Brian D. Barr to speak at South Jersey Claims Association on Nov. 13

Cherry Hill, N.J.- Brian D. Barr, a Partner of Cooper Levenson, Attorneys at Law and a member of the firm’s Defense Litigation Practice Group, will speak at a Continuing Education (CE) class to be held at the South Jersey Claims Association meeting on Wed., Nov. 13 at the Hotel ML in Mount Laurel, NJ. Barr will discuss the topic “The Affidavit of Merit Act and Claims Against Licensed Professionals.”

The class will carry credits for:

Adjusters & Producers: 3 General Insurance CE Credits – NJ, PA & DE
Accountants: 3 CPA Credits – NJ, PA & DE
Attorneys: 3 Regular Legal CLE Credits – NJ, PA & DE
CPCU: 3 Credits

Fees for the class are:

$0.00 – There is no charge for Insurance Company employees, TPA employees, Agents & Brokers
$20.00 – All other SJCA Members
$50.00 – All Non-members

To register for the class, click here.

About the Speaker:
Brian D. Barr is a partner in the firm’s Defense Litigation practice group, working out of the Cherry Hill office. He focuses on matters involving insurance defense litigation, bringing to the table extensive experience in all related issues, such as personal injury defense, insurance coverage, environmental and toxic torts, construction litigation and professional malpractice. He is a sought after speaker nationwide on these issues due to his extensive background in such litigation.

Barr has tried multiple cases involving claims for traumatic brain injuries, construction defect litigation, insurer bad faith and consumer fraud. He has successfully defended claims against construction companies/general contractors for defects and consumer fraud establishing favorable law in the Appellate Division for these claims. He also prepared a joint Appellate Brief and successfully argued issues in chemical exposure cases helping establish important warning/labeling law for hazardous materials and federal preemption.

A graduate of Gettysburg College (B.A., 1986) and Rutgers Law School (J.D., cum laude, 1989), he was admitted to the bar in New Jersey and Pennsylvania in 1989, United States District Court for the Districts of New Jersey and Eastern Pennsylvania in 1990, and United States District Court for the District of Western Pennsylvania in 1996.

The Right to Choose a Defense Attorney in Litigation: Case Study

By: Brian D. Barr and Louis Niedelman

You own a business and have just received a Summons and Complaint naming your business as a defendant.  You are insured and you send these to your insurance agent to report the claim to your insurance carrier.

Such litigation is stressful and disruptive.  For corporate clients it often involves interviews with employees, production of records, and takes your employees away from their job.  How do you ensure that the defense attorney retained by your insurer to represent you will efficiently defend the company?

Once the insurance company retains defense counsel, the client is not guaranteed that it will ultimately be protected for any judgment in the underlying litigation.  There may be a reservation of rights letter or financial exposure beyond your insurance policy limits.

Unfortunately for policy holders, liability policies typically grant the insurer the right to control the defense, and do not grant a policyholder the right to select their own attorney.  If there is no policy provision giving you the right to select your attorney, it is the insurance company that assigns their own attorney, who then controls your litigation and your financial interests.

So how does a client get involved in selecting their own trusted defense attorney within  their business liability policy?  Generally, since any settlement monies come from the insurer, the insurer wants to control the defense, control the costs, and work with their own selected counsel.

When attempting to persuade the insurance carrier to use the law firm desired by you, the insured, you should argue that your personal law firm already knows the nature of your business, knows the company’s policies and procedures, knows the key principals and employees involved, and also knows the jurisdiction and judges likely to be involved in your case.  You can argue that defense costs will be reduced because of your law firm’s pre-existing  knowledge and familiarity with the client.  These are great arguments, but often are ignored by the insurance company.

How to Ensure Choice of Counsel

When you are renewing your business comprehensive general liability insurance policy, D&O coverage, or professional line coverage, you or your broker should request a “selection of counsel endorsement” for your  policies.  If granted, your law firm and the insurance carrier can then negotiate the terms of the retention, including the hourly rate to be paid.

