Briscoe

Kelley

By William E. Kelley, Jr., and Andrew C. Briscoe

In the unfortunate event of a construction jobsite accident that results in bodily injury or, in the worst-case scenario, a fatality, the resulting claims and litigation can be extremely complex. Construction jobsite accident claims often play out as follows.

Employee of a subcontractor is injured on the jobsite while working on a construction project. Employee has statutory remedies against his employer (i.e., subcontractor) through Indiana’s Worker’s Compensation statutes, but subcontractor is otherwise immune from further litigation under general negligence theories of law (see, e.g., Ind. Code § 22-3-2-6). Thus, employee sues general contractor, owner, construction manager, architect, engineer, and a variety of other entities that had varying levels of involvement with the construction project.

After the initial lawsuit is filed by employee, there is often a second wave of claims among the project participants in the form of additional insured, indemnity, and contribution claims relating to the division of contractual responsibilities for jobsite safety. For example, owner may seek indemnity and defense from general contractor, who in turn seeks indemnity and defense from its various subcontractors. Even though subcontractor may be immune from direct suit by employee, subcontractor may nonetheless find itself brought into the litigation by virtue of this second wave of claims.

In many jobsite accident claims, there can even be a third wave of claims that arises in relation to the scope of insurance coverage obligations for the parties’ multiple insurers. For example, claims against design professionals relating to jobsite safety obligations may result in disputes between the commercial general liability and professional liability insurers in relation to the nature of the design or professional activities involved in the claim and application of the “professional services” exclusion typically found in CGL policies. Additional claims can also arise if it is discovered that project participants failed to procure the required insurance or endorsements for the project.

The reality is that what begins as a bodily injury claim on a construction jobsite can quickly become a complex web of contractual claims, cross-claims, counterclaims, third-party claims, and declaratory judgment actions — all requiring multiple attorneys, insurers, and parties to wade through the contractual, indemnity, and insurance provisions. How is it that what begins as a general negligence claim quickly evolves into a complex contractual construction dispute? A review of standard form contract provisions and Indiana law interpreting those provisions provides some insight.

Contractual allocation of jobsite safety responsibility

Oftentimes, the general conditions in the construction contract documents place primary responsibility for jobsite safety upon the general contractor. The general contractor, in turn, allocates portions of this responsibility downstream to its subcontractors. For example, under the American Institute of Architects A201 (2007) General Conditions, section 10.1 provides that “the Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract.”

In order to ensure that subcontractors are subject to the same safety obligations as the general contractor, section 5.3 of the AIA A201 General Conditions requires that each subcontractor be contractually bound by the same safety provisions and other contractual obligations owed by the contractor to the owner. Thus, the general contractor must ensure that downstream subcontract agreements are coordinated with the prime agreement, such that the specific jobsite safety obligations are specifically incorporated into those subcontract agreements. Consequently, affirmative responsibilities for jobsite safety are often imposed upon the individual subcontractors, placing responsibility upon the subcontractors for the day-to-day safety measures and programs implemented for the benefit of their own employees.

On the design side of the project, many contracts with architects and engineers contain limiting language that excludes the architect and its consultants (including engineers) from responsibility for creating, implementing, or overseeing project-wide safety programs. For example, section 3.6.1.2 of the AIA B101 (2007) Owner-Architect Agreement provides that the architect “shall not have control over, charge of, or responsibility for … safety precautions and programs in connection with the Work, nor shall Architect be responsible for the Contractor’s failure to perform the Work in accordance with the requirements of the Contract Documents.”

Since the general conditions often place primary jobsite safety responsibility upon the general contractor and further limit the architect’s responsibility for the same, then it is of little surprise that section 3.18.1 of the AIA A201 (2007) General Conditions imposes an indemnity obligation upon the general contractor, requiring it to “indemnify and hold harmless the Owner, Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease, or death … .”

Thus, for those design-bid-build projects using a general contractor to perform the construction work, many contractual provisions impose the obligation of implementing jobsite safety programs upon the general contractor, and they further require the general contractor to ensure that its subcontractors are bound by those same obligations. In turn, the general contractor becomes responsible for indemnifying the owner, architect, and others on the project for any acts or omissions by the general contractor or its subcontractors, where bodily injuries occur as a result of negligence. As a result, the general contractor must protect itself through risk allocation mechanisms in its subcontract agreements, including indemnity, additional insured provisions, and other similar contractual provisions that require the subcontractors to provide indemnity and/or insurance to the general contractor for these risks.

Indiana law interpreting contractual jobsite safety obligations

When facing construction jobsite accident claims, Indiana courts have often worked to balance the concepts of contractual allocation of jobsite safety responsibility, on the one hand, with the imposition of a duty in tort to third parties, on the other hand. For example, in Stumpf v. Hagerman Construction Corp., 863 N.E.2d 871 (Ind. Ct. App. 2007), the general contractor hired a subcontractor to perform mechanical work for the project; in turn, the subcontractor hired a sub-subcontractor to install pipe insulation. The plaintiff was an employee of sub-subcontractor, and he was injured when he fell while installing insulation. The plaintiff alleged that both the general contractor and the subcontractor had incurred a contractual duty relating to safety for the project and had failed to properly supervise the work of sub-subcontractor and ensure that it adhered to the appropriate regulations relating to fall protection.

