Washington Construction Law Recent Case Update · 3 John P. Ahlers (206) 515-2226 No Damage for...

Washington Construction Law Washington Construction Law Recent Case UpdateRecent Case Update

NoNo--DamagesDamages--forfor--DelayDelayWritten NoticeWritten Notice

ByByJohn P. AhlersJohn P. Ahlers

22 John P. Ahlers (206) 515John P. Ahlers (206) 515--22262226

No Damages for Delay No Damages for Delay UpdateUpdate


No Damage for Delay ClausesNo Damage for Delay Clauses

Contract provision Contract provision stating that time stating that time extension is the sole extension is the sole remedy for a delay.remedy for a delay.RCW 4.24.360 RCW 4.24.360 -- Any Any such clause “is against such clause “is against public policy and is void public policy and is void and unenforceable.”and unenforceable.”


RCW 4.24.360 (enacted 1979)RCW 4.24.360 (enacted 1979)

Washington’s Statutory Prohibition Washington’s Statutory Prohibition of “No Damage For Delay” Clausesof “No Damage For Delay” Clauses

Any clause in a construction contractAny clause in a construction contract . . . which . . . which purports to waive, purports to waive, releaserelease, or extinguish the rights of a , or extinguish the rights of a contractor, subcontractor, or supplier to damages or an contractor, subcontractor, or supplier to damages or an equitable adjustment arising out of unreasonable delay equitable adjustment arising out of unreasonable delay in performance which delay is caused by the acts or in performance which delay is caused by the acts or omissions of the contractee or persons acting for the omissions of the contractee or persons acting for the contractee is against public policy and contractee is against public policy and is void and is void and unenforceableunenforceable..


No Damage for Delay ClausesNo Damage for Delay Clauses

Open IssuesOpen Issues::Only “unreasonable delays” barred by statuteOnly “unreasonable delays” barred by statuteNominal contract remedy may be enforceableNominal contract remedy may be enforceableUse of reciprocal liquidated damages in public Use of reciprocal liquidated damages in public contractscontracts


Is It or Isn’t It A “No DamageIs It or Isn’t It A “No Damage for Delay” Clause Prohibited Byfor Delay” Clause Prohibited By

RCW 4.24.360?RCW 4.24.360?

Cooperation With Other Contractors,Cooperation With Other Contractors, Section 1Section 1--05.14 (WSDOT 2006)05.14 (WSDOT 2006)The Contracting Agency may perform other The Contracting Agency may perform other work at or near the site . . . with other forces than work at or near the site . . . with other forces than those of the Contractor. This work may be done those of the Contractor. This work may be done with or without a contract. . . .with or without a contract. . . .


The coordination of the work shall be taken into The coordination of the work shall be taken into account by the Contractor as part of the site account by the Contractor as part of the site investigation . . . and any resulting costs shall be investigation . . . and any resulting costs shall be incidental and included within the unit bid prices incidental and included within the unit bid prices in the contract.in the contract.

Section 1Section 1--05.14 (cont.)05.14 (cont.)


““No Damage For Delay” No Damage For Delay” ClausesClauses

Utilities and Similar Facilities,Utilities and Similar Facilities, Section 1Section 1--07.17 (WSDOT 2006)07.17 (WSDOT 2006)When others delay the work through lateWhen others delay the work through late removal or relocation of any utility or similar removal or relocation of any utility or similar facility, the Contractor’s loss of time will be facility, the Contractor’s loss of time will be adjusted by extending contract time in keeping adjusted by extending contract time in keeping with Section 1with Section 1--08.8 [Extensions of Time]…. 08.8 [Extensions of Time]….


Any costs resulting from the coordination and Any costs resulting from the coordination and prosecution of the work regarding utility prosecution of the work regarding utility adjustment, relocation, replacement, or adjustment, relocation, replacement, or construction shall be at the Contractor’s expense construction shall be at the Contractor’s expense as provided in Section 1as provided in Section 1--05.14.05.14.



““No Damage For Delay” No Damage For Delay” ClausesClauses

Progress Schedule, Section 1Progress Schedule, Section 1--08.3 (WSDOT 2006)08.3 (WSDOT 2006)The Contracting Agency allocates its resources The Contracting Agency allocates its resources to a contract based on the total time allowed in to a contract based on the total time allowed in the contract. The Contracting Agency will the contract. The Contracting Agency will accept a progress schedule indicating an early accept a progress schedule indicating an early physical completion date but cannot guarantee physical completion date but cannot guarantee the Contracting Agency’s resources will be the Contracting Agency’s resources will be available to meet the accelerated schedule. available to meet the accelerated schedule.