And the best news is that it does not cost you any more premium dollars to include a “selection of counsel endorsement” in your policies.

The services of an experienced and well-informed insurance broker are vital in negotiating and procuring both the coverage and the “selection of counsel endorsement.”  Frequently, negotiation of these terms can take months, not weeks or days, and you should speak to your broker well before the expiration date of your current liability policies – and this also applies to your automobile, business and homeowners insurance policies.  You should advise your broker of your desire to use your own attorney as your defense counsel based on their knowledge of the company, its policies and procedures, and the cost-savings, removing the expensive learning curve for a new insurance-appointed counsel to learn about your company.  Your insurance broker or agent will be your best advocate for a “selection of counsel endorsement.”

Self-Insured Retention

Most insurance policies include a self-insured retention (SIR) or deductible.  This means that if there is a settlement or jury verdict rendered against you, the payment from dollar zero to your SIR limit will be payable by you before the insurance company must pay.  The higher the SIR or deductible, the more likely the insurance company will allow the insured to select defense counsel.  Frequently, the goal of the insurance company and the goal of the client are at odds.   An insurance company may want to dispose of the case quickly and cheaply, but you may have financial reasons to do otherwise.  Similarly, cases that threaten the company’s reputation or very existence provide a compelling reason for your choice of a defense attorney who is familiar with you and your business, and your specialized needs, and market niche.

Choosing counsel is even more important if the company conducts business in many states and requires coordination of discovery and the company’s “position” concerning particular issues.  A company would not want the deposition testimony of one of its employees to be used against the company in a case in another jurisdiction where there are different litigation tactics and strategies involved in these cases.

What to do?

Most insurance brokers and agents are very familiar with the “selection of counsel endorsements” and the benefits they provide to their clients.  Talk to your broker well before renewal dates of your liability insurance policies to express your concerns and to protect your personal and business interests. See case study below to illustrate:

Hypothetical Case Study

In this case, the client sold its manufacturing facility with all equipment to the purchaser as part of an Asset Purchase Agreement.  The selling entity continued to monitor the buyer’s production to ensure continuity of name brand and quality control for other client-related entities in the supply chain.  After the sale, there are multiple work-site injuries caused by the machinery on site.  As a result of these accidents occurring over a several year period, multiple bodily injury claims are filed against the client.

Because the client used different insurers over the course of its operations, the insurers retained separate defense counsel to represent the client in these individual cases.  Due to lack of communication between the insurer-retained counsel, there was no coordination of discovery.  As a result, one entity answers discovery that an employee who monitored the site for continuity of business purposes was an employee of the selling entity.  Because of this mischaracterization and inconsistent discovery, the client’s insurance company raised defenses for coverage of the claim.

Reservation of Rights

When initially retained, insurer-retained defense counsel defended the client under a Reservation of Rights because the insurance policy covered products liability claims, but not negligence claims.  Because of the admissions by insurer-retained defense counsel in one case that the “inspector” was an employee of the seller, the insurer resisted covering the claim due to this purported employee’s negligent safety inspection.

To make matters worse, insurer-retained defense counsel was unaware that the New Jersey Products Liabiity Act subsumed negligence claims into the Products Liability action and allowed the negligence count of the complaint to go forward.  This quandary could have been avoided if the client had a choice of counsel provision in their policy.  Your personal counsel could have answered discovery consistently, has a better understanding of the key personnel and issues in the case and is mindful towards the coverage issues raised by the insurer.   Wary of the coverage issues raised by the insurer, the attorney should have filed a motion for partial summary judgment to dismiss the negligence count, leaving the only remaining count in the case, i.e., products liability, covered by the policy of insurance.

Insurance Practices

Over the last several years insurers have become more aggressive with their reservation of rights letter demanding personal contribution by the insured when there are potential coverage issues.  If an insurance company can extract $200,000 from the insured on a $1,000,000 policy limit due to catastrophic losses, it is the insurer, not the client that benefits.  Selection of counsel protects the client from inconsistent legal positions taken in different matters or even jurisdictions, and ensures the client will be properly protected and defended in the case.

