Lamson, Dugan and Murray, LLP, Attorneys at Law

General Contractors Can Be Sued by a Subcontractor’s Injured Employee

Posted in General Contractor Concerns
Nebraska Construction Hole in Floor

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General contractors that exercise control over the worksite can be sued by a subcontractor’s injured employee. The Nebraska Supreme Court’s recent opinion, Gaytan v. Wal-Mart, should serve as a reminder that general contractors may be responsible for the safety of all workers on a job site.

In this case, a roofing subcontractor’s employee died after falling through the roof of the under-construction Wal-Mart. The deceased employee’s estate sued Wal-Mart and Gram Construction, the general contractor, alleging that they were negligent in maintaining a safe worksite.

The court initially acknowledged that an owner, the employer of an independent contractor, does not typically owe a subcontractor’s employee a duty because the owner typically has no control over the manner in which the work is to be done by the contractor. This general rule, however, has exceptions, such as where the owner retains control over the contractor’s work. But, for the exception to apply, the owner must have (1) supervised the work that caused the injury, (2) actual or constructive knowledge of the danger that caused the injury, and (3) the opportunity to prevent the injury.

Here the deceased employee’s estate argued that Wal-Mart controlled the general contractor’s work. The court found otherwise, relying on the contract which stated that Wal-Mart had no right to exercise control over the general contractor, its employee, or agents, and the lack of evidence that Wal-Mart actually exercised any control over the construction site.

The court also analyzed whether the general contractor exercised control over the roofing subcontractor. The contract between the general contractor and roofing subcontractor revealed that the general contractor had the general right to (1) supervise the subcontractor’s work, (2) require compliance with applicable law and the general contractor’s safety program, and (3) resolve safety issues. The court also found it significant that OSHA had penalized the general contractor, noting that even though the general contractor’s employees were not exposed to the roofing hazard, the general contractor had explicit control for the overall safety and health of the work site. Finally, the evidence revealed that the general contractor had monitored whether the roofing contractor’s employees were wearing personal protection equipment and had developed a fall protection plan for the subcontractor. The general contractor countered this last point by noting that none of its employees were allowed to access the roof.

Based on this evidence, the court found that the general contractor had a duty to monitor and control the safety of the worksite and had actually done so, even though its employees did not access the roof. Thus, the general contractor could be found liable for the injuries suffered by the roofing subcontractor’s employee.

Why You Should Care: This case is an excellent example of how both the general contractor’s contract and practices can create a duty to maintain a safe work place for all workers on the job site, even in those areas that the general contractor does not allow its own employees to access.

 

A Winning Procedure to Develop a Request for Compensation — Lunch & Learn

Posted in Construction Claims

Thanks to everyone that attended last week’s Lunch & Learn on preparing claims. We had Construction Worker Ecstaticsome great discussion from both the ranks of general contractors and subcontractors.

For those of you that missed the meeting or didn’t pick up the handout, A Winning Procedure to Develop a Request for Compensation, send me an e-mail and I’ll send it to you.  My e-mail address is cmartin@ldmlaw.com.

In a nutshell, to develop a winning request for compensation, you must:

  • Select the Right Team
  • Identify the Issues
  • Review the Contract
  • Come Up with a Plan
  • Review the Schedule
  • Review ALL Job Docs, including change orders and correspondence
  • Review Costs
  • Determine Legal Entitlement
  • Determine Funding Source

Submitting a claim is always difficult, but if you have a procedure in place, it can make the process easier and more successful.

 

 

Arbitration—No Opportunity for Appeal

Posted in Arbitration

Last week I presented to the Great Plains Chapter of the American Society of Professional Estimators on arbitration and litigation. Some of the questions related to the difficulty of appealing an arbitrator’s decision. A Florida appellate court recently confirmed this difficulty.

In Village at Dolphin Commerce Center, LLC v. Construction Service Solutions, LLC, a contractor filed an arbitration claim against the owner to get paid for its work. The owner claimed that the contractor could not maintain the claim to get paid because the contractor was not licensed. Apparently, there is a law in Florida that a contractor unlicensed at the time of the contract cannot maintain an action in Florida for unpaid work.

The arbitrator appears to have ignored the Florida law that an unlicensed contractor could not maintain an action to get paid for its work and ruled in favor of the contractor.

The owner appealed to the state court, arguing that the arbitrator misapplied Florida law. The court refused to hear the case, finding the parties had willingly submitted their claim to the arbitrator and they were bound by the results. In essence, the parties to the arbitration could not appeal the arbitrator’s decision.

Why You Should Care: Arbitration can be effective to resolve a claim, but you will likely be stuck with the arbitrator’s decision without a chance for an appeal.

Union THUGS Plead Guilty

Posted in Unioin Campaign

Behind BarsSome time ago, I wrote about union THUGS (The Helpful Union Guys) that tormented merit shops to force contractors to use union labor on projects. The THUGS set fire to equipment, beat contractors with baseball bats, and picketed apartment complexes where contractors lived.

