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ConstructionRisk.com ReportÔ
Vol. 2, No.2 - Feb. 2000
In This Issue:
· Does
Project Monitoring Make You Liable for Job Site Injuries?
· Sovereign Immunity
Does Not Bar Contractor Claim for Contested Work
· Insurance Company
Improperly Refused to Defend Additional Insured Under Contractor's
Policy
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Does Project Monitoring Make Owner Liable for Job
Site Injuries?
By: James P. Reinert, Esq.
The disturbing trend of expanding job site liability appears to have
reached its high point. Recent appellate court decisions indicate that
the courts are becoming unwilling to saddle owners and others with
liability for job site injuries.
Currently, most workers who are injured while on a job site are
covered by worker's compensation insurance. On occasion, however,
despite recovering worker's compensation benefits, workers will try to
seek further recovery against the owner of a project. In Missouri and
other states, such attempts at additional recovery, above and beyond
worker's compensation benefits, are meeting with increased resistance.
In a recent case, Smart v. Chrysler Corporation, an injured
worker attempted to recover from the owner, as a result of any injury on
the job site. Chrysler was retooling one of its two manufacturing plants
in Fenton, Mo. The plaintiff, Robert Smart, was an employee of Helmkamp
Construction, a
subcontractor on the job. Smart was working on a
steel platform setting a checkerplate when he fell approximately 40
feet. Ironically, Smart was wearing a safety harness but the end was not
tied off.
Smart filed suit against the owner of the project, Chrysler
Corporation, alleging that it had maintained substantial control over
the project because Chrysler had published certain safety guidelines,
conducted weekly progress meetings and had guards posted at the plant.
As it turned out, plaintiff's allegations simply did not hold up in
the face of the actual facts of the case. Per its contract with the
general contractor, a joint venture of ABB Flexible Automation and Fluor
Daniel, Chrysler had contractually obligated ABB/FD to maintain safety
on the job site. Further, Chrysler, as the owner , had in effect
"surrendered" the job site to the general contractor.
Plaintiff argued, however, that because Chrysler conducted weekly
status/progress meetings with the general contractor and principal
subcontractors on the project, Chrysler retained substantial control of
the project, including control of safety on the site.
The trial court granted Chrysler's motion for summary judgment. In
doing so, the trial judge ruled that there was simply nothing for the
jury to decide because there was no evidence that Chrysler either
retained sufficient control of the premises or exercised control over
the project, such as to make Chrysler liable to Smart for his injury.
On appeal, the Missouri Court of Appeals affirmed the trial court.
The Court recognized that an owner may maintain active involvement in a
construction project and, further, may actually take steps to insure
that the contractors are complying with the contract documents. An owner
simply has a right to do so. Such interest in the project, however, does
not expose the owner to tort liability in the event that someone on a
job site is injured during construction. Further, the Court recognized
that parties to a construction project have the ability to deal with
potential risks by way of their contracts. As an example, a general
contractor and subcontractor can agree that the subcontractor is
specifically responsible for the safety of the subcontractor's
employees.
In Missouri and many other states, the issue of safety will often be
determined by contract. In the Smart case, Chrysler had
specifically contracted with the ABB/FD joint venture that ABB/FD would
be responsible for safety on the project. In fact, there were weekly
safety meetings conducted by ABB/FD. Irrespective of contract
arrangements, however, the Court further recognized that the owner can
retain sufficient control of the work, or be sufficiently involved in
the project, such that the owner takes on the responsibility, either
directly or implicitly, of safety on the site and, therefore, the owner
may be exposed to tort liability.
The key question will be always one of control. Insuring that a
project proceeds in compliance with contract documents and maintaining
the ability to stop the work if the owner perceives that there are
unsafe practices, do not generally rise to the level of
"control" such that a court will impose liability on an owner
for the injury of a worker. In Smart and other cases, the Court
reasoned that, generally, the owner does not have the expertise to
manage a job. Therefore, the owner hires the general contractor
and pursuant to that relationship, the owner has a right to rely on the
expertise of the general contractor, or other contracting party, to
perform the work in a safe manner.