Nicholas Sansone to speak at the CLM Construction Conference in San Diego on Sept. 26

Nicholas Sansone, a partner with Cooper Levenson, will speak at the CLM Construction Conference, held Sept. 25 – 27, 2019 at the Marriott Marquis San Diego Marina, San Diego, Cal.

Sansone will serve as a panelist on September 26, 2019 2:30 PM at a session entitled “Litigation Impact from Changes During Course of Construction: Future of Defect Litigation.” Fellow panelists include Rose Hoyle, AXA XL; Terence Kadlec, Envista Forensics; and Ralph Woodard, Navigators. The session is described as:

“Communication between design professionals, construction crews, insurers, and product manufacturers varies from project to project. The level of communication may depend on the completeness of plans, dictated by the contract, or even the product of direct experience with differing construction methods.

Changes in the design or construction occur during construction as a result of value engineering, owner changes, site conditions, and other complications. Transparency between the design and construction teams hinges on communication. What happens when this transparency doesn’t occur? A design professional makes a minor change to a subgrade waterproofing system that alters the de-watering of a property without necessary changes to the means, methods, and products. What risk and liability are shifted to the contractor or product manufacturer? What happens when a subcontractor makes a small change to a wall footing for the betterment of construction and secures some but not all of the necessary approvals? Who then becomes responsible?

Regularly, there are issues when contractors take an incomplete set of design drawings and infers the designer’s intent. Did the contractor inherit these design elements?  Has the risk transferred? This session explores these examples and more from the perspective of the carrier, counsel, and expert.”

The CLM conference covers all aspects of insurance, risk, and claims management of the insurance related to the construction industry. In addition to addressing construction defects and other hot topics, conference sessions will address facets of construction site accidents/injuries, coverage issues, subcontractor issues, risk management, and new technologies. Sessions will address issues on the national, regional, and state levels. In addition to the interactive educational sessions, conference attendees will have many opportunities to network with other thought-leaders in the industry. Register at https://www.theclm.org/Event/ShowEventDescription/10113.

Who is liable? It depends…. by Carmelo Torraca and Young Yoon

by Carmelo (Tony) Torraca Esq. and Young Yoon, Esq.

Part of our practice has been to assist companies walk the tight rope between getting additional business, while at the same time, not having all of the risk transferred directly to our client. In one of our presentations, we discussed the plight of a pest control company who, pursuant to a contract, was responsible not only for the workers’ compensation injuries to an employee who slipped and fell at a restaurant he was servicing on behalf of the company, but also indemnification and additional insurance required by the restaurant when that employee filed a third party action. The pest control company and its carrier paid a considerable sum to an employee who was injured while doing his job.

In the slew of case law presented, the courts have made a distinction between the additional insurance requirement and that of indemnity. As to additional insurance, the common interpretation rule is once there is a contractual requirement to name someone as an additional insured on its policy, the court must look to the policy to see if there is coverage.

In a recent case of July 10, 2019, the Appellate Division decided Comcast of Garden State v. Hanover Insurance Co. The Court followed the rule and paid special attention to the policy language, showing the importance of not only knowing what the contract says but what is covered by your insurance.

The facts in this recent case showed that.

Richard Endres filed suit alleging injuries due to the negligence of JNET Communications and Comcast of Garden State, L.P., as a result of tripping over a temporary above-ground cable JNET installed while performing work as Comcast’s contractor. Comcast tendered the defense of the lawsuit to JNET’s insurer, Hanover Insurance Company. Hanover initially accepted the defense. JNET admitted it placed the cable and Comcast was dismissed. Comcast was reinstated after deposition testimony suggested that a Comcast technician replaced the cable after JNET’s initial placement. Hanover tendered the defense back. At Endres’ trial, the jury found Comcast 60% liable and JNET 40% liable.

Comcast filed suit against Hanover and JNET that Comcast was an additional insured entitled to coverage under the policy. The trial court determined that Comcast was an additional insured pursuant to its contractual obligations. Hanover and JNET appealed.

