The AIA General Conditions address the risk of casualty loss to property during construction. One of the parties agrees to maintain “all-risk” casualty insurance until completion and acceptance of the project. And, the parties agree to a reciprocal waiver of claims for damage “covered by property insurance,” which applies to subcontractors, employees, agents, etc., of each party. This leads to a question: When a casualty loss is less than the deductible amount of the policy, is the loss covered by property insurance?

The owner of a project in Indiana elected to carry property insurance with a very large deductible. A $1 million casualty loss, allegedly caused by subcontractors, was well within the deductible, so the insurance company made no payment. The subcontractors argued the loss had been “covered” because it resulted from a risk stipulated in the policy. The project owner and its prime contractor argued the waiver did not apply because the insurer made no payment for the loss.

The second case in this issue involved an alleged misrepresentation of custom fabricated windows. The project owner argued promotional material had represented crafting of individual items and testing for compliance with certain standard specifications. The supplier responded the language was merely “advertising puffery.”

The third case addressed delay damage claims disguised as change order requests. A New York court ruled the contractor could not use this device to avoid the consequences of an enforceable no-damages-for-delay clause.

Although the casualty loss to a project was below the deductible stipulated in the owner’s “all-risk” insurance policy, the project owner was the insurer of the deductible and the reciprocal waiver of claims in the AIA General Conditions applied.

A manufacturer did not violate a consumer fraud statute when it said its products were individually crafted. Nor did an industry certification suggest each custom product was independently tested.

A subcontractor could not avoid an enforceable no-damages-for-delay clause by disguising delay claims as change order requests. The construction manager’s alleged inept management could not constitute intentional or bad faith conduct.

State mechanic’s lien statutes usually invalidate lien filings that have exaggerated or overstated amounts. The language of these statutes varies, but it is implicit that there must be some wrong-doing on the part of the lien claimant. Some statutes expressly require fraudulent intent. That is the case with the Illinois statute.

An Illinois appellate court was faced with the question of whether a contractor’s duplicate billings were evidence of a fraudulent lien filing. In this case, they were. These were not mere misstatements of charges for work. They included billing for materials furnished to a separate project and for labor at two separate projects for the same employees during the exact same hours.

The second case in this issue involves an employee’s right to sue an employer for underpayment of wages mandated by a state prevailing wage statute. If testing and inspection services qualified as maintenance—and they did—was there standing for former employees as third-party beneficiaries of the contracts between their employer and the public works owners?

Double billings and charges for costs incurred on separate property were sufficient to support a finding of fraudulent intent in filing a mechanic’s lien.

Testing and inspection services were part of “maintenance” of public works facilities and therefore subject to a state prevailing wage law. The standing of former employees to sue as third-party beneficiaries of the public works contracts was an unsettled question of law that was referred to the state’s highest court.

Statutes requiring a party to a dispute to pay their opponent’s attorney fees can produce bitter results. Fee awards comparable to the damage recovery are not unheard of. In a construction contract context, these “fee shifting” provisions are found in prompt payment statutes and mechanic’s lien statutes. In both cases, the purpose is to compensate the party that was wrongfully denied payment.

A Kansas court addressed a situation in which a prime contractor made late payment to a subcontractor. The contractor said the late payment was justified by the sub’s refusal to sign lien waivers. The sub argued the subcontract language did not mandate waivers as a precondition to payment.

A Minnesota court was asked to apply a fee shifting provision in a mechanic’s lien statute. The contractor prevailed on its lien foreclosure action, but the project owner recovered a larger amount on its negligence counterclaim against the contractor. The owner argued it would violate the policy of the lien statute to allow the contractor to recover attorney fees under those circumstances.

The third case in this issue involved a termination for the convenience of the government. Restrictive language in the contract did not necessarily apply because the contract, when terminated for convenience, had been converted into a cost reimbursement arrangement.

Once a prime contractor demanded lien waivers from its subcontractor—discretion granted to the contractor under the terms of subcontracts—execution of the waivers became a condition precedent to payment. The sub’s refusal to sign the lien waivers excused the contractor’s failure to make timely payments.

An owner’s liability for breach of contract, and the mechanic’s lien which secured the contractor’s recovery, were distinct from the owner’s successful claim against the contractor for negligent construction.