Northeastern Subcontractors Association
Vol 18, No. 7 (518) 869-9800 January 2000
Inside this edition: Employment Practices Liability Program * President's Message * Right to Arbitrate Eliminated * New Members * Understanding Payment Laws on NYS Public Projects
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NESCA UNVEILS EMPLOYMENT PRACTICES LIABILITY PROGRAM (Go Top)
On November 4, 1999, NESCA's Board of Directors approved a new association group program to assist members in purchasing Employment Practices Liability (EPL) Insurance coverage. This new program will provide several key advantages to members who must purchase EPL coverage, most notably a substantial cost savings when compared to standard industry individual policy premiums. The EPL Program has been specifically tailored for NESCA and its members by Allied Coverage Corp. with insurance provided by Lexington Insurance Company. In recent years, there has been a dramatic increase in discrimination and sexual harassment litigation arising out of workplace incidents, and employers have incurred substantial legal expenses in defending these types of claims. Since the employer's general liability policy does not cover liability for employment practices, the insurance industry has responded to the marketplace by devising a form of coverage specific to this need. Employment Practices Liability Insurance covers employee-related wrongful termination, discrimination, sexual harassment and workplace torts. Wrongful termination is defined as termination of any employment relationship in a manner which is against the law and wrongful or in breach of an implied agreement to continue employment. Discrimination means termination of any employment relationship or a demotion or a failure or refusal to hire, promote or otherwise to take any action against an individual with respect to compensation or terms and conditions of employment because of race, color, religion, age, sex, disability or other protected category. Sexual harassment means unwelcome sexual advances and/or requests for sexual favors and other verbal or physical conduct that are made a condition of employment or are used as the basis for an employment decision or create a hostile work environment. Workplace torts means retaliation, defamation, infliction of emotional distress, invasion of privacy, wrongful discipline, wrongful reference, failure to employ or promote, wrongful deprivation of career opportunity or wrongful demotion. As more and more construction owners begin to specify EPL coverage as a required form of insurance for contractors and subcontractors, many NESCA members may not have any choice as to whether you purchase an EPL policy. You may have to purchase this coverage as a condition of your contracts. To make it easier and more affordable for NESCA members to purchase EPL insurance coverage, the NESCA EPL Program offers the following key advantages: A substantial savings of up to 50% or more when compared to standard individual policies. Members purchasing coverage under the program will automatically be entitled to broadened coverages that would otherwise generate an additional premium charge under individual policies. Risk management services provided by Lexington including a Risk Management Consultant, a toll-free EPL hot line, dedicated in-house claims staff, an EPL Risk Management Package of key human resources documents and other services. Members who would like additional information about the NESCA EPL Program should call Lisa Marchica at Allied Coverage Corp. 1-800-861-9452, Ext. 259.
NESCA held its annual holiday meeting and reception on December 9th at the Century House in Latham, a meeting attended by more than 160 members and their spouses. This event proved to be both an entertaining and rewarding evening for all who attended. Our Toys for Tots campaign yielded a van-load of toys -- not to mention the $1,400 check we turned over to representatives of the Marine Corps. Thank you to all who donated a toy for this worthy program. After dinner our members were entertained and amazed by the wizardry of magician Jim Snack, who kept us all glued to our seats with his astonishing "slight of hand" demonstrations. Jim's appearance, along with a 3-hour open bar and a fantastic menu, were co-sponsored by NESCA's past presidents and the executive committee. I'd like to thank the following companies for their generosity in co-sponsoring this meeting: AFSCO Fence Supply Co., Inc. AWESCO Albany Ladder Co., Inc. All-Lifts, Inc. Campito Plumbing & Heating, Inc. Dagostino Building Blocks, Inc. Gomez Electrical Contractors, Inc. NationsRent Stants Combustion Associates, Inc. Teal Becker & Chiaramonte, CPA's Vellano Bros., Inc. Valley Equipment Co., Inc. John V. Warren, Inc. Weather Guard Industries, Inc. The Woodward Company As you can see in the lead story of this month's NESCA Newsletter, the Board of Directors recently adopted a new membership benefit intended to save you a significant amount of money on Employment Practices Liability Insurance. EPL Insurance is relatively new to the marketplace, and is intended to protect your company against claims of discrimination, sexual harassment and wrongful termination. There has been such an explosion of litigation in these employment-related areas over the last several years that many construction companies are beginning to recognize the need to carry this type of insurance since these claims are