New Jersey is considering assembly bill A571 which would create a new board of general contractors and require all general contractors in New Jersey to be licensed by the State. Currently, only certain licensed trades and residential home improvement contractors are required to be licensed. However, this would change under the pending legislation which would require all general contractors to be licensed by a brand new board of general contractors, even for commercial construction projects. The board would be charged with enacting the standards to be met in order to become a general contractor in New Jersey and they would also administer an exam which would have to be passed in order to become licensed. The licenses would be subject to renewal every two years and the contractors would also have mandatory continuing education requirements. As of now, the bill is not law and has only been introduced and referred to Assembly Regulated Professions Committee.
In New Jersey, members of a limited liability company who actively perform services on behalf of the company are deemed to be employees of the company for purposes of receipt of benefits and payment of workers' compensation insurance, but only if the company elects to purchase such coverage when the policy is purchased or renewed. This election may only be made at purchase or at renewal and may not be withdrawn during the policy term. Further, if there are multiple partners in the company, they all must either opt in or opt out. While many owners of LLCs do not elect to purchase workers compensation coverage for themselves, where a small to mid-size construction or manufacturing company is involved, they should consider doing so since the owners are often also in the field or on the manufacturing floor.
In a recent unpublished decision from the Appellate Division, an owner of a millwork company was struck by a steel rod, causing leg, knee and back injuries. However, despite the incident occurring in conjunction with the manufacturing of millwork, workers compensation benefits were denied due to the fact that the owners did not elect to include themselves on the workers compensation policy. Although they claimed to have asked for such coverage, and blamed their broker for filing out the form incorrectly, the Appellate Division still found that was insufficient to create liability for the insurance company where the application clearly indicated no coverage for the owners. (Kearton v. E.W. Millwork LLC)
In a recent unpublished decision from the Appellate Division, the court held that a homeowner did not acquire a portion of his neighbor's property by adverse possession. In New Jersey, if someone who doesn't own a particular area of real property possesses that property for over thirty years, the non-owner can take ownership of said property by filing an adverse possession action in Superior Court. However, in order to do so, such possession must be (1) continuous and uninterrupted, (2) actual and exclusive, (3) open and notorious, and (4) adverse and hostile. The court in this matter found that the possession, which consisted of an incorrectly-placed fence on an irregular shaped lot was not so "open and notorious" to give rise to an adverse possession claim. Noting that, "[t]here is nothing about the small fenced-in area that would suggest an actual encroachment ... the encroachment was at the far rear of defendants' lengthy (400 foot) property and obscured on defendants' side by a swath of trees," the court determined that the property should remain with its original owner. (Chen v. Gesualdo)
Earlier this week, a general contractor’s responsibility for the safety of the entire jobsite was reaffirmed by the Appellate Division in a case involving a subcontractor’s injured employee. Relying on, Alloway v. Bradlees, Inc., the Court noted that:
A general contractor has an even more comprehensive duty than the property owner to ensure the safety of the employees of any subcontractors working at a construction site. This duty is based on the public policy considerations embodied in the Federal Occupational Safety and Health Act and New Jersey's Construction Safety Act: It was obviously the legislative intention to ensure the protection of all of the workers on a construction project, irrespective of the identity or status of their various and several employers, by requiring, either by agreement or by operation of law, the designation of a single repository for the safety of them all. That "single repository" is the general contractor.
Here, although the trial court had dismissed the general contractor from the case on the basis that OSHA itself didn’t issue any violations, the Appellate Division overturned the decision, noting that OSHA compliance was only one factor and that general negligence principles govern the determination of whether a legal duty should be imposed on a contractor for injuries sustained by another contractor's employee. (Arias v. Cardinal Estates LLC, et. al.)
Attorney Fee Awards under Prompt Payment Act are not Dependent Upon the Amount Recovered by the Contractor where the Fees are Otherwise Reasonable
In a published decision from September of 2021, the Appellate Division reversed a trial court’s award of $12,250.40 in attorney fees, opening the door for the Plaintiff to possibly recover the full $104,670.51 in attorney fees and costs that were incurred. The Plaintiff subcontractor had filed a Prompt Payment Act claim for $30,500, which the Defendant fought for two years all the way to trial. In accordance with prosecuting its case through to a trial, the Plaintiff incurred over $100,000 in attorney fees and costs. However, the trial judge reduced this figure to $16,375.73, finding that a fee award of over $100,000 would be unreasonable where the amount recovered was only $30,500.
The Appellate Division reversed this finding, and remanded to the trial court to revisit the attorney fee award. In doing so, the appellate court emphasized that to drastically reduce the amount of attorney fees to be recovered would work against the public policy behind the Prompt Payment Act in the first place stating:
The statute's salutary goals of ensuring that contractors and subcontractors are fully and promptly paid for their work are thwarted when such plaintiffs fully prevail on a suit to vindicate their rights under the Act but net little or nothing owing to the costs of the litigation. … Without the court's unstinting enforcement of the statutory fee-shifting provision, contractors and subcontractors with relatively small claims would win only a Pyrrhic victory against defendants who failed to discharge their statutory obligations to pay promptly what they owe. Instead of deterring owners and contractors from delaying payment or stiffing their subs as the Legislature intended, it would be the stiffed contractors and subcontractors who would be deterred from suing to vindicate their statutory rights.
(JHC Industrial Services LLC v. Centurion Companies Inc.)