““No Damage For Delay” No Damage For Delay” Clauses Clauses

No additional compensation will be allowed if No additional compensation will be allowed if the Contractor is not able to meet their the Contractor is not able to meet their accelerated schedule due to the unavailability of accelerated schedule due to the unavailability of [the] Contracting Agency’s resources or for other [the] Contracting Agency’s resources or for other reasons beyond the Contracting Agency’s reasons beyond the Contracting Agency’s control.control.



Scoccolo Construction v. Scoccolo Construction v. RentonRenton

Contract for street Contract for street widening.widening.Contract stated relocation Contract stated relocation of utilities would be by of utilities would be by utility companies.utility companies.Scoccolo required to Scoccolo required to coordinate relocation coordinate relocation with utility companies.with utility companies.



Contract provided:Contract provided:No additional compensation will be made to No additional compensation will be made to [Scoccolo] for reason of delay caused by [Scoccolo] for reason of delay caused by actions of any utility company and [Scoccolo] actions of any utility company and [Scoccolo] shall consider such costs to be incidental to shall consider such costs to be incidental to the other items of the contract.the other items of the contract.



Puget Power did not Puget Power did not timely complete timely complete relocation of the relocation of the overhead power lines overhead power lines with underground lines.with underground lines.Scoccolo was delayed Scoccolo was delayed and damaged.and damaged.

DELAY



Renton's Motion for Summary Judgment Renton's Motion for Summary Judgment based upon the exculpatory contract provision based upon the exculpatory contract provision was granted by trial court.was granted by trial court.Court of Appeals initially reversed but does Court of Appeals initially reversed but does not directly address the question of whether not directly address the question of whether RCW 4.24.360 invalidated the no damage for RCW 4.24.360 invalidated the no damage for delay clause of the contract.delay clause of the contract.



On remand, a jury On remand, a jury awarded Scoccolo awarded Scoccolo damages ($1 million).damages ($1 million).Renton appealed for a Renton appealed for a second time.second time.



The Court of Appeals reversed, thereby The Court of Appeals reversed, thereby invalidating a substantial portion of invalidating a substantial portion of Scoccolo’s jury verdict.Scoccolo’s jury verdict.The Court held that the utilities were not a The Court held that the utilities were not a “person acting for the contractee” and “person acting for the contractee” and therefore the statute did not apply.therefore the statute did not apply.



Utilities were not a “person acting for the Utilities were not a “person acting for the contractee” despite the fact that the City contractee” despite the fact that the City had written franchise agreements with the had written franchise agreements with the utilities which gave it the power to compel utilities which gave it the power to compel the relocation.the relocation.



Scoccolo had no contractual power to compel Scoccolo had no contractual power to compel the utilities to act.the utilities to act.Scoccolo was not in contractual privity with Scoccolo was not in contractual privity with the utilities, therefore Scoccolo cannot pursue the utilities, therefore Scoccolo cannot pursue the utilities for its delay damages.the utilities for its delay damages.



Court of Appeals 2005 decision is first Court of Appeals 2005 decision is first reported case to interpret RCW 4.24.360.reported case to interpret RCW 4.24.360.Decision’s narrow interpretation of phrase Decision’s narrow interpretation of phrase “person acting for the contractee” likely to “person acting for the contractee” likely to result in more owners attempting to reinsert result in more owners attempting to reinsert no damage for delay clauses back into their no damage for delay clauses back into their contracts.contracts.



Supreme Court RulingSupreme Court RulingUnanimous verdict in favor of Scoccolo, the Unanimous verdict in favor of Scoccolo, the utilities were “acting for” the City.utilities were “acting for” the City.RCW 4.24.360 (No Damages for Delay RCW 4.24.360 (No Damages for Delay Statute) trumped the exculpatory clause (no Statute) trumped the exculpatory clause (no compensation for utility company delay).compensation for utility company delay).Scoccolo’s $1 million is restored.Scoccolo’s $1 million is restored.


Notice UpdateNotice Update Post Post Mike M. JohnsonMike M. Johnson


3 Elements of Notice3 Elements of Notice

1)1) Event (Notice of Event (Notice of the Event)the Event)

2)2) Claim (Notice of Claim (Notice of the Claim)the Claim)

3)3) Claims Process and Claims Process and ProcedureProcedure

OF EVENT


Standard Specifications (2004) /Standard Specifications (2004) / WSDOT & Municipal Projects WSDOT & Municipal Projects

Section 1Section 1--04.5 (if Contractor is in disagreement 04.5 (if Contractor is in disagreement with any change order, direction or instruction with any change order, direction or instruction by Engineer) by Engineer) [Notice of Event][Notice of Event]

1.1. Signed written notice of protest before Signed written notice of protest before doing the work.doing the work.


Standard Specifications (2004) /Standard Specifications (2004) / WSDOT & Municipal Projects (cont.)WSDOT & Municipal Projects (cont.)

