Tag Archives: defective construction

N.C. Condo Owners Should Get Their Ducks in a Row Before Filing Derivative Claims for Construction Defects

Under the N.C. Nonprofit Corporation Act, members of North Carolina nonprofit corporations, including incorporated condo associations, have standing to assert the rights of their organizations derivatively.  N.C. Gen. Stat. § 55A-7-40(a).  That means members of incorporated condo associations upset about perceived construction defects can assert the rights their associations might have against the parties potentially responsible for those deficiencies.

Why would condo members want to assert defective construction claims derivatively, as opposed to individually?  Simple answer: prevailing plaintiffs under the Act can recover their expenses in maintaining derivative claims, including their attorneys’ fees.  N.C. Gen. Stat. § 55A-7-40(e).  That arguably creates an incentive for condo owners to join derivative claims alongside individual claims when suing for defective construction.

Image by digitalart / FreeDigitalPhotos.net

Image by digitalart / FreeDigitalPhotos.net

But as the N.C. Court of Appeals (“COA”) made clear in its January 21, 2014 decision in McMillan v. Ryan Jackson Properties, LLC, condo owners who want to assert claims for construction defects on behalf of their associations had better get their facts straight before pulling the litigation trigger.  Pointing the finger at the wrong guy can lead not only to dismissal of a derivative claim, but also to an award of attorneys’ fees in favor of the defendant.

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Filed under Construction Defects, State law, policy & news

CASE LAW SPOTLIGHT: Court of Appeals Wades Boldly Into “Your Work” Waters

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In a pair of recent decisions, the N.C. Court of Appeals has clarified that an “accident“ or “occurrence” may arise from faulty construction, ruled that the “your work” exclusion is not so broad as to exclude from CGL coverage damage to property other than the faulty work product itself, and held that lost revenue and other consequential damages may be recoverable against a CGL policy, even if such damages arise from the defective construction itself.   Taken together, the two opinions narrow the reach of the “your work” exclusion in North Carolina, and should preclude the type of firestorm that engulfed the contracting community, insurance industry and legislature in South Carolina earlier this year, when its Supreme Court came to virtually opposite legal conclusions.

You’ll find a full discussion and analysis of both decisions, including their potential impact on the construction industry here in North Carolina, after the jump.

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Filed under Construction Defects, Feature story, Insurance Issues