The court first observed that under Indiana law, “it is well established that an employer does not have a duty to supervise the work of an independent contractor to assure a safe workplace and consequently is not liable for the negligence of the independent contractor.” Id. at 876. “The rationale behind this rule is that ‘a general contractor typically exercises little, if any, control over the means or manner of the work of its subcontractors, and requires only that the completed work meet the specifications of the owner in its contract with the general contractor.’” Id. (citations omitted).

However, the court noted that there are five exceptions to this general rule: (1) where the contract requires the performance of intrinsically dangerous work; (2) where one party is by law or contract charged with performing the specific duty; (3) where the performance of the contracted act will create a nuisance; (4) where the act to be performed will probably cause injury to others unless due precaution is taken; and (5) where the act to be performed is illegal. With regard to the second exception, the court noted that “if a contract affirmatively evinces intent to assume a duty of care, actionable negligence may be predicated upon the contractual duty.” Id. at 876.

In Stumpf, the plaintiff relied upon the second exception and alleged that the general contractor and the subcontractor each incurred a contractual duty to ensure the safety of all persons on the project. Ultimately, the court agreed with the plaintiff and held that the general contractor had incurred a duty for safety so as to support the plaintiff’s negligence action. In so holding, the court relied upon the fact that the general contractor contractually agreed to “take all necessary precautions for the safety of employees on the work, and shall comply with all applicable provisions of Federal, State, and Municipal safety laws and building codes to prevent accidents or injury to persons on, about or adjacent to the premises where the work is being performed ... . Contractor shall designate a responsible member of its organization on the work, whose duty shall be the prevention of accidents.” Id. at 877. Taken as a whole, the court held that “this contractual language evinces intent by the parties to charge [the general contractor] with a duty of care for the safety of all the employees on the project, including the employees of its subcontractors.” Id. at 878.

As to the subcontractor, the court held that it “subsequently assumed the same duty of care when it agreed to be mutually bound by the provisions of the prime contract.” Id. Thus, under general principles of negligence law, the plaintiff could proceed with his negligence claim against both the general contractor and the subcontractor based upon the jobsite safety obligations contained in those parties’ contracts.

Construction managers and multi-prime projects

The concepts of contractual responsibility for jobsite safety become even more complex and fact-specific when construction projects include construction managers, multiple-prime contractors, and other nontraditional models for project delivery, including design-build. For example, in Hunt Construction Group, Inc. v. Garrett, 938 N.E.2d 794 (Ind. Ct. App. 2010), reh’g denied, the owner hired a construction manager, and the owner separately entered into agreements with individual contractors to perform the construction work. The plaintiff, who was injured while performing her work, was an employee of one of those contractors. The court’s analysis focused on whether the construction manager had incurred an obligation for jobsite safety sufficient to give rise to a duty in tort to the plaintiff.

The construction manager argued that any safety obligations or duties ran only to the owner and not to the employees of various contractors working on the project. The construction manager’s agreement with the owner contained language that expressly attempted to limit its liability for jobsite injuries. In particular, the agreement provided that the construction manager’s duties were undertaken “[w]ithout assuming the safety obligations and responsibilities of the individual Contractors” and that the construction manager “shall not 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.”

Ultimately, the court held that the construction manager had incurred a contractual duty for safety because, under its contracts with the owner, the construction manager was responsible for approving the contractors’ safety programs, monitoring compliance with safety regulations, performing inspections, and addressing safety violations. Id. at 804. Furthermore, the construction manager had the ability to remove any employee or piece of equipment deemed unsafe. Id.

The court reached this conclusion despite language in construction manager’s contract with the owner that attempted to limit its obligations for safety to the owner. In rejecting the construction manager’s reliance on the terms allocating jobsite safety responsibilities to the contractors, the court noted that “our focus must be on the intent of the agreements regarding the construction manager’s responsibilities, not the contractor and subcontractor responsibilities. The fact that the contractors also accepted a duty regarding safety does not in any way alter [the construction manager’s] duties or liabilities under the contracts.” Id. at 800.

Conclusion

The complex web of contracts among construction project participants typically define and allocate the risks and liabilities among the project participants, but these contractual and insurance claims sometimes take center stage in what begins as a construction jobsite accident claim. In fact, due in part to the costs and time involved with these multiple layers of claims that can result from one bodily injury lawsuit, some large-project participants are moving to alternate insurance and risk allocation models, including controlled insurance programs, either in the form of an owner-controlled insurance program or contractor-controlled insurance program, where one insurer provides coverage to an entire group of enrolled participants. This model potentially avoids the infighting by project participants that can occur in the second and third waves of these types of claims, as one insurer provides the defense and indemnity to all covered participants.

In any event, the Stumpf and Garrett cases underscore the need for parties, attorneys, and insurers to identify and understand these lines of contractual responsibilities and obligations. Further, given the approach that Indiana courts have taken to impose duties in tort on jobsite accident claims, parties must use extra care at the beginning of these projects to ensure that proper risk allocation mechanisms are incorporated into the contracts.•

Will Kelley and Andrew Briscoe are attorneys with Drewry Simmons Vornehm, LLP. Kelley is the current chair of the Defense Trial Counsel of Indiana Construction Law Section. The opinions expressed in this article are those of the authors.