The issue before the Appellate Court was whether Comcast was an additional insured for its own negligent acts under the policy. The Court concluded that it was not.

In interpreting the policy, the Court relied upon the following language:
          Any person or organization with whom you agree. . . is an insured, but only with respect to (1) “your work” for the insured . . . [defined as] “work of operations performed by you on your behalf.

Hanover argued that Comcast was not an additional insured because the jury found Comcast 60% liable and JNET 40% liable. Hanover contended that the jury based its findings of Comcast’s liability on Comcast’s direct negligence unrelated to JNET’s work and was not vicariously liable based upon JNET’s work. Hanover argued that the policy only provides coverage “with respect to” its insured JNET’s work. It did not provide coverage for the negligent acts of another entity. It appears that there was nothing in the policy that required a specific allocation of liability, in order to demand indemnity.

In support of its claim, Comcast relied upon Franklin Mutual Insurance Co. v. Security Indemnity Ins. Co., 275 N.J. Super. 335 (App. Div. 1994) and Harrah’s Atlantic City, Inc. v. Harleysville Ins. Co., 288 N.J. Super. 152 (App. Div. 1996), but the Court drew the distinction from the issues at hand. In both those cases, the insurance policy had language that stated:
Only with respect to liability arising out of the ownership, maintenance or use of that part of the premises.

The Court held that, in those cases, coverage as an additional insured was dependent upon the construction of the insurance policy term “arising out of” which was not “capable of precise definition.”

But in the JNET insurance policy, the Court agreed with Hanover, that the policy was not ambiguous where its plain language “only with respect to” allowed additional insurance only with respect to JNET’s work. Because Comcast’s liability was not determined in reference to or in relation to JNET’s work, Comcast was not an additional insured for its own negligent acts. Here, the Courts relied upon Supreme Court decisions in the indemnity provision requiring that in order to indemnify someone for their own negligence, there must be plain language clearly expressing contrary intent.

The importance of the court’s holding is when entering into a contract and being asked to name someone as an additional insured, not only does the terms of the contract become important, but also that of your insurance policy. While in this case, Hanover was able to avoid paying for Comcast’s own negligence, the contractual provision between Comcast and JNET may have included specific indemnity language asking for such coverage. I trust that we will see many other insurance carriers rewrite the policy for the more specific language. To the business owners and those entering into these type of contracts, it is strongly encouraged to have the contracts reviewed not only by your attorney, but also, your insurance broker, who ensured that if you are agreeing to provide additional insurance, it is for what is intended.

Cooper Levenson Welcomes Young Yoon, Esquire to the Firm

Cooper Levenson is pleased to announce that Young Yoon has joined the firm. Yoonwill work in the firm’s Cherry Hill office, in the Defense Litigation Practice Group.

Yoon has significant experience with auto property damage lawsuits through trial or settlement. Young’s background also includes residential and commercial real estate transactional work.

While in law school, Yoon worked with the Community Health Law Project in Collingswood, where he handled matters involving developmentally disabled clients and tenant rights with regard to housing habitability. He also interned with the office of New Jersey Senator Robert Menendez, where he worked on mortgage modification issues for constituents and Energy Efficiency and Conservation Block Grants.

We are very happy to welcome Young to the Cooper Levenson team. His background will be a great fit for our Defense Litigation Practice Group,” said Kenneth J. Calemmo, chief operating officer of Cooper Levenson.

Yoon is admitted to the District Court of New Jersey and the Southern District of New York. He is fluent in Korean. Young  is a member of the South Jersey Korean-American Association.

Young graduated from Boston College with a Bachelor of Science in Psychology and from Rutgers School of Law with a Juris Doctor.

Cooper Levenson is a full service law firm since 1957, with 65 attorneys and offices in New Jersey, Delaware, Florida, Nevada, and New York.  For  more information, visit www.cooperlevenson.com.

How to Improve the Plight of the Truck Driver

by Saleel V. Sabnis, Esq.

