The High Ground

Disturbing Trend in Construction Claims

Bosley — Wed, 14 Mar 2012 21:20:09 +0000

By Greg Martin, CIC

Are dissatisfied project owners beginning to use suits against subcontractors license bond sureties as a way of forcing settlement of complex construction defect claims?

How are we to prepare for this tactic?

We are all used to seeing construction project disputes turn into lawsuits but they have followed a familiar pattern. The owner and General Contractor disagree about scope changes and the extra cost of the project, so the GC files a lien on the property. Then, the owner returns fire with a suit alleging construction defect and other things. Subsequently, the subcontractors are brought in by cross complaint, or tender and many months later, the parties settle out to the satisfaction of no one.

But, we just saw a secondary tactic which appears to be more common these days …. an amended complaint which sues the sureties who provided the subcontractors’ license bonds.

One of our clients supplied materials to a General Contactor for a large custom home and a year after afterwards, received a letter and attached complaint from its contractors license bond carrier. Needless to say, they were surprised because they had never received the complaint directly.

In retrospect the reason was simple, the homeowner had sued the General Contractor after becoming dissatisfied with the quality of the overall work, and of course had failed to pay for part of it, but was embroiled in litigation and looking for a way to get things ….unstuck…

It worked. The sub’s sureties notified the contractors that they could either mount a defense themselves or the bond company would defend and bill them back the expenses ….or cash out any held collateral if that was the arrangement. The subs howled and at present that is where we find ourselves.

From a legal perspective the homeowner has little prospect of collection. Geoffrey Hudson, an attorney who represents many sureties, told me ultimately the strategy will likely fail because the homeowner did not sign contracts with the subcontractors so there is no “privity” of contract. In essence, the contractors’ license bond is there to secure compliance with the license law and applies to direct contracts, not indirect relationships

But it really does not matter, the fact is that the tactic has succeeded in bringing extra pressure on the General Contractor who felt it was controlling the litigation. Now, a second area of penetration has been opened, and any cooperative defense has been made more difficult.

I can almost hear my commercial contractor friends saying “ yeah – that’s residential construction – I don’t have to worry” but I beg to differ … the homeowner in this case built a commercial grade residence, is a corporate leader, and the law firm that amended the complaint is a well known Southern California firm representing developers, contractors, and large public agencies.

So what do we do?

First, make sure you don’t have some kind of collateral pledged to your Contractors License Bond Surety and if you do, you need to replace the relationship.

Second, General Contractors need to formulate a pre-qualification question of subcontractors making sure they are not choosing subs who have a collateral requirement. Unfortunately, I have been unable to find a way to independently identify who is, or who is not, using collateral other than by asking.

Finally, we need to find a select group of panel counsel attorneys, approved by enough sureties, as panel counsel to be able to offer a group defense should this happen again. Fortunately, we will soon see what the best legal defense is in this specific case and then can offer it to a group of subcontractors and their sureties to diffuse this tactic in the future.

Our response to this new challenge is not yet complete but we have made a start.

2012 OSHA Posting

Bosley — Thu, 16 Feb 2012 18:38:05 +0000

Noted below is the text of the letter we sent out to our clients regarding the OSHA reporting requirements.

We’re three weeks into the new year and there are a couple of things to update for 2012. First we have a week to update and post the annual OSHA Report. Your 2011 OSHA Log can now be completed for your company and be posted by February 1st through April 30^th. This report will always be required by State inspectors and immediately upon notice of an accident. It must be posted alongside other State and Federal 2012 Worksite Posting Notices[1].

Attached is a copy of this 2 page report for your use this year.

The following is a list of basic instructions that will help you complete the form. This is also a reminder to post to summary log (300a) and file the table!

Always begin each new entry in pencil which allows for corrections & revisions.
Start numbering each incident with the year, for example 11-1, 11-2, 11-3 (Col# A).
Differentiate between injury and illness. Allegations of stress related injuries are not to be considered illness or injury; list them as ‘other’ in the description field.
First Aid incidents are not recordable. First aid is normally considered any 1-time treatment for scratches, cuts, burns. If you need additional information on First Aid, contact us for reference materials.
Categorize each reported incident as either: Lost days away from work (Column 3 & 4), or Restricted work (Column 5). Report medical only claims in (Column 6). Lost days are capped at 180 maximum.
Do not include injuries that occurred in the calendar year 2010 and rolled into 2011, as these have already been recorded and would represent duplicate reporting.

