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Inside This Issue:

  • Highway Contractor Protected by State Immunity Statute
  • Contractor Entitled to Rely Upon Government’s Implied Warranty of Specifications

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ARTICLE # 1
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Highway Contractor Protected by State Immunity Statute

Where a highway construction contractor followed specifications given to it by the state, it was immune pursuant from liability arising out of a motorist’s personal injury action. The plaintiff’s law suit alleged that her injuries were caused by, or made worse by, a guardrail that was constructed by the contractor. Under the state of Kansas highway contractor immunity statute, a contractor is provided immunity from third party suits if certain conditions are met. These conditions are that (1) the injury occurred after the construction was complete; (2) the work of the contractor was accepted by the official responsible for the project; and (3) the contract provisions and specifications were satisfied by the contractor.

Plaintiff alleged that the contractor negligently performed its obligations under the contract by failing to install guardrails in accordance with the specifications, and that the contractor failed to warn KDAT that the guardrail it installed was negligently designed. Specifications for guardrails were provided by a KDOT document entitled “Protective Steel Plate Guard Fence at Bridge Piers.” The guardrails depicted in the specification for single column and two-column piers was an “open-end” design, meaning that the ends of the guardrails on either side of the columns do not connect with one another. “Closed-end” guardrails were specified for certain other conditions as defined by the same document. The contractor installed the open-end design whereas the plaintiff asserts that a closed-end design was required by the specifications because the overpass contained a multiple-column pier. It is this discrepancy that forms the basis of the plaintiff’s negligence claim and she asserts that it had been built closed-end, her car may not have flipped into the air when she hit the guardrail and she would not have sustained such serious injuries.

The contractor asserted that it fully complied with the specifications. The state supported the contractor’s position by way of an affidavit filed by the assistant secretary of transportation. The contractor filed a motion for summary judgment to dismiss the complaint on the grounds that it was immune from suit pursuant to the statute. In the plaintiff’s opposition to the motion, she included a counter-affidavit from an expert who opined that the closed-end design would have been required by the state at the accident site and that despite the state’s acceptance of the contractor’s work, the open-ended guardrails did not conform to the contract specifications. This affidavit was found by the district (trial) court to be too speculative and conclusory to establish a disputed issue of material fact. Accordingly, the court granted the contractor’s motion for summary judgment.

On the appeal from that decision, the appellate court sustained the lower court decision in favor of the contractor and explained that the state immunity statute protected the contractor because the three-part test described above was met by the contractor. Specifically, the plaintiff’s injuries occurred after the work had been completed; the state had accepted the contractor’s work; and finally, no evidence was presented to establish a material factual dispute with respect to the contractor’s compliance with the specifications. The court held that the purpose of the state statute was to protect contractors from liability when an accident occurs from completed highway project that the contractor had no role in designing. As seen by the court, “Such protection is logical, practical, and necessary.” Rodarte v. Kansas Dept. of Transportation, 39 P.3d 675 (Kansas, 2002).
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ARTICLE # 2
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Contractor Entitled to Rely Upon Government’s
Implied Warranty of Specifications

Where a contractor had to revise the government’s design and expend additional time and expense to construct a door for a helicopter hangar, the government argued unsuccessfully that the contractor was barred by a general disclaimer from claiming entitlement to a change order for its extra costs. The specifications contained a general disclaimer advising prospective contractors to verify the government’s design prior to bidding the project. After contract award, the contractor discovered that the specified three-pick-point design for the heavy door would not work. It submitted its own design for a four-pick-point door that was accepted by the government. This resulted in modifications to the door and to trusses supporting the door. When the government refused to approve a change order, the contractor filed an action with the Armed Services Board of Contract Appeals. The Board held in favor of the contractor, and the government appealed to the Federal Circuit Court of Appeals.