Recently two of the ten union members plead guilty to arson-related charges, including two counts of maliciously damaging property by means of fire, extortion, and RICO conspiracy charges.

For their actions, the union members are looking at up to 110 years in prison and over $1 million in fines.  The judge is expected to sentence them in early 2015.

 

More Regulations for Federal Contractors

Posted in Office of Federal Contract Compliance Programs (OFCCP)

The Office of Federal Contract Compliance Programs (OFCCP) has been busy. In the last iStock_000004581445XSmallseveral weeks, the OFCCP has proposed regulations that will require contractors and subcontractors to provide summary compensation data and another rule prohibiting federal contractors and subcontractors from discriminating against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant.

Equal Pay Report

The OFCCP has proposed Summary Compensation regulations which would require federal contractors and subcontractors with more than 100 employees to “provide summary data on the compensation paid to employees by sex, race, ethnicity, specified job categories, and other relevant data points.” Covered employers would have to submit three types of information:

  1. the total number of workers within a specific EEO-1 job category by race, ethnicity and sex;
  2. total W-2 wages defined as the total individual W-2 wages for all workers in the job category by race, ethnicity and sex; and
  3. total hours worked, defined as the number of hours worked by all employees in the job category by race, ethnicity and sex.

Prohibition to Pay Secrecy

The OFCCP announced a proposed rule to prohibit pay secrecy policies and actions by covered Federal contractors and subcontractors. The proposed rule will implement Executive Order 13665 by prohibiting federal contractors from discharging or discriminating in any other way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant.

The OFCCP concluded that this rule will enable 28 million employees of federal contractors and subcontractors to discuss their compensation without fear of adverse action and will contribute to reducing pay discrimination and ensure that qualified and productive employees receive fair compensation.

Why you should care: If you are a federal contractor, these two rules are yet another rule proposed by the OFCCP which will impact your operations and will require additional reporting should they actually become federal regulations.

 

When Do You Call Your Lawyer?

Posted in Construction Law

The National Association of Home Builders recently conducted a survey asking its NAHB-Logomembers about the legal issues they faced in the last 12 months and whether they consulted their attorney to deal with the problem. Below are some highlights of the survey.

Legal Issue % of Homebuilders % Contacted Counsel
Warranty/call back claims 34% 51%
Contract disputes 22% 84%
Defective Install/Workmanship 20% 83%
OSHA Issues 13% 33%
CGL Coverage Questions 11% 73%
Construction Liens 10% 57%

 

I was not surprised that over 80% of home builders contacted their counsel when dealing with contract disputes and defective installation and workmanship issues. But, I was surprised to see that only 33% of home builders contacted their counsel when dealing with OSHA problems. Given the potential penalties involved in OSHA violations, I thought that more home builders would contact their attorney to assist with the problem.

How often do you contact your attorney to discuss legal issues? Are these survey results in line with your business?

 

Fundamental Fairness Trumps Contract Language

Posted in Construction Contracts

The Texas Supreme Court recently ruled that a “no-damages-for-delay” clause would not be enforced where the delay was caused by the owner. The court’s ruling flies squarely in the face of the contract language that attempted to insulate the owner from any delay claims, even those it caused.

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In the case of Zachary Construction v. Port of Houston underlying contract, proposed by the Port of Houston, was heavy handed, to say the least. The contract provided:

[Contractor] shall receive no financial compensation for delay or hindrance to the Work. In no event shall the Port Authority be liable to [Contractor] … for any damages arising out of or associated with any delay or hindrance to the Work, regardless of the source of the delay or hindrance, including events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF OR IS DUE IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY. [Contractor’s] sole remedy in any such case shall be an extension of time.

Wow, that’s some one-sided language. If the contract was enforced, the contractor could not get any damages for delay, even those damages caused by the active interference of the Port of Houston.

During construction, the Port of Houston expanded the scope of the project. The parties entered into a change order with pricing based on the contractor’s proposed method of completion. After the change order, the Port of Houston insisted that the contractor resubmit plans to perform the work. Ultimately, the Port of Houston required the contractor to complete the project using the methods required by the Port of Houston, which caused delays and increased costs.

Not surprisingly, the contractor demanded that the Port of Houston compensate it for the increased costs of using the Port of Houston’s construction methods. The Port of Houston refused, citing to the no-damage-for-delay clause in the contract. The case went to trial and the jury found in favor of the contractor. Perhaps the juror realized that enforcing the no-damage-for-delay clause would simply not have been fair.

The case was appealed and the intermediate appellate court reversed. The case was then heard by the Texas Supreme Court, which reinstated the jury verdict. The Texas Supreme Court found that a no-damage-for-delay clause would not be enforced when an owner actively interferes with a project.

