Construction Law
THE COTNEY BRIEF | Construction Law Simplified October 2025
- State and Federal Regulatory Changes
New DOT Rule Rewrites DBE Certification Standards for Contractors
DOT issued an Interim Final Rule (IFR) that took effect Oct. 3, 2025. It removes the race/sex presumptions from DBE/ACDBE eligibility and orders immediate transitions: Unified Certification Programs must reevaluate all current DBEs/ACDBEs, and, until that reevaluation is done, recipients may not set DBE contract goals or count participation toward goals. It is currently being legally challenged.
If you do DOT-funded work (e.g. bridge/road facilities, transit depots, airport construction reimbursed by FAA) expect a pause on project-specific DBE goals and counting until the state’s UCP finishes reevaluations. Bid docs and compliance language may change mid-stream.
If you don’t touch DOT dollars: No immediate change. Owners outside DOT can choose to copy the approach, but there’s no automatic spillover from this rule.
👉 Takeaway: Roofing and construction contractors working on federally funded projects should immediately review their DBE partnerships and certifications. With the removal of automatic presumptions of disadvantage, firms that once qualified may lose certification unless they can demonstrate individualized proof. Until DOT finalizes its recertification process, contractors should proceed cautiously on bids tied to DBE participation goals and document all compliance efforts to mitigate legal and contractual risk.
- Case Law Update
License Lapse Costs Contractor Everything: California Court Bars Recovery in ABI v. Balfour Beatty
In American Building Innovations v. Balfour Beatty Construction, 104 Cal.App.5th 954 (Sept. 3, 2024), the California Court of Appeal affirmed the dismissal of a subcontractor’s suit for unpaid work on the ground that it was not properly licensed during the relevant performance period. The court concluded that the subcontractor’s license suspension triggered by a lapse in workers’ compensation insurance barred it from recovering under Business & Professions Code § 7031.
The facts are important. ABI (the subcontractor) initially held workers’ compensation coverage but allowed its policy to be cancelled after refusing to pay disputed premiums. The cancellation was reported to the Contractors State License Board (CSLB), which resulted in automatic suspension of ABI’s contractor license. ABI later applied for retroactive reinstatement of its license, asserting that its failure to maintain insurance and file a certificate was due to circumstances beyond its control. But the court found ABI’s delays, misrepresentations, and failure to secure alternative insurance meant it did not satisfy the narrow statutory safe harbor, so the reinstatement as a legal defense failed.
Because ABI could not clear the licensing hurdle, the court held ABI could not enforce the contract or recover for its performance. In addition, the court upheld an award of over $1.55 million in attorney’s fees to Balfour Beatty under the subcontract’s prevailing-party fee provision.
👉 Takeaway: This decision underscores the absolute importance of maintaining proper licensing and insurance coverage even when disputes over premiums or coverage arise. Courts will scrutinize attempts at retroactive reinstatement, and contractors risk being barred from recovery (and exposed to fee awards) if they fail to meet strict statutory requirements.
- Contract Provision of the Month – Forum Selection Clause
Context: A forum selection clause identifies the specific state, county, or court where any disputes arising under the contract must be resolved. Including this clause gives predictability and control over where litigation occurs. Without it, you can be dragged into court in another state or jurisdiction, dramatically increasing costs and complexity, UNLESS there is a specific statute that requires the case to be litigated in the county/state where the work was performed.
For contractors and suppliers, it helps ensure disputes are resolved in your home state or a neutral jurisdiction where you understand the laws and have local counsel. It also avoids inconsistent rulings or being forced to litigate under unfamiliar local rules.
From a risk-management standpoint, the clause reduces uncertainty and discourages frivolous claims filed in distant or plaintiff-friendly venues. It can also simplify enforcement of judgments and align the forum with other contract provisions like governing law or arbitration location.