Part time employees accrue benefits at reduced rates. For each 8 hours lost record it as 1 full day. Two 4-hour shifts would constitute one 8-hour workday missed. Likewise, time lost from work should be recorded at a maximum of 5 days per week regardless of any overtime history. The first reported lost day begins with the day following an injury.

Even if you did not have any reportable injuries in 2011, you must complete a report and post the 300A showing ‘None’ and fill in each column to be in compliance.
If a second page is required, always total the first page and bring totals forward.
Keep separate logs for each location even though you may not be required to post at alternate locations.
Draw a line at the bottom of the report after December 31^st and total each of columns 1-13 indicating the report is complete.
Sign and date the bottom of each page prior to February 1^st, 2012.
Transfer the information from the OSHA 300 Log to the OSHA 300a Summary Posting Notice which complies with HIPPA privacy regulations. Post just the summary notice in your normal posting area (bulletin board.) Make sure that you have secured the log in such a fashion to prevent tampering.

At the end of April I will send you a reminder to file the OSHA 300a Posting Notice to your comp file, attached to any Workers Comp Notice of Injury Report Forms (#5020) and the MPN[2] plan.

These records need to be kept for a period of five years and are required by various State and Federal inspectors and auditing organizations. It should be filed along with each of your 2011 Facility Inspection reports and general training records.

Sincerely,

Chris Cordill, President

[1] Copies of the 2012 Employer Posters which include EEO, EDD and FMLA notices can be secured for $23 on line or by phone at http://www.calbizcentral.com/Store/Products/Pages/PLE2009.aspx

[2] If you do not have an updated MPN for your company or need to revise your program call me immediately.

National Labor Relations Board Notice #1526

Bosley — Thu, 08 Dec 2011 23:53:01 +0000

The National Labor Relations Board (NLRB) has instituted a rule which became effective on August 30, 2011 which requires all private sector employers to post notice at their worksites advising employees of their rights to organize and bargain collectively with their employer, etc. Under the rule, the approved notice will have to be posted no later than Jan 31, 2012. Copies of the required poster can be downloaded from the NLRB’s website www.nlrb.gov or ordered from their offices. Additional information along with a fact sheet describing the new rule can be found at https://www.nlrb.gov/node/1526

It is very important that the required notice be posted in the location where all other required notices are posted, because failure to post can give rise to an unfair labor practice charge and have other negative legal consequences. The poster must be 11” x 17”. This new posting may be used by unions to try and jump start organizing efforts, particularly with the NLRB’s proposed rules shortening the time frame for holding an election on the horizon. Therefore, it’s critical to note that there are proactive programs available that include training for managers and supervisors and education for employees.

Please feel free to give us a call if you have any questions.

Quick link – http://www.nlrb.gov/sites/default/files/documents/1562/employee_rights_nlra.pdf

Does having a Doctor Issued Medical Marijuana Card Trump Your Work Rules?

Bosley — Tue, 04 Oct 2011 18:05:26 +0000

One of our clients was recently approached by an employee who explained that their physician had issued them a Medical Marijuana card and ‘instructed them to take it on a regular basis.’ The employee seemed to be laying the ground work for exemption to the company drug policy and preparing his Employer for his open use under the new Ca regulations/guidelines.

Our client immediately began wondering if this prohibited their enforcement of the employee handbook and if it would still be valid for specific employees in this situation.

Could he work in the shop after smoking?
Could he smoke it during the day in the designated smoking areas with regular tobacco users?
Could he drive the delivery truck without restrictions?

In today’s litigious environment any careful business owner is concerned with things like allegations of discrimination, allegedADAviolations and privacy rules which make them cautious in such situations. So what do we do when this happens?

According to Human Resources Consultants:

“Nobody is granted any rights to use marijuana just because they have a card from their doctor. It is treated like any other illegal drug: use, possession, distribution or sale in the work place or while on company property is grounds for termination, and being under the influence while at work or while driving a company vehicle is grounds for termination.

If someone pops positive on a pre-employment or post-employment drug screen, the company is within its rights to terminate, even if they have a medical marijuana card. ”

So rather than wait for an incident to arise we are recommending that employers reiterate the company policy to all employees along with a clear warning that while a medical marijuana card may allow the purchase of Marijuana – it remains unacceptable in the workplace.

Ooohhh, Ooohhh, That Smell!