The trucking industry is the heart of the U.S. economy. Nearly 71% of all the freight tonnage moved in the U.S. is on trucks. Without the industry, the economy would come to a standstill. According to the American Transportation Association, to move 10.5 billion tons of freight annually requires over 3.5 million truck drivers. Simply stated, the growth of this country’s economy is severely stunted without the trucking industry and able drivers.

Yet, one must consider the plight of this country’s truck driver. There has been a recent dip in those entering (or staying) in the profession which may be predictable upon closer scrutiny. Drivers spend weeks away from home essentially in solitude. Driver health has become an increasing concern due to long hours sitting and the lack of healthy food choices on the road. And then there is compensation. According to government data, the 1.7 million tractor-trailer truck drivers in the United States earned an average of $44,500 in 2018. Many truck drivers are paid on a per-mile basis, which means that some of them earn less than the federal minimum wage. Over the past several decades, driver pay has fallen dramatically when adjusted for inflation. The drop in salary is coupled with longer hours — as much as 80 hours are common some studies suggest— because drivers spend many more “non-driving” or “off-duty” hours than they used to at customer locations waiting to pick up cargo and make deliveries which is uncompensated time.

Indeed, drivers who work as employees of behemoth companies make a middle-class income and have better hours. But those drivers are not representative of the hundreds of thousands of other drivers who are struggling. Because driver pay is low, trucking companies have, according to some research, a turnover rate as high as 95 percent. Lobbyists for the industry are taking another route to enlarge the applicant pool by pushing the Trump administration to lower the minimum age for commercial driver’s licenses to 18 from 21 despite a strong correlation between younger drivers and accident rates.  Not surprisingly for the past several years, the trucking industry has openly declared that it can’t find enough drivers to fill existing positions (a shortage of approximately 50,000 drivers which could inflate to six figures within the next decade).

The remedy to these ills cannot be effectuated overnight. However, there are baby steps which can be taken to improve the lives and incomes of this country’s valued truck drivers. The government should require that trucking companies and freight customers compensate drivers for every hour of work, including non-driving tasks or otherwise come up with a scheme where drivers are entitled to earn minimum wage and overtime for all of their “road” hours regarding of the actual “driving time.” Of course, increased pay is central but coupling pay with a benefits package is equally prudent. An employer can discourage driver turnover by offering graduated incentives so that the longer a truck driver stays with the company, the better their benefits. Instituting career advancement or professional development programs is another to way to keep drivers happy. Handing out promotions or job title changes can have a strong effect as drivers want to feel as if they are moving up through the company. To effectively address the driver shortage, trucking companies should look for ways to entice more women, minorities, and veterans. Minorities and women are an underrepresented group within the trucking industry. Veterans are particularly important as many are looking to transition into new careers.

And then there is the general branding of the industry as a whole. Operations managers or safety directors should utilize a more strategic approach in using social media for driver recruitment. Posting driver positions on social media channels may seem obvious in 2019 but trucking companies should not only use social media to recruit drivers; they use social channels to share information on their company culture as well and express who they are as a company to potential drivers via current employee testimonials and company mission statements.

For all the talk that self-driving trucks one day might render these issues moot, the reality is that truck drivers are not going away anytime soon. Just look around you. Everything you see has probably seen the inside of a truck in some form. It’s time that we take care of our valued truck drivers.

 

Nick Sansone to speak at Claims & Litigation Management Alliance (CLM) in Orlando

Nicholas Sansone, a partner with Cooper Levenson, will speak at the Claims and Litigation Management Alliance (CLM) Annual Conference in Orlando, FL. The conference will be held from March 13 – 15, 2019. The panel, entitled “Ethical Conundrum: Can Artificial Intelligence Truly Make the ‘Critical Decision?’” will be held on March 15 at 10:40 a.m.