This very contractual relationship, and Chrysler's lack of actual
control of the management of the project, ultimately resulted in a
determination that Chrysler was not responsible for Smart's injury.
Responsibility for safety on the job site can be a matter of contract,
but the courts will expect the parties to act in compliance with their
contractual agreements. If the owner actually directs the work, even in
the absence of directing the actual safety aspects of the joy, an owner
may be held responsible depending on the degree of actual direction
provided.
All parties -- owner, general contractor or other participants in a
construction project, such as a design professional -- should state
clearly in writing what each party's responsibility is as far as site
administration and, specifically, safety. Once the arrangements are
made, the parties should act in compliance with those agreements. In
doing so, each party, in an arm's length transaction, can properly and
fairly both protect its interests in the project and insure that all
parties will be particularly aware of the responsibility that they bear
as far as safety on the job site.
About the Author: James P. Reinert, Esq. is an attorney with the
construction law practice group of the law office of Brown & James.
He may be contacted at Brown & James, 705 Olive Street, Suite 1100,
St. Louis, MO. 63101; phone 314-421-3400.
____________________________
Sovereign Immunity Does Not Bar Contractor Claim for Contested Work
A general contractor, under contract to the Brevard County School
Board was required by the architect to install a more expensive fire
protection system than it believed was called for by its contract. It
argued that the architect misinterpreted the contract and thus required
the contractor to install an upgraded system, which in essence
constituted new and additional changes to the original contract.
Specifically, what was at issue was an instruction by the architect
to the contractor to install an antifreeze system pursuant to the
architect's interpretation of the contract. The contractor responded
that it would install the system, but under protest. No option was
afforded under the contract for the contractor to suspend its work.
Standard clauses of the General Conditions provided that in the event
the parties were unable to agree to as to whether a change occurred, the
owner would make a unilateral determination and the contractor would be
required to proceed with the work. The contract also contained typical
language as follows: "Failure of the parties to reach agreement
regarding the cost and time of the performing the change in the Work
and/or any pending protest, shall not relieve the contractor from
performing the Change in the Work promptly and expeditiously."
Although the architect issued written engineering information and
directives relating to the fire protection system, and numerous field
reports were transmitted with instructions to comply with these
directives, the School Board failed to issue a formal change order.
The Board
took the position that the upgraded system was within the scope of the
original contract and specification. Ultimately, the contractor
completed the project and when the owner failed to issue an equitable
adjustment to its contract, the contractor sued, alleging that the
School Board breached its contract by failing to issue a formal written
change order as called for by the contract provisions. A written
change order would have
permitted the contractor to recover compensation for the additional work
being performed.
At the trial, the county argued that the
contractor had not right to recovery since it had performed the work
without a change order. Brevard County argued that the suit
for this work was barred by sovereign immunity because it was outside
the contract. The trial court granted summary judgment in favor of the school board
on the basis of sovereign immunity. The trial court agreed with the county and "concluded
that if disputed work is not expressly part of the original contract or
a change order, and it is not an implied part of the contract, sovereign
immunity bars recovery for the disputed work because it is 'outside' the
contract."
In rejecting the trial court's decision, the appellate
court found that the essence of the dispute was whether the original
contract specifications and engineering requirements encompassed the
work that the contractor claims was over and above the original contract
requirements. If it encompassed that work then the contractor would not
be entitled to recover additional costs. But if it did not include that
work, then the contractor was entitled to a change order and additional
compensation. The court states: "In either event, the work involved
here is not properly characterized as extra work performed 'outside' the
contract." Thus, the court reversed the judgment and permitted the
contractor to proceed with a trial to determine on the facts whether he
was entitled to compensation.