2.2. Supplement written protest within 15 days Supplement written protest within 15 days in writing with the following:in writing with the following:

(a)(a) Date of protested order;Date of protested order;(b)(b) Nature and circumstances which Nature and circumstances which

caused the protest;caused the protest;(c)(c) Contract provisions that support Contract provisions that support

protest;protest;


Standard Specifications (2004) /Standard Specifications (2004) / WSDOT & Municipal Projects (cont.)WSDOT & Municipal Projects (cont.)

(d)(d) Estimated dollar cost and how estimate Estimated dollar cost and how estimate was determined; andwas determined; and

(e)(e) Analysis of progress schedule showing Analysis of progress schedule showing schedule change or disruption if Contractor schedule change or disruption if Contractor claims a schedule change or disruption.claims a schedule change or disruption.


Section 1Section 1--09.11(2) 09.11(2) –– Claim [Notice of Claim]Claim [Notice of Claim]1.1. Detailed factual statement of claim for Detailed factual statement of claim for

additional compensation and time, providing all additional compensation and time, providing all necessary dates, locations, and items of work necessary dates, locations, and items of work affected.affected.

2.2. Date on which the facts arose which gave Date on which the facts arose which gave rise to the claim.rise to the claim.

Standard SpecificationsStandard Specifications (2004) /(2004) / WSDOT & Municipal Projects (cont.)WSDOT & Municipal Projects (cont.)


3.3. Name of each Contracting Agency Name of each Contracting Agency individual, official, or employee involved in or individual, official, or employee involved in or knowledgeable about the claim.knowledgeable about the claim.

4.4. Specific provisions of the Contract which Specific provisions of the Contract which support the claim and a statement of the reasons support the claim and a statement of the reasons why.why.



5.5. If the claim pertains to discretionary If the claim pertains to discretionary decisions of the Engineer or matters for which decisions of the Engineer or matters for which the Engineer’s decision is final, set out in detail the Engineer’s decision is final, set out in detail all facts supporting Contractor’s position.all facts supporting Contractor’s position.

6.6. Identification of any documents and the Identification of any documents and the substance of oral communications supporting the substance of oral communications supporting the claim.claim.



7.7. Copies of any identified documents, Copies of any identified documents, other than Contracting Agency documents and other than Contracting Agency documents and documents previously furnished by documents previously furnished by Contractor, that support the claim.Contractor, that support the claim.

8.8. If additional time is sought:If additional time is sought:(a)(a) Specific days and dates for which Specific days and dates for which

time is sought,time is sought,



(b)(b) Specific reasons why the time Specific reasons why the time extension should be granted,extension should be granted,

(c)(c) Specific provisions of Section 1Specific provisions of Section 1--08.8 08.8 under which time is sought, andunder which time is sought, and

(d)(d) Analysis of Contractor’s progress Analysis of Contractor’s progress schedule to demonstrate reason for time schedule to demonstrate reason for time extension.extension.



9. If additional compensation is sought, the 9. If additional compensation is sought, the exact amount sought and a breakdown of that exact amount sought and a breakdown of that amount into the following categories:amount into the following categories:

(a)(a) LaborLabor(b)(b) MaterialsMaterials(c)(c) Direct equipmentDirect equipment



(d)(d) Job overheadJob overhead(e)(e) Overhead (general and administrative)Overhead (general and administrative)(f)(f) Subcontractor’s claimsSubcontractor’s claims

10. Notarized statement certifying validity of 10. Notarized statement certifying validity of claim.claim.



Mike M. Johnson, Inc.Mike M. Johnson, Inc. v. Spokane County,v. Spokane County, 150 Wn.2d 375 (2003)150 Wn.2d 375 (2003)

Spokane County Spokane County –– OwnerOwnerMike M. Johnson Mike M. Johnson –– ContractorContractorSewer ProjectSewer Project


Mike M. Johnson, Inc. Mike M. Johnson, Inc. v. Spokane Countyv. Spokane County

WSDOT SpecificationsWSDOT SpecificationsApril 1998 AwardApril 1998 AwardCounty notified Contractor at the County notified Contractor at the preconstruction conference of road widening preconstruction conference of road widening which caused a revision of the storm sewer.which caused a revision of the storm sewer.June 4, 1998 Change Order 3 revised the June 4, 1998 Change Order 3 revised the design of the road and sewer ($69,000) design of the road and sewer ($69,000) –– changes clause.changes clause.



Mike M. Johnson made no objection or Mike M. Johnson made no objection or protest. protest. (No Notice of event)(No Notice of event)Later, Mike M. Johnson encounters telephone Later, Mike M. Johnson encounters telephone cables (U.S. West).cables (U.S. West).



