J. Kent Holland, J.D. © 2013
This Bulletin is provided for informational purposes only. Please consult with qualified legal counsel to address your particular circumstances and needs. Zurich is not providing legal advice and assumes no liability concerning the information set forth above.
Who is legally responsible for project site safety? Contractors, design professionals and project owners all have different roles and responsibilities when it comes to site safety. Responsibility and liability can arise under both statutory and common law. Contract terms and conditions may also be the basis by which parties become responsible for site safety. In addition, actions by parties in the project field may establish responsibility, even if such responsibility would not otherwise exist by law or contract terms.
Construction contractors typically have overall responsibility for project safety. Project owners generally limit their own safety responsibility by contractually making the contractor and design professionals “independent contractors” such that the owner is not responsible for their actions.
Professional consultants typically seek to include language in their own contracts with project owners stating that the consultant is not responsible for the contractor’s means, methods and procedures—including matters of safety, and the contractor is solely responsible for site safety. Despite such contractual language, injured construction workers often seek to recover damages from entities other than their employer so they can obtain more than would be available under workers compensation.
This issue of C&DR Briefings reviews recent court decisions from which we can learn valuable lessons about managing the risk of site safety responsibility.
Owner Responsibility for Site Safety
Once the project owner has executed a contract with its independent contractor delegating site safety responsibility to that firm, the owner generally has no legal liability for injuries to the employees of the independent contractors unless the owner asserts some control over the means, methods and procedures of the contractor’s work or takes some action at the project that causes or contributes to an injury. There are exceptions to the general rule, including where there is (1) a non-delegable duty; (2) an inherently or intrinsically dangerous activity; or (3) negligent exercise or retention of control over the work by the owner.
Merely retaining the right to stop, inspect or approve work is generally not enough to create owner liability. Instead, retention of control by the owner must be so significant that the contractor cannot freely choose and exercise its means, methods and procedures as it deems fit.
In the case of Beil v. Telesis Construction, Inc., 11 a.3D 456 (PA Supreme Ct. 2011), a project owner, Lafayette College, entered into a construction management agreement with a general contractor (GC) to renovate a building. That firm in turn subcontracted the renovation work to other contractors, one of whom performed the roofing work.
An employee of the roofer climbed scaffolding that had been installed by a masonry subcontractor and fell from that scaffolding, suffering a serious injury. The employee sued the construction manager /general contractor as well as the masonry subcontractor and the college — alleging that all were negligent.
The Supreme Court of Pennsylvania held that although the college exercised some authority regarding safety, and regulated access to, and use of, certain areas of the premises, this conduct did not constitute the type of control that would subject it to liability since it did not retain control over the actions of the independent contractors.
Hirer of Independent Contractor Implicitly Delegates Site Safety Responsibility
Owners can reduce their site safety risk through contract language — making construction contractors’ independent contractors solely responsible for site safety procedures — and by making their professional consultants independent consultants solely responsible for the safety of the consultant’s employees. It is then important that the owner not insinuate itself into site safety responsibility through actions that could be interpreted by a court to constitute actual control over the contractor’s work.
The key to the hirer of an independent contractor successfully delegating worksite safety responsibility to the independent contractor (including duties imposed by requirements such as federal or state OSHA regulations) is that the hirer (e.g., owner) does not exercise control over the independent contractor’s work.
In Seabright Insurance v. US Airways, 258 P.3d 737 (Cal 2011), the court held that the project owner, U.S. Airways, was not responsible for site safety. The court explained that employees of an independent contractor that are injured in the workplace, as a general rule, cannot sue the party that hired the contractor to do the work even when the party that hired the contractor failed to comply with workplace safety requirements that were statutorily imposed.
