On Tuesday, January 10, Mike Madigan hosted the first webinar of you 2017 Construction Law Webinar Series. Mike discussed the top 2016 Ohio Construction Law Developments including Supreme Court Cases such as Stolz v. J&B Steel Erectors, Inc. and Chicago Housing Authority v. DeStefano and Partners, Ltd. He also spoke on several cases to look over for and potholes to avoid in 2017.

1. z
WEBINAR SERIES
2017 Construction Law

2. z
2016 Notable Construction Cases

3. z
Two Construction Related Cases
From the Ohio Supreme Court

4. z
Stolz v. J&B Steel Erectors, Inc.
2016-Ohio-1567, 2016 WL 1592951 (Ohio 2016)
+ A subcontractor on a self-insured construction-project plan
is immune from liability to an injured employee of an other
subcontractor.
+ Allows General Contractor to create a “wrap-up” insurance, but
limited to coverage for workers’ compensation insurance.

5. z
Boone Coleman Constr. Inc. v. Piketon,
2016-Ohio-628, 2016 WL 744304 (Ohio
2016)
+Upheld a liquidated damages provision.
+The reasonableness of a liquidated damages clause
per diem rate in a public works contract must be
determined prospectively, in evaluating whether the
clause is an unenforceable penalty.

6. z
Ohio Court of Claims
ACCURATE ELECTRIC CONSTRUCTION, INC. V. THE OHIO STATE UNIVERSITY
At the dispositive motion stage, Referee found that notice given after the contractor
was already “off the project” was insufficient to preserve the claim.
JUTTE ELECTRIC, LTD., ET AL. V. OHIO FACILITIES CONSTRUCTION COMMISSION
Referee ruled in favor of OFCC after multi-week trial. Determined Surety did not
conduct reasonable investigation when it took over principal’s work. Also, Article 8
was not satisfied.
WOOD ELECTRIC, INC. V. OHIO FACILITIES CONSTRUCTION COMMISSION
Court ruled that notice provided by the electrical contractor was sufficient and
allowed the contractor to recover 100% of its claim, including extended home
office overhead. On appeal by OFCC.
Article 8

7. z
Local Residency
Requirements in Limbo
• Governor Kasich signed, H.B. 180, a law that was
supposed to go into effect on August 31, 2016.
• Bans public entities from insisting on local residency
requirements when procuring construction services.
• Cleveland’s “Fannie Lewis law,” which requires that 20%
of construction hours on Cleveland projects be
performed by Cleveland residents.

8. z
Local Residency
Requirements in Limbo
• The City of Cleveland filed for – and received
– an injunction preventing the State of Ohio
from implementing the law until the case
could be heard on its merits.
• Contractors have no choice but to adhere to local
residency requirements until the legality and
constitutionality of H.B. 180 is firmly upheld by the
courts.

9. z
Chicago Housing Authority v. DeStefano and
Partners, Ltd, 2015 IL App (1st) 142870, 2015
WL 8605437 (Ill. App. Ct 1st Dist. 2015)
Federal law preempted an owner’s breach of contract claim against an architect
for failure to design in compliance with federal accessibility standards for the
disabled.
The owner’s state action was a de facto indemnity claim which would
undermine the owner’s non-delegable duty to comply with federal
standards.

10. z
Gongloff Contracting, L.L.C. v. L. Robert Kimball &
Assoc., Architects & Engineers, Inc., 2015 PA Super
149, 119 A.3d 1070 (Pa. Super. Ct.)
Pennsylvania Appeals Court held that:
Architects potentially are subject to liability for negligent
misrepresentation claims when it is alleged that those professionals
negligently included faulty information in their design documents, and
Steel subcontractor alleged sufficient facts that documents supplied by
architect included false information as required to survive motion for
judgment on the pleadings.
Erosion of the Economic Loss Rule

11. z
Defect Case Update

12. z
Westfield Insur. Co. v.
Custom Agri Systems, Inc.
+2012
+Ohio Supreme Court Analyzed A Typical CGL Policy and
What Triggers an “Occurrence”

13. z
Westfield Insur. Co. v.
Custom Agri Systems, Inc.
Point Counter-Point
Argument Against Coverage
“Claims of Defective
Construction or Workmanship
Brought By A Property Owner
Are Not Claims For “Property
Damage” Caused By An
“Occurrence.”
Argument For Coverage
“If the damages are
consequential and derive
from the work the insured
performed, coverage
generally will lie.”

14. z
How Will That Argument
Play Out?

15. z
No Coverage
Claim Was A RESULT of Defective Workmanship

16. z
Franklin County Common Pleas
Decision Finds Coverage

17. z
Pending Defect Cases To Watch
Ohio Northern University

18. z
1 2
3
4
5
7
9
6
8
Waverly School District Board of Education et al., v. Triad AR, Inc. et al, and
Westfield Insurance Company
Pending Defect Cases To Watch

19. z
Potholes To Avoid in 2017

20. z
Labor Shortage
Qualified subcontractors
A low bid may come with significant risk
Increases chances of defective work claims
Exposure to Liquidated Damages

21. z
Owners That Get
In Over Their Head
These Owners Do Not Have Sufficient Funds On Hand To Handle Adversity
• Unrealistic expectations
• National crisis

22. z
Project Financing With No Room
For Error

23. z
Don’t Forget the Great Recession

24. z
Don’t Forget the Great Recession

25. z
Lessons Learned From These
Projects
+Don’t enter into agreements where lien rights are
waived or subordinated to other interests.
+A lien is only as good as the Project’s value
+ If the Bank’s mortgage exceeds the value – lien claimants
will likely be on the hook.

26. z
The More Complicated It Is To
Explain The Financing
The Greater The Risk
Does The Owner Have Cash On Hand? Or Is This Just A Shell Game?

27. z
Collision Between Pay-if-Paid
and Ohio’s Public Bond
Will A Surety Avoid Liability Under Its
Principal’s Pay-if-Paid Provision?
Subcontractor
Construction Manager
Owner
Surety
Does Pay if Paid Apply
to Surety?

28. z
P3 Problems

29. z
State Budget Problems

30. z
Here in Ohio –Surety Protection

31. z
Pointers
+ Make Sure Your Agreement Allows You to Suspend Work If
Payments Are Not Timely Received.
+ Read and follow the Agreement’s Notice Provisions When It
Comes to Suspending Work.
+ Don’t Waive Your Lien and Payment Claim Rights – Either in the
Agreement or By Signing Waivers In Exchange For Partial
Payments.
+ Choose Your Projects Carefully. Let Your Competitor Have the
Troubled Project.

32. z
Questions?
Mike Madigan, Director
Kegler Brown Hill + Ritter
mmadigan@keglerbrown.com
keglerbrown.com/madigan
614-462-5478