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Building a Legacy: The Vision Continues

in Perspective
Mike Chollet

Washington University in St. Louis has played a unique role my life. Though I was never registered there as a student, I spent a large part of my youth on its storied campus.

Our cover story in this issue features a transformative $280 million project called “Campus Next” which is focused on the east end of the Danforth Campus at Washington University. Growing up in University City, my family home was about five blocks from that area, but back then it was known as the Hilltop Campus. As a kid, I thought the Hilltop Campus moniker made a lot of sense given the elevation of the property and the steep hill which extended from the north side of the athletic complex down towards the old Channel 9 building and Forest Park Parkway. My siblings and I called that stretch of landscape “suicide hill” and it was our favorite destination for sledding. When we needed to thaw out between sledding runs, we found the perfect spot in the lower level laundry rooms of the married resident housing. Every Spring, our entire neighborhood crew looked forward to the annual Thurteen Carnival fundraisers. The rest of the year (assuming the statute of limitations for trespassing has run its course by now) I confess that we pretty much ran wild, exploring campus buildings, galleries, tunnels and engineering facilities. Those were much simpler times.

In my twenties, I found a more legitimate excuse to hang out on campus when I took a job as a manager of the Whittemore House, a wonderful old mansion built in 1912 on Forsyth Boulevard which serves as the faculty club for professors and staff of the University and the medical school. The five years I spent at Whittemore House ultimately laid the groundwork for what turned out to be a rewarding 30-year career in the hospitality industry. During my time there, I was privileged to meet many of the great people who helped make WashU what it is today and whose names now grace buildings across the campus.

In a roundabout way, I could even credit WashU for the existence of my two wonderful children, since the campus is where I met their mother Debbie. In the late 70s, she took a job waitressing at the faculty club to help finance her graduate studies in the engineering department. As she neared the completion of her degree, Debbie began her job search. Always one to aim high, she reached out to William Tao, one of those great people who helped to write the University’s story. Tao was a true giant in the local engineering community, a member of the Washington University governing board and, conveniently enough, a Whittemore House member.

Debbie likes to say that his written response to her resume, in which he thoughtfully provided suggestions for some other companies that she might consider, was the kindest rejection letter

she ever received. Soon after the letter arrived, Debbie was working a club party when she spotted Tao and his wife Anne and approached him to thank him for the letter. After a five-minute conversation, they agreed to meet again later that week to continue their discussion. Charmed by her intelligence and tenacity, Tao hired Debbie as his assistant. She worked for William Tao & Associates for more than eight years and in the process built a lifelong friendship that continues to this day.

Washington University has always been a dynamic part of the St. Louis landscape, and its reputation as one of the premier educational facilities in the world is a diamond in our city’s crown. Over the decades, the University’s visionary leadership has provided the St. Louis building community with a continuous supply of challenging and innovative projects and we look forward to continuing our role as documentarians of the University’s the next chapter. As for me, my sledding days may be over, but the WashU campus will always hold a special place in my heart.

A Good Story Well Told

in Columns/Perspective
Mike Chollet

St. Louis Construction News & Review was launched in 1969 as The Voice for the St. Louis Construction Industry, and the founding Publisher was adamant about his choice of the word “for” rather than “of” in that tagline. Nearly 50 years later, we are mindful of that subtle but very important difference. Our stated purpose is not to speak on your behalf, but rather to provide a voice for the local construction industry. We see our role as story teller – the stories themselves are yours and our goal is to document and share them.

Every year around this time, the St. Louis CNR team comes together to brainstorm and identify topics for the two or three “Industry Features” that will appear in each of the six issues scheduled for the upcoming year. As you can imagine, it’s a tricky assignment to look ahead, sometimes 14 months into the future, and land on a dozen or more stories that will be timely, relevant and interesting to our readers.

The “Building Features” you see in each issue are obviously more time-sensitive, subject to unexpected setbacks, projected completion dates and dependent on our ability to round up the industry contacts we need to help us tell the story accurately. Whether the topic is chosen 12 months or 12 days before we start writing, the truth is, setting up those interviews can be a struggle. The more players connected to a project, the more difficult it is to identify the right spokesperson for each entity and locate a window in their schedules for the interview.

When we can get it, access to a subcontractors list is optimal. Those lists give our writers perspective on the complexity of the project which improves the accuracy of their reporting and often adds dimension to the stories that might have been missed. Subs lists also make it more likely that we will get the attributions right. For the record, publishers hate running corrections. Not because it’s inconvenient, but because it means we didn’t get it right the first time. We are always grateful to the General Contractors who understand the value of a good story well told and support our commitment to getting it right by providing subcontractors lists for their projects.

Occasionally, our efforts to report on what’s happening in a particular segment of the industry are similarly thwarted by communication issues. In fact, we were forced to cancel an “Industry Feature” planned for this issue when significant efforts to arrange interviews with leading providers of the products and services we intended to cover failed. My optimistic evaluation is that everyone doing this particular line of work is swamped right now and too busy to talk to a reporter. Our team was disappointed about losing what we thought was an important story, but we also regret the lost opportunity to support those companies by featuring their work.