US Airways hired an independent contractor to maintain and repair its luggage conveyor at the San Francisco International Airport. It did not direct the work, and it did not have its own employees participate in the work. The conveyor lacked certain safety guards required by applicable regulations and, while inspecting the conveyor, one of the contractor’s workers got his arm caught in its moving parts. After the contractor’s workers compensation insurance paid benefits for the injury, the insurer sued US Airways claiming the airline caused the injury.
The trial court granted summary judgment to the airline because it found no evidence that it affirmatively attributed to the accident; the California Supreme Court agreed that summary judgment was properly granted. In reaching its decision, the court discussed the interplay of workers’ compensation and the limitation upon suits that can be brought by employees against their employers. It also discussed how the same principles can apply when bringing suit against the one that hired the independent contractor that employed the work since “the hirer of an independent contractor generally has … ‘no right of control as to the mode of doing the work contracted for….’”
The court explained that it previously held the hirer of the independent contractor cannot be found liable “merely because [it] retained the ability to exercise control over safety at the worksite,” but that it is fair to make the hirer liable if it “exercised the control that was retained in a manner that affirmatively contributed to the injury of the contractor’s employee.”
The court also cited one of its earlier decisions that held if the injured party is the contractor’s employee, and therefore entitled to workers’ compensation benefits, policy concerns regarding allowing the hirer to escape liability for bystanders who are injured by the contractor’s negligence do not apply. Thus, “a hirer is presumed to delegate to an independent contractor the duty to provide the contractor’s employees with a safe working environment.”
As determined by the court, the key to a hirer of an independent contractor successfully delegating worksite safety responsibility to an independent contractor (including duties imposed by the hirer by requirements such as state OSHA regulations), is that the hirer does not exercise control over the independent contractor’s work.
Contractor Responsibility for Site Safety
The general contractor on a project is typically responsible for overall site safety because the contractor is performing the type of work that is creating the most significant safety risks on a site. The Agreement between the contractor and the owner specifically assigns this responsibility to the contractor as an independent contractor responsible for its own means, methods and procedures — including safety precautions. See for example, American Institute of AIA A 201-2007, section 10, and ConsensusDOCS 200 – 2007, Section 3.11.
In addition to being liable for acts that cause injuries, the contractor may in some instances also have liability for the injuries of its subcontractor’s employees. This can be so even when those injuries are not directly caused by the prime contractor.
Courts in some states impose liability on contractors for hazards where the contractor knows or should know the employee of a subcontractor is not protecting himself against a known hazard. Some states find contractors liable for injuries to subcontractor employees if the contractor has retained control over the subcontractor’s means, methods and procedures – especially if the prime contractor maintains safety-related supervisory duties such as providing a safety supervisor, or ensures compliance with safety rules and regulations.
Some courts find contractor liability by focusing the legal analysis primarily on the language of the contract between the project owner and contractor that includes specific and detailed safety responsibilities being imposed by the contract upon the contractor. Cochran v. Gehrke, Inc., 305 F. Supp. 2d 1045 (N.D. Iowa 2004).
Other courts hold that merely maintaining the authority to direct, control or supervise the work that created the injury is not sufficient basis to find the prime contractor liable for subcontractor injuries if the contractor did not exercise actual control over its subcontractor’s work. Thus, in the absence of proof of any negligence or actual supervision of a subcontractor, the mere authority the general contractor has to supervise the work and implement safety procedures is not a sufficient basis to impose liability on the prime contractor or to find that it owes any common law indemnification to the project owner for damages.
Contractor Responsibility for Injuries Sustained by a Subcontractor’s Employee
In McCarthy v. Turner Construction, 953 N.E. 2d 794 (NY 2011), the court held the general contractor owed no common law duty to indemnify the project owner for the injuries sustained by a subcontractor’s employee since the GC neither controller nor supervised the subcontractor’s work.
The GC was performing a build-out for a store tenant (not the project owner) and retained the services of a subcontractor for certain work. An employee of the subcontractor was injured by falling from a ladder and sued the owner for damages. The owner then sued the GC for both common law indemnification and contractual indemnification for damages the owner had been found vicariously liable under the state’s statutory law.
