishing waiver or estoppel regarding a forfeiture clause where the insurer fails to issue a reservation of rights. The court also made clear that its decision did not limit the damages applicable to an insurer which breaches its duty of good faith toward its insured. Such an insurer is liable for all damages resulting from its breach, and is not limited to damages contemplated by the contract.

The Maxwell court emphasized the importance of communication between insurers and insureds. Indeed, after Maxwell, policyholders should have increased motivation to engage in clear, detailed communications with their insurer regarding the insurer’s coverage position prior to entrusting the insurer with defense of a claim. If a policyholder cannot rely on a reservation of rights letter to explain the scope and limits of an insurer’s coverage position, it must seek such information through other means.

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On July 6, the California State Senate narrowly approved the use of $4.5 billion in proceeds from state Proposition 1A bonds for transportation projects. Governor Jerry Brown is expected to sign the bill into law. Full text of the bill can be found here. Senate Bill 1029 is intended to preserve California’s rights to about $3.3 billion of federal American Recovery and Reinvestment Act (ARRA) funds for the long-awaited California High Speed Rail.

About $2.6 billion of the state bond proceeds is now dedicated to High Speed Rail, intended to match the $3.3 billion of ARRA funds for a total of about $5.9 billion in funding for the early rail projects. (The remaining $1.9 billion is earmarked for local transit improvements, such as $140 million for new BART cars, $705 million for Caltrain electrification, $61 million for the SF Muni Central Subway, and $500 million for Metrolink and related systems.)

The early High Speed Rail funding focus is on the Initial Operating Section (IOS), which runs down the Central Valley from Merced to the San Fernando Valley (about 130 miles of initial segments and about 300 miles in total). Design-build package HSR11-16 has already been shortlisted to five bidders; this is for 23-29 miles of infrastructure around Fresno (including a major river crossing and many grade crossings) and is estimated at $1.2-1.8 billion. According to the Request for Proposal, award is scheduled for December of this year.

Further design-build packages for infrastructure connecting Fresno with Bakersfield, and for stations and track along all of these segments, would be expected to follow. There would also be associated architect/engineer and construction management contracts, and two design-bid-build contracts for multiple-use crossings. Additional design-build packages for infrastructure, stations and track connecting Merced with Fresno, and Bakersfield with the San Fernando Valley, are expected in the future. A procurement package for the trains would then ensue.

The contracts for these later segments face some additional significant hurdles. They are conditioned on additional agency signoffs, completion of the environmental impact review process, and negotiations with scores of landowners, cities and counties. Furthermore, more funds would have to be released by state and federal legislators. US congressmen have already announced their intention to audit how the High Speed Rail Authority has spent existing funds, and it is possible that Congress will limit or defer funding for the future segments. Some observers remain doubtful that all of these approvals will be obtained (let alone obtained on schedule).

All of the initial packages are expected to make use of public funds. Opportunities for public-private partnerships (PPPs), such as DBFOM contracts and concessions, are expected to be available for the urban sections closer to San Francisco, LA and San Diego, and for operating phases. However, the High Speed Rail Authority says unsolicited proposals for private financing may be considered.

The rail projects receiving ARRA funds are subject to the Buy America mandates of 49 U.S.C. 24405(a), requiring steel, iron and manufactured components to be of US origin. http://www.fra.dot.gov/Pages/11.shtml Bidders have already been warned that no waivers should be assumed (see page 13 of the RFP).

This legislation is intended to preserve California’s claim on the ARRA funds, and indicates a significant step forward for initial segments of High Speed Rail. Because more approvals and money are required for the overall project (now estimated to cost $69 billion in 2011 dollars), stakeholders will have to make many more strides before opening day.

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The First Circuit has endorsed key principles that favor policyholders in insurance coverage disputes — principles that can frequently be used to help insureds in construction cases. So, this new case is worth a look. In Oxford Aviation, Inc. v. Global Aero., Inc., 2012 U.S. App. LEXIS 10101 (1st Cir. 2012), the U.S. Court of Appeals for the First Circuit vacated the district court’s decision which found that a carrier had no duty to defend claims involving alleged faulty workmanship. Relying on Maine law, the court held strong to the concept that even the remotest possibility of coverage triggers an insurer’s duty to defend.