On the heels of this loss, our always-sunny editor, Kerry Smith, made what I think is an important observation. Kerry noted that most of the companies she called were not prepared to tell (or to help us tell) their stories. Without a designated media spokesperson or an understanding of the value of editorial coverage in their home market, opportunities were missed. If my hunch is right, and all the companies we called were buried in work, that’s fantastic, but the missed coverage still matters because it might have helped queue up projects for when the pipeline eventually slows down. The next time the phone rings, whether it’s St. Louis CNR or another publication calling, remember that your story is worth telling, and you can help make sure it is a good story well told.

Publisher’s Perspective

in Columns/Perspective
Mike Chollet

“The measure of intelligence is the ability to change.”
― Albert Einstein

The library has always been one of my favorite spots. As a lover of history and an avid reader, I believe I’ve probably learned more in the last 15 years than I managed to absorb in the previous 50 combined. Inversely, the older I get the more challenging it becomes to embrace change. Depending on how you interpret Einstein’s statement above, I could be headed for a zero-sum game, intellectually speaking.

History tells us that while mankind’s relationship with change is complicated, great things can happen when a society is willing to embrace new ways of doing things. In this issue of CNR, several feature stories highlight the connection between the construction industry and our city’s need to adapt and change. We hope you enjoy the issue and we invite you to reach out and share your own stories with me or with our editor, Kerry Smith. 

In this issue:

Prefab to Fast-Track Projects – The practice of pre-building large components before delivery to the jobsite is on the rise. Advantages include convenience cost-savings and one partial solution to the challenge of recruiting and retaining a qualified labor force.

Construction Management Programs in Higher Education – Colleges and universities are taking the bull by the horns to address the construction labor shortage, offering degreed and post graduate study programs in construction management, engineering and other programs. It is a forward-thinking trend that promises to be a great boon to our industry in coming years. 

Engineering to Withstand Modern Threats – Engineers are being put to the test as they face down the challenge of designing public buildings and schools that can withstand terrorist threats and the increasingly common occurrence of natural disasters.

Back to School – In the midst of an economic downturn that decimated the construction industry, we were encouraged to see funding continue for construction and expansion of colleges and universities. A successful $85 million bond referendum, passed in 2016, is providing funding for an extensive rework of Ladue High School.

Transforming Olin Library at Washington University – Sometimes, building projects are like Forrest Gump’s box of chocolates: You never know what you’re going to get. Read about the challenges Alberici Constructors faced in effecting “inverted vertical expansion” as this WU landmark was transformed; literally, from the ground up.

Mike Chollet

mike@stlouiscnr.com

Is Traditional Marketing Dead?

in Columns/Marketing

By STEPHANIE WOODCOCK

Stephanie Woodcock

Cold calling is dead. The days of the “hard sell” are behind us. Thank goodness, right? However, this places the onus on the marketing departments to support sales even more and create a united front of messaging and brand positioning. Both departments need to work in tandem with each other with the new trend of “soft selling,” a trend that is here to stay.

If your company depends heavily on referral work and repeat business, you’ve been in business for a while and you have salespeople and project managers who possess years of relationships and experience in their field, chances are you are already employing the soft sales approach. How do we increase its effectiveness? We engage Marketing. Yes, you – Sales – will not get rid of us. You need us. The hard sell is going away, but we – Marketing – are here to stay.

Companies lose important sales opportunities when they don’t engage Marketing. They don’t understand this new relationship between marketing and sales. In the old way of hard sales, Sales could act more independently through cold calls, forceful sales letters and unsolicited pitches. The customer knows he or she is being sold to. There is no gray area. Marketing was able to act more independently as well, while employing more traditional, straightforward marketing techniques that didn’t need the salesperson’s collaboration.

The buyer persona is changing. Buyers are more aware, more informed, doing their own research online, choosing when they buy and preferring to order online with a few clicks on their keyboard or mobile device rather than picking up the phone.  Because this customer/sales dynamic is changing with a new, softer approach, Sales and Marketing need to work together to strategically find ways of informing customers rather than pressuring them.

This type of selling focuses on the relationship-building aspect of sales and finds less aggressive ways to show customers the solutions they need. Enter Marketing.

Marketing should support the sales effort with a brand image and message that delights and informs the customer. Useful and creative messaging that captures the customer’s interest and information is the key to growing your sales pipeline. While Sales engages customers, builds relationships and becomes trusted advisors, if Sales doesn’t have the brand, messaging and marketing expertise to back up this soft sell approach, Sales misses out on major low-hanging fruit opportunities.

It’s actually more than a soft sell approach. It is a creative and strategic partnership between Sales and Marketing that connects the customer base with the identity of the company.

Many undermine or dismiss marketing’s importance because it is more difficult to measure. I was recently asked, “Are print ads in industry magazines really worth it?” Why was I was asked this? Because it is difficult to measure results and the bottom-line value.

My answer is simple: If your customers are reading that magazine, if you want to position your company as a premier, experienced expert in your industry… then yes, they are worth it.  And guess what? You can measure an ad’s effectiveness.  While the main point of print ads, billboards, commercials and more are to position and elevate your brand, they can be measured through analytics. A customized website link can be printed on the ad that directs traffic from that ad to a monitored landing page.