Although the GC had not been found to be directly liable or vicariously liable for the subcontractor employee injuries, the property owners argued they were entitled to common law indemnification. They asserted the GC contractually assumed sole responsibility and control of the entire project, and had the contractual authority to (1) direct, supervise and control the means and methods of plaintiff’s work; and (2) institute safety precautions to protect the workers.
The owner asked the Court to adopt a general rule that a party may be liable for common law indemnification upon a showing that the party (i.e., the proposed indemnitor) either was actually negligent or had the authority to direct, control or supervise the injury-producing work even if it did not exercise that authority. What the owner asked to court to do was equate a party that merely has authority to direct, control or supervise the work with a party who is actively at fault in bringing about the injury suffered by the plaintiff.
The appellate court held that in the absence of proof of any negligence or actual supervision of a subcontractor, the mere authority the general contractor has to supervise the work and implement safety procedures is not a sufficient basis to require common law indemnification of the project owner.
In rejecting the project owner’s argument the court held:
“A party cannot obtain common law indemnification unless it has been held to be vicariously liable without proof of any negligence or actual supervision on its own part. But a party’s (e.g., a general contractor’s) authority to supervise the work and implement safety procedures is not alone a sufficient basis for requiring common-law indemnification. Liability for indemnification may only be imposed against those parties (i.e., indemnitors) who exercise actual supervision (Citation omitted). Thus, if a party with contractual authority to direct and supervise the work at a job site never exercises that authority because it subcontracted its contractual duties to an entity that actually directed and supervised the work, a common-law indemnification claim will not lie against that party on the basis of its contractual authority alone.
Although the agreement, inter alia, required (GC) to supervise and direct the work at the premises owned by the property owners, this fact alone was insufficient to establish that (GC) actually supervised or directed the injured plaintiff’s work, especially in light of the fact that (GC) contracted the work [out to a subcontractor,] that resulted in plaintiff’s injury, and Supreme Court’s findings that (GC) (1) had no supervisory authority over [Plaintiff’s employer’s] work, (2) would not have directed plaintiff as to how to perform his work; and (3) did not provide any tools or ladders to the subcontractors who worked at the site.”
Although the GC interacted with both the subcontractor and sub-subcontractor firm whose employee was injured, the court found that the GC had no supervisory authority over the sub-subcontractor’s work, and it provided no tools or ladders to subcontractors that worked at the site.
The court in McCarthy v. Turner held that because the GC in this case “did not actually supervise and/or direct the injured plaintiff’s work, [GC] is not required to indemnify the property owners under the common law.”
An issue that that has been confounding contractors and their attorneys is how the multi-employer worksite rule of OSHA is to be applied to impose safety responsibility. In the decision of C&M Builders v. Strub, 22 A. 867 (MD 2011), the court addressed a situation where an employee of an HVAC subcontractor fell to his death while working on a house from the third floor to the basement, through an open stairwell.
Framing of the house had been completed three weeks earlier by the framing contractor who left a hole in each floor for the stairwell to be installed later. On the day of the accident, the HVAC subcontractor let himself into the house and placed ladders into the openings so he could move between the three floors. The framing subcontractor was not at the site the day of the accident and did not control the conditions of the site or how the HVAC work was performed.
Either the HVAC contractor or someone else removed boarding that the framing contractor had placed over the doors and windows after completing its work several weeks earlier. They then took the wooden ladders from the trash bins and put them back into the stairwell holes to have access to the three floors. The HVAC worker fell when he apparently became impatient waiting for his co-worker to bring him a ladder to complete some work he was doing. He took matters into his own hands by removing a nail that held a wooden makeshift ladder to the side of the stairwell, and then pulling the ladder up to his floor, he apparently leaned it against a metal stud that collapsed under his weight when he began to climb the ladder.
