Construction Corner - Legislation Update - August 2019

Michael E. Catania

08/14/2019

CONSTRUCTION CORNER

Michael E. Catania

Legal News and Updates for the Design and Construction Industry

CONSTRUCTION LEGISLATION UPDATE

Several bills were passed at the end of the most recent legislative session and now await the governor’s signature. Below is a summary of some of the more important construction related items:

1. S5933A- Adds a new section, 138-b, to the State Finance Law requiring that all state agency and state authority contracts contain a clause which allows a contractor to make a delay claim for additional costs where such delay is caused by a material act or omission of the state agency. In order to make a delay claim, the contractor will have to submit a notice of claim to the state agency no later than 15 days from when it knows the facts which form the basis for its claim. This notice will have to be certified in writing and under oath and contain detailed descriptions of the actual delays and their causes. It also requires documentation as to the “substance of any material oral communication relating” to the delay claim. [1] Given the complexity of the statute, I would highly recommend that construction counsel be retained to help submit these delay claims.

2. S. 2394 - This bill establishes a “new comprehensive definition of "Substantial Completion” for public construction projects under existing law. With retainage so often tied to achieving substantial completion, this legislation should help contractors get paid in a timelier manner. This bill defines substantial completion as follows: “The project is sufficiently complete in accordance with the contract so that the public owner may occupy or utilize the work for its intended purpose.”

3. S.6575- This MWBE bill was reported on in my previous newsletter. The governor signed it into law on July 15. Generally speaking, the law increases the governor’s initiative to address the findings of the 2016 Disparity study. It does this in several ways, including a 10% bid preference for MWBE’s for contracts under 1.4 million dollars. It also increases the personal net worth limits for Owner Qualifications as MWBEs and requires state agencies to adopt MWBE goals based on the 2016 disparity study. In addition, the law requires that all waivers of compliance be made available for online public posting. [2]

[1] https://www.nysenate.gov/legislation/bills/2019/s5933/amendment/a

[2] https://www.nysenate.gov/legislation/bills/2019/s6575

INSURANCE LAW UPDATE

As outlined in some of my prior newsletters, Owner and Contractor Controlled Insurance Programs (OCIPs and CCIPs) are becoming commonplace on larger projects. If you are a contractor under one of these programs, it is imperative that you consult with a construction attorney and insurance specialist to make sure you do not have any gaps in coverage. You might assume that, should a particular loss be excluded under the OCCIP, your general liability policy will step in and provide coverage. You may be wrong! Many a CGL policy contains a wrap-up exclusion with language similar to ISO CG 21 54 01 96, which states:

This insurance does not apply to "bodily injury" or "property damage" arising out of [ongoing or completed operations] . . . as a consolidated (wrap-up) insurance program has been provided by the prime contractor/project manager or owner of the construction project in which you are involved. This exclusion applies whether or not the consolidated (wrap-up) insurance program: (1) Provides coverage identical to that provided by this Coverage Part; (2) Has limits adequate to cover all claims; or (3) Remains in effect.

Under this language, your CGL policy will not provide coverage on a project in which you are enrolled in an OCIP or CCIP even if the provided insurance is insufficient. Thus, if the wrap-up policy disclaims, your own policy will not step in to fill the insurance void.

This language is also a concern for contractors who retain subcontractors or suppliers that are not part of the OCIP or CCIP (say, for example, off-site fabricators). If those subcontractors/suppliers have a wrap-up exclusion similar to one above, their own CGL policies may disclaim coverage for you, the additional insured. The ISO form does not require the insured to actually be enrolled in the program for the exclusion to apply, only that the project has such a program.

As such, an enrolled contractor who is sued for an unenrolled supplier’s negligence, and who looks to that supplier’s insurance company for coverage as an additional insured, may be out of luck. To address this rather large loophole, ISO has issued a new endorsement which conditions the wrap up exclusion to only those instances where the insured is actually enrolled in the program. If you deal with unenrolled subcontractors or suppliers on an OCIP or CCIP project, make sure they have such an endorsement.

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This Newsletter is meant to provide general information only and not to provide legal advice or opinions. The viewing of the information contained in this newsletter should not be construed as, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance on the information contained herein and we disclaim all liability with respect to actions taken or not taken based on any or all of the contents of this newsletter to the fullest extent permitted by law. An attorney should be contacted for advice on specific legal issues.

Construction Corner - Legislation Update - August 2019

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