The Court of Appeals affirmed the Board decision in favor of the contractor. The court explained that when the government provides a contractor with design specifications, such that the contractor is bound by them, there is an implied warranty that the specifications are free from design defects. [citing United States v. Spearin]. As further explained by the court, “This implied warranty attaches only to design specifications detailing the actual method of performance. It does not accompany performance specifications that merely set forth an objective without specifying the method of obtaining the objective. Because the implied warranty protects contractors who fully comply with the design specifications, the contractors are not responsible for the consequences of defects in the specified design.”

In this case, the government attempted to avoid the consequences of its implied warranty by shifting the risk to the contractor via a general disclaimer. But the court did not accept this. In fact, the court emphatically stated that general disclaimers that require a contractor to check plans and determine project requirements do not overcome the implied warranty. Only express and specific disclaimers will suffice, said the court, to overcome the implied warranty that accompanies design specifications. In the absence of such disclaimers, a contractor is entitled to any additional costs it reasonably incurs in producing satisfactory results.

Factors that influenced the court in favor of the contractor included the following: (1) the design of the government was defective but it was not a patent defect that could be readily discovered by a contractor prior to bidding the job. Contractors are not required to investigate to ferret out hidden or subtle errors in the specifications. (2) The government authored the specifications incorporating significant design characteristics that the contractor was required to follow and from which the contractor was not permitted by contract to deviate from without “approval of the Army’s architect.” “If the three-point-pick design had been merely a performance specification … [contractor] could have chosen any method of building a workable tilt-up canopy door, including a four-pick-point door design, and (3) Although the disclaimer at issue required the contractor to verify supports, attachments, and loads, it did not clearly alert the contractor that the design may contain substantive flaws, requiring correction and approval before bidding.

Although the general disclaimer did not overcome the implied warranty, it nevertheless had importance, said the court. It placed on the contractor the risk to check the accuracy of the physical details provided in the drawings by the government, “but not the design.” In summary, the court concluded that the design flaw at issue was hidden and the contractor had no obligation to ferret out the subtle flaw before bidding. The disclaimer placed responsibility on the contractor for verifying physical details, but it did obligate the contractor to “analyze the Government’s design to determine whether it will work for its intended purpose. Since the design details of the specifications created an implied warranty, and since the general disclaimer did not work to overcome that warranty, the contractor was entitled to recover its additional costs incurred in creating a design and constructing a door that worked for its intended purpose. White v. Edsall Construction Company, 296 F.3d 1081 (Fed. Cir. 2002).

Risk Management Note: This case serves as an excellent reminder that contractors are entitled to rely up design specifications and that project owners cannot avoid their implied warranty of design by attempting to include vague disclaimers or requirements that the contractor perform pre-bid investigations of its own. The court rightly explained the principles of the Spearin doctrine, holding the government responsible for the costs necessary to construct the door to an appropriate design. It is unfortunate to see an increasing number of project owners trying to get around the Spearin doctrine by using onerous contract language against their contractors. In the opinion of this editor, all parties to construction projects are better served by contract language that recognizes entitlement to a change order in circumstances similar to those described by the court in this case. Efforts by owners to shift the risk to the contractor will inevitably result in an increased number of cost contingencies added to the contractor’s bids, and will also logically result in more disputes and contractor claims. Prudent risk management calls for assigning the risk to the party that can best control the risk, and in this case that would appear to be the project owner.

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This newsletter Report is published and edited by J. Kent Holland, Jr., J.D., a construction lawyer and risk management consultant for environmental and design professional liability.  The Report is independent of any insurance company, law firm, or other entity, and is distributed with the understanding that ConstructionRisk.com, LLC, and the editor and writers, are not hereby engaged in rendering legal services or the practice of law.  Further, the content and comments in this newsletter are provided for educational purposes and for general distribution only, and cannot apply to any single set of specific circumstances. If you have a legal issue to which you believe this newsletter relates, we urge you to consult your own legal counsel. ConstructionRisk.com, LLC, and its writers and editors, expressly disclaim any responsibility for damages arising from the use, application, or reliance upon the information contained herein.

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