The court held that the framing contractor did not control the jobsite conditions and work at the time of the accident, and owed no duty pursuant to the multi-employer worksite doctrine of OSHA. The court also found that the laborer intentionally assumed the risk and was contributorily negligent when it knowingly performed under the conditions and this barred recovery under Maryland law.
Despite the above-described intervening acts by others, the first level of the appellate court (Court of Special Appeals) found that the framer was a “creating employer” under OSHA. In reversing that decision, the highest court of appeals (Court of Appeals of Maryland) explained, “Even if [the Framing Contractor] ‘created’ a hazard that was in violation of a regulation, it did not exercise continuing control, or even a presence, at the worksite at the time of [the worker’s] fatal accident. Thus, the facts of this case do not warrant this Court’s adoption or application of the “multi-employer worksite doctrine” or its ‘creating employer’ citation policy.”
In analyzing the facts of the case, the court said the laborer was not an employee of the framer and the general duties of OSHA and MOSHA (the state Maryland state regulations) requiring an employer to maintain a safe workplace for its employees were inapplicable. The question then was whether “specific duty” clauses of regulations applicable to multi-employer worksites were valid to the situation. This duty has been found by OSHA and numerous courts to mean that “creating employers” owe a duty to non-employees where there is evidence of responsibility or duty to maintain the worksite, and it is feasible the employer would be in a position to remedy the hazard.
A key to imposing liability, however, is that the contractor must be found to have created the hazard and then maintained the areas in which the hazard was located. If the contractor has control over the areas in which the hazards are located, and the duty to maintain those areas, liability can be imposed. Under the circumstances of this particular case, the court found that no duty was imposed on the contractor by the regulations.
Contractor Employee Cannot Circumvent Workers Compensation Bar Against Suing His Employer Unless He Can Show an Intentional Wrong Created Substantial Certainty of Injury or Death
Where an employee of a contractor was injured in the collapse of an unshored 25 foot deep trench, he filed suit against his employer – asserting that the exclusive remedy of the workers’ compensation act did not bar the suit because an exception granted under the law allows suits against employers for injuries resulting from an employer’s “intentional wrong.”
The Supreme Court of New Jersey determined the circumstances in this case demonstrated poor judgment and was an exceptional wrong, but not an “intentional wrong” within the meaning of that term under the statutory exception to the exclusive remedy of the workers compensation statute.
There must be a showing of actual intent to do wrong, and substantial certainty that the wrong would lead to injury or death of the employee. In this case, none of the facts provided what the court considered to be an “objectively reasonable basis for expecting that a cave-in almost certainly would occur during the brief time plaintiff was sent into the trench.”
Even if the employer were judged reckless or guilty of gross negligence based on the evidence presented, the court held the worker did not satisfy the “conduct prong of the substantial-certainty test” required to get out from under the workers compensation act exclusive remedy. Van Dunk v. Reckson Associates Realty Corp., et al., 45 A. 965 (NJ 2012).
In this case, OSHA conducted an investigation and found that the “non-compliance [with OSHA standards] was a “willful violation” and assessed a fine. The plaintiff asserted a willful OSHA violation should be given great weight in determining that an “intentional wrong” was committed. Based on a litany of risk factors, the plaintiff asserted the employer knew that a trench collapse could happen, even if he did not know precisely when it would happen.
The employer argued that to permit the plaintiff to avoid the exclusive remedy of the workers’ compensation statute and sue his employer would allow for injured parties to pursue independent tort actions based on the possibility of injury, rather than a near certainty.
Not Every OSHA Violation is an “Intentional Wrong”
After reviewing the facts and a number of important case precedents, the court here determined “We decline to find that every willful OSHA violation constitutes an intentional wrong for purposes of the Act. To do so would produce detrimental consequences, such as encouraging employers to dispute OSHA violations, rather than negotiate a penalty and move on, having corrected and been penalized for the error. . . .”
