Practice Area: Commercial Litigation

September 24, 2015

By Kevin Cornish, Esq.

Small business owners spend significant time and money preparing to open and operate their businesses.  From market research to obtaining necessary equipment to securing inventory, the tasks are endless.  Small business owners must also secure facilities from which to operate.  Often, this means renting commercial space from a landlord.  Unfortunately, this aspect of operating a small business frequently is not given the appropriate amount of attention.

Here is how the process typically goes: the small business owner spends time researching appropriate locations in which to operate.  When the owner finds a suitable location, the owner inquires with the landlord about availability.  Understandably, owners focus their negotiations around the monthly rental amount and length of the lease agreement.  If the parties agree on these issues, the landlord will often present the business owner with a lease agreement that contains numerous provisions and legal issues over many single spaced pages.  Not wanting to incur additional costs, business owners often spend little time reviewing, negotiating, and understanding all of the terms of the lease agreement that the landlord has provided.

Landlord lease agreements often contain terms that are very favorable to the landlord and not as favorable to the tenant.  Commercial lease agreements also contain provisions that small business owners without legal training may not fully understand.  These issues can include confession of judgment, common area maintenance and how such charges are calculated, which party is responsible for repairs and improvements, legal options for the landlord and tenant in the event of a breach, legal requirements of the parties to act upon a breach, insurance requirements, indemnity and releases, subletting and assignment, acceleration of rent, and many more.

Many issues within a commercial lease agreement may not seem important at the outset of the lease, but could prove costly in the long term.  Frequently, the first time small business owners have an attorney review a lease is after an issue arises.  By that time, with the lease agreement signed, nothing can be done to change the lease terms.  After consulting with an attorney, business owners are surprised at what the lease means or the terms that are included.

While small business owners may not view legal review and negotiation of the lease agreement as an important investment, it can often prove indispensable in the future.  Small businesses can often secure more favorable terms with negotiations prior to signing of the lease.  At a minimum, having an attorney review and explain the lease terms greatly assists the business owner in understanding options and ramifications.

It is true that legal review of a lease agreement is another startup cost for a small business.  However, the benefits of reviewing the lease agreement before signing it are significant and can prevent headaches in the future. And that’s usually money well spent.

For more information feel free to contact Kevin Cornish at (610) 275-0700 or by email at kcornish@highswartz.com. Visit his attorney profile here.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

In these cases, its important to understand that just because the insurance company asserts that the policy does not provide coverage, does not necessarily make it true.

Individuals and businesses purchase insurance to protect themselves and their assets: automobile insurance to protect them in the event of an accident involving a motor vehicle; homeowners insurance to protect their house and property; commercial general liability insurance to protect their businesses; professional liability insurance to protect professional business activities.

Each of these types of insurance generally protects the insured in the event a lawsuit or legal claim is filed or asserted against them. Often, insureds expect that if a claim is filed against them, their insurance company will step up and defend the person or business.

Insurance policies offer two types of protection: defense and indemnification.  An insurance company’s duty to defend requires that the insurance company defend the insured if a legal claim is asserted against the insured and the allegations “may potentially come within the policy’s coverage,”  Sphere Drake, P.L.C. v. 101 Variety, Inc., 35 F. Supp. 2d 421, 426 (E.D. Pa. 1999). (emphasis added).   The duty to defend exists even if the “claims against the insured [are] groundless, false, or fraudulent.”

On the other hand, the duty to indemnify is narrower. It requires that the insurer pay for any losses for which the insured is found liable.  An insurer has a duty to indemnify “only where the insured is held liable for a claim actually covered by the policy.  Whole Enchilada, Inc. v. Travelers Prop. Cas. Co. of Am., 581 F.Supp.2d 677, 694-95 (W.D. Pa. 2008).

Insureds are sometimes faced with situations in which a legal claim is asserted against them, but their insurance company denies coverage and refuses to defend them.  This leaves insured wondering what to do and where to turn.  Individuals or businesses could face significant expense to defend against the alleged claims.  This is especially difficult when the insured has been paying premiums expecting that their insurance company would protect them in the event of a lawsuit.

When an insurance company denies coverage, the insured can defend the claim itself or file a declaratory judgment action against the insurance company.  In a declaratory judgment action, the insured asks the court to review the insurance policy and the claims asserted and determine if the insurance company is required to defend the insured.  Many times, the court determines that the insurance company is wrong and that the insurance company is required to defend the insured.