NOT covered under general liability policies. Plus, if you bid public work, you've probably begun to see requirements for EPL insurance contained in your bid documents, particularly on school work. NESCA's group EPL insurance program is intended to substantially reduce the price you pay for EPL coverage, and I urge you to take a look at this new member benefit. Finally, I highly encourage you to make plans to attend NESCA's first meeting of the new millennium, to be held on January 13, 2000 at the Century House. Our speaker will be Mark Alesse, Chairman of New Yorkers for Civil Justice Reform, a coalition of businesses and business organizations who have banded together to fight lawsuit abuse and reform New York's liability laws. Mark will make a presentation on what steps NYCJR is taking to reign-in out of control litigation, and what NESCA members can do to help. During 1999, NYCJR successfully introduced comprehensive reform legislation which includes reform of Sections 240 & 241 of the Labor Law, the so-called construction industry "Safe Place to Work" Law. I hope to see you on January 13th!
DELETION OF CLAUSE ELIMINATES RIGHT TO ARBITRATION (Go Top)
The Appellate Division of the State of New York, Third Department, recently held that the deletion of an entire arbitration section from a "Standard Form of Agreement Between Owner and Contractor" (AIA form A101) eliminates the right to arbitrate any dispute under the contract, notwithstanding other undeleted references to arbitration within the contract. In Joseph Francese, Inc. v. Enlarged City School Distict of Troy, the Appellate Court upheld the trial court's finding that the plaintiff's cause of action was time barred by a one year statute of limitations in which the plaintiff wrongfully sought to proceed with his claim in arbitration instead of in the courts. Joseph Francese, Inc. v. Enlarged City School District of Troy, 693 NYS2d 280 (3d Dep't. 1999). The court held that the contractor's mistaken pursuit of its breach of contract claim in an arbitration proceeding was not in good faith and not under color of right, and thus, the limitation period for the breach of contract claim would not be tolled. The contract between the parties for an elementary school construction project included a modified AIA Form A201, "General Conditions of the Contract for Construction". Among the modifications made by the parties was a deletion of the entire arbitration section of the contract. In making its decision, the Court pointed out that bidders were furnished with the project manual containing the proposed contract form, including the modified AIA form A201, prior to submissions of their bids. Also included in the project manual was language pointing out the modifications to the contract and directing potential bidders to seek the advice of an attorney in reviewing the modified language. The general contractor on the project, plaintiff, was eventually terminated. Alleging damages as a result of the owner's failure to properly administer the project and coordinate the work of its contractors, plaintiff served defendant with a demand for arbitration on September 15, 1993. Defendant's counsel, after notifying plaintiff of the deletion of the arbitration clause in the parties contract, moved to stay the arbitration. In May, 1994, the defendant's application was granted, and the Supreme Court ruled that the deletion of the arbitration clause was clear evidence that the arbitration was not intended by the parties. The Appellate Court affirmed the Supreme Court's ruling. Six months later, plaintiff commenced a breach of contract action in the Supreme Court, which was dismissed on the ground that the action was not timely commenced. In that action, the court rejected plaintiff's argument that the one year statute of limitations for bringing a claim under its contract had been tolled by the arbitration proceedings. The plaintiff appealed, and the Appellate Court again affirmed the lower court's holding. The Court, noting that the protection of the tolling provisions of CPLR 204(b) are available only if litigation was delayed while the party pursued an arbitration claim under a "color of right", held that regardless of undeleted references to arbitration in other printed clauses of the contract, plaintiff's deletion of the entire arbitration clause of the AIA form A201 negated any ambiguity in the parties intention in forming the contract. An entire eight paragraph section entitled "Arbitration" was deleted in the contract and a majority of the 24-page document's references to arbitration were manually crossed out. The Court stated, "Clearly, the deletion of Section 4.5 'Arbitration' -- the procedural heart and soul of the contract -- left all other references to arbitration unsupported." The Court also referenced what it called the "cardinal rule of contract interpretation," that where preprinted and hand written clauses in a contract are inconsistent, the written clauses prevail. This rule is based upon the idea that "the written words are the immediate language and the terms selected by the parties themselves for the expression of their meaning while the printed form is intended for general use, without reference to particular objects and aim." Therefore, when parties to a contract modify or review contracts with both preprinted and handwritten clauses, all parties must be mindful that the handwritten clauses of the contract control.