The court concluded, “The existence of an uncontested finding of an OSHA safety violation in the wake of this workplace injury does not establish the virtual certainty that [case precedent] demands. An intentional wrong must amount to a virtual certainty that bodily injury or death will result. A probability or knowledge that such an injury or death ‘could’ result, is insufficient.”
For these reasons, the court concluded the OSHA safety requirement violation pertaining to trenches deeper than five feet did not demonstrate substantial certainty of injury or death — and the exclusive remedy of the workers compensation act must be enforced to bar the litigation against the employer.
Considerations for Contractors
Prime contractors should become familiar with the laws and court decisions in their states regarding their liability for site safety. As a proactive risk management strategy, a contractor can draft subcontract language that can place responsibility on the subcontractor to maintain safety for the subcontractor’s work. An indemnification clause can be included in the subcontract to require the subcontractor to indemnify, defend and hold harmless the prime contractor from any claims or damages arising out of the subcontractor’s work – including bodily injury of subcontractor employees. Finally, the insurance provisions of the subcontract should require the subcontractor to provide the prime contractor with additional insured status under the subcontractor’s general liability insurance policies.
Design Professional Responsibility
Design professionals and professional consultants also need to take precautions against accepting responsibility for the safety of anyone other than their own employees. Numerous court decisions have addressed the question of whether a firm such as an architect, engineer or CM has liability for someone else’s employee despite not being directly or even indirectly responsible for causing the injuries.
The first question addressed by courts is whether the contract between the consultant and the project owner established consultant safety responsibilities. Even if the contract language clearly states that the consultant has no responsibility for project site safety and the contractor is solely responsible (e.g., AIA B 101-2007, § 220.127.116.11 and AIA A 201-2007, § 11.1.4), the court will not stop there with its analysis. Rather, the courts will look at the facts of the case to determine whether the consultant did anything or should have done anything in the field during construction affecting site safety.
Contrasting Opinions of Courts in Different States
Courts in different states take very opposite positions concerning the responsibility of the design professional for safety during construction. In Carvalho v. Toll Brothers 278 NJ Super. 451(1995), the New Jersey court found under the contract the Engineer had authority to stop work that was not in compliance with the specifications, and that by common law the Engineer had a duty to take action when confronted with a dangerous condition with which he has actual knowledge.
In sharp contrast to the Carvalho holding , the Pennsylvania court in the case of Herczeg v. Hampton Transportation Municipal Authority, 766 A.2d 866 (PA Superior Ct. 2001), concluded that even where the engineer had actual knowledge of the dangerous condition that led to the death of a construction worker, the engineer owed no duty to the construction worker.
The Pennsylvania court said, “We reject any notion that a duty arises solely upon an engineer’s actual knowledge of dangerous conditions. If someone is under no legal duty to act, it matters not whether that person is actually aware of a dangerous condition. Conversely, if someone by contract or course of conduct has undertaken the responsibility for worker safety, that person may still be liable even in the absence of actual knowledge of the dangerous condition if they should have known of the condition.” The court made a point of explaining that the contractual authority of an architect or engineer to reject work that is not being performed consistent with the plans and specifications is solely for the benefit of the project owner.
Construction Manager Not Responsible for Jobsite Safety or Liable to Contractor’s Employee for Injuries
A construction manager (CM) is not liable for injuries suffered by a contractor’s employee where the CM’s contract with the project owner did not establish CM contractual responsibility for jobsite safety and where (1) the contractor’s contract with the owner stated the contractor was the controlling employer responsible for its own safety programs and precautions for its employees, and the CM responsibility did not extend to direct control over or charge of acts or omissions of the subcontractor and its employees; and (2) the CM did not undertake any extra contractual responsibility in the field that would have created any legal duty or responsibility for the safety of all employees.
These types of cases are rather typical where an employee can only recover workers’ compensation benefits and cannot sue its own employer — thus setting the stage for an attempt to obtain greater damages by asserting that someone other than the employer is at fault — such as the CM or possibly a project owner.
