Green Materials May Lead to a Rise in Construction Defect Litigation

The green building boom has increased the possibilities available to contractors to construct environmentally friendly projects, both in accordance with new government standards and their customers’ wishes. However, along with progress also comes uncertainty. Some of the newer environmentally advanced construction materials may not have much of a track record for safety. While there are no new definite risks that are currently known, the coming years will determine whether environmental advances in building materials will also be safe or have similar useful lives.

There are many variables within the green building boom that could affect the insurance market, both for the structures once they are built and for the professionals designing and building them.

Green Building Poses an Uncertain Future for Insurance Premiums

It is impossible to say at this point in time whether newer green building materials have increased or decreased risks of construction defects or other legal issues. They are too new to have acquired any sort of track record yet. However, insurance companies will be active in the space given the expanding activity in the green construction sector.

One example is with LEED certification, where the uncertainty varies by level of certification. At the basic level, LEED certification may not involve too much of a departure from traditional building methods. Many, contractors have been building to standards that would qualify for basic LEED certification for years, and there has been no known spike in construction defects. The risks arise when customers wish to have a project built to gold or platinum certification. At that point, the contractor may be asked to use more untried building methods, equipment and/or materials in the design and build process. As innovative as these methods may be, no one quite knows yet how such will perform throughout the life of the project. New technology does not automatically mean increased risk, but we’re still too early in the green movement to know exactly where this increased risk exists, if at all.

How Specific Green Technologies Could Impact Premiums

One example of a new technology that may raise questions is wind turbines. Some customers have taken to requesting mini wind turbines on the roof of a new project. However, there could be a risk that the building’s roof may not be properly designed to withstand the weight or movement of the turbines. Although these fears could turn out to be unfounded, it may take years to know whether there are any potential issues caused by wind turbines on a roof.

Another new technology about which there is little safety data is fuel cells. Some new projects have resulted in the installation of fuel cells directly outside a building’s property. These cells produce electricity by converting a source fuel into an electrical current and water. This conversion process can generate intense heat. There is always a possibility that this intense heat could result in increased fire risk. These technologies are too new to have generated any patterns or issues which would appear in their safety records, but the lack of incidents does not guarantee there won’t be any in the future.

There is one new green technology that has already resulted in an increase in insurance claims. Some projects have featured a vegetative roof. In some cases, buildings with these roofs have suffered water damage because drains on the roofs become clogged, are improperly installed and/or improperly specified drains. Additionally, membranes on the roof have become pierced, leading to water damage to the floors below.

One common way that a building technology becomes “green” is by materials and components being created out of recycled material. When a material is described as being made of recycled material, the origins may be unknown. A common follow-up question is, “Recycled from what?” Insurance companies ask this same question. Just because material is made of recycled material does not automatically mean it is safe or quality.

The unknown risk potential of new green technologies could also result in increased insurance costs while underwriters learn more about the technologies. To protect themselves, underwriters may be inclined to raise premiums while they do their due diligence regarding the safety of new technologies.

Green Buildings Could Become More Expensive to Insure

There is one reason why green building technologies will definitely raise insurance premiums. The emerging technologies cost more to build. Thus, an overall insurance policy will be for a higher amount, requiring higher payments. If green building materials prove to be riskier than traditional construction materials, the insurance premiums will be even higher. However, some insurance companies may offer discounts for green buildings.

That said, there are other reasons why premiums may not increase too much. Companies that invest in green technologies often have a track record of creating a culture of safety. They are more interested in the maintenance of their buildings and safe operation. These safety and preventative maintenance-conscious policyholders could lead to a small number of claims over time and potentially lower premiums.

Builders and Engineers May Need Their Own Insurance

Another potential area of liability is for builders. Companies are looking to hire contractors who can build a structure that would help them achieve certain green benefits, including LEED certification. Sometimes, a green building can fail to live up to its environmental targets even when there are no overt building defects. In one lawsuit, Southern Builders v. Shaw Development, the building’s owner (Shaw Development) sued its builder because, among other things, the “green” building allegedly failed to achieve certification in a timely manner, which allegedly cost the owner $635,000 in state tax credits. The case settled outside of court.

As more companies opt for green building technologies, litigation between developers and owners on one hand, and builders on the other, will increase. From a contractor’s perspective, they need to be careful about making any specific warranties and representations regarding their work. Architects and engineers may need to be specifically insured against any professional liability claims resulting from the environmental underperformance of their buildings.

In general, insurance premiums are a reflection of the risk taken on by an insurer to insure something or someone. Right now, there is not enough yet known about green buildings to reasonably predict what the future holds for construction defect litigation involving those buildings, and the cost of insuring them or the projects that helped make them green. For more information on construction litigation matters, contact MehaffyWeber.