This panel explores the issues surrounding the incorporation of Artificial Intelligence (AI) into our lives.  Examples include predictive design in construction, robotic surgical equipment, self-driving cars, and legal software performing document review, research, and legal analysis.  If errors or omissions, defects, and/or injuries result from decisions made by AI-driven programs, where does the potential chain of liability end?  Further, with insurance professionals evaluating such responsibility and potentially relying upon AI to analyze valuation following accidents/claims, is the AI component a reliable defense if bad faith is alleged?  These scenarios raise the question of whether it was the AI or the humans behind the AI.  Through all sectors, there is a human element involved – from program development, entering data, and managing the output.  As it relates to claims handling and litigation, who makes the “critical decision” as to the outcome in a given situation?  Who should be making the “critical decision?” Further, AI is a function of algorithms evaluating, processing and applying vast amounts of data.  Does AI account for subjective considerations or ethical concerns?  Could it? Does potential bias of the AI developer factor in?  Litigation challenges are arising in the industry while the law and regulations lag. #CLM2019

More information about the conference is at https://www.theclm.org/

Cooper Levenson Partner Carmelo T. Torraca to speak at the 2019 NJPMA Bed Bug Workshop

PRESS RELEASE

December 3, 2018

Cooper Levenson Partner Carmelo T. Torraca to speak at the 2019 NJPMA Bed Bug Workshop

Cooper Levenson Partner Carmelo T. Torraca will be a speaker at the New Jersey Pest Management Association’s Annual Bed Bug Workshop, which will be held on Tuesday, January 29, 2019 at the Radisson Hotel, 21 Kingsbridge Road, Piscataway, NJ.

Torraca’s session is entitled, “Walking the Tightrope – Risks and Exposures in Contracts.” The session will be a discussion of the tightrope every business person walks in the never-ending quest to bring in new business and protect themselves at the same time. Session attendees will examine a case that illustrates the risks and exposure that may lurk in corporate contracts. They will also discuss possible steps that can be taken as safeguards.

The day is filled with sessions focusing on the regulations and issues in pest management, treatment techniques and demonstrations, and culminating with the Bed Bug Inspector Exam for those with a 7A DEP license certification.

The registration fee for this workshop is $75.00 for NJPMA members and $140.00 for non-members. For more details and complete schedule, please visit www.njpma.com/2019-bed-bug-workshop.

Carmelo (Tony) Torraca, a partner of the firm, is a seasoned attorney with experience in the defense of catastrophic and significant injury litigation arising from passenger and commercial vehicle accidents, boating and marina accidents, construction defects and accidents, and more. Niche markets of focus include cyber liability insurance claims, negligent security cases, and pest management and bedbug liability defense.

Cooper Levenson is a full service law firm since 1957, with 70 attorneys and offices in New Jersey, Delaware, Florida and Las Vegas. For  more information, visit www.cooperlevenson.com.

 

Michael Mitrovic, Esquire joins Cooper Levenson

Cooper Levenson is pleased to announce that attorney Michael Mitrovic has joined the firm as Of Counsel to the Insurance Defense Litigation Practice Group.

“Mike is an accomplished attorney and a recognized insurance industry executive. He has held positions of the highest level in global insurance companies, and his significant knowledge in the areas of claims management, as well as transactional liability and tax liability underwriting, will make him a great addition to the Cooper Levenson team,” said Kenneth J. Calemmo, chief operating officer.

Mitrovic served as President of Global Claims for Ironshore Inc. A recognized insurance industry executive, his career spans nearly forty years with extensive experience in every aspect of the insurance industry. Mitrovic was responsible for launching the company’s U.S. operations and oversaw the development of specialty product lines and requisite regulatory approvals.  Prior to joining Ironshore, he served for more than 22 years with AIG; most recently in the roles of Vice President of Claims and President of AIG Worldwide Financial Lines. He also co-founded and was President and Chief Operating Officer of Axcelera/ Global Specialty Risk.

Mitrovic has received numerous awards for his contributions as a leader in the business world and insurance industry. In 2014, Penn State University Liberal Arts Alumni Society honored him with the 2014 Outstanding Liberal Arts Alumni in Business Award, for success in the business community and influence as a leader. Mitrovic also received the Claims Executive of the Year Award, an award sponsored by major insurance companies and brokers that recognizes years of service, contributions to the insurance industry, and the example of leadership and professionalism set for peers and colleagues.