In Hunt Construction Group, Inc. v. Garrett (964 N.E. 2d 222, Indiana 2012), an employee of a concrete contractor (Baker Concrete Construction, Inc.) was injured in a workplace during construction of a stadium. While removing forming material from concrete, one of her co-workers dropped a piece of wood that struck her on her head and hand. Although employed by Baker, she sought to recover from the CM (Hunt). She alleged that the CM had a legal duty of care for jobsite-employee safety. The CM’s only contract was with the project owner; it had no contractual relationship with Baker Concrete or any other contractors on the project.
On cross motions for partial summary judgment, the trial judge ruled that the CM could be held vicariously liable for the actions of Baker Concrete that led to the claimant’s injuries. On appeal, the appellate court reversed the trial court’s judgment on vicarious liability, holding that the CM did not become liable for the contractor’s safety responsibilities merely because CM safety representatives inspected the site daily for violations of the project safety program and conducted safety committee meetings.
Contract Did Not Impose Site Safety Duties
The court found that where the contract did not obligate the CM to provide jobsite safety, the CM would not be deemed to have legally assumed a duty of care for safety unless it undertook specific supervisory responsibilities beyond those set forth in the original construction documents.
In deciding whether the CM owes a duty, the court explained that it focuses on determining “whether (1) such a duty was imposed upon the CM by a contract to which it was a party; and (2) the CM assumed such a duty, either gratuitously or voluntarily.” In this case, the court found that no legal duty of care for jobsite-employee safety was imposed upon the CM by any contract to which it was a party. “First, the CM contract itself did not specify that the CM had any responsibility for safety whatsoever. Second, counterpart construction contracts signed by the contractors and subcontractors indicated that they had responsibility for project safety and the safety of their employees. Third, those contracts expressly disclaimed any direct or indirect responsibility on the part of the construction manager for project safety.”
Although there were safety requirements in the CM contract, the court noted, “[N]one of the safety provisions in the CM contract here impose upon Hunt any specific legal duty or responsibility for the safety of all employees at the construction site.” In fact, the contract supports the opposite conclusion according to the court. “Hunt’s contract expressly states that its CM services are to be ‘rendered solely for the benefit of [the client] and not for the benefit of the Contractors, the Architect or other parties performing Work or services with respect to the Project.’
Moreover, the contract provided that Hunt was not ‘assuming the safety obligations and responsibilities of individual contractors,’ and that Hunt was not to have ‘control over or charge of or be responsible for … safety precautions and programs in connection with the Work of each of the Contractors, since these are the Contractor’s responsibilities.’”
The court concluded: “In short, Hunt did not undertake in its contract a duty to act as the insurer of safety for everyone on the project. Rather, Hunt’s responsibilities were owed only to [the Client], not to workers….”
The court also pointed out that with regard to the CM’s responsibility to review and monitor the contractor’s safety programs, the contract reiterates that Baker Concrete was “the controlling employer responsible for [its own] safety programs and precautions”, and Hunt’s reviewing and monitoring of these programs did not “extend to direct control over or charge of the acts or omissions of the Contractors, Subcontractors….”
It is important to note that the court was quite critical of what it called the plaintiff’s “all-or-nothing” proposition that by agreeing to certain safety items in its contract with the owner the CM had become responsible for all jobsite safety – including that which pertained to employees of contractors. In rejecting that argument, it suggested that if this argument was accepted and CM’s were made liable in situations like this one, it would be bad for jobsite safety.
As explained by the court, “[S]afety at construction sites, especially at large public-works projects like this one, should not be sacrificed for fear of exposure to liability. The contract at issue here reflects a way of promoting safety without exposing construction managers to suits like this one. We agree with Judge Friedlander that the position advanced by [claimant] would ‘make it virtually impossible for a contractor taking on the role of construction manager to limit its liability so as not to become an insurer of safety for workers of other contractors.’”