Specification § 1Specification § 1--04.504.5Immediate signed written notice of protest Immediate signed written notice of protest before doing the work.before doing the work.Supplement written notice of protest within Supplement written notice of protest within 15 days (5 requirements).15 days (5 requirements).No protest No protest –– deemed acceptance.deemed acceptance.[MJM failed this step][MJM failed this step]



Specification § 1Specification § 1--09.1109.11Failure to follow protest procedure as a Failure to follow protest procedure as a waiver.waiver.If protest fails to achieve resolution, must If protest fails to achieve resolution, must submit claim (10 requirements).submit claim (10 requirements).Failure to follow claim procedure is waiver Failure to follow claim procedure is waiver of rights.of rights.[Consequence of lack of Notice][Consequence of lack of Notice]



June 26, 1998 MMJ letter: Lists seven June 26, 1998 MMJ letter: Lists seven “concerns,” one of which is the phone line “concerns,” one of which is the phone line “causing additional costs and delays.” “causing additional costs and delays.” ((concerns and claims)concerns and claims)July 16, 1998 County letter: Invites a claim.July 16, 1998 County letter: Invites a claim.July 24, 1998 MMJ letter: Doing an analysis.July 24, 1998 MMJ letter: Doing an analysis.


Mike M. Johnson, Inc.Mike M. Johnson, Inc. v. Spokane Countyv. Spokane County

August 3, 1998 County letter: No claim August 3, 1998 County letter: No claim –– utility locate statute.utility locate statute.August 7, 1998 County letter: MMJ letter August 7, 1998 County letter: MMJ letter “too general and nonspecific regarding relief.”“too general and nonspecific regarding relief.”August 14, 1998 MMJ letter: Expect August 14, 1998 MMJ letter: Expect compensation while waiting for U.S. West compensation while waiting for U.S. West relocation.relocation.


Mike M. Johnson, Inc.Mike M. Johnson, Inc. v. Spokane Countyv. Spokane County

August 25, 1998 MMJ’s lawyer’s letter: August 25, 1998 MMJ’s lawyer’s letter: $98,000/50 days. No supporting explanations,$98,000/50 days. No supporting explanations, no reference to contract.no reference to contract.January 27, 1998 County letter: Will January 27, 1998 County letter: Will negotiate, but no waiver.negotiate, but no waiver.


Court’s DecisionCourt’s Decision

Contractor did not comply with the Contractor did not comply with the protestprotest procedure. § 1procedure. § 1--04.5.04.5.Contractor did not follow Contractor did not follow claim procedureclaim procedure.. § 1§ 1--09.11. “Contractual condition precedent 09.11. “Contractual condition precedent to Contractor’s right to seek judicial relief.”to Contractor’s right to seek judicial relief.”


Court’s DecisionCourt’s Decision

Comments or concerns that do not include the Comments or concerns that do not include the amount of the claim or length of the delay are amount of the claim or length of the delay are not in conformity with requirements of not in conformity with requirements of protestprotest procedure. § 1procedure. § 1--04.5.04.5.


Court’s Decision (cont.)Court’s Decision (cont.)

Actual notice by the Owner of the condition iActual notice by the Owner of the condition in n and of itself does not excuse a Contractor and of itself does not excuse a Contractor from complying with contractual notice from complying with contractual notice provisionsprovisions..Waiver is established only when the Owner Waiver is established only when the Owner has actual knowledge has actual knowledge andand directs the directs the Contractor to proceed with the extra work.Contractor to proceed with the extra work.


MMJ DilemmaMMJ DilemmaAn Owner can:An Owner can:

demanddemand additional work outside the scope of additional work outside the scope of the original contract, observe the contractor the original contract, observe the contractor perform that work,perform that work,discussdiscuss the work with the contractor, andthe work with the contractor, andyet yet denydeny fair compensation for services fair compensation for services rendered if the contractor fails to submit a rendered if the contractor fails to submit a written request for compensation/time for the written request for compensation/time for the demanded work in the required format.demanded work in the required format.


MMJ DilemmaMMJ Dilemma

(cont.)(cont.)The Owner can direct work be done, and the The Owner can direct work be done, and the Owner is Owner is not prejudicednot prejudiced by the Contractor’s by the Contractor’s failure to abide by the technical requirements of failure to abide by the technical requirements of submitting a claim for payment, but the submitting a claim for payment, but the contractor nevertheless forfeits its claim.contractor nevertheless forfeits its claim.


Weber Construction v.Weber Construction v. Spokane CountySpokane County,,

124 Wn. App. 29, 98 P.3d 60 (2004)124 Wn. App. 29, 98 P.3d 60 (2004)

Road building Road building project for project for Spokane County.Spokane County.


Weber Construction v. Spokane CountyWeber Construction v. Spokane County

Project was a “cut and fill” project whereby Project was a “cut and fill” project whereby material excavated from the site was to be material excavated from the site was to be used for fill and embankments.used for fill and embankments.Large boulders were encountered, unsuitable Large boulders were encountered, unsuitable for fill and embankments.for fill and embankments.



