BEWARE—The Pollution Exclusion Is Alive in Oregon

This article was originally posted on The Northwest Policyholder, Miller Nash Graham & Dunn’s insurance coverage blog.


Contractors, builders, real estate managers, and others should be aware of a March 9, 2017, decision by an Oregon federal judge who found that carbon monoxide is included in the plain meaning of “pollutant” as defined in a liability insurance policy. As a result, an insured contractor had no coverage for its faulty work.

In Colony Ins. Co. v. Victory Constr. LLC, U.S. District Court, Oregon, Case No. 3:16-cv-00457-HZ, Colony Insurance sought a declaratory judgment that it had no duty to defend and indemnify Victory Construction in two state court personal-injury lawsuits. The defendant, Victory, installed a pool and was alleged to have been negligent in the installation and ventilation of a gas heater, resulting in the escape of carbon monoxide into a home, causing the residents to be sick. Victory was insured by Colony, which denied coverage for the residents’ ensuing claims. Colony’s Commercial General Liability Insurance Policy contained a Hazardous Materials Exclusion, i.e., a pollution exclusion. The policy defined “hazardous materials” as: “‘pollutants’, lead, asbestos, silica and materials containing them.” The definition of “pollutants” included “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” The court concluded that because carbon monoxide clearly fell within the definition of a pollutant, there was no coverage. Continue Reading

City of Corvallis Loses the First Round of the Voter Annexation Fight

Community_planningOn February 24, 2017, Judge Matthew J. Donohue, Benton County Circuit Court, released a decision upholding SB 1573, which exempts certain annexations from voter approval. A number of cities in Oregon have home rule charter provisions that require voter approval of annexations. This requirement, however, sometimes works at cross-purposes with Oregon’s overall land use planning system, which requires cities to keep a 20-year supply of urbanizable land within their urban growth boundaries, which can then be annexed over time to meet the 20-year need.  Continue Reading

IRS: “Shea It Ain’t So!” The Ninth Circuit Opens The Door For Real Estate Developers to Defer Income Tax

income-taxIn a coup for real estate developers, the Ninth Circuit affirmed the U.S. Tax Court’s approval of a real estate developer’s strategy to defer income in Shea Homes, Inc. v. Commissioner, 834 F.3d 1061 (9th Cir. 2016). The strategy appears fairly narrow, and will likely be the subject of future IRS challenges. Continue Reading

Chapter 2: Ending “Drive-By” Lawsuits Under the ADA

barrier-77492_1280We wrote about the plans to amend the Americans With Disabilities Act on January 31, 2017, to deal with so-called drive-by lawsuits claiming that there are illegal physical barriers to access. Now we have the language in the proposed bill, HR 620. This differs from the bill that was submitted in Congress in 2015 in ways that will please property owners even more. Continue Reading

Ending “Drive-By” Lawsuits Under the ADA

Wheelchair_ramp_sign_Businesses are required to comply with the obligations under Title III of the Americans With Disabilities Act (“ADA”)—there cannot be discrimination on the basis of disability in the full and equal enjoyment of the goods, services, facilities, or accommodations of any place of public accommodation. When a plaintiff prevails in an ADA lawsuit, the court awards attorney fees. In recent years, the number of lawsuits filed to complain about alleged violations under Title III has skyrocketed, especially in Florida, Texas, Arizona, and California. Continue Reading

That Was Fast! 2017 Washington Legislature Proposes Bills Responding to the Hirst Decision

wishing-well-76869_640Last week, my colleagues wrote about the Whatcom County v. Hirst decision by the Washington Supreme Court. As a consequence of Hirst, if public water is not available to serve a development, a county must independently verify that water from wells is available before it issues permits, even for single-family or small-development construction that, in the past, relied on permit-exempt wells. No longer can a county assume an adequate water supply, even if the Department of Ecology has not closed the basin to new development. This decision could interject uncertainty, delay, and cost into the land use permitting process. Continue Reading

Washington Supreme Court Strikes a Blow to Vested Rights

stormwaterIn a blog post dated February 17, 2016, we wrote about a decision of the Washington Court of Appeals in Snohomish County v. Pollution Control Hearings Board favorable to developers. At issue in the case was the Washington State Department of Ecology’s rule that required application of new stormwater regulations to all development proposals submitted before July 1, 2015, if the developer does not start construction by June 30, 2020. The court of appeals took issue with Ecology’s rule, and held that the new stormwater regulations do not apply to “vested” developments. An owner vests its development proposal on the date it submits a fully complete land use application to a county or city. To “vest” means to fix the rules that apply to the development at the time of application. Any later-enacted land use control ordinances or regulations do not apply to a vested development. Key to the court of appeals’ decision was its holding that a developer vests to “land use control ordinances,” with the finding that stormwater regulations are land use control ordinances. Continue Reading

Washington Court of Appeals Signals Change in Notice Requirements Under Construction Contracts

14037102660_da39bb71f9_oDivision III acknowledges hairline cracks in Mike M. Johnson rule.

“Close enough” only counts in horseshoes and hand grenades, and nowhere is that more true than when Washington courts are interpreting notice and claim procedures in construction contracts. As a result of the Washington State Supreme Court’s 2003 decision in Mike M. Johnson, Inc. v. Spokane County, Washington follows a rule of uniquely strict contract construction, whereby a contractor’s failure to follow exactly any proscribed notice and claim provision of the contract can doom the contractor’s later claims for extra work, even if the owner had actual notice of the claims and was not prejudiced by the failure to follow all claims procedures perfectly. The opinion has been oft-criticized, and there have even been attempts to overturn it legislatively, but Mike M. Johnson remains good law, and a trap for unwary contractors. Continue Reading

Individual Laborers Granted Lien Rights by Court

framing contractorIt has been generally assumed that only licensed contractors were entitled to file lien claims in the state of Washington for work they performed on real property for which they were not paid in full.1 That assumption has now been discarded in the recent decision Guillen v. Pearson, decided August 16, 2016.

In Guillen v. Pearson, ABSI Builders, Inc., a framing subcontractor, was hired on an apartment construction project by the project’s owner and general contractor, Milestone at Wynnstone, LLC. When ABSI did not pay its laborers’ wages, five ABSI laborers filed a construction lien against Milestone’s property and then sued to foreclose the lien. Milestone argued the traditional view that only licensed contractors that contract to perform work on real property have construction lien rights under RCW 60.04.021, and that employees of such contractors do not. However, the Court broke with the traditional view and chose to interpret RCW 60.04.021 broadly under the plain meaning of the statute which used the words “any person furnishing labor.” Continue Reading