Alston & Bird – September 12, 2012
Parties often question what, if any, standard of care construction managers (CMs) owe on a project. The 7th Circuit Court of Appeals recently addressed this question when a “greenhorn” carpenter was injured while trying to make repairs on the upper floors of a Trump Tower construction project in Chicago. The carpenter sued the project’s CM, arguing the CM was negligent by allowing work to continue despite high winds, and by not requiring the greenhorn to work with a more experienced “journeyman” carpenter.
The CM acknowledged that, under Illinois law and the Restatement of Torts, it owed a duty of care if (1) it entrusts work to an independent contractor; and (2) retains control of any part of the work. Conceding that it retained a “high degree of control over this worksite,” the CM argued “that it never entrusted work to [the subcontractor] because [the CM] never entered directly into a contract with [the subcontractor].” Relying on O’Connell v. Turner Constr. Co., the CM contended that the subcontractor contracted directly with the owner, but the CM only signed the subcontract as the owner’s agent, so therefore it did not “entrust” the work and owed no duty to the subcontractor’s employees.
The 7th Circuit distinguished O’Connell by pointing to the fact that the CM actually selected the subcontractor:
In [O’Connell], the court concluded that a project manager did not entrust work to a subcontractor because it had not “actually selected the contractors or subcontractors,” even though it had helped the site’s owner in drafting contracts and handling construction bids. Here, in contrast, the record shows that [the CM] selected [the subcontractor]. [The CM] does not explain why it should matter that it was technically acting as an agent for the owner when it made the selection.
Due to the CM’s control in selecting the subcontractor, the 7th Circuit concluded that the CM “entrusted work” to the subcontractor, even though it was only acting as the owner’s agent. As a result, the CM owed a duty of care to the subcontractor’s employees, and a jury had to decide whether the CM violated that duty.
The opinion does not address why the CM had a duty to ensure safe working conditions rather than the subcontractor — the plaintiff’s actual employer. While the court plainly focused on the CM’s role in hiring the subcontractor and its continuing control over the work, the court did not address the apparently undisputed principal/agency relationship between the owner and the CM, but instead, only questioned “why it should matter” that the CM was only the owner’s agent.
Perhaps the indemnity obligations owed to the CM by the subcontractor and the owner will define the true scope of the CM’s exposure. However, premising liability on the nebulous concepts of how involved a CM is in selecting a subcontractor and the degree of control the CM retains — rather than on the CM agreement and the subcontract itself — could prove to be a Pandora’s box of responsibility for construction managers that otherwise believe their exposure is relatively limited. Moreover, the holding may give CM’s a negative incentive to be less hands-on despite obligations running to the owner, because the express principal/agency distinctions do not alone protect the CM, even when the CM is acting within its scope as agent.