It was necessary for Weber to obtain pit run It was necessary for Weber to obtain pit run material from another site to make up for the material from another site to make up for the lack of onlack of on--site material to build the roadway site material to build the roadway embankments.embankments.A claim was made by Weber for additional A claim was made by Weber for additional compensation as a result of the quantity and compensation as a result of the quantity and quality of the boulders encountered.quality of the boulders encountered. (Notice of the Event?)(Notice of the Event?)



On 8/12/99, the County issued Change Order On 8/12/99, the County issued Change Order No. 1 which permitted hauling of material No. 1 which permitted hauling of material from a private quarry and stated that the reason from a private quarry and stated that the reason was that excavated material that was planned was that excavated material that was planned for use in building the roadbed and for use in building the roadbed and embankments contained large boulders that embankments contained large boulders that were not suitable for shallow fills and building were not suitable for shallow fills and building embankments. embankments. (Notice of the Event?)(Notice of the Event?)



The change order also specified the price for The change order also specified the price for the import material, and an estimated quantity the import material, and an estimated quantity of 14,600 cubic yards. No price was provided of 14,600 cubic yards. No price was provided for removing and wasting the boulders. for removing and wasting the boulders. (Notice of Claim?)(Notice of Claim?)The Standard Specifications applied.The Standard Specifications applied.Weber protested the change order on 8/19/99.Weber protested the change order on 8/19/99.



Weber supplemented its written protest on Weber supplemented its written protest on 8/31/99, and provided all of the required 8/31/99, and provided all of the required information information except the estimate of the costs except the estimate of the costs of the protested workof the protested work. Weber requested that . Weber requested that the County identify a dump site for the the County identify a dump site for the boulders, and then Weber would provide the boulders, and then Weber would provide the County with an estimate and how the estimate County with an estimate and how the estimate was made. was made. [Notice of Claim? Claim = $$][Notice of Claim? Claim = $$]



The County steadfastly denied that a change The County steadfastly denied that a change condition existed, and that Weber had any condition existed, and that Weber had any entitlement, much less right to compensation. entitlement, much less right to compensation. The County advised Weber of this by 9/8/99 The County advised Weber of this by 9/8/99 letter.letter.



Although the County estimated the quantity of Although the County estimated the quantity of boulders at 14,600 cubic yards in the change boulders at 14,600 cubic yards in the change order, ultimately over 40,000 cubic yards of order, ultimately over 40,000 cubic yards of boulders were hauled to waste and replaced boulders were hauled to waste and replaced with import material.with import material.The Project was shut down for the winter The Project was shut down for the winter from 11/99 until 5/00.from 11/99 until 5/00.



Weber worked full time from 11/99 through Weber worked full time from 11/99 through 3/00 compiling its costs of the impacts related 3/00 compiling its costs of the impacts related to its change conditions claim.to its change conditions claim.On 3/10/00 Weber submitted its certified, On 3/10/00 Weber submitted its certified, written claim for over $1,000,000 as required written claim for over $1,000,000 as required by the Standard Specifications.by the Standard Specifications. (Now had price)(Now had price)



Weber offered to provide the County with full Weber offered to provide the County with full access to its job cost accounting records so access to its job cost accounting records so that the County could audit the job costs. The that the County could audit the job costs. The County declined.County declined.The case was tried to a jury in Spokane The case was tried to a jury in Spokane County Superior Court.County Superior Court.



The trial judge dismissed the case at the The trial judge dismissed the case at the conclusion of Weber’s case finding that:conclusion of Weber’s case finding that:1.1. the existence of the boulders was the existence of the boulders was

foreseeable, andforeseeable, and2.2. Weber did not follow the contract Weber did not follow the contract

procedures for requesting additional procedures for requesting additional compensation in that it did not provide the compensation in that it did not provide the estimated cost with its supplemental protest estimated cost with its supplemental protest information.information.



On 3/6/03, Division III of the Court of On 3/6/03, Division III of the Court of Appeals reversed on both counts, ruling that Appeals reversed on both counts, ruling that the issue of whether the County’s actual the issue of whether the County’s actual notice of Weber’s problems constituted notice of Weber’s problems constituted waiver of strict compliance with the contract waiver of strict compliance with the contract terms was a question of fact for a jury.terms was a question of fact for a jury.



Spokane County sought discretionary review Spokane County sought discretionary review from the Washington Supreme Court.from the Washington Supreme Court.Discretionary review was granted.Discretionary review was granted.



Following the Supreme Court’s decision inFollowing the Supreme Court’s decision in Mike M. JohnsonMike M. Johnson, it remanded the , it remanded the WeberWeber case case to the Court of Appeals for consideration in to the Court of Appeals for consideration in light of light of Mike M. JohnsonMike M. Johnson..On July 27, 2004, the Court of Appeals, for On July 27, 2004, the Court of Appeals, for the second time, reversed the trial court.the second time, reversed the trial court.



