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MSZ&M Property Damage Practice Group Scores Defense Verdicts in Multi-Million Dollar Stucco Cases

In 2019, our client, a stucco remediation contractor was placed on notice of 26 estate homes with stucco claims and shortly thereafter found itself part of over 10 AAA filings and 2 Court of Common Pleas cases all arising out of 26 homes and allegations of non-compliant stucco applications from 2005 through 2015 with a total exposure in excess of five million dollars.  Along with counsel for the other subcontractors to the developer/builder, our Property Damage Group lead by Philadelphia Partner Jeffrey Sotland, Esquire has spent the last three years defending these cases and addressing issues such as collateral estoppel, statute of repose, statute of limitation, and the right of contractual indemnity.  To date, Jeffrey Sotland and his group have secured defense verdicts on 7 of 26 homes.

The most recent decision from the Arbitrator was the result of weeks of remote/virtual AAA hearing brought by the builder after settling with 6 homeowners for $1,442,000.00.  This hearing focused on the deficiencies by three subcontractors, but the builder’s case was significantly affected by a recent defense verdict for another home, the failure to call any homeowners as witnesses, and its own contradictory expert reports.  In a nine page well-reasoned decision, the Arbitrator found for the subcontractors on every aspect of the claim and denied all claims for damages.

The one interesting and overriding issue for our client was that it was not in existence until 2014 (all six homes in this case were built before 2008) and was alleged to be a successor in interest to another company with a similar name and identical ownership that actually performed the work on the homes in question.  That other company was uninsured for these losses so the builder brought this claim to chase the insurance policy.  However, the allegations of successor in interest were put forth with no supporting evidence to substantiate this claim.  The Arbitrator concluded that the evidence presented at the arbitration was wholly insufficient to prove the necessary elements under Pennsylvania law for successor in interest liability. 

The challenges posed by the “pay and chase” mentality was evident in this matter as the builder settled the cases the day after producing its experts report.  To bring this extra contractual/contribution claim, the builder directed its expert to create a new report that deviated greatly from the initial report (and reports in other cases), thereby compromising his effectiveness as an expert.  Further inhibiting the builder’s claim was the finding by the Arbitrator that the settlement was not reasonable and that there was insufficient evidence to substantiate the amounts paid in light of a recent defense verdict on a single home in an identical case from the same group of homes.  Even with a practicing attorney attempting to provide expert analysis that the settlement was reasonable, the builder’s justifications were just not rationale or supported by the evidence.  It should be noted that the builder never asked the subcontractors to participate in the settlement or provide any notice until after the settlement was effectuated.

The strategy for our defense was to maintain a low profile, coordinate efforts with other defense counsel, and focus on the legal obstacles for the builder.  While we lost every battle on the issues of collateral estoppel, statute of repose, motions to amend, and evidentiary rulings, the Final Award was vindication that the strategy for this matter was appropriate and provided our client with the best chance of success.