ConstructionGuy — Thu, 29 Sep 2011 19:42:35 +0000

The first thing I noticed was the smell …the sweet faint smell …vaguely familiar like from the past …kind of reminded me of college …

“Hey man …Dave … Boss….Hey, can talk to you minute?” A voice from outside the office door drifted in behind the scent and I saw my new, recently trained, lowest ranking shop employee poking his head around corner.

“Sure …what’s up?” I replied

“Well…like..a…dude you know .. like…I .. have this problem.. a medical thing .. kind of sickness – not hurt or anything but my doctor gave me this prescription and a card and … hey …. I didn’t you guys to wonder when I was out back or anything … you know?”

He had me completely stumped and it must have showed.

“Dude … do you want to see the card? Here it is…”

And I found myself looking at the card on my desk. It was signed. It had an official seal. And it said the bearer of the card had official, medical, and legal permission to buy marijuana at any properly licensed clinic.

“So hey, thanks, I just didn’t want you guys to wonder … you know?” And with that the card was snatched away and my new employee backed out of the office with the mild and reassuring odor fading away slowly after he left.

Pot head. Head. Head Shop. Bongs. Water Pipes …… Shelly with the halter top after the party leaning back in my double wide, dorm special, bean bag chair …..

Focus – I needed to focus.

I had a Pot Head in my shop and I think he had just told me he would be out back on breaks smoking pot before operating cutting equipment, moving loads with the forklift, driving the delivery truck and (oh no !) talking with customers at the jobsite.

“JANICE ….JANNN….I…I…I….C…E” I yelled out the door to my trusty administrative assistant, HR director, accounting guru and otherwise female alter ego who had been with me for a dozen years. “Grab the Employee Manual, come in hear, and shut the door !!!”

Janice arrived holding the oversized binder. “What happened to you – see a ghost?” she remarked taking seat in the chair new the window “what did the new guy say.”

“He has a medical marijuana card” I replied while seizing the binder and flipping through pages to the controlled substances section. “Yep its here – use of an illegal drug while in the course of employment is grounds for termination – check and see if you have a copy of the form he signed when we hired him”

“Yes – but for him its not illegal – he has a card” Janice said leaning back in the chair for what looked like a long stay.

Doubt crept into my mind. While just seconds ago I was in the early stages of rehearsing the firing speech, with some changes I had never even thought I would have to include, now a series of letters floated into my imagination…..ADA…HIPPA….OSHA…..

Would enforcing our employee work rules just result in a discrimination suit? Could my newest employee excuse himself from an installation at the customers home to go outside and light up ?

I needed advice.

So I called my insurance broker …. He should have some ideas…. After all he just came back from Burning Man ….

************Stay Tuned For The Answer To This Situation************

Why I Went to Burning Man

Bosley — Thu, 22 Sep 2011 23:14:42 +0000

I’ve done all those regular vacations: from high adventure and action to relaxing. I wanted something different. I loved the idea of waking up in the morning and riding my bike across the desert for a pancake breakfast, drinking absinthe at noon and celebrating the experience at midnight.

Burning Man is that rare opportunity to recreate yourself for a single week: to live in the moment, off the grid, without any responsibilities and without your default image & reputation to contend with. It gives you the opportunity to pretend you’re still young with your whole life ahead of you and to act out.

To dance under the moon & lasers to loud music you can feel.

To adventure across the open desert and climb on giant art play equipment.

To stay up till dawn after wandering into someone’s camp without an invitation and being welcomed in.

To dress in character & be invited to share meals with complete strangers.

To talk about life & the mysteries & conflicts, get a temporary tattoo, to dance like nobody’s watching…..but everyone does, and nobody laughs at you.

Burning Man is an experience to be shared with a few friends or just someone special. It is potentially life changing if you let it:

It allowed me to reinvent myself for 1 week, to tell people I was a factory worker, or circus performer, to be irresponsible and only responsible for myself.

I wore kilts and boots, hats that made a statement.

I survived a dust storm exposed to the elements.

I walked across the desert at night, and rode a bike for miles to get everywhere. I lived under the stars at night and napped in the shade in the afternoon.

I met people from all walks of life who talked about life & the world as they see it and what gets them excited and why we were different and how life works.

Burning Man – it’s not for everyone, and it’s not for me as a permanent way of life, but for one week, I stretched myself and lived outside my comfort zone…did a few things that might have seemed foolish in the default world but somehow made sense there. I laughed and was free to question & wonder out loud without repercussion.