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Statute of Frauds, not satisfied

An alleged requirements contract for a supply of auto parts did not satisfy the statute of frauds, when it did not say in writing that it was a requirements contract or otherwise establish a quantity, when:

• The email in question referenced a $10,000 credit limit (“Our credit manager is on the conservative side. He has given you a credit limit of $10K until he sees a credit history pattern. Your terms are net 30 days.t had a $10,000.”) The Fifth Circuit held: “The $10,000 figure is a credit limit; it is not a ‘specif[ication of] a quantity’ of goods that Wesden would buy from ITW.”
• The email attached a price list. The Court held: “Wesden contends that the attachment satisfies the quantity-term requirement because it shows that the parties agreed to an ‘”‘unlimited” quantity in writing, which is very specific.’ But this is not so. The attachment is an empty order form listing the per-unit price for each Auto Magic product. There is no quantity or exclusivity term in the price list.”

Wesdem LLC v. Illinois Tool Works, Inc., No. 22-50769 (June 9, 2023).

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SCOTUS Keeps Trademark Law Simple

Jack Daniel’s v. VIP presented the question whether a dog toy, with the general appearance of a Jack Daniel’s bottle, infringed the Jack Daniel’s trademarks. The matter reached the Supreme Court because of a dispute over whether to (a) apply the customary likelihood-of-confusion factors under the Lanham Act, or (b) before applying those factors, apply “the Rogers test” that focuses on a First Amendent issue. The Supreme Court chose the simpler path and went straight to the factors:

Without deciding whether Rogers has merit in other contexts, we hold that it does not when an alleged infringer uses a trademark in the way the Lanham Act most cares about: as a designation of source for the infringer’s own goods. VIP used the marks derived from Jack Daniel’s in that way, so the infringement claim here rises or falls on likelihood of confusion. But that inquiry is not blind to the expressive aspect of the Bad Spaniels toy that the Ninth Circuit highlighted.

No. 22-148 (U.S. June 8, 2023) (citation omitted).

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Planning For When Your Mind Fades

As our population ages, age-related diseases, such as Alzheimer’s and other forms of dementia, will afflict an increasing number of people. Although irreversible and incurable, those diagnosed with these diseases can live for prolonged periods of time with treatment.

In the early stages of the disease, individuals with dementia can maintain a good quality of life. However, as the disease progresses, that changes. They lose their ability to recognize family members, become increasingly fearful and agitated, and are unable to take care of themselves.

If you receive a dementia diagnosis, what type of treatment would you want? Would your wishes change as the disease progresses?

Living Will: The Texas Directive to Physicians

A Texas Directive to Physicians allows you to specify what kind of life-sustaining treatment should be administered or withheld if your physicians diagnose you with:

1. A terminal condition from which you are expected to die within six months, even with available life‑sustaining treatment provided in accordance with prevailing standards of medical care; or
2. An irreversible condition that prevents you from caring for yourself or making decisions for yourself and will result in your death without life‑sustaining treatment provided in accordance with prevailing standards of care.

The statute defines a terminal condition as an incurable condition caused by injury, disease, or illness that according to reasonable medical judgment will produce death within six months, even with available life-sustaining treatment provided in accordance with the prevailing standard of medical care.

The statute defines an irreversible condition as a condition, injury or illness that may be treated, but:

• is never cured or eliminated,
• leaves a person unable to care for or make decisions for himself, and
• is fatal without life sustaining treatment provided in accordance with the prevailing standard of care.

The document gives individuals the option of indicating whether doctors should administer or withhold treatment depending on whether the patient is suffering from a terminal or irreversible condition.

It works well for acute situations, such as an accident or a stroke, but not for degenerative conditions where quality of life diminishes over time.

Living Will for Dementia

Dr. Barak Gaster, an internist at the University of Washington School of Medicine, believes that most advance directives are not appropriate for diseases that progress gradually because they do not adequately account for the fact that treatment wishes may change as the disease advances. So he worked with others to create a dementia-specific advance directive that allows those diagnosed with the disease to better express their wishes.

The Health Care Directive for Dementia provides information about the symptoms of mild, moderate, and severe dementia, and allows individuals to specify their treatment goals depending on the course of their disease. For example, someone could specify he would like to receive all treatment that prolongs his life, including rescusitation if his heart stopped beating, if his dementia is mild. However, that same person could also direct that all care to prolong his life should not continue when his dementia becomes severe.

The New York Times recently featured Dr. Gaster and one of his patients in an article titled: One Day Your Mind May Fade. At Least You’ll Have a Plan.

Many thanks to my friend, Kay Allen, a certified financial planner in Colleyville, Texas, for bringing this article to my attention.

This article was originally published on February 26, 2018, and updated on June 6, 2023.

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Arbitration: Where’s the Agreement with the Plaintiff?

Fox v. The Rehabilitation & Wellness Centre of Dallas, LLC, et al.