Image is power. You are presenting an image of your company that helps support your sales effort.

Both traditional and non-traditional marketing techniques are needed to accomplish a cohesive strategy. The older, more traditional way of marketing will not properly reach those newer buying types and is being reinvented to remain relevant. Landing pages, digital marketing, analytics and SEO/SEM are all part of this reinvention. These non-traditional methods are becoming an integral piece of the marketing playbook. The key is for Sales and Marketing to develop a strategy that uses the best of both traditional and non-traditional marketing.

So how do we accomplish this? I sit down with marketing teams to discuss and create strategic approaches. How-to videos, white papers, social media engagement, search engine optimization, electronic newsletters, lunch n’ learns and digital engagement are just a few of the marketing tools my clients use to become the go-to source for their customers.

My clients also still use traditional marketing techniques such as print ads, billboards and press releases – but these traditional techniques have been

reinvented. Traditional marketing is not dead. It is reborn. Billboards call attention to creative website URLs to increase traffic and SEO on a mobile website. Press releases link to blogs and white papers on the company’s website. Print ads have call-to-action links to increase online engagement.

In softer, strategic sales, we shape the narrative. Because the soft sales approach relies on expertise and relationships, our marketing position plays an important role. More importance is placed on the marketing team to help facilitate the soft sales process. It’s no longer a transaction between a salesperson and a customer. The whole company’s image is becoming part of the transaction.  Website presence and traffic, search optimization, digital tools and electronic marketing are all essential in a comprehensive communication strategy. If the brand and message of Marketing isn’t in line with the values Sales is presenting, then the relationship with the customer – and the customer’s trust – is at risk.

How do you increase your marketing efforts and image? Each company and industry need a customized approach. The good news: There are so many tools in our arsenal now to make an impact. The bad news: Learning how to master each takes more skill and a team of people to facilitate.

I find that companies are still struggling to get sales and marketing departments on the same page. They each go their separate ways, as if their paths do not cross. Whether you know it or not, your paths cross. Your customers see what the marketing department sends out and then they see the salesperson. The two need to be unified in their approach. Get a good team of people, work on a strategy, solidify your identity and work together. Marketing and Sales need each other. It’s “’til death do us part.”

Stephanie Woodcock is president of Seal the Deal Too, a St. Louis-based marketing, creative & communications firm. She can be reached at stephanie@sealthedealtoo.com.

Is Your Business’s Faith in Technology Its Undoing?

in Columns/Technology

BY JOE BALSAROTTI

Joe Balsarotti

There’s evidence of it all around us. Teens can’t make change at the drive-thru window. Drivers blindly follow GPS right into a lake (if they take the wheel at all). Cursive writing has become a lost art. Surveys show that people losing their smartphone rank that experience just one point below a terrorist attack in regard to the level of stress it would cause.

As technology does more and more for us, the adage “use it or lose it” has begun to prove itself a law of the universe. Just as the prevalence of auto-pilot use caused the FAA to increase simulator time for pilots due to falling reaction times, we see what used to be common knowledge has become foreign to the younger generations – or lost to those who don’t make use of the skills they once had.

Maybe map reading, making change or flying planes aren’t required for your business, but the same causes and effects are probably starting to creep into your business processes. After all, we purchase and use technology in our companies to increase productivity and lower costs. However, blind trust in the technology – with staff now unable to verify or recreate the results without the ‘black box’ – should be of concern to any business owner or manager.

All technology eventually fails. We back up, surge-protect, virus-protect, firewall and scan. We sync data and for mission-critical systems, we include redundant elements and have spares at the ready.

Is your company ready for when the systems “which can’t go down” do go down? Does your business have a documented plan in place to start from scratch in case of a major disaster? Where are the license keys, contracts and warranty information for your equipment, software and services? Is your answer, “On the computer?” If so, you now see the problem.

The old POTS (plain old telephone service) was unbelievably resilient. New VoIP (voice over internet protocol) phones are anything but. You can’t just grab a $10 extension phone at Radio Shack like you used to, plug it into the wiring closet and at least get a line out. Now the internet line needs to be up, the switches, routers, firewalls and VoIP servers need to be in place, powered and configured to achieve that same basic dial tone. That’s the price for the cost savings and flexibility of VoIP, and there’s no choice as phone companies slowly turn off those POTS services.

Fire, flood, earthquake, alien invasion or zombie apocalypse – all could render all your technology infrastructure useless. You say, “It’s all safely in the cloud” and that’s fine, assuming you can get to that cloud. What many forget is that if you can’t get to your account information, license keys, contracts and the like, you can’t gain access. With encryption being the norm for backups nowadays (for good reason, as I’ve discussed in previous columns) that also means if you lose the key, the data is rendered useless and unrecoverable.

What’s a business owner or manager to do? Follow the words of President Ronald Reagan, “Trust, but verify.”

~Take the steps to back up locally and offsite in the cloud.

~ Put redundant elements in place where critical.

~ Regularly maintain and update not only the hardware, but the software also.

~ Make sure there are hard copies of your contracts, licenses, keys and other critical information locked up in a fire safe both on-site and off-site.