W&J Construction Corporation v. Fanning/Howey Associates,
1999 Fla. App. LEXIS 11635; 24 Fla. Law. W.D. 2002 (August 27, 1999).
Risk Management Note:
It is surprising that the County would
assert that a contractor could be barred by sovereign immunity from
asserting a claim for compensation under these circumstances. Had the County's position been permitted to stand on appeal,
it would have put all contractors working for this county in an
untenable position concerning payment. According to the contract, they
are required to continue to work when they can not reach agreement with
the county as to whether work is additional and compensable.
But by arbitrarily refusing to issue a change order for
additional work, the county could use its own failure as a
sword against the contractor by arguing that the lack of a change
order means that the work was "outside" the contract and,
therefore, barred from recovery by the doctrine of sovereign immunity. The very fact that
the county would treat its contractor in this fashion should be warning
to both contractors and design professionals to exercise extra caution
when negotiating with counties like these.
___________________________________
Insurance Company Improperly Refused to Defend Additional Insured
Under Contractor's Policy
An additional insured endorsement to an
insurance policy entitled the Texas Department of
Transportation (TxDOT) to a defense by the Contractor's insurance
company. St. Paul Insurance Company did not deny that it owed some
coverage to TxDOT, but it refused to defend the agency, claiming that
TxDOT would be adequately protected from vicarious liability by the
defenses asserted by the contractor.
In a letter to TxDOT, St. Paul
stated "St. Paul also expressly reserves its rights to allocate
defense costs between any covered and non-covered claims and to recover
from TxDOT the defense costs allocable to the defense of non-covered
allegations. In particular, the defense costs allocable to the defense
of TxDOT against the allegations that it negligently designed this
project would not be covered under the St. Paul policy."
In its motion for summary judgment asking
the court to declare St. Paul responsible
for defending it, TxDOT argued that the Texas law requires an insurer to
defend the entire suit if any of the insured's claims are covered. The
trial court granted the agency's motion, declaring that the agency was
entitled to "a reasonable non-conflicted legal defense."
On appeal, the appellate court stated the principle that the duty to
defend is broader than the duty to indemnify and that once coverage has
been found for any portion of a suit, an insurer must defend the entire
suit. The court states that "this is because the insurance contract
obligates the insurer to defend its insured, not to provide a partial
defense." The court further stated that "where the complaint
does not state facts sufficient to clearly bring the case within or
without the coverage, the general rule is that the insurer is obligated
to defend if there is, potentially, a case under the complaint within
the coverage of the policy. Stated differently, in case of doubt as to
whether or not the allegations of a complaint against the insured state
a cause of action within the coverage of a liability policy sufficient to
compel the insurer to defend the action, such doubt will be resolved in
the insured's favor."
According to the court, the pleadings in this case can be read to
allege that the contractor constructed a highway with inadequate
flood-control measures, that TxDOT supervised the construction and that
both defendants' acts and omissions caused injury to the plaintiffs.
Because the contractor's work was done pursuant to its contract with
TxDOT, the court concluded that these allegations fell squarely within
the terms of the policy. The court rejected St. Paul's argument that
only allegations of vicarious liability against TxDOT would trigger the
duty to defend. An allegation that TxDOT itself was directly negligent
would trigger the duty to defend, according to the court.
One final note about this dispute is that St. Paul also argued that
the policy's "professional services" exclusion negates its
duty to defend. That exclusion precludes coverage for claims arising out
of the contractor's provision or receipt of professional services. But
the policy did not specifically define "professional
services." Moreover, the court focused on language of the
endorsement that stated it provides coverage for the insured's work for
the additional insured or the additional insured's general supervision
of that work. This endorsement was preceded by the statement: "This
change broadens coverage."
The court stated: "We fail to
understand how St. Paul can broaden its policy coverage to specifically
include supervision and then claim that such activity is excluded as a
"professional service." For these reasons, the court held that
TxDOT was entitled to be defended by St. Paul.
St. Paul Insurance Company v. Texas Department of Transportation,
999 S.W. 2d 881, 1999 TX. App. LEXIS 6338.
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LLC
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