There were two bases to the Court’s opinion.There were two bases to the Court’s opinion.First, the Court found that substantial First, the Court found that substantial evidence existed that Weber had evidence existed that Weber had complied complied with the requirement to provide required with the requirement to provide required information to supplement its written information to supplement its written protest as to the estimated cost of the workprotest as to the estimated cost of the work..



(cont.)(cont.)The Court found that because the County The Court found that because the County did not did not provide the requested informationprovide the requested information on the on the disposal of the boulders, Weber could not have disposal of the boulders, Weber could not have stated in good faith how any such estimate was stated in good faith how any such estimate was determined. determined. (County precluded Notice (County precluded Notice Compliance)Compliance)



Substantial evidence supported Weber’s Substantial evidence supported Weber’s compliance with the contract terms.compliance with the contract terms.

The second basis for the Court’s decision, was The second basis for the Court’s decision, was that the Court found that substantial evidence that the Court found that substantial evidence also existed as to the also existed as to the County’s waiverCounty’s waiver of of strict contractual compliance with the protest strict contractual compliance with the protest procedures.procedures.



Waiver:Waiver:The Court found that the County knew that The Court found that the County knew that Weber was required to provide a dollar cost Weber was required to provide a dollar cost estimate, and knew that Weber was aware estimate, and knew that Weber was aware of this requirement and was attempting to of this requirement and was attempting to meet it.meet it.Weber requested information needed to Weber requested information needed to provide the estimate, but the County failed provide the estimate, but the County failed to provide the information.to provide the information.


American Safety Casualty American Safety Casualty Insurance v. Olympia,Insurance v. Olympia, Wn. App. Div. 2 (6/27/06)Wn. App. Div. 2 (6/27/06)

Contract for sanitary Contract for sanitary sewer lines between sewer lines between Olympia and Katspan.Olympia and Katspan.American Safety Casualty American Safety Casualty was Katspan's surety.was Katspan's surety.Contract contained Contract contained Standard Specifications Standard Specifications including:including:


§ 1§ 1--04.5, notice and protest, immediate 04.5, notice and protest, immediate notice with supplemental information notice with supplemental information within 15 days within 15 days (Notice of Event)(Notice of Event)§ 1§ 1--09.1(1) and (2), claim requirements 09.1(1) and (2), claim requirements (Notice of Claim)(Notice of Claim)§ 1§ 1--09.11(3), suit must be brought within 09.11(3), suit must be brought within 180 days of final acceptance 180 days of final acceptance (Claim (Claim Procedure)Procedure)

American Safety Casualty Ins. v. OlympiaAmerican Safety Casualty Ins. v. Olympia


Issue: Did Olympia Waive the Issue: Did Olympia Waive the Contract's Lawsuit And Protest Contract's Lawsuit And Protest

Time Limits?Time Limits?

Trial court said Trial court said nono on motion for on motion for summary judgment and awarded fees to summary judgment and awarded fees to Olympia.Olympia.Court of Appeals reversed.Court of Appeals reversed.



1/5/01 City sent Katspan 1/5/01 City sent Katspan a letter granting 20a letter granting 20--day day time extension.time extension.Katspan disagreed by Katspan disagreed by letter and referred to letter and referred to earlier letter. Neither earlier letter. Neither letter compliedletter complied with protest requirements.with protest requirements.



2/26/01 Katspan sent another letter to City 2/26/01 Katspan sent another letter to City seeking to preserve its right to request time seeking to preserve its right to request time and money and stating that it would prepare and money and stating that it would prepare additional documentation.additional documentation.Katspan did not provide the documentation.Katspan did not provide the documentation.



When project almost complete, City's When project almost complete, City's representative sent Katspan two letters asking representative sent Katspan two letters asking for the information Katspan had promised in for the information Katspan had promised in its 2/26/01 letter.its 2/26/01 letter.Katspan responded that the information would Katspan responded that the information would be coming shortly. It was never sent.be coming shortly. It was never sent.



City's representative sent Katspan a letter City's representative sent Katspan a letter requesting that it execute a change order for requesting that it execute a change order for all additional work. Katspan refused.all additional work. Katspan refused.Katspan became insolvent and assigned its Katspan became insolvent and assigned its rights to American Safety.rights to American Safety.9/10/01 City accepted project as complete.9/10/01 City accepted project as complete.



11/01 American Safety sought an equitable 11/01 American Safety sought an equitable adjustment of $767,995. Request did not adjustment of $767,995. Request did not comply with claim requirements.comply with claim requirements.3/02 American Safety's attorney contacted 3/02 American Safety's attorney contacted City's attorney.City's attorney.