The details, after the jump.

Airlarr hired Oxford to perform repairs and installations on its airplane. After picking up its restored plane, Airlarr sued Oxford for breach of contract, breach of express and implied warranties and various state-law claims. Airlarr alleged that, due to Oxford’s “negligence and faulty performance,” one of the plane’s side windows cracked on Airlarr’s flight home from Oxford’s Maine facility. Airlarr also listed a number of “defects and other substandard work,” including uncomfortable seats, leaking fuel injectors, a cracked turbocharger, and an improperly installed carpet. But the cracked window was central to the Court’s decision to overturn the district court’s ruling.

Oxford tendered the complaint to its CGL insurer, Global Aerospace, and requested that the insurer provide a defense. But Global disclaimed both coverage and its duty to defend Oxford in the Airlarr lawsuit. Oxford then sued Global in a Maine state court, and Global removed the case to federal district court. The district court granted summary judgment in favor of Global, holding that Global had no duty to defend because Airlarr’s claims fell within the CGL policy’s exclusions. The First Circuit disagreed and held that the district court should have considered the issue of initial coverage instead of relying solely on the policy’s exclusions.

Recognizing that Maine interprets coverage terms like “accident” and “occurrence” broadly – as opposed to courts that rely on these terms to exclude coverage for faulty workmanship – the First Circuit concluded that the damage to the plane’s side window should be considered an “accident” and an “occurrence” and be covered under Coverage A of the policy. The court, therefore, did not interpret these terms narrowly to exclude coverage for faulty workmanship.

The court reiterated the basic principle that an insurer’s duty to defend is generally broader than its duty to indemnify. The court insisted that an insurer has a duty to defend even if the possibility of coverage is highly unlikely. After discussing the exclusions that Global relied on, the court concluded that, because the policy covers at least one of Airlarr’s claims, Global has a duty to defend the entire lawsuit: “Here, at least one scenario relating to the cracked window, occurring in flight and away from Oxford’s facilities, does fall within coverage and could plausibly avoid all cited exclusions.”

To determine whether any exclusion could negate the policy’s coverage of the damaged window, the court analyzed possible exclusions. The court held that exclusion (j)(4), which excludes from coverage “[p]roperty damage to … [p]ersonal property in the care, custody or control of the insured,” did not exclude the damaged window because the damage occurred after Oxford returned the plane to Airlarr. Additionally, in discussing exclusion (j)(6) (the “your-work” exclusion), which excludes a “particular part of any property that must be restored, repaired, or replaced because your work was incorrectly performed on it,” the court noted that this exclusion could conceivably apply to the damaged window. However, by its terms, the your-work exclusion does not apply to “property damage occurring away from premises you own or rent and arising out of your product or your work.” Because the damage to the window occurred in-flight and in Airlarr’s possession, the court concluded that the your-work exclusion did not exclude coverage of the cracked window.

The court quickly dismissed exclusion k (the “your-product” exclusion), which excludes “[p]roperty damage to your product arising out of it or any part of it,” since the cracked window was never alleged to be Oxford’s product.

The court also discussed exclusion l (the “products-completed operations hazard” exclusion), which excludes “[p]roperty damage to your work arising out of it or any part of it and included in the products-completed operations hazard.” The court noted, however, that the damaged window was not alleged to be, nor was there any indication that it was included in, Oxford’s work. Therefore, this exclusion also could not apply to the damaged window.

In concluding that the policy’s exclusions could not exclude coverage for the damaged window, the court held that Global had a duty to defend even though Global would likely be on the hook for little, if any, indemnification if Airlarr prevailed in the lawsuit: “If Airlarr proves its case, it seems unlikely that there will be much, if any, indemnification since most of the claimed injuries appear likely to be covered by exclusions. But the duty to defend is triggered by any realistic possibility of any damage that might be within coverage and outside the exclusions and the damaged window creates that prospect.” Notwithstanding the exclusions, therefore, the court held that Global had a duty to defend.