Actions In Field Did Not Create Site Safety Duties
Having determined that the CM owed no contractual duty for jobsite safety, the court next focused on whether the CM undertook such responsibility by its actions in the field. As stated above, the court found the CM did nothing in the way of safety actions that went beyond the requirements of its contract. Consequently, the CM had no liability based on assumed site safety responsibilities.
In this case, even though the CM did indeed participate in site safety meetings and do site safety reports and other safety-related activities, the court found that all of these were within the scope of the contractually-agreed upon services performed strictly for the benefit of the owner-client and not for the benefit of employees of any of the contractors. This seems to be the key in many of these decisions – which the contract and actions in the field demonstrate that the CM was only serving the interests of its client and not anyone else.
Architect Liable to an Airport Maintenance Man who was Electrocuted While Working on an Electric Switchgear Box that had No Warning Labels
Approximately four or five years after completion of the Hilton Hotel at the Boston Logan Airport, an employee of the airport authority was electrocuted while attempting to repair an electrical transformer that lacked required wiring diagrams and warning signs. The family of the deceased filed suit against the owner of the hotel; the architect that designed it; the consultant that did the electrical engineering services; the general contractor; and the electrical subcontractor, alleging negligence, gross negligence and breach of warranty. The hotel filed cross claims against the architect and the electrical engineer seeking indemnification and contribution.
The Supreme Court of Massachusetts held that claims for contribution were proper because the consultant owed an independent duty of care to the electrician to comply with its contractual obligations to the project owner whereby the contractor provided proper warning labels on the switchgear. There were issues of fact to be determined by a jury as to whether the worker’s death was caused by the design firms’ failure to report that the contractors had not complied with the specifications. LeBlanc v. Logan Hilton, 974 N.E. 2d 34 (Mass. 2012).
The Contract Language
Under its agreement with Hilton, the consultant was to “visit the site at intervals appropriate to the stage of construction to become familiar with the progress and quality of Work, and to determine, in general, if Work is being performed in accordance with the Construction Documents.” The agreement further provided, “[Consultant] shall promptly inform Hilton in writing of any deficiencies in Work and/or deviations from the requirements in Work and/or deviations from the requirements of the Construction Contract which come to [Consultant’s] attention.”
There was also a paragraph that acknowledged “[Consultant] shall not be responsible to have control over or charge of and shall not be responsible for construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with Work being performed at Site.” These clauses are from a standard form document from the American Institute of Architects (AIA).
Another section of the Agreement provided that the consultant would indemnify Hilton from and against all claims “arising out of and to the extent caused by the negligent acts, errors and omissions during the performance of professional services….”
Contract specifications for the switchgear in question required that it have a stenciled “mimic bus” diagram on the face of the cabinets that showed schematically the configuration of the equipment and the switching arrangement. Another section of the specification required a warning sign “on or adjacent to any switching equipment that read: ‘Warning – Load side of switch may be energized by backfeed.’”
Diagrams and Warning Label Not Installed
Neither the mimic diagram nor the warning label was installed by the switchgear manufacturer. This was pointed out by a subcontractor that tested and inspected the installed switchgear during project commissioning, and issued a report recommending that “Signs should be installed … that inform operating personnel that fuses can be energized from several sources, both incoming lines and tie switch.”
The electrical engineer reviewed the report and wrote a letter to the manufacturer directing him that the wording and placement of signs was to be “submitted as a shop drawing.” After the switchgear was subsequently activated, the electrical engineer did a field observation and issued a report to the Consultant acknowledging the gear had been started up, but making no mention of the presence or absence of warning signs. The record did not reflect the manufacturer ever submitted the shop drawing as it had been directed to do.
Trial Court Decision
On a motion for summary judgment, the trial judge granted summary judgment for the consultant and electrical engineer, which he characterized as the “Design Team” because he found that the limitation of responsibility set forth in the contract rendered them not responsible for the contractor’s failure to perform work according to the specifications.