~ Have a contact list for emergencies and a calling order to wrangle the staff together.

~ Drill your staff to make sure they can keep basic business functions running without the cool technology.

~ Check your insurance coverage to verify you have cyber coverage as well as contents coverage.

~ Speak to your IT provider about what services it can offer in event of an emergency.

The United States Small Business Administration found that more than 90 percent of companies fail within two years of being struck by a disaster. Unfortunately, it’s these basic non-technology pieces of the technology puzzle which elude so many business owners and become the death knell after a disaster strikes.

Use these tips and apply common sense business practices to make sure your business doesn’t become a statistic.

Joe Balsarotti is President of Software To Go and is a 40-year veteran of the computer industry, reaching back to the days of the Apple II. Keep up with tech by following him at Facebook.com/SoftwareToGo or on Twitter @softtogo.

Court Rules for and against Contractor and Subcontractor

in Columns/Law

BY JAMES R. KELLER

James R. Keller

Missouri’s Eastern District Court of Appeals decided for and against a contractor and its subcontractor. The opinion offers significant legal rulings on everyday construction issues including change orders for extra work, lien waivers and attorney fees.

The case is Parkway Construction Services, Inc. v. Blackline LLC, 2019 WL 1344401 (March 26, 2019).

The court placed the victory with the subcontractor, however, finding it to be the prevailing party. This finding allowed the subcontractor to recover attorney fees under its subcontract.

The fees exceeded by 11 times the amount awarded on the subcontractor’s claim. The Eastern District directed the trial court to reconsider these fees considering the overall dollar value of the recovery.

The project was the renovation of two apartment buildings at 2804-2820 South Compton Avenue in St. Louis, MO. Magnolia Halliday, LLC owned the property.

Magnolia hired Blackline as the general contractor. Blackline entered into a subcontract with Parkway to do the plumbing work for $96,000.

Blackline agreed to provide shower valves, faucets, tubs and sinks. Parkway’s scope of work included reworking existing drains lines, waste drains and vents (DWV). This improvement would allow for new fixtures.

The contract described Parkway’s objective was to provide a complete working plumbing system. But Parkway was unwilling to accept the risk of replacing all the DWV piping.

Thus, the parties stipulated that Parkway would be responsible for repairing or replacing up to a maximum of 50 percent of the DWV piping. This 50 percent threshold was not clearly defined.

The contract did expressly define extra work, however, as requiring prior written authorization from Blackline. Extra work is work not in the original contract scope.

The contract also contained an attorneys’ fee provision stating that the prevailing party was entitled to its reasonable attorneys’ fees, costs and expenses. The contract did not define “prevailing party.”

The project quickly fell behind schedule due to factors beyond Parkway’s control. Blackline continuously pressured Parkway to stay on schedule.

During the project Parkway emailed Blackline that it had reached the point of having repaired 50 percent of the stacks without any additional costs. It asked Blackline for direction going forward. Parkway stated it was a “tough job with a ton of additional costs we could not have foreseen.”

Blackline responded three days later. It disagreed that the 50 percent threshold had been reached.  Blackline contended that the entire job should be completed without exceeding the 50 percent allowance.

Parkway created two change order forms. One form related to the extra DWV work. The other form related to extra shower valve work.

Parkway submitted the shower valve change order form to Blackline before starting the work. Blackline approved in writing the extra work for $1,051.

Parkway submitted the DWV change order form only after completing the work. Parkway did not detail the precise hours spent on each task. It also did not receive in advance oral authorization to do the work.

When Blackline refused to grant the DWV change order request for extra work, Parkway stopped work.

Blackline then had to hire another plumbing contractor to complete the work.

As a partial attempt to resolve the DWV piping issue, Parkway executed a lien waiver in return for Blackline’s payment of $25,200. The waiver waived any claim for work through the date of the lien waiver.

Blackline also tendered to Parkway a check for $8,712.97. Blackline calculated this was the remaining amount due to Parkway after subtracting Blackline’s costs for hiring a second subcontractor to complete the job.

Parkway did not accept the check as payment, fearing this would preclude its claim for extra work.

At trial, Blackline admitted it owed Parkway $1,051 for the extra shower valve work and $8,712.97 under the contract as the remaining balance due. Parkway sought $79,449 relating to its extra work claim on the theory that Blackline benefitted from the work and if it did not pay it would be “unjustly enriched.”

Missouri case law supports recovery for work performed that was requested, but no formal contract was in place to cover the work. The claim is for quantum meruit or unjust enrichment.

The trial court found Blackline’s tender of $8,712.97 as final payment of the balance due to be a conditional settlement offer that Parkway did not accept. The court also noted Blackline’s behavior as “employing sharp practices to pressure Parkway to complete the project” and at the same time being “purposefully unresponsive to Parkway’s attempts at communication.”

Blackline prevailed on the DWV extra work claims. Blackline did not request the work as extra work.

The trial court also found that Parkway released its DWV claims by signing the lien waiver.

Parkway did recover on its contract balance and shower valve extra work claims. The work apparently was not subject to the lien waiver.

Finding Parkway to be the prevailing party, the trial court awarded attorney fees of $103,234.31.