Mitrovic holds a B.A. from Pennsylvania State University, an M.A. from New York University and a Masters in International Affairs from Columbia University. He received a J.D. from the University Of Richmond School Of Law.

Read more about Michael here.

 

When does the six year Statute of Limitations begin?

By Carmelo T. Torraca and Elizabeth A. Kaufman

On September 14, 2017, in The Palisades at Fort Lee Condo Ass’n v. 100 Old Palisade, LLC, 2017 N.J. Lexis 845,  the Supreme Court of New Jersey reversed and remanded to the trial court the Appellate Divisions decision in Palisades at Fort Lee Condo Ass’n v. 100 Old Palisade, LLC, 2016 N.J. Super. Unpub. LEXIS 193, wherein the Appellate Court was faced with an appeal from a Condominium Association which lost its cause of action against various contractors who created the defects in the building prior to the Condominium Association’s formation due to expiration of the six-year Statute of Limitations.

In the 2017 decision, the Court reversed and remanded the case because it was unclear as to exactly when notice of the six year Statute of Limitations for the construction defects began to accrue.  The high Court held that “neither the trial court nor the Appellate Division applied the correct legal standard for determining when the construction-defect actions accrued pursuant to N.J.S.A. 2A:14-1. Although N.J.S.A. 2A:14-1’s six year statute of limitations typically commences upon substantial completion of a structure, the discovery rule applies to the accrual of a claim under N.J.S.A. 2A:14-1.  Under that rule, the limitations clock does not commence until a plaintiff is able to discover, through the exercise of reasonable diligence, the facts that form the basis for an actionable claim against an identifiable defendant.” Palisades(2017) at 11 citing Caravaggio v. D’Agostino, 166 N.J. 237, 246(2001).  However, the word “accrual” is not defined within N.J.S.A. 2A:14-1.

The Supreme Court held,

“ the date that a structure is deemed substantially complete oftentimes is when a cause of action accrues because some construction defects will be readily apparent on inspection and therefore the plaintiff will have a reasonable basis for filing a claim. But many construction defects will not be obvious immediately.  In such instances, a cause of action does not accrue until the plaintiff knows or, through the exercise of reasonable diligence, should know of a cause of action against and identifiable defendant.  A plaintiff who is a successor in ownership takes the property with no greater rights than an earlier owner. If the earlier owner knew or should have known of a cause of action against an identifiable defendant, the accrual clock starts then.”

By way of history, this 11-story parking structure and 30-story residential tower was purchased in 1998.  Defendant contractors then began work improving the residential tower.  Afterwards, the property operated as a rental property for approximately two years.  On June 28, 2004, the property was sold to 100 Old Palisade, LLC, which began the process of converting the property into a condominium form of ownership pursuant to the New Jersey Condominium Act, N.J.S.A. 46:8B-1, et. seq.

In January 2005, Old Palisade issued a Public Offering which included an engineering report prepared by Ray Engineering, Inc.  A Master Deed was created, in accordance with the condominium rules, providing that the Association, through its board members, was responsible for the maintenance and repair of the common areas of the property as defined by the Master Deed.  Old Palisade retained control of the Board until members were chosen by unit owners.  Upon the sale of 75% of the units, full control of the Board was transferred to the unit owners.

In July 2006, following the sale of the required number of units, the unit owners gained full control of the Association’s Board.  The Association then retained Falcon Engineering Group to undertake an engineering evaluation of the property.  In May 2007, Falcon produced a report which identified various construction defects in the property, including defects in the exterior wall, parking garage, roof, and plaza terraces.  Falcon provided the report to the Association Board on June 13, 2007.

Plaintiff filed its first of eight Amended Complaints on March 12, 2009, asserting claims against various parties, including the persons and entities involved in the conversion of the property to condominium ownership.  Plaintiff also asserted construction defect claims against various contractors who performed work on the property before its conversion.

