Steven J. Stuart | Smith Currie & Hancock | March 31, 2016
Construction managers are often in an unenviable position. With expansive contracts, construction managers perform multiple tasks that may impact many different people. With the general charge of managing a construction project comes the potential of broad liability to those involved with the project.
At its core, liability stems from a duty owed to another. A duty may arise from contract or apart from contract, through action or inaction. And a central component of duty is control. Did A’s contract provide that A was to do or prevent X? If not, was A in the position to do or prevent X? Should A have done or prevented X? Replacing “A” with construction manager and “X” with a safety protocol or worksite injury provides real-world context that helps explain the broad liability that construction managers may face on a project.
The starting point to limiting this liability is the contract. A well-drafted contract will define the scope of a particular duty and to whom that duty is owed. For example, a contract may specifically limit a construction manager’s role in worksite safety. Absent a specific contract provision addressing the issue, should a construction manager be liable to someone that is injured on the project? The applicable jurisdiction’s public policy and case law are additional points to understand. A recent Indiana case, Lee v. GDH, LLC, 25 N.E.3d 761 (Ind. Ct. App. 2015), illustrates these points.
A Subcontractor’s Employee Sues a Construction Manager
Daniel Lee, a plumber, was severely injured while performing an air leak test on a gas line that exploded. Lee’s employer, PDP, had contracted with a community college, Ivy Tech, to perform specific work at the project. Ivy Tech separately contracted with GDH to perform construction management, including certain safety program services.
Lee alleged that GDH negligently failed to perform its safety program services and that GDH’s failure to do so caused Lee’s injuries and damages. The court focused on whether GDH owed any duty to Lee.
A Contract Helps Mitigate Limitless Liability
First, the court reviewed the contract between GDH and Ivy Tech to determine “whether a contract to which the construction manager was a party imposed such a duty of care.” The court found that GDH’s contract with Ivy Tech did not impose such a duty.
During the period before construction was to begin, GDH was contractually responsible to Ivy Tech for providing “recommendations and information to the Owner regarding the allocation of responsibilities for safety programs among the Contractors.” During construction, GDH’s safety responsibilities were limited to reviewing the contractors’ safety programs and coordinating them. GDH’s contract provided that it would not have direct control over the acts or omissions of contractors, except that GDH was obligated to stop unsafe or hazardous work if it became aware of such work. Also, GDH’s contract stated that contractors would be “solely” responsible for “safety precautions and programs in connection with” their work according to the terms of their own contracts, and GDH would not be responsible for contractors’ performance on safety issues. Although GDH’s contract stated that it would carry out its duties “consistent with the best interests of the Owner,” GDH’s contract stated that no provision created “a contractual relationship with or a cause of action in favor of a third party against either Ivy Tech or GDH.”
The court found that GDH contractually disclaimed responsibility for the safety of a contractor’s employees and adequately specified that contractors, including PDP, would be responsible for administering safety programs in connection with their portions of the project.
Next, the court addressed Lee’s argument that GDH’s contract did not fully resolve the issue—that GDH assumed a duty of care to Lee through GDH’s actions in the course of managing the project. Lee contended that GDH required Lee’s employer to comply with GDH’s safety program; that GDH was required to and did review Lee’s employer’s safety program; that GDH’s project manager stated that he was responsible for ensuring that all lockout/tagout procedures were followed; and/or that GDH held weekly safety meetings with contractors to ensure workplace safety. From this, Lee asserted that a 2012 case established that where a construction manager takes specific actions related to employee safety, the jury should determine whether a construction manager, like GDH, assumed a legal duty to another, like Lee, with regards to safety.
The court recognized that a duty may indeed be found if GDH undertook specific responsibilities beyond those in GDH’s contract. However, GDH’s contract specifically contemplated Lee’s arguments, and Lee did not successfully argue otherwise. That is, Lee failed to show an action by GDH that did not fall within the terms of GDH’s contract with Ivy Tech. The language in GDH’s contract ultimately governed whether GDH owed a duty to Lee, and the affirmative and disclaimer language negated any duty owed by GDH to Lee.
Points to Consider
With the goal of limiting the potentially broad liability of a construction manager, the Lee decision provides valuable takeaways.
First, the Lee decision emphasizes that during negotiation of a CM contract consideration should be given as to who will shoulder certain duties and liability. This should involve an understanding of the other contracts that will be issued on the project. The contract between Ivy Tech and PDP, Lee’s employer, contemplated that PDP would be in the best position to prevent Lee’s injury. GDH’s contract with Ivy Tech tracked this through specific disclaimers of GDH’s role in worksite safety and the limits to its role.
The Lee decision also emphasizes the importance of updating contract language that addresses both affirmative obligations as well as disclaimers based on the applicable jurisdiction’s case law developments. Lee relied on a 2012 case wherein the Indiana Supreme Court interpreted similar contract language to conclude another construction manager owed no duty to a subcontractor’s injured employee. With GDH’s contract largely resembling the contract provisions at issue in the 2012 case, GDH successfully avoided a court finding that GDH owed specific duties to a contractor’s injured employee.
Understanding a jurisdiction’s specific…