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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


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.

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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.

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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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