Both parties appealed parts of the trial court’s rulings.

The appellant court decided that the lien waiver was enforceable and precluded Parkway from seeking any money for work it performed before the date on the lien waiver. The appellant court also decided that Parkway should have ceased work until it obtained written authorization pursuant to a change order to exceed the 50 percent threshold.

Despite these rulings, the appellant court found Parkway to be the prevailing party. The court noted there are many varied definitions and interpretations under Missouri case law as to who is the prevailing party.

In this case the court noted that Parkway’s evidence generally related to all its claims.  Thus, success on one was enough to be the prevailing party.

The Eastern District sent the matter back to the trial court to reexamine appropriate attorney fees and to make certain they were not excessively awarded given the success by the parties on various claims.

James R. Keller is counsel with Sandberg Phoenix & von Gontard, P.C., where he concentrates his practice on construction law, complex disputes, real estate and alternative dispute resolution. He also is an arbitrator and a mediator. Keller can be reached at (314) 446-4285, jkeller@sandbergphoenix.com.

My, How Time Flies: Windows 7 Will Be Gone in a Flash

in Technology
Joe Balsarotti

By JOE BALSAROTTI

It seems that the upcoming discontinuation of Windows 7, Microsoft Server 2008 and Adobe’s Flash were somehow a surprise to a number of businesses. Microsoft drops its monthly security updates and patches as of January 2020, as in the beginning of next year. We’ve consulted with our clients for a while to develop budgets and replacement plans for their networks, but far too many IT firms don’t like to give “bad news” – and as such, they leave such discussions until the last minute.

If your business is all Windows 10 or Server 2016, congratulations. Pat yourself on the back; you’re more prepared than most, it seems. If all this is all news to you, you need to get ready quick. The computer industry has been plagued with shortages of Intel processors for months now and there is no relief in sight. That means multiple months-long wait times for server and higher-end PC orders. Also, there are a number of application programs that need to be upgraded to run under Windows 10, so this tech refresh will probably take longer, from a calendar perspective, than previous ones. Networks with older NAS (network attached storage) units and old servers have problems connecting to new Windows 10 equipment, as W10 slammed the door on many of the security holes that the operating systems of these devices have.

Microsoft did its biggest push ever to position Windows 10 as its premier operating system. For more than a year, Microsoft gave free updates for users of both Windows 7 and Windows 8. Personally, I suspect sweeping the anything-but-popular Windows 8 under the rug was a large part of the strategy. However, narrowing the development focus to just one version certainly can’t hurt Microsoft, who has had its hands full trying to patch and secure multiple operating systems at the same time.

In January 2020, when Microsoft stops updating Windows 7, all those old machines become a security risk for your business and the data of both your company and its customers. As we’ve discussed before, running a business with known flaws in its PCs and networks opens it up for liability and loss of customers. Assuming one wants to stay in business, updating older technology is a business imperative in today’s environment. A new wrinkle is that Microsoft has said that updates will be available for those Windows 7 and Server 2008 customers who sign support contracts, but pricing will be such that updating the machines will be a far, far less expensive strategy.

Microsoft’s position is that Windows 10 is the “last version of Windows” and will morph over the years and undergo substantial updates on the fly, adopting the philosophy of Apple with its operating systems. Whether that idea will survive amidst changes in technology and widely varying needs of users is a gigantic question. Just ask the Apple owners who wake up to notice things that used to work no longer do because their systems can’t handle the new updates. Also, look forward to “as a service” offerings from Microsoft where monthly or annual payments will replace Windows bundled with systems. Microsoft has already been successful transitioning millions of Microsoft Office buyers onto monthly or annual payments for Office 365.

On top of these Microsoft changes, Flash – the language that powered websites for two decades – is finally going away. Flash, which was developed by Macromedia (and acquired by Adobe in 2005), brought easy animation to the web. However, Flash has been plagued with bugs and security flaws. Apple dropped support in its browsers and Apple co-founder Steve Jobs publicly skewered the software in an open letter back in 2010. Those using Firefox for browsing saw Flash support end, and Microsoft is dropping it from IE and Edge as well. At one point, more than 80 percent of users accessed some Flash-enabled website each and every day, but at last count that had dropped into the teens as HTML5 became the web language of choice. As with the Windows 7 transition, look for disruptions as old websites and applications that have not been rewritten become inaccessible.

Be sure to not only plan for the physical replacement of machines, servers and upgraded software, but also for training as Windows 10 and Windows servers have some substantial differences from their predecessors – and rewritten websites might have different functionality from their Flash version days.

Hopefully this isn’t new news. Hopefully your company and its tech staff (or outside provider) are already discussing this on an ongoing basis. However, if your current IT provider isn’t consulting with you at least annually to talk through refreshes to your technology, you may want to get serious about upgrading soon.

Technology is always in motion. To ignore it is to put your company at a disadvantage.

Joe Balsarotti is President of Software To Go and is a 40-year veteran of the computer industry, reaching back to the days of the Apple II. Keep up with tech by following him at Facebook.com/SoftwareToGo or on Twitter @softtogo.                             