The parties all agreed that the substantial completion date of the contract for the work was May 1, 2002, well beyond the six-year statute of limitations as required by N.J.S.A. 2A:14-1 for a Complaint filed in 2009.  The Trial Court, relying upon the substantial completion date, found that the Complaint was filed untimely and granted the summary judgment in favor of the Construction Defect Defendants.  The Judge wrote that the Defendant Contractors could not have reasonably anticipated that the Association would eventually be formed and they would be “forever liable” for the alleged construction defects, notwithstanding the six-year statute of limitations.

The Appellate Court decided this solely upon a legal issue, therefore it owed no deference to the Trial Court’s “interpretation of the law that flows from the established facts.”  The Court cited to N.J.S.A. 2A:14-1 which, in pertinent part, provides that claims for tortious injury to real property or for a recovery under a contract claim “shall be commenced within [six] years after the cause of action shall have accrued.”  The statute does not define when a cause of action accrues and that issue has “been left entirely to the judicial interpretation and administration.”[1]

The Appellate Court began its analysis the same as the lower Court by observing that the statute of limitations on an action for deficiencies in design or construction commences to run upon substantial completion of the structure.[2]  However, the date of accrual may be delayed by application of a discovery rule or other equitable considerations.[3]  In effect, the date the limitation began to run is when the Plaintiff knew or should have known of the defect.  The Court could have easily relied upon the Falcon 2007 report to initiate this accrual period indicating that the more specific report identifying the defects served as Plaintiff’s discovery of damages.  However, the Court was faced with the difficulty that the Ray Engineering report also identified, albeit not to the same specificity, some of these defects.  Instead, the Court placed significant weight upon the formation of the Association.

The Court cited to the Condominium Law stating that the Association has the responsibility for “maintenance, repair, replacement, cleaning and sanitation of the common elements” of the condominium.  The Court also acknowledges that an individual unit owner can file a derivative action on behalf of the Association against the contracting defendants for construction defects in the common elements; however, the unit owners were not compelled to do so.

Indeed, it would be unreasonable for the statute of limitations to run on the claim of a condominium association, unless a unit owner, or group of unit owners, took on that responsibility.  We are convinced that, under the circumstances, the statute of limitations could not begin [to] run on the Association’s claims until the unit owners had full control of the governing Board.

This definition of accrual based upon the formation of the party who initiated the claim is a new concept and not previously cited by other case law.  The Court’s reliance upon both the formation of the Association, which was in 2005, and the 2007 Falcon report was a basis for overturning the Trial Court’s granting of the summary judgment.

The Court also went on to disagree with the Trial Court’s assertion that it would be unfair to allow the Association to assert its claim against Defendant contractors because Defendants could not have reasonably anticipated that the property would have been converted to a condominium, that the Association would eventually be formed, and that they would be “forever liable” for the alleged construction defects.  The Appellate Court relied upon N.J.S.A. 2A:14-1.1(a), providing for a Statute of Repose of ten years terminating all construction defect claims irrespective of the conditions.  This ten-year limitation for the Statute of Repose “generally commences one day after the issuance of the Certificate of Substantial Completion for the project.”  The purpose of the Statute of Repose was to limit the expanding liability of contractors, including an expansive application of the discovery rule.

Fortunately, the Supreme Court disagreed. The Supreme Court rejected the concept of the Statute of Limitations beginning when the suing party, in this case the Association was created. Rather, the Supreme Court reaffirmed that the Statute of Limitations accrues when anyone in the ownership chain knew or reasonably should have known of a construction defect based upon “objective evidence.”  A subsequent owner has no better standing in the Statute of Limitations analysis than any of the previous owners.

[1] Quoting, Russo Farms v. Vineland Bd. of Ed., 114 N.J. 84, 98 (1996).

[2] Mahony-Troast Constr. Co. v. Supermarkets Gen. Cor., 189 N.J. Super. 325, 329 (App. Div. 1983).  See also, Russo Farms, supra, 144 N.J. at 115-116.

[3] Trinity Church v. Lawson-Bell, 394 N.J. Super. 159 (App. Div. 2007).