In a recent published Appellate Division case, the court firmly upheld a trial court's summary judgment decision which dismissed an action filed by an automobile insurer seeking remuneration from a health insurer for PIP benefits paid for certain people injured in auto accidents. The pertinent facts are that these individuals procured auto insurance from the auto insurer but designated the health insurance as the "primary" payor of PIP benefits in the event of accident.
Here, the health insurer never processed any requests for payment which were made directly by the auto insurer. Here, the auto insurer voluntarily issued PIP benefits (i.e., payments) on behalf of the injured people. Here, it appears that the auto insurer did not direct the injured people to submit their claims to the health insurer first. This is an important step in the PIP scheme of "primary vs. secondary" because only after a denial by the health insurer will the auto insurer become responsible for payment.
Therefore due to the many mis-steps by this auto insurer, its complaint was dismissed with prejudice.
Palisades Insurance Company v. Horizon Blue Cross Blue Shield of New Jersey A-2830-19.
Illegal Escape Clause in "Garage Policy"
In another unanimous opinion by the New Jersey Supreme Court, it was held that a "garage policy" which insured a loaner vehicle, and contained a provision which did not conform to the Regulations promulgated by the MVC, contained an illegal escape clause.
In this matter, a dealership procured insurance coverage for its loaner vehicles which provided for liability coverage in the event of an accident. However, the insurance policy contained a provision that the procured insurance only provided coverage when the "customer lacked the minimum insurance required by law." When the customer with the loaner car got into an auto accident, and the injured sued, the dealership's insurer disclaimed coverage because the customer had personal auto insurance with the legally minimum coverage of $15,000/$30,000.
Upon challenge by the injured, the court reviewed the law and the plain language of the regulations revealed that a "garage policy" must provide for liability insurance of $100,000/$250,000. Thus the court found the disclaimer of coverage, which was based upon language contained in a clause of the policy, to be unlawful, and the injured would be able to demand damages up to the "garage policy" limits. Huggins v. Aquilar (A-78-19).
Where an owner of a property sues a contractor in a construction litigation case, the burden of proof is upon the owner to both prove that the work was defective and what it will cost to have the defective work repaired. In an unpublished decision from February 2021, the Appellate Division noted that even without testimony from the contractor who prepared the repair estimate, the repair estimate may still be admissible as a business record exception to the rule against hearsay. The court noted that the repair estimate, "may have been admissible as a business record if: (a) the author prepared the document in the regular course of business, contemporaneously with its estimate, and not for litigation, (b) the business regularly made such estimates, and (c) the method, purpose or circumstances of preparation did not indicate that it was not trustworthy. Accordingly, while the better evidence would still be to bring in the contractor for live testimony, the court found that the trial court (among other things) should have at least considered if the estimate was admissible as a business record and therefore the case was reversed and remanded. (Olivera v. NJ Asphalt Services)
In an unpublished decision released today, the Appellate Division gave litigants two reminders for those engaged in construction litigation over unpaid services. The first reminder is directed to a defendant that assert a "setoff" amount is due and owing from the plaintiff. In that regard, the Court reminds that a setoff is an affirmative defense and that the defendant "bears the burden of proving it." In the case at bar, although the defendant sought a setoff amount from the plaintiff, it failed to produce evidence showing that such an amount was actually due. Here, for example, the defendant's trial witness claimed, during testimony, to not have the correct ledger with her while on the stand and thus could not competently testify to the large setoff amount sought.
The second reminder to litigants touches on the Prompt Payment Act ("PPA") which is found at N.J.S.A. § 2A:30A-2. The first subsection of that statute is applicable only with the owner, while the second subsection is applicable only with a subcontractor. In the former subsection "(a)" if an owner does not reject an invoice/work by a contractor it is "deemed approved." In subsection "(b)" if a contractor does not reject an invoice/work by a subcontractor it is NOT "deemed approved." This distinction is important when seeking payment for construction services because if an invoice and/or work performed is "approved" or "accepted" the lone argument between the parties will be financial in nature. (A&E Construction Co. v. Barrier Electric Co., Inc, et als.)
In a reported opinion from the Appellate Division, the Court overturned a trial court verdict in the amount of $457,870.86 (inclusive of counsel fees), finding that there was no violation of the Uniform Fraudulent Transfer Act (“UFTA”). The suit was brought by a landlord who had been leasing 16,000 square feet of a strip mall to a Amma Corp. for the operation of a supermarket. Prior to the end of the lease, the owners of Amma Corp., Mr. and Mrs. Perez, created a new company named NRVP LLC and opened another supermarket under that company’s name in a different location less than a half-mile away. The Perezes operated both supermarkets simultaneously for approximately nine months, but proceeded to have Amma break its lease with its landlord about nineteen months early. After breaking the lease, the Perezes shut down Amma Corp.
Unable to find a replacement tenant for Amma Corp., the landlord sued NRVP LLC for the balance due under the remainder of Amma’s lease on a successor liability theory. The trial court testimony indicated that other than a trademark, no assets of Amma were transferred to NRVP. However, given the common ownership, the close proximity in location, and the transfer of Amma’s trademark of the term “Super Supermarket” to the new company, the trial court found that NRVP was liable for the debts of Amma as a “continuation of the selling corporation,” and entered judgment in favor of the landlord.
However, the Appellate Division disagreed and reversed the trail court’s decision, finding that transfer of all, or substantially all, of the assets of the prior company is a prerequisite to the imposition of liability upon another company. Here, while there was the transfer of a trademark, the expert testimony was that is value was only $740 and there were no other assets transferred. Accordingly, there could be no successor liability. 160 West Broadway Associates LP v. 1 Memorial Drive LLC, et. al
Peter J. Vazquez, Jr.