August 2016

The lack of insurance coverage for a contractor’s faulty workmanship is the bane of both homeowners looking to recover damage for defective work and contractors seeking to defend against such claims.  In many states, like Pennsylvania, courts hold that faulty workmanship is not an “occurrence” that is covered by a standard commercial general liability insurance policy.  In other words, courts hold that CGL policies cover damage to other property not part of the construction project itself.

This is problematic for both the homeowner and the insured.  For the homeowner, the lack of a policy providing indemnification sometimes means the homeowner is left trying to collect against a defendant, who is otherwise but has little to no assets against which to collect a judgment.  For the contractor, the lack of a policy providing coverage means that assets are at risk and it could be forced to spend significant sums in attorneys fees defending the case.

In Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, the New Jersey Supreme Court held that a contractors standard CGL policy covers consequential damages caused by defective workmanship, even if the consequential damages are to the project itself.  At issue in Cypress Point Condominium Association, was language contained in a standard ISO CGL policy that is used in as the standard language in a majority of policies.  The case arose out of a dispute between the insured contractor and its insurer over whether damage caused by leaking windows and facades was covered under the contractor’s CGL policy.  The Court held that such damages are covered holding:

“because the result of the subcontractors’ faulty workmanship here—consequential water damage to the completed and nondefective portions of Cypress Point—was an “accident,” it is an “occurrence” under the policies and is therefore covered so long as the other parameters set by the policies are met.”

The importance of this holding is significant.  First, homeowners stand a much better chance of collecting on a damage claim against a contractor found liable for defective work.  Second, contractor’s can expect coverage from their carriers in almost all defective construction claims.

 

On July 11, 2016, the National Labor Relations Board issued a decision stating that unions can include both sole employees and joint employees into a single bargaining unit without the consent of both employers.  The case, Miller & Anderson, Inc., called upon the Board to revisit its holding in Oakwood Care Center, which held that a union could not seek to hold an election of a bargaining unit of solely and jointly employed individuals without the consent of both employers.  The decision has a significant impact on any contractor using temporary staffing services.

In Miller & Anderson, the sheet metal workers petitioned to represent a unit of employees solely employed by Miller & Anderson and those Miller & Anderson had leased through a construction industry staffing agency known as Tradesmen International.  The Regional Director dismissed the petition for an election based on the Board’s holding in Oakwood Care Center, which would required both Miller & Anderson and Tradesmen to consent to the election – which they did not.

The union appealed and the Board overturned the Regional Director and returned to the law that existed under its decision in M.B. Sturgis, Inc.  In doing so, the Board held that employer consent is not required for a bargaining unit of sole and joint employees so long as the employees maintained a traditional community of interest.

The decision is problematic for several reasons.  First, in the 16 years the standard has gone from no employer consent being required, to employer consent being required, and now back to employer consent not being required.  The is prejudicial to both employers and unions that seek to represent their employees because there is simply no certainty on what they law is or will be. The Regional Director’s dismissal was not overturned because he applied improper law, it was overturned because the NLRB did not like the law that existed, so the Board decided to change it by fiat.

Second, the decision will create tripartite bargaining between unions and two employers that have little common interests.  Because employers only have a duty to bargain but not to enter into an agreement with an union, it is unlikely that any workers will actual become represented by the union.

Third, make no mistake about it, this is a huge win for labor and will lead to many backdoor unionization of merit shop employers who use temporary employees, especially contractors will smaller full time employees.  For example, after Miller & Anderson, the unions can sneak salts onto a merit shop employers project.  If that contractor only had two full time employees and it leases three employees that happen to be covert union salts, the contractor will lose a union election no matter what it does.