Neighborhood Watch

Coach — Tue, 16 Aug 2011 22:03:13 +0000

Social networking is on fire! My son and daughter have their own Facebook accounts and with our supervision, they are having a blast with these fun systems. Almost everyone under the age of 30 is using these amazing systems to share with family and friends all sorts of fantastic occasions to celebrate. Birthdays, nicknames, pet’s names, anniversaries, weddings, and even funerals are shared for those we love and know. Unfortunately, there are those out in cyberspace that use this information to do harm. Predators have been using the information to hunt unsuspecting children and take advantage of the elderly. We read recently of a whole new tactic that these evil-doers have figured.

A British man was sentenced to 15 months in jail for what the judge defined as “sophisticated fraud… A well planned complex clever theft.” Iain Wood spent up to 18 hours a day scrutinizing his neighbor’s mail and Facebook accounts in an elaborate scheme to steal $57,000.00 from their bank accounts to pay for his out of control gambling habit.

Wood spent the past 2 years gleaning information he could from Facebook and other social networks to build a database of information on his neighbors. He would then pilfer their mail for bank statements and other financial information. With the personal information he could ascertain from the social network sources, he would go on line and attempt to break into their bank accounts to loot the accounts of their money. He was able to answer many of the security questions asked by the bank and cleverly used the “did you forget your password?” button to access the account information.

This scheme was very effective and it took almost 2 years for the police to catch Wood. He would use mostly dormant accounts at first so that many unsuspecting victims didn’t notice the thefts were taking place. He would order replacement cards and then empty the accounts of their money even often utilizing overdraft protections in the process. Ultimately, he got caught when he either got cocky or desperate. He started to steal money from other’s accounts and transferring the money directly into his own account.

Look, we all love Facebook and all of the other social networking systems that are a lot of fun to use. With the economy struggling, people become desperate and look for any avenue of opportunity. Please be aware of this tactic and watch how much detail you share on these systems. It’s a sad commentary but it’s important to remember… Somebody is always watching…

Be Aware!

Bosley — Thu, 11 Aug 2011 17:43:08 +0000

“Look both ways before you cross the street!” “Don’t forget to lock your car.” “Wear your life jacket when you go boating.” “Make sure you lock all the doors and windows when you leave the house.” Often, we are given warnings in life to protect our life and safeguard our belongings when we do something.

In business, we have similar warnings and are proactive about safeguarding the business functions, employees and assets. We plan a budget, set up safety procedures, purchase insurance, and generally conduct ourselves in a manner to protect our interests.

Sometimes in business, just as in life, we are the victims of negative circumstances just by passively existing.

This concept is all too familiar for one of our clients who operates a window and door glass company. They had moved into a desirable strip mall years ago and peacefully co-existed with their neighbors, one of whom was a Mom and Pop Grocery Store. They installed their security fences, barbed wire, alarms, and otherwise secured the premises where they prospered. As the economy turned for the worse, they took the necessary steps to survive and ride out the downturn.

Unfortunately, the Mom & Pop Grocery Store wasn’t so lucky and they went out of business. Some time after the Grocery store closed, a new business moved in – a recycling center. The recycling center did a steady stream of business with customers coming and going all hours of the day. As the center took in the recyclables behind the storefront, the customers sometimes lined up behind our insured’s store.

Now, behind our insured’s store there was a storage room which contained aluminum and other metal products which they used in conjunction with their manufacturing. Often, the door was left open as they worked throughout the day and there’s no doubt that the folks lining up to cash in their goods saw the contents of the shed. The insured figured he had protected his assets with heavy-duty steel entry doors, surrounded by tall steel fences, topped with barbed wire. Pretty secure, wouldn’t you think? Apparently, it wasn’t secure enough for one determined thief who cut through the fence, and steel door to steal the contents of the storage bin.

The insured arrived at the business one morning to discover the theft and sadly called our office to report it. We handled the claim & it was resolved quickly. Unfortunately, the damage to the fence, barbed wire, and storage shed totaled over $5,000 which will show up on the insured’s loss runs next renewal. The value of the aluminum? Just $500.

Just as we need to listen to the warnings expressed to us, we need to be aware of what is going on around us in other businesses or activities which might affect us just by being in their proximity.

Welcome to the High Ground Blog!

Bosley — Thu, 04 Aug 2011 21:06:28 +0000

We started this blog to bring you fresh information on a variety of topics related to the business world. While our perspective may be from that of an Insurance Broker, we hope the breadth and depth of our business experience will come across in other topics.

We consider ourselves your business partner, and with this blog, we hope to accomplish our goal of providing “Professional Insurance Expertise with a Personal Touch.”