Thereafter, City advised it needed additional Thereafter, City advised it needed additional information and documentation to make the information and documentation to make the requested equitable adjustment.requested equitable adjustment.America Safety advised it was having America Safety advised it was having difficulty obtaining the documents and asked difficulty obtaining the documents and asked if the City would negotiate without if the City would negotiate without information.information.



City responded that it would proceed, but City responded that it would proceed, but would not negotiate. It claimed it had would not negotiate. It claimed it had inadequate backup information.inadequate backup information.5/02 American Safety sent City two 35/02 American Safety sent City two 3--ring ring binders containing information.binders containing information.8/02 City responded it needed additional 8/02 City responded it needed additional information.information.



11/02 City again requested additional 11/02 City again requested additional information.information.1/03 American Safety notified City that it had 1/03 American Safety notified City that it had received 4 or 5 boxes from Katspan, and they received 4 or 5 boxes from Katspan, and they were available for review.were available for review.City reviewed the documents.City reviewed the documents.



4/23/03 City notified American Safety that the 4/23/03 City notified American Safety that the documents did not contain all of the documents did not contain all of the requested/required information.requested/required information.City stated American Safety had until 5/16/03 City stated American Safety had until 5/16/03 to produce the information, and that if it to produce the information, and that if it failed, the City would deny the claim.failed, the City would deny the claim.Deadline was not met.Deadline was not met.



7/31/03 American Safety through its 7/31/03 American Safety through its consultant contacted the City to discuss consultant contacted the City to discuss information City was demanding.information City was demanding.8/4/03 City's accountant responded that he 8/4/03 City's accountant responded that he had been given the green light to discuss.had been given the green light to discuss.8/03 Consultants exchanged E8/03 Consultants exchanged E--mails about mails about information and how American Safety should information and how American Safety should format it.format it.



5/21/04 American Safety contacted the City to 5/21/04 American Safety contacted the City to notify it that information was available.notify it that information was available.City responded and denied American Safety's City responded and denied American Safety's claim and stated that it could no longer file claim and stated that it could no longer file suit because suit was untimely under the suit because suit was untimely under the contract.contract.8/04 American Safety sued City.8/04 American Safety sued City.



Court of Appeals Decision:Court of Appeals Decision:Court distinguished Court distinguished Mike M. JohnsonMike M. Johnson. City . City did did not continuously express its intent to not continuously express its intent to abide by contractual provisionsabide by contractual provisions. . [Now [Now standard]standard]If City had no intention of allowing litigation, If City had no intention of allowing litigation, it should have informed American Safety.it should have informed American Safety.



City could also have halted all communication.City could also have halted all communication.City's City's continued requests for information, continued requests for information, reference to future litigationreference to future litigation, and , and deadlinesdeadlines for productionfor production well beyond the contract well beyond the contract limitations created inferences that the City limitations created inferences that the City waivedwaived the contract terms.the contract terms.



Court further found that issues of fact Court further found that issues of fact remained as to whether the totality of the remained as to whether the totality of the circumstances resulted in an implicit waiver circumstances resulted in an implicit waiver of the contract provisions for timeliness of of the contract provisions for timeliness of claim and suit.claim and suit.


Strand Hunt Construction v. Lake Strand Hunt Construction v. Lake Washington School Dist.,Washington School Dist.,

Wn. App. Div. I (9/5/06)Wn. App. Div. I (9/5/06)

$37 million high $37 million high school projectschool projectDelay Impact Delay Impact caused by design caused by design conflictconflict


Key Contract Document Key Contract Document Provisions:Provisions:

Changes could be up to 10% of the contract Changes could be up to 10% of the contract amount.amount.Compensation for changes based on direct Compensation for changes based on direct cost plus a fee calculated as percentage of cost plus a fee calculated as percentage of direct costs.direct costs.


Key Provisions (cont.)Key Provisions (cont.)

Fee on changes is an “allowance for all Fee on changes is an “allowance for all combined overhead, profit, and other costs, combined overhead, profit, and other costs, including all office, home office, and site including all office, home office, and site overhead, and includes delay and impact costs overhead, and includes delay and impact costs of any kind.”of any kind.”Claims to be submitted within 14 days of the Claims to be submitted within 14 days of the event giving rise to them. event giving rise to them. [Claim Notice][Claim Notice]


Key Provisions (cont.)Key Provisions (cont.)

Claims to include “a clear description of the Claims to include “a clear description of the claim, the proposed change in the Contract claim, the proposed change in the Contract Sum and/or time of the Claim and provide Sum and/or time of the Claim and provide data supporting the Claim.” data supporting the Claim.” [Definition of [Definition of Claims]Claims]Claims not so made are waived.Claims not so made are waived.