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Perhaps they saw that Scott Walker defeated a recall attempt in Wisconsin and decided that momentum is moving against organized labor. Whatever the thought process, a log jam has been removed and a major project can move forward. On Wednesday, June 6, the Metropolitan Washington Airport Authority (WMAA) agreed that Phase II of the Dulles Rail Project (extending the commuter rail line from Wiehle Avenue in Reston to Dulles Airport) can proceed without the pro-labor provision that has jeopardized project funding. The provision at issue would have awarded points to potential bidders that promised to use union labor on the project. Contractor bids are evaluated by WMAA, at least in part, on points awarded for any variety of factors, such as prior project experience and the strength of the contractor’s technical proposal. Thus, award of the project might not necessarily have gone to the lowest bidding contractor. For more than a year the debate raged, even reaching the floor of the Virginia Assembly. Virginia, a right to work state, threatened to withhold its share of project funding if MWAA insisted on the pro-labor provision. Already, Governor McDonnell has pledged $150 million from Virginia at the start of 2013 now that the pro-labor provision has been taken off the table. Those that applaud MWAA’s decision point out that the project costs will likely be lower, leading to lower costs both for taxpayers and commuters.

With this hurdle aside, the path is cleared to extend the Silver Line to Dulles Airport. The Loudoun County Board of Supervisors has yet to approve its portion of funding to carry the Silver Line past Dulles and into Loudoun County.

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Under the Texas code, the workers’ compensation exclusive remedy bar applies up and down: barring injured employees of subcontractors from bringing common law tort suits against a general contractor which provided workers compensation insurance, and also in reverse, barring injured employees of the general contractor from bringing suit against a subcontractor, even when the employees are covered under separate workers’ comp policies. So says the Texas Court of Appeals in Garza v. Zachry Construction Corp., 2012 WL 1864350 (Tex. Ct. App. May 23, 2012).

In Garza, an employee at DuPont’s Ingleside, Texas plant was injured when the railcar mover he operated came loose. He received workers’ compensation benefits through a policy provided by DuPont, and later brought common law tort claims against a subcontractor and two of its employees for negligence in causing the accident. The subcontractor, whose employees were covered by a separate workers compensation insurance procured by DuPont, successfully argued that DuPont was their deemed employer and the injured worker and subcontractor employees were deemed fellow employees. In this way, the subcontractor was shielded from such actions by the workers’ compensation exclusive remedy bar contained in Texas Labor Code section 408.001 as made applicable to subcontractors by Labor Code section 406.123. On appeal, the Court of Appeals agreed.

Garza, the injured employee, argued that the exclusive remedy bar could not apply where the subcontract specified that the subcontractor’s employees were not employees of DuPont, Garza’s employer. But even if they were deemed employees for purposes of statutory workers compensation benefits, the bar could not apply where the subcontractors were covered under a separate workers’ compensation policy than that covering DuPont’s employees. Lastly, if the statute does immunize the subcontractor, then it violates the open courts guarantee (assuring that a person bringing a well-established common-law cause of action will not suffer unreasonable or arbitrary denial of access to the court) in the Texas constitution.

In rejecting these arguments, the appellate court first ruled that the subcontract at issue required DuPont to procure workers’ compensation coverage for Zachry’s employees, “thereby, creating the legal fiction of DuPont as the ‘deemed employer’ and Zachry and its employees as ‘deemed employees'” under Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 438 (Tex.2009) and HCBeck, Ltd. v. Rice, 284 S.W.3d 349, 352 (Tex.2009). The subcontract, however, did not provide these same “deemed employees” with the other more traditional employee benefits enjoyed by DuPont’s actual employees. Secondly, the court ruled that nothing in the workers compensation statute, section 406.123, “specifies that when a general contractor purchases a workers’ compensation policy for its own employees and also purchases a second policy for its subcontractors, then its own employees and its “deemed” employees may freely sue each other simply because they receive their coverage under different policies, albeit from the same “employer” for work performed at the same job site.” According to the court, such an interpretation would be contrary to the purpose of the legislation – which is to encourage coverage of employees. Finally, the court concluded that Garza’s rights under the open courts provision are not violated because “[t]he workers’ compensation benefits he receives from his employer, which also provides those same benefits to its subcontractors, is an adequate substitute for his right to bring his tort claims against those subcontractors.”

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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.