11/17/2015

Around the Nation: November 2015

State news and updates from CLM chapters, reps, and committees.

By Bevrlee J. Lips

CALIFORNIA: Entities Must Maintain License Subsequent to Transfer of Contractual Obligations

The Court of Appeals of the State of California recently held that a corporation must maintain a license under the Contractors’ State License law even after transferring contractual obligations. In Judicial Council of California v. Jacobs Facilities Inc., the Judicial Council of California, Administrative Office of the Courts (JCC) contracted with a licensed, wholly owned subsidiary of Jacobs Engineering Group Inc. (Jacobs) to provide maintenance and repairs to judicial buildings. Jacobs transferred the project to a different wholly owned subsidiary, which obtained a contractor’s license while the original subsidiary’s license expired. The original entity remained the signatory on the contract until the parties assigned the contract to the second subsidiary nearly a year later.

JCC sued Jacobs and its subsidiaries under Business and Professions Code §7031(b), which requires an unlicensed contractor to disgorge its compensation, and sought return of all monies paid under the contract—approximately $18 million. The appellate court rejected Jacobs’ arguments and held that evidence that the subsidiary contracted to perform services was required to hold a contractor’s license, allowed that license to expire, and continued to perform services while unlicensed essentially was undisputed.

The court, nonetheless, declined to order entry of judgment for JCC, finding that Jacobs remained entitled to an opportunity to prove substantial compliance under the statute on remand.—From Northern California Chapter Member Wakako Uritani

COLORADO: Cities Adopt Ordinances in Wake of Legislature’s Failure on Construction Defect Claims Reform

The creation of Colorado’s Homeowner Protection Act made it easier for homeowners and associations to bring construction defect claims against homebuilders. Consequently, Colorado construction defect lawsuits and damage awards have increased, significantly impacting homebuilders and insurers. Several cities have seen segments of their affordable housing markets dwindle because the legislature has repeatedly rejected laws favorable to condominium homebuilders. The cities of Lakewood, Lone Tree, and Aurora, among others, recently approved ordinances designed to avoid expensive litigation and to promote development. These ordinances include a builder’s right to repair defects prior to the filing of a lawsuit that is not dependent upon owner approval, requiring HOAs to obtain a majority consent of homeowners before filing lawsuits, and deeming amendments to ADR provisions in declarations void and not effective for construction defect claims based on allegations predating the amendment. Recently, Denver also has discussed similar ordinances.—From Greater Denver Chapter Member Adam Wiens

NEW JERSEY: Court Rejects Insurer Liability in Nuisance Suit Over Migrated Pollution

In Ross v. Lowitz, the New Jersey Supreme Court held that a property owner whose land was impacted by the discharge of a hazardous substance as defined by the New Jersey Spill Compensation and Control Act may not maintain a direct cause of action against the insurer of the discharger. The act imposes fairly broad liability, has a cost recovery component, and creates a private right of action. Ross brought the suit against Lowitz, the owner of a neighboring property, after it was discovered that a leak from an underground storage tank on her property migrated onto Ross’ property. The court declined to hold that the act or New Jersey common law allowed for the adjacent homeowner to maintain a direct cause of action against the insurer of the Lowitz property. Specifically, the court noted that Ross neither was an intended third-party beneficiary nor did he have an assignment.—From Southern New Jersey Chapter Director of Events Jeanine Clark

OREGON: No Medical Degree Required in Biomechanical Engineer Testimony

In Durette v. Virgil, the Oregon Court of Appeals recently upheld a trial court ruling that allowed a biomechanical engineer to testify in a low-impact auto accident case. The plaintiff contended on appeal that the expert was unqualified to testify as to medical causation, he was not a licensed engineer in Oregon, and his testimony lacked foundation because he examined only photos of the vehicles involved and the plaintiff’s medical records to conclude that the accident could not have caused the plaintiff’s injuries (e.g., there was insufficient force). The court rejected all of these arguments. Specifically, the court held that a biomechanical engineer requires no medical degree in order to comment on injury causation.—From CLM Member Jack Levy

PENNSYLVANIA: Unavoidably Unsafe Products Exclusion Tested

Pennsylvania’s state and federal courts recognize that prescription drugs fall within the “unavoidably unsafe” products exclusion to strict liability under comment k to the Restatement (Second) of Torts §402A. While courts have applied this reasoning to exempt medical devices from strict liability, the Pennsylvania Supreme Court has not addressed the issue. In Wilson v. Synthes USA Products, the plaintiff attempted to bring a strict liability claim against the manufacturer of spinal fixation rods that had broken after being implanted in the plaintiff’s back two years earlier. By memorandum opinion on the manufacturer’s motion to dismiss, Judge Schmehl outlined the recent state and federal authority on both sides of the dispute, ultimately agreeing with the manufacturer, dismissing the plaintiff’s strict liability claims, and requiring the plaintiff to proceed under a negligence theory.—From CLM Member Katherine Wang

TENNESSEE: No Cause of Action for Failure to Hire

In a case of first impression, the Tennessee Supreme Court reviewed a case against a prospective employer for failure to hire a job applicant who had filed or was likely to file a workers’ compensation claim against a previous employer. In Yardley v. Hospital Housekeeping Systems LLC, the plaintiff was injured while working for a hospital in housekeeping. During the time she was out due to the injury, the hospital subcontracted housekeeping to an outside company. When the plaintiff sought to return to work, the hospital referred her to the new company, which refused to hire her because of her outstanding workers’ compensation claim against the hospital. In a question referred to the Supreme Court by the Middle District Federal Court, the Supreme Court held no cause of action for failure to hire under the Tennessee Workers’ Compensation Act. This case also contains a good discussion of the laws in other states.—From CLM Member James C. Wright 



Bevrlee J. Lips was managing editor of Claims Management magazine (now CLM Magazine) from January 2012 until March 2017.

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