Takeaway: Fundamental fairness tells us that an owner should not be able to interfere with a contractor’s work and then expect to rely on a no-damage-for-delay clause to avoid liability. But, today’s legal environment also tells us that proving that the owner’s conduct was simply not fair can take a long time (8 years) and perhaps negotiating better contract language upfront will make the project run more smoothly.

Nebraska Joins the Ranks—No CGL Coverage for Faulty Work

Posted in Construction Claims, Insurance coverage, Uncategorized

The Nebraska Court of Appeals has ruled that a home builder that fails to adequately Justice is servedcompact the soil does not have insurance coverage to repair damages to the home caused by the settling soil. In “insurance speak”, there was no occurrence to trigger coverage.

In this case, Cizek Homes, Inc. v Columbia National Insurance Companya home builder contracted with a buyer to build a house. A lot was selected and the home was built. After the buyer moved in, the house started to settle, causing damage to the house. The buyer told the builder about these problems and the builder agreed to fix the problems. The builder also contacted its insurance company and requested coverage for the buyer’s claim. The insurer rejected the claim, determining that the buyer’s claim was not covered by the builder’s Commercial General Liability (CGL) insurance.

The insurer then filed suit asking the court to interpret the insurance policy and to determine whether the CGL insurance covered the claim. The court looked to the buyer’s allegations that the builder failed to construct the home in accordance with  accepted construction and industry standards and that the builder was negligent in designing and constructing the home. The builder admitted that it was obligated to pay for the costs of repairs, but denied that it was negligent in constructing the home.

The first question for the court was whether there was an occurrence under the policy. Under the policy, an occurrence is defined as an accident including continuous or repeated exposure to substantially the same harmful conditions. Relying on established case law in Nebraska, the court determined that faulty workmanship, standing alone, is not an occurrence under a CGL policy. This means that if the faulty workmanship only damages the work, such as a roofer’s faulty work damaging only the roof, there is no occurrence.

Looking again to the allegations between the buyer and the builder, the court found that the there were no facts presented that would support an inference that the damage was caused by anything other than the builder’s negligence. Moreover, the only damage claimed was to the house, which means that the only damage was to the work itself, and thus there was no occurrence. Because there was no occurrence, coverage was never triggered.

This opinion makes clear in Nebraska that a contractor’s faulty work, that only damages the work that contractor performed, will not be covered by the contractor’s commercial general liability insurance.

 

Lunch & Learn–How to Prepare a Winning a Request for Compensation

Posted in Uncategorized

Join us for our Fall Lunch & Learn

Thursday, October 16th at 11:30.  Group of teenagers sitting in classroom with raised hands.

We will be discussing How to Prepare a Winning Request for Compensation.

The topics we will cover include:

  • Developing a Roadmap to Prepare the Claim
  • Determining Applicable Contract Terms
  • The Impact of Change Orders
  • Identifying the Important Documents
  • Calculating the Amount Owed

Seating is limited, so please RSVP to Craig Martin, (402) 397-7300, or via e-mail: cmartin@ldmlaw.com.

The “Your Work” Exclusion—Is there a Trend against Coverage?

Posted in Insurance coverage

Two more courts have weighed in on the “your work” exclusion in commercial general iStock_000015701146XSmallliability (CGL) policies, finding that contractors did not have coverage for work performed improperly. These cases highlight that whether you have coverage for poor workmanship will depend on the state’s law applied. It now appears that if you are in South Carolina or Massachusetts, you will not have coverage.

The South Carolina case, Precision Walls, Inc. v. Liberty Mutual Fire Insurance Company, involved a subcontractor hired to tape insulation. After taping the insulation, a brick veneer was installed on the exterior. During the brick installation, the mason reported that the tape was losing its adhesion and the subcontractor was instructed to repair the problem. In order to access the tape, portions of the brick veneer had to be removed and re-installed. The subcontractor then sought coverage for the costs associated with repairing the tape.

The insurer denied coverage and the subcontractor sued its insurer. The court ruled in favor of the insurer, finding that the defective tape was “your work” because it was “material furnished in connection” with the subcontractor’s work. The policy specifically excluded from coverage damage to property caused by “your work”. Thus, there was no coverage for the subcontractor.

The Massachusetts case, Pacific Indemnity Company v. Lampro, also found there was no coverage. There, the landscape subcontractor failed to abide by the environmental restrictions required by the permits and clear cut trees and brush. The homeowner’s property insurer paid $100,000 to fix the damage and the insurer then sued the contractor and its general liability insurer to recoup the money it paid to restore the property.

The court found that the general contractor’s CGL policy did not provide coverage, again, because of the “your work” exclusion. This policy excluded coverage for real property that must be repaired or restored because “your work” was incorrectly performed. The court also found that there was no occurrence under the policy because the subcontractor’s failure to abide by the permit restrictions was not an accident, but rather a risk of doing business.

Take Away: Getting an insurer to pay for damage to the work under a CGL policy is becoming increasingly difficult. You would be well advised to review your state’s laws to determine whether you have coverage.