Sample provision:
Forum Selection and Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of [Your State], without regard to its conflict-of-law principles. Any claim, dispute, or cause of action arising out of or relating to this Agreement, the Project, or the performance of the Work shall be brought exclusively in the state or federal courts located in [County and State]. The parties expressly consent to the personal jurisdiction of such courts and waive any objection to venue or inconvenient forum.
- Understanding Builder’s Risk Insurance: Key Legal Pitfalls in Construction Projects.
Builder’s risk insurance is a crucial yet often misunderstood form of coverage that protects construction projects during the course of construction. Unlike general liability insurance, which covers third-party injuries or property damage, builder’s risk insurance is a form of first-party property coverage that insures against damage to the project itself. It generally applies to buildings, materials, fixtures, and equipment being used in the construction or renovation of a structure. For contractors, developers, and owners, understanding the scope and limitations of these policies is essential to prevent costly disputes and uninsured losses.
One of the most common legal issues surrounding builder’s risk policies is determining who is covered. Policies are typically purchased by the owner or general contractor, but subcontractors often assume they are included as insureds. In many cases, however, coverage only extends to those specifically named or who meet the policy’s definition of “insured.” Contractors should review certificates of insurance and policy endorsements carefully to confirm their status. Courts have repeatedly held that simply being a party to the construction contract does not guarantee builder’s risk protection. This lack of clarity can lead to disputes when damage occurs, and parties expect coverage that does not exist.
Another recurring issue involves what types of losses are covered. Builder’s risk policies generally cover direct physical loss or damage to the project, but they often exclude faulty workmanship, design defects, or wear and tear. However, many modern policies include “resulting loss” provisions, which cover damage caused by defective work even if the defective component itself is excluded. For example, if a subcontractor installs a faulty roof that leaks and damages interior finishes, the cost of repairing the roof may not be covered, but the resulting water damage inside the building might be. Understanding the distinction between defective work and resulting loss is critical when negotiating coverage and submitting claims.
Legal disputes also arise over when coverage begins and ends. Builder’s risk coverage typically starts when materials are first delivered to the jobsite and continues until substantial completion or occupancy. Problems occur when projects are delayed, partially occupied, or subject to multiple phases of construction. Insurers may deny claims on the basis that coverage expired once a certificate of occupancy was issued or when the owner began using the space. Contractors and owners should ensure that the policy period aligns with the actual construction schedule and that extensions are obtained if delays occur.
Finally, the allocation of deductibles and claim proceeds can lead to conflict. Construction contracts should clearly define how insurance proceeds will be distributed and who is responsible for deductibles. Courts have held that, in the absence of clear contract language, insurers may have to determine allocation, which can prolong claims and litigation. To avoid disputes, contractors should ensure that builder’s risk obligations in the contract match the policy’s terms and that all parties understand their respective roles in maintaining and benefiting from the coverage.
In summary, builder’s risk insurance provides essential protection during construction, but only when properly structured and understood. Contractors and owners should carefully review policy language, confirm insured status, verify coverage scope, and align contract provisions to ensure that the policy functions as intended.
👉 Takeaway: Builder’s risk insurance can be a powerful safety net during construction but only if contractors and owners understand who is covered, what losses are included, and when coverage begins and ends. Most disputes arise from unclear policy language, faulty workmanship exclusions, or timing issues tied to substantial completion. The best protection is proactive: confirm insured status in writing, align contract terms with the policy, and monitor coverage throughout the project. Doing so can prevent expensive gaps in protection and costly post-loss litigation.
- Upcoming Speaking Engagements & Events
- NRCA Board and Committee Meetings, Legal Updates, October 27-30, 2025, Scottsdale, AZ
- Western States Board and Committee Meetings, Legal Updates, November 3-6, 2025
- IRCA Expo and Conference, State of the Industry, November 11, 2025, Indianapolis, IN
Disclaimer: This newsletter is for educational purposes only and does not constitute legal advice or create an attorney-client relationship.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.