Strand HuntStrand Hunt

6/29/03 Letter from Strand Hunt to District 6/29/03 Letter from Strand Hunt to District requesting compensation for inordinate requesting compensation for inordinate number of RFIs caused by defective drawings.number of RFIs caused by defective drawings.

Over 1,500 RFIs. 400 were directly related Over 1,500 RFIs. 400 were directly related to change orders.to change orders.Strand Hunt preliminary figures of Strand Hunt preliminary figures of $752,053 in direct cost impacts and $752,053 in direct cost impacts and $426,045 for indirect costs for labor $426,045 for indirect costs for labor inefficiencies.inefficiencies.



District stated 6/29 letter did not constitute a District stated 6/29 letter did not constitute a claim and did not comply with contract claim and did not comply with contract requirements.requirements.7/23/03 Strand Hunt sent District a letter 7/23/03 Strand Hunt sent District a letter entitled "Claim for Multiplicity Impacts." entitled "Claim for Multiplicity Impacts." Requested $2,434,813 for an inordinate Requested $2,434,813 for an inordinate number of RFIs and other defects in contract number of RFIs and other defects in contract documents. documents. (Claim increased about 4 times.)(Claim increased about 4 times.)



District denied claim.District denied claim.7/31/03 Strand Hunt filed suit.7/31/03 Strand Hunt filed suit.11/04 Strand Hunt submitted "Consolidated 11/04 Strand Hunt submitted "Consolidated Request for Equitable Adjustment" for Request for Equitable Adjustment" for $4,538,366. $4,538,366. (Claim increased about 2 (Claim increased about 2 times.)times.)



District moved for partial summary judgment District moved for partial summary judgment seeking dismissal of Strand Hunt's claims for seeking dismissal of Strand Hunt's claims for cumulative impact damages, field overhead cumulative impact damages, field overhead delay damages, and home office overhead delay damages, and home office overhead damages because Strand Hunt failed to damages because Strand Hunt failed to comply with contract requirements for claims.comply with contract requirements for claims.



District further contended that claims for District further contended that claims for overhead were barred because they were overhead were barred because they were indirect delay damages which could only be indirect delay damages which could only be asserted in connection with direct damage asserted in connection with direct damage claims.claims.3/7/05 trial court granted District's motion.3/7/05 trial court granted District's motion.



8/18/05 trial court entered order clarifying that 8/18/05 trial court entered order clarifying that its earlier order dismissed Strand Hunt's its earlier order dismissed Strand Hunt's quantum meruitquantum meruit claims.claims.Court of Appeals affirmed.Court of Appeals affirmed.



Strand Hunt failed to comply with the Strand Hunt failed to comply with the requirements for submitting a claim.requirements for submitting a claim.Court rejected Strand Hunt's contention that it Court rejected Strand Hunt's contention that it would have would have been impossiblebeen impossible for it to submit for it to submit claims in the manner and time frame specified claims in the manner and time frame specified in the contract.in the contract.



Court did not “understand” how Strand Hunt Court did not “understand” how Strand Hunt could fail to notice $4,538,366 in expenses.could fail to notice $4,538,366 in expenses.Court rejected Strand Hunt's contention that Court rejected Strand Hunt's contention that the “event” giving rise to cumulative impact the “event” giving rise to cumulative impact claim was a dispute with the District. Such an claim was a dispute with the District. Such an interpretation would render the contractual interpretation would render the contractual claim requirements meaningless.claim requirements meaningless.


Strand HuntStrand HuntCourt rejected Court rejected quantum meruitquantum meruit claim as claim as contract anticipated changes and contained contract anticipated changes and contained provisions regarding degree and nature of provisions regarding degree and nature of changes.changes.Court rejected Strand Hunt's contention that Court rejected Strand Hunt's contention that RCW 4.24.360 RCW 4.24.360 (No(No--DamagesDamages--ForFor--Delay)Delay) overturned the contract provision regarding overturned the contract provision regarding delay damages. Strand Hunt agreed to such delay damages. Strand Hunt agreed to such terms and should have complied with them.terms and should have complied with them.



Court rejected Strand Hunt's recovery of Court rejected Strand Hunt's recovery of home office overhead per Eichleay formula as home office overhead per Eichleay formula as Strand Hunt worked continuously, and was Strand Hunt worked continuously, and was never suspended, even though worked never suspended, even though worked allegedly inefficiently.allegedly inefficiently.

Legislative SolutionLegislative Solution

failure to submit claim notice or claim-related documentation


party failing to provide such notice has the initial burden to make a prima facie showing that the party failing to receive such notice was not prejudiced thereby


"prejudiced" means being deprived of the opportunity to mitigate cost, time, or both cost and time impacts

Washington Construction Law Recent Case Update · 3 John P. Ahlers (206) 515-2226 No Damage for...

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Transcript of Washington Construction Law Recent Case Update · 3 John P. Ahlers (206) 515-2226 No Damage for...