Eastern District Orders Insurance Company Back to Trial Court on its Refusal to Cover Homeowners’ Construction Policy Claim

in Law/Uncategorized
James R. Keller

BY JAMES R. KELLER

Missouri’s Eastern District Court of Appeals recently granted judgment for homeowners and against their insurance carrier on claims for construction damages to piers, a pole and the foundation of their home. The appellate court sent part of the dispute back to the trial court to consider further whether the insurance company’s refusal to cover a policy claim for these damages was vexatious.

The case is Cockerham v. American Family Mutual Insurance Company, 561 S.W.3d 862 (Eastern District, MO 2018).

The appellate court noted this was the first case in Missouri to directly address the issue of insurance coverage under a policy of this sort. The Missouri Supreme Court denied on Dec. 18 an application to consider the Eastern District’s opinion.

The Eastern District’s decision is now new law affecting all similarly worded insurance policies, at least in Missouri courts in the Eastern District.

Homeowners Robert and Stacia Cockerham sued their insurance provider, American Family Mutual Insurance Company, for damages relating to the construction of an addition to their residence. The addition was a celestial observatory.

The alleged damages involved a newly installed telescope support system attached to the foundation of their home and the homeowners’ loss of use of the observatory.

The homeowners purchased their home on Lakeshore Drive in Creve Coeur, MO in 2001. In 2005 they hired Nicholas Schalk and Schalk Construction, LLC to construct the observatory addition to their home.

The project included a telescope and its support system. Schalk had never before built such a system.

Schalk hired one subcontractor to install the piers and a separate subcontractor to pour concrete over the piers. The homeowners claimed the concrete subcontractor poured the concrete incorrectly, damaging the piers, the support system and the foundation.

The homeowners made a claim on their insurance policy to cover the losses. American Family denied coverage. It contended the claims were excluded from coverage or were not covered at all under the homeowner policy.

After cross motions for summary judgment, the trial court granted American Family’s motion in part by dismissing the homeowners’ claim for vexatious refusal to pay for the piers, pole and foundation damage. The homeowners appealed.

The appeal involved interpretation of the insurance policy and its various sections.  Typically, this is a question of law for judges, not juries, to decide.

The policy excluded defective construction in part C but it did cover “resulting loss” to property described in Part C that was “not excluded.”

The Eastern District found its job to be difficult. The policy required the appellate court to “decipher a rather prolix word puzzle.” Insurance policies tend to be complicated, layered with qualifiers, exceptions and exclusions.

American Family argued that it did not cover the loss because the homeowners’ losses were already excluded due to faulty construction. The “not excluded” clause did not apply, the carrier contended, since the coverage already was excluded.

Focusing on the “resulting loss” clause, the Eastern District rejected this argument. The policy did not define “resulting loss.” As Missouri courts typically do when the contract does not define a word whose meaning the parties dispute, the court turned to Webster’s Dictionary for guidance.

Webster’s Third New International Dictionary (1993), unabridged, defines the verb form of the word “result” as “to proceed, spring or arise as a consequence, effect or conclusion: to come out or have an issue.”

The court noted that the policy did not specifically state what a “resulting loss” may result from except to the extent such losses will not be covered that are “excluded or excepted” from the policy.

The Eastern District concluded that an ordinary purchaser of insurance would conclude that where one loss results from another loss caused by faulty construction, “such resulting loss is covered.”

Thus, the policy covered the damages to the piers, pole and foundation due to the incorrectly poured concrete. This includes the cost to remove and replace the bad concrete.

The Eastern District also found there were factual questions as to whether American Family’s refusal to pay on this claim was vexatious. This included a dispute as to whether the insurance company’s position denying coverage was willful and unreasonable.

The court’s finding means the dispute has returned to the trial court for further consideration regarding the piers, pole and foundation claims for vexatious refusal to pay.

The homeowners also had a claim for loss of use of their observatory. The policy, however, covered such a loss only when the property as a whole was uninhabitable, causing additional homeowner expenses.

The appellate court agreed with the trial court’s denial of this claim.

It was undisputed that the house was not uninhabitable – especially since the homeowners continued to live there.  They had no claim for additional living expenses because there were none.

The appellate court concluded that American Family clearly was not subject to a vexatious refusal to pay claim for loss of use. Since there was no coverage, the carrier’s position was proper.

The homeowners had additional assertions that the Eastern District found persuasive enough to raise more genuine fact questions meriting further trial court consideration.  They included that American Family’s representatives told the homeowners they did not need a builder’s risk policy to cover losses like the ones that occurred in this case, given the policy they had. The representatives included an adjuster who allegedly told them that “their losses would be covered.”

The appellate court also noted that the carrier did not cite the “resulting loss” clause in its defense when it filed its answer to the initial lawsuit. It did not rely on this clause in its briefs on the motions for summary judgment.

The insurance company relied solely on the faulty construction exclusion.

James R. Keller is counsel with Sandberg Phoenix & von Gontard P.C. where he concentrates his practice on construction law, complex business disputes, real estate and alternative dispute resolution. He also is an arbitrator and a mediator. Keller can be reached at (314) 446-4285 or jkeller@sandbergphoenix.com.