Similarly, insureds can also face difficult and confusing situations when their insurance company initially agrees to defend them, but then files its own declaratory judgment action asking the court to rule that the insurer is not required to continue defending the insured.  If the court agrees with the insurer’s position, then the insurer would stop defending the claim.  Therefore, the insured has a strong interest in defending the claim to ensure that the insurance policy provides coverage.

Finally, there is a potential that an insurance company’s failure to defend an insured constitutes bad faith.  In such a situation, an insured may be able to recover their attorneys’ fees from the insurer.

Any time an insurance company does not agree to provide coverage under an insurance policy, it is important for an attorney to review the insured’s legal rights and options.

Visit Kevin’s attorney profile.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

By Kevin Cornish, Esq.

March 11, 2015

This is a follow up to the June 1, 2014 blog entitled Pennsylvania Supreme Court to Decide Whether HICPA Allows Recovery under a Theory of Unjust Enrichment.

HICPA does not preclude recovery on Unjust Enrichment Claim

The Pennsylvania Supreme Court issued its decision in the case of Shafer Electric & Construction v. Mantia, 96 A.3d 989 (2014). At issue before the Supreme Court was whether the Home Improvement Consumer Protection Act, 73 P.S. §§ 517.1-517.18, bars a contractor from recovery for unjust enrichment when the home improvement contract does not comply with HICPA requirements. The Superior Court held that HICPA does not preclude a non-compliant contractor from pursuing an unjust enrichment claim, and the Supreme Court affirmed. Unjust enrichment is an equitable doctrine allowing a party to recover on the basis of a quasi-contract, or contract implied in law, when one party is enriched unjustly at the expense of another.

The Supreme Court first recognized that HICPA only bars actions for breaches of express home improvement contracts when the contract does not comply with HICPA. The Supreme Court noted that an unjust enrichment claim does not sound purely in contract and that HICPA is silent as to quasi-contract actions, such as unjust enrichment.

The Supreme Court also noted that disallowing an unjust enrichment claim when HICPA requirements have not been satisfied would allow a homeowner to avoid payment for work performed even if the work was perfect.

The Supreme Court focused primarily on the language of HICPA. While HICPA specifically states that a contract which is not compliant with HICPA is invalid and unenforceable, the Supreme Court held that HICPA’s language does not discuss the preclusion of common law equitable remedies such as unjust enrichment. The Supreme Court noted that if the Pennsylvania General Assembly wanted to modify the right of non-compliant contractors to recover under unjust enrichment, it could have done so.

Due the Supreme Court’s decision, contractors who do not comply with HICPA are permitted to bring equitable causes of action, such as unjust enrichment. Likewise, homeowners cannot avoid payment for work performed by non-compliant contractors on the sole basis that the contractor did not comply with HICPA.

Recoverable Damages

The procedural posture of Shafer Electric is also important. After the contractor brought suit against the homeowners, the homeowners filed preliminary objections to the action. Preliminary objections challenge the legal basis of a lawsuit based upon the facts alleged in the complaint, which are accepted to be true. The defendant does not have an opportunity to present its facts. In determining preliminary objections, courts assume all alleged facts to be true and determine whether the law allows for recovery.

Due to the procedural posture of the case, certain legal issues and defenses, in addition to the underlying facts of the case, were not litigated. For instance, under unjust enrichment, a plaintiff can only recover the reasonable value of services rendered. In a breach of contract action, a plaintiff could recover expectation damages, reliance damages, or restitution damages. Additionally, certain legal defenses are available to a defendant in an unjust enrichment action, such as the doctrine of unclean hands. Breach of contract actions may also implicate attorneys’ fee and interest recovery that are not available in an unjust enrichment action.

As a result of the Supreme Court’s decision, contractors who have not strictly complied with all aspects of HICPA are not precluded from bringing actions to recover money that has not been paid to them. However, a contractor’s damages may not be as expansive as those available in a breach of contract action. In order to assure the most options in the event of non-payment, contractors should comply with all aspects of HICPA and assure that written contracts are HICPA compliant.

The Supreme Court’s decision also means that homeowners cannot avoid payment to contractors based solely on a contractor’s failure to comply with HICPA. However, a homeowner may still have equitable defenses to a contractor’s claim of non-payment.

If you are a homeowner or home improvement contractor with questions regarding HICPA compliance and rights and responsibilities under HICPA, feel free to contact Kevin Cornish at 610-275-0700 or kcornish@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.