The judge held that the Design Team’s duty was limited to that which they controlled, and he granted them summary judgment on the issue of causation.
Appellate Court Decision
An intermediate appellate court reversed that decision because it found that although the Design Team had no authority or responsibility for controlling the work, it did, pursuant to the contract, owe a duty to Hilton to provide biweekly reports of work progress and competence, and “especially of any deficiencies or deviations from contractual requirements.”
Lack of notification to Hilton regarding the manufacturer’s failure to install the warning signage, concluded the intermediate appeals court, constituted a contractual breach that posed a “field of risk for third parties likely to come into contact with the switchgear.” Therefore, summary judgment should not have been granted since there was an issue of fact of causal negligence to be decided by trial.
In addition, the court held that expert testimony against the Design Team was not required because the issue of professional negligence in this case was “comprehensible to a lay person in view of the contractual duties, the special hazards of electricity and the evidence of insufficient monitoring and notification.” That decision was appealed to the Supreme Court of Massachusetts, which issued the decision reported herein.
Supreme Court Decision
Tort May Arise from a Contractual Relationship.
The first point the Supreme court made was that “It is settled that a claim in tort may arise from a contractual relationship … and may be available to persons who are not parties to the contract…. [A] defendant under a contractual obligation ‘is liable to third parties not parties to the contract who are foreseeably exposed to danger and injured as a result of its negligent failure to carry out that obligation.’” Here, said the court, there was sufficient evidence that the Design Team breached their contract by failing to report to Hilton the manufacturer failed to comply with the specifications regarding the mimic bus and warning signage.
Expert Testimony was not Required
Expert testimony was not presented to attest that failure to report the noncompliance with the specifications constituted a breach of the professional standard of care. The court began its analysis by citing several case precedents for the proposition that professionals “do not have a duty to be perfect in their work, but rather are expected to exercise ‘that skill and judgment which can be reasonably expected from similarly situated professionals.’”
Although the court cited case precedent for the proposition that a violation of the standard of care can only be demonstrated by expert evidence, it concluded no expert testimony was required in this particular case because “there was evidence that the Design Team actually knew of the deficiencies but failed to fulfill its contractual duty to report the deficiencies to Hilton, and the [ ] deficiencies presented so obvious a risk to the safety of any person who would operate the switchgear, we [conclude] that the evidence is sufficient without expert opinion to permit a finding of negligence.”
Evidence that Professional Negligence Caused Third Party Harm
With regard to the question of whether summary judgment should have been granted for causation, the supreme court concluded, “there is a genuine issue of material fact whether reporting the deficiencies to Hilton and refusing to declare the project completed until the deficiencies were corrected would have caused the mimic bus diagram and warning signage to be installed before [the maintenance worker] was electrocuted.” In other words, the court is saying that the Design Team’s failure to do what it was supposed to do per its contract could be professional negligence as to the third party, and a jury must be permitted to decide whether the negligent breach of the contract “caused” the death of the worker.
As the court put it, “Because the evidence in the summary judgment record is sufficient to support a finding that [the worker’s] death was caused by the professional negligence of the Design Team based on their failure to report known deficiencies to Hilton that posed a serious safety risk to anyone who operated the switchgear, the judge erred in granting summary judgment to the Design Team on the cross motions for contribution….”
Contractual relationships between the various project members, including prime contractors, subcontractors, construction managers, and professional consultants can allocate or even shift primary responsibility from one party to another. Through statutory laws and regulations, as well as common law tort (negligence) principles, a party may be subject to certain responsibilities and liabilities regardless of how creative they have been in their contract language. Based on a party’s actions in the field, a party may subject itself to site safety responsibility despite contract language stating that it has no responsibility.
Note: The substance of this paper was originally published by ZurichNA as a Construction and Design Professional Risk Briefing, Spring 2013.