Former Equipment Sales Eye Trends, Patent Technology to Serve New Markets

in Marketing
Stephanie Woodcock

By STEPHANIE WOODCOCK

Henry Ford famously said, “If I had asked people what they wanted, they would have said faster horses.”

Chuck Justus, owner of Green2Go Rental Power & Light, a supplier of eco-friendly rental power and field lighting products, quotes Ford while explaining an industry that refuses to change. “On one hand, you have smaller rental houses that are mom and pops and don’t take chances, and on the other hand, you have large companies that are slow to change,” said Justus. “Because of the lack of innovation and this unwillingness to change, both sides are killing product evolution in the rental industry.”

Justus’ work experience helped him develop his patented technology. Years ago, he worked for a large company that manufactured equipment and saw engineers wringing their hands trying to find a solution when in 2015, a large portion of diesel engines in mobile applications were required to meet heightened emission standards. Contractors had to look in different directions for alternatives, according to Justus, which led to increased acquisition costs for generators and a longer learning curve for both technicians and end users. Power and lighting equipment were becoming more complex.

In 2016, Justus started Green2Go, an emerging supplier in the rental power industry in St. Louis. According to the founder, his products challenge the status quo and add innovation to an industry that had seen little innovation over the last fifteen years.

“I saw an opportunity I call ‘radically different’ and I took a chance,” said Justus, who cites St. Louis Art Fair as a client that uses his generators. “They were spending north of $50,000 in electric rental and installation for their festival. With my product, the were able to save 50 percent on electrical infrastructure.”

Keith Jackson, president and owner of 24/7 Onsite Cameras, also uses the words “radically different” when describing his mobile camera trailers. Jackson says there has always been security and there have always been cameras, but there hasn’t always been the ability to rent security mobile camera trailers.

“The concept of onsite security cameras is fairly new,” he said. “I took these two concepts – security and cameras – and customized them for jobsites. I made security trailers that were customized to be mobile and rentable because I saw the emerging market and need for this technology.”

There is a radically different mindset for renting versus owning security equipment, according to Jackson.

“You have to think about what can go wrong with a piece of equipment and how to meet the harsh demands of the environment. There is no rulebook,” he said. “You find a need and develop the product to fit the need, but if you’re going to rent it like we do, you have to industrialize it and be willing to invest the dollars in production and in owning that product for a long period.”

In addition to embracing and understanding the nuances of an emerging market, Jackson said he also pours much time and expertise into thinking through the manufacturing process. “For instance, when my mobile camera trailers travel, they have to have the capability of being lowered to a certain level so they can be transported by truck. From the industrial housings that store the electronics to the solar panels that make the product stand-alone, each production detail is customized to be ‘road rental ready,’” he said.

Jackson’s experience in the rental industry spans more than 25 years. When he launched 24/7 Onsite Cameras in 2010, Jackson says no one was renting mobile security trailers. “Few companies saw the need to have security on their jobsites,” he said. “Instead, they bought extra product to counteract the anticipated loss of supplies on a jobsite and hired security guards when necessary. Rental units never sleep, never take breaks or bribes, and have a photographic memory.”

Contractors today see beyond the benefit of security alone, according to Jackson. They can consolidate manpower, remotely oversee deliveries and contractors and reduce theft on their jobsites. Safety on jobsites is improving with onsite cameras, he says, because surveillance increases worker awareness. Mobile security trailers continue to change the jobsite culture.

The education process remains a big component of his long-term success, according to Jackson. Once contractors realize the return on their investment is beyond jobsite security, they become loyal customers. “But the industry is slow to change,” he said. “Hurdles in this emerging market are setting precedents with price and changing customer perceptions and expectations. Customers want to continue to do things the way they have always been done. Unfortunately, sometimes it’s too late. We are the least expensive first option and the most expensive last resort.”

Another business owner changing the culture of the jobsite and willing to invest in innovative equipment is Chase Darrah, owner of ChaseCo Equipment Rental & Sales. With four locations in the Midwest, Darrah started his rental company in 2004 after working in equipment sales for one of the largest Ditch Witch dealers in the world based out of Sullivan, MO.

In the 2000s, Darrah noticed the trend of contractors renting equipment rather than purchasing it.

“It made total sense to me,” Darrah said. “Why pay for the insurance, maintenance and taxes and have that fixed cost on a piece of equipment that you don’t use every day?”

At that time, Darrah also detected the need for a specialty equipment rental facility. “A great rental store does really well at managing the equipment from all aspects including purchasing, replacing, maintaining, servicing, delivering, inspecting and stocking,” he said. “The rental store isn’t in the building business or the manufacturing business. It is in the equipment business. On the flip side, many companies in these industries aren’t in the equipment business. It makes sense to sub the equipment needs out to the rental company,” he added.

Like his colleagues Jackson and Justus, Darrah saw an emerging market in renting advanced equipment that could change the landscape of jobsites. Every year the percentage of equipment that is rented versus purchased increases, according to Darrah. “I saw an unfulfilled need before other rental houses did, and I was willing to invest the dollars into my vision.” Like Justus, he faced a slow-to-change industry that favor adapting to new technology.

