Home > Uncategorized > L.A. Unified v. Great American Insurance Co. Allows Contractor Extra Work Claim

L.A. Unified v. Great American Insurance Co. Allows Contractor Extra Work Claim

In L.A. Unified School District v. Great American Insurance Company, No. S165113, the California Supreme Court issued its ruling resolving an issue that had been interpreted differently by the court of appeals.  The Court of Appeal decision, followed here by the trial court, held that to recover for nondisclosure, the contractor must show the public entity affirmatively misrepresented or intentionally concealed material facts that rendered the furnished information misleading. That Appellate Court also broadly held that a contractor need show only that the public entity knew material facts concerning the project that would affect the contractor’s bid or performance and failed to disclose those facts to the contractor. (Jasper Construction, Inc. v. Foothill Junior College Dist. (1979) 91 Cal.App.3d 1, 10-11.) Contrast, a different Court of Appeal had held a contractor need not prove an "affirmative fraudulent intent to conceal" when disclosure would have eliminated or materially qualified the misleading effect of facts disclosed. (Welch v. State of California (1983) 139 Cal.App.3d, 556.) Finally, a third Court of Appeal had suggested that the careless failure to disclose information may allow recovery if the public entity possessed superior knowledge inaccessible to the contractor. (Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 552.)

The California Supreme Court affirmed, and held a contractor need not prove an affirmative fraudulent intent to conceal. Rather–with the qualifications stated below–a public entity may be required to provide extra compensation if it knew, but failed to disclose, material facts that would affect the contractor’s bid or performance. Because public entities do not insure contractors against their own negligence, relief for nondisclosure is appropriate only when (1) the contractor submitted its bid or undertook to perform without material information that affected performance costs; (2) the public entity was in possession of the information and was aware the contractor had no knowledge of, nor any reason to obtain, such information; (3) any contract specifications or other information furnished by the public entity to the contractor misled the contractor or did not put it on notice to inquire; and (4) the public entity failed to provide the relevant information.  In these circumstances, a public works contractor can obtain extra work compensation for such material non-disclosure.

Nothing herein should be construed as legal advice or creating any attorney-client relationship. Please consult with an attorney for specific legal advice. Thank you.

All Rights Reserved © 2010 by Michael L. Mau, Esq.

The Mau Law Firm

Blog: http://maulaw.spaces.live.com

Website: www.MauLaw.com

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