Dallas Court of Appeals, No. 05-21-00904-CV (June 5, 2023)

Justices Molberg (Opinion), Partida-Kipness, and Carlyle

Neil R. Burger

Roger Fox brought wrongful death and survivor claims on behalf of his deceased wife, Karen. Defendants moved to compel arbitration based on an agreement signed by Roger—not Karen. The trial court granted Defendants’ motion to compel arbitration and dismissed all claims.

The issue before the Court was simple: Did Defendants “meet their initial evidentiary burden to prove the existence of a valid, enforceable arbitration agreement?” No, they did not.

The Court noted that the trial court did not hold an evidentiary hearing, did not consider any affidavits, and did not admit any evidence into the record. Instead, the only items before it were unauthenticated documents attached to the filings. Although the parties apparently ignored this evidentiary problem in both the trial court and on appeal, which would have been dispositive had he raised it, the Court recognized another fundamental problem: there was no evidence that Roger signed the agreement on Karen’s behalf. Therefore, even assuming the contract had been authenticated and admitted, Defendants did not meet their burden under principles of contract law and agency, which require the agent’s (Roger’s) authority to be established through the principal’s (Karen’s) conduct. Roger’s signature, accompanied by language in the agreement purportedly stating Roger was acting as Karen’s agent, did not suffice.

The Court thus reversed the order compelling arbitration and remanded the case to the trial court for further proceedings.

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Rule 91a: “Just the Facts Pleadings, Ma’am” … Even if It’s Not Briefed?

Davis v. Homeowners of American Insurance Co.

Dallas Court of Appeals, No. 05-21-00092-CV (May 31, 2023)

Justices Molberg (Opinion, linked here), Pedersen (Dissent, linked here), and Kennedy

Ken Carroll

A defendant insurer successfully moved to dismiss the plaintiff’s claims under Rule 91a, based on limitations. But the Dallas Court of Appeals reversed, 2-1. The problem? The insurer’s motion to dismiss relied heavily on a variety of documents submitted with that motion to establish the limitations point. Rule 91a, however, expressly provides that a “court may not consider evidence in ruling on the motion and must decide the motion based solely on the pleading of the cause of action.” “In the Rule 91a context, only the non-movant’s pleading may be looked to when determining whether the cause of action pleaded has a basis in law.” A Rule 91a motion to dismiss, the Court explained, “is not a substitute for … summary judgment,” and so “the court may not resort to evidence proffered by the movant, such as through affidavits, transcribed testimony, or documents.” The majority therefore reversed the Rule 91a dismissal, but cautioned that it was not addressing the merits of the limitations argument, which might yet succeed on summary judgment.

Seems straightforward, right? So, why a dissent? Well, said Justice Pedersen, the plaintiff did not preserve error in the trial court. More specifically, the plaintiff did not object to the trial court’s considering the movant-insurer’s proffered documentary evidence, choosing instead to argue the merits of the insurer’s argument and the “evidentiary value” of the documents on which it relied. “Issues not timely preserved for appeal are waived,” and the procedural misstep identified by the majority wasn’t objected to or otherwise preserved in the trial court here.

Compounding the problem, the plaintiff-appellant did not raise the Rule 91a pleadings/evidence issue on appeal. That, argued Justice Pedersen, also should have precluded the majority’s decision. Per the Texas Supreme Court in Pike v. Texas EMC Management, “Our adversary system of justice generally depends ‘on the parties to frame the issues for decision and assign[s] to courts the role of neutral arbiter of matters the parties present.’” 610 S.W.3d 763, 782 (Tex. 2020) (quoting Greenlaw v. United States, 554 U.S. 237, 243 (2008) (discussing the “party presentation principle”)). “A court of appeals may not reverse a trial court judgment on a ground not raised” on appeal. Id. “Accordingly,” said Justice Pedersen, “this Court’s precedent … prohibits our panels from reversing trial court judgments on unassigned, nonfundamental error”—as he contended the majority did here.

Curiously, the majority opinion does not respond to the dissent’s preservation and waiver arguments.

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Preservation of “Legal Issue” Grounds

In Ortiz v. Jordan, 562 U.S. 180 (2011), the Supreme Court “held that an order denying summary judgment on sufficiency of the evidence grounds is not apealable after a trial …. a party who wants to preserve a sufficiency challenge for appeal must raise it anew in a post-trial motion.”

In Dupree v. Younger, No. 22-210 (May 25, 2023): “The question presented in this case is whether this preservation requirement extends to a purely legal issue resolved at summary judgment. The answer is no.

That distinction makes sense and should help avoid unnecessary disputes about preservation. There will, however, be disputes about “sufficiency” questions that turn on points of law; as illustrated by the longstanding definition of a “no evidence” appeal issue in Texas state practice:

“No evidence” points must, and may only, be sustained when the record discloses one of the following situations: (a) a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; (d) the evidence establishes conclusively the opposite of the vital fact.

City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005).

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