Darrah currently stocks Ditch Witch vacuum excavators (hydrovacs) in his rental fleet, trailer-mounted vacuums on steroids with high-powered water pressure systems commonly used in the directional boring field. This product, however, is in its infancy stage with so many unknown uses, Darrah says.  ChaseCo Rental was one of the first equipment rental companies to purchase these in the country, according to Darrah. “I knew we could present these to our existing customer base involved in directional boring, but I also knew we would have to educate our other customers in other markets for our rental revenue to increase. It has been a long road, but every year the demand is rising,” he said.

Darrah says uses for this product are plenty, but it takes a while to get customers on board. “We went through the same process with mini-excavators when we first opened,” he said. “Many of our customers were using full-size backhoes at that time and thought mini-excavators were a joke. But eventually, when they needed to rent an excavator, they began to see the many benefits that excavators provided over backhoes.”

Another commonality between the three innovators is their ability to gain traction from new, less traditional markets. Green2Go rents to event organizers.  24/7 Onsite Cameras rents to the oil and gas market, utilities, industrial and large contractors. Chase Rental Co. rents to large manufacturing plants.

Are You Losing Contact with Sales Humanity?

in Marketing
Tom Woodcock

By TOM WOODCOCK

The pressure to give in is immense.

Do everything electronically and save time. You’ll also cut costs. Sounds great, doesn’t it? Communicating by social media, email or text. Getting plans off FTP sites. Researching suppliers through their websites. Electronic deposits for payment (though for some reason, few “modernize” to this technique).

All of these make the need to meet face to face, or even voice to voice, obsolete. Nobody comes by the plan room anymore. iPads manage project information onsite and appointments are held via Skype. Attendance begins to drop at construction events and association meetings. Pretty soon, everything in construction will have an app.

I’m not an old fuddy-duddy, but I just don’t quite buy into the totality of complete, non-human communication. I’m the farthest thing from a computer geek and I still enjoy face-to-face contact with customers. I regularly speak to general contractors, subcontractors and their suppliers about getting personal again. They communicate a longing for the old days when you looked into someone’s eyes in a live situation, not through a computer screen. I find it interesting that purchasing products online during the holiday season has flatlined a bit. Isn’t it remarkable that so many people waited in line for a ridiculous amount of time to be first for Black Friday? Hmmm, seems people still like to physically go out and shop.

This really doesn’t surprise me in the least. It may sound simplistic, but people still prefer to do business with other people. Yes. Face to face, in meetings, working together. When you reduce your customer interaction to solely electronic sources, you lessen your own personal role in securing a project.

It’s easy to simply work through electronic communication and sit comfortably in our posture- supporting desk chair. This techno-generation finds avoiding personal contact preferable, not to mention do all our social interaction on Facebook or LinkedIn. Sheesh. Soon, we’ll just order our food online and have it delivered to our desk. Oh, you already do that? At least you won’t have to worry about sun poisoning.

The last time I looked, construction took place outside and around people. It amazes me how many contractors skip walk-throughs, client meetings or doing follow-up meetings on project completion. The more you eliminate customer contact, the more you make yourself exactly like your competitors. Why would anyone choose you or your firm over another if all the data came from each company electronically? You may think, “That’s what my customers want.” Well, my son wants cake for dinner every night, but I know it’s not the best thing for his health. How can you educate your customers on innovations, competitive differences or negative market practices if you’re not getting in front of them?

Accepting every electronic innovation that comes along is a bit irresponsible. Evaluate how effective the innovation is: Does it move you closer to the customer or further away? The closer you are to the customer, the more you’ll learn his/her needs, tendencies or preferences. Tweeting, posting or friending does not count as developing customer relationships. Tried and true sales tools such as the handshake, the smile and the thank-you are still alive and well. You cannot do any of these without being with the client.

I know you’re busy; having all this technology at your fingertips buys you more time. But that time is worthless if it comes at the cost of a lesser connection to your customer base. If no one visits plan rooms anymore, then I want to be the only one who does. If nobody delivers bids personally anymore, call me FTD. If you live by the price, you’ll die by the price. If Electrician A looks just like Electrician B, my choice will be made according to price. If GC A looks like GC B, who can build my building cheaper? It’s not very complex. For those of you who feel all of this is a waste of time and are convinced that 100 percent electronic communication is the wave of the future, please compete against my clients.

Once again, I’m not anti-technology. You should be getting email and project information on your phone, being active on business social networks and leveraging electronic marketing vehicles. These are simply no-brainers. However, they are merely support mechanisms, not primary communication tools. You are your primary communication tool. It’s much tougher for anyone to tell you “no” when looking into your eyes.

The one thing that this all takes is courage. So many people hide behind their keyboards and attack from cyberspace. I challenge you to buck the trends and keep the tradition of personal contact in your repertoire. It will truly make a significant difference if you stick with it. There are no quick fixes to a slow, fast or highly competitive economy. Yet by combining effective electronic tools with traditional human contact, you’ll have a greater level of success. As a matter of fact, I don’t just think it. I know it.

Tom Woodcock, president of seal the deal, is a speaker and trainer for the construction industry nationwide. He can be reached via his website,  www.tomwoodcocksealthedeal.com, or at (314) 775-9217.

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