Kmestevez – Page 4 – ARIZONA CONSTRUCTION and the LAW

April 30, 2019September 4, 2019

“Preceding 30 days” means “Preceding 30 days” – Arizona Court of Appeals Finds that Prompt Pay Act Only Covers Work Performed Within 30-day Billing Cycle

***UPDATE – 7/23/2019***

The Court of Appeals’ decision in SK Builders, Inc. v. Smith, which is the subject of this post from April 2019, will cease being good law on August 27, 2019. The case was legislatively overruled by SB 1397, which was signed into law by Governor Ducey in April 2019 and will become effective on August 27, 2019. A post on the effects of SB 1397 and its overruling of the SK Builders decision will be forthcoming.

It is no secret that Arizona’s Prompt Pay Act (the “PPA”) is constructed around a 30-day billing cycle. Indeed, the PPA codified monthly progress billings as the standard payment arrangement on all Arizona construction projects. It was not, however, the understanding or practice of those in the construction industry that payment applications submitted at the end of a billing cycle were limited to work performed or materials furnished in the preceding 30 days. But this changed with the Arizona Court of Appeals’ recent decision in SK Builders, Inc. v. Smith. In SK Builders, the court held that the PPA provision stating that “billing[s] or estimate[s]” be based on “work performed and…materials supplied during the preceding thirty day billing cycle” means that the PPA does not apply to general contractors’ billings or estimates that contain work furnished outside the past 30 days. read more

September 19, 2018September 19, 2018

No Exclusion for You: Arizona Supreme Court Holds that Contractual Liability Exclusion in Homeowner’s Policy did not Relieve Insurer of its Duty to Defend Builder-Vendor

This summer, the Arizona Supreme Court rendered an opinion in Teufel v. American Family Ins. Co., et al., 244 Ariz. 383 (2018) that addresses interesting issues relating to insurance and the nature of the legal obligations owed by builder-vendors to home buyers. Specifically, the Court examined whether a homeowner’s insurance policy exclusion “for personal liability ‘under any contract or agreement’ relieve[d] an insurer of defending its insured, an alleged builder-vendor, against a claim for negligent excavation brought by the home buyer.” The Court ultimately held “that the exclusion did not apply to relieve the insure of its duty to defend because the negligence claim [arose] from the common law duty to construct the home as a reasonable builder would.” read more

March 21, 2018

Not So Fast: Arizona Supreme Court Rolls Back Recent Expansion of Common Law Indemnification Claims

Just over a year ago, I authored a post on the Arizona Court of Appeals decision in Hatch Development, LLC, et al. v. Sol’s Construction Co., Inc., 240 Ariz. 171 (App. 2016), which addressed the concept of common law indemnification. Just recently, however, the decision in Hatch Development was abrogated by the Arizona Supreme Court’s opinion in KnightBrook Ins. Co., v. Payless Car Rental System, Inc., 243 Ariz. 422 (2018).

The Abrogated Hatch Development Decision

In Hatch Development, homeowners sought indemnification from their contractor for damages suffered by a neighbor due to a defectively installed sewer system. The court ultimately ruled in the homeowners’ favor, holding that a common law “duty to indemnify may arise in at least two alternative circumstances: First, when the party seeking indemnity has ‘extinguished an obligation owed by the party from whom it seeks indemnification,’ or second, when the indemnity defendant is ‘at fault.’” The court noted that the first circumstance was grounded in Restatement (First) of Restitution § 76. Conversely, the second circumstance, on which the Court’s decision turned, was predicated on Restatement (First) of Restitution § 78(b)(ii), which provides, in pertinent part, that a party is entitled to indemnification where: (1) he or she makes a payment on an obligation; (2) the obligation arises because of the fault of the indemnity defendant; and (3) the payment is made with the justifiable belief that the obligation was owed. read more

December 31, 2017

Zumar v. Caymus: Arizona Court of Appeals Holds that the Arizona Prompt Pay Act does not Apply to a Contractor-Subcontractor Relationship on a Federal Project

A decade ago, the Arizona Court of Appeals held that “the primary purpose of [Arizona’s Prompt Pay] Act is to establish a framework for ensuring timely payments from the owner to the contractor and down the line to the subcontractors and suppliers whose work has been approved.” Stonecreek Bldg. Co., Inc. v. Shure, 216 Ariz. 36, 39 (App. 2007) (emphasis added). But just recently in Zumar Industries, Inc. v. Caymus Corp., No. 1 CA-CV 16-0423, the Court of Appeals was tasked with deciding whether the Act still applied to a “down the line” relationship on a federal work project, where there was, by statute, no preceding “owner-contractor” relationship. The Court held that the Act did not apply in these circumstances. read more

November 14, 2017November 14, 2017

They’re Here: AIA Rolls Out 2017 Updates to Contract Documents

The American Institute of Architect’s (“AIA”) Contract Documents are among the most widely used form agreements in construction. For purposes of keeping up with critical court decisions and industry trends, the AIA reviews and amends its core documents every ten years. 2017 marked a decade since the last updates, and like clockwork the AIA has released revised versions of its documents over the course of this year. Several months ago, the AIA released new versions of 14 documents, including its flagship agreements for the design-bid-build delivery model. And just recently, the AIA has released 20 additional new documents relating primarily to the scope of architects’ services. read more