Eberl Iron Works, Inc. 128 Sycamore Street Buffalo, NY 14204 (716) 854-7633; FAX (716) 854-1184 Contact: John O. Smith
Insulation Specialty, Inc. 664 County Road E. Fairfield, VT 05448 (802) 827-6171; FAX (802) 827-3985 Contact: Concetta Madison
Peter J. Rozell, Ltd. 145 Park Road Queensbury, NY 12804 (518) 793-2634; FAX (518) 793-2865 Contact: Sal Prisco
SUBS/SUPPLIERS SHOULD UNDERSTAND PAYMENT LAWS ON NYS PUBLIC PROJECTS (Go Top)
Getting paid on a timely basis has long been identified as one of the most common problems faced by construction industry subcontractors and suppliers. With each and every payment requisition submitted, the question that normally runs through the minds of most subs and suppliers is "how long will it take me to get paid?" While laying the contractual groundwork to ensure prompt payment and good cash flow is an extremely important measure to take, when doing public work in New York State there are also a number of statutory "prompt payment" laws which subcontractors and suppliers can rely on to move payment along. Beginning in 1974, NESCA and its state affiliate, the Empire State Subcontractors Association (ESSA), began a successful campaign of lobbying for important changes in the law which require payment to subcontractors and suppliers to be made in a expeditious manner. As follows are four ESSA prompt payment measures enacted into law between 1978 and 1992 which all subcontractors and suppliers who perform NYS public work should be aware of and understand: 1978 Payment/Retainage Law - Amended Section 139-f of the State Finance Law (for state projects) and Section 106-b of the General Municipal Law (for counties, towns, municipalities, school districts) to require the prime contractor to pay each subcontractor and supplier within 15 calendar days of the receipt of payment by the prime contractor from the public owner. This amendment also restricted the amount of retainage which can be held on a subcontractor's payment to 5 percent unless prior to entering into a subcontract agreement, the subcontractor is unable or unwilling to provide performance and payment bonds at the request of the prime contractor, in which case the prime may retain 10 percent. 1984 State Prompt Payment Law - Amended Section 179-f of the State Finance Law to mandate that state agencies pay contractors within 45 days (was reduced to 30 days in 1988) from the receipt of an approvable requisition or pay market rate interest penalties. 1989 Interest Pass Through Law - Amended Section 179-f of the State Finance Law to require prime contractors to pay subcontractors and suppliers a pro rata share of interest collected due to a late payment by a state agency equal to the percentage of their pro rata share of the contract payment. 1990 Subcontractor Prompt Payment Law - Amended Section 139-f of the State Finance Law by adding teeth to the 15-day payment period between prime contractors and subcontractors/suppliers on state public works projects. This amendment assesses market rate interest penalties against prime contractors who fail to make payment within the required 15-day period. 1992 Local Government Prompt Payment Law - Amended Section 106-b of the General Municipal Law to require, with the exception of New York City, local governments to pay contractors within 30 days (except for municipal corporations which may take up to 45 days) from the receipt of an approvable requisition or pay market rate interest penalties. This amendment also requires prime contractors to pass along a pro rata share of interest collected to subs and suppliers, and further requires payment to subs and suppliers within the 15-day payment period or pay market rate interest penalties.