May 2012 Volume XI No. 1 Taking Care of Business
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Supreme Court Clarifies The Scope Of Construction Manager Liability For Subcontractor Employee Injuries

In Indiana, construction firms engaged as construction managers must navigate many pitfalls and take precautions to avoid liability for workplace injuries outside their control. A construction management contractor may be liable to the employee of a subcontractor for workplace injuries where the construction management contract imposes a duty for safety or the construction manager assumes such a duty through its actions.

In Indiana, the rights and remedies of an employee against their employer for workplace injuries are governed by the worker’s compensation system. However, the injured person is free to pursue other legal remedies, including litigation, against individuals or entities other than their employer who may be liable for their injuries, including general contractors, other subcontractors and construction management firms.

The Indiana Supreme Court recently addressed the issue of when, and under what circumstances, a construction management firm may be liable for jobsite injuries sustained by an employee of a subcontractor. In Hunt Construction Group, Inc. et al v. Garrett, Cause No. 49S02-1106-CT-365, March 22, 2012, the Supreme Court held that a construction management firm was not liable for the injuries suffered by an employee of a subcontractor where the construction management firm did not contract to provide jobsite safety services nor assumed such a duty through its actions related to jobsite safety. In the Hunt Construction Group case, Hunt Construction Group was contracted by the local Stadium Authority to serve as the “construction manager” for the construction of Lucas Oil Stadium in Indianapolis. Hunt was contracted to provide comprehensive construction management services, including management of certain safety-related tasks. However, Hunt’s contract, to which only Hunt and the Stadium Authority were parties, specifically stated that Hunt’s services were to be rendered only for the benefit of the Stadium Authority, and not for the benefit of any other entities or individuals working at the site. The contract also provided that Hunt was not assuming control over the safety programs of the individual subcontractors nor assuming responsibility to monitor those safety programs. In light of these specific contractual limitations, the Supreme Court held that Hunt did not, by contract, undertake a duty to ensure the safety of all employees of subcontractors working on the project.

The Supreme Court also addressed the issue of whether Hunt had assumed a duty to ensure the safety of the subcontractor’s employees through its actions or conduct. Referencing the long-standing precedent of Plan-Tec v. Wiggins, 443 N.E.2d 1212 (Ind. Ct. App. 1983), the Court held that where a construction manager is not obligated by contract to provide jobsite safety, the construction manager must undertake specific supervisor responsibilities beyond those set forth in the original construction documents in order to “assume” such a legal duty for jobsite safety. Hunt’s contract with the Stadium Authority required Hunt to schedule and conduct weekly meetings with contractors to discuss “such matters as safety” and to routinely inspect the project to determine if contractors were implementing appropriate safety procedures. Having already determined that the contract itself did not impose any legal duty upon Hunt for the safety of a subcontractor’s employee, the Supreme Court concluded that Hunt’s compliance with those contractual obligations did not lead to an “assumption” of a duty to that employee. The undertaking of additional safety responsibilities beyond those required by the contract is necessary before a construction manager can be found to have “assumed” a legal duty for the safety of a subcontractor’s employee.

As a result of the Hunt Construction Group opinion, contractors serving in a construction management role should ensure that their contracts with the owner of the project clearly specify the construction manager’s duties with respect to safety planning, implementation and/or oversight. Further, a construction manager should ensure that the contract for their services specifies that the other contractors and subcontractors are responsible for the implementation and continued operation and maintenance of their own safety programs. Finally, a construction manager should limit its safety-related actions to those duties imposed by its contract.

On the opposite side of the spectrum, while a subcontractor generally will not have the authority to request that certain provisions related to safety be included in the contract between the project owner and construction manager, the subcontractor should be aware of the construction manager’s obligations with respect to safety, in order to understand its own obligations and potential liability for jobsite injuries.

Please contact us at www.hwelaw.com if you have questions regarding this article or if we can be of assistance.

 

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Obtain an Endorsement to Assure Liability Insurance Coverage

Sean Kenyon
Sean Kenyon

If you think you are covered by securing coverage on another's policy of insurance as an additional insured, think again. In Indiana, care must be taken to assure that an endorsement, in addition to a certificate of liability insurance, contains the language needed to assure liability coverage.

Commonly, a property owner will require that a contractor, employed to provide services of varying types, including construction work, add the owner to the contractor’s policy of insurance as an additional insured. Seemingly, just as frequently, a general contractor will require that a subcontractor’s policy extend coverage to the general and/or to the owner for purposes of liability insurance coverage. Unfortunately, in many such instances the commonly followed approach for assuring that the property owner or contractor has been added to a policy as an additional insured is the exchange of a certificate of liability insurance. Such an approach is fraught with peril. While arguments for coverage based just on the certificate of liability insurance may succeed depending on the particular circumstances of a given case, the safer approach to assure coverage is to require an endorsement adding the additional entity as an insured to the policy.

From an insurance coverage perspective, the problem with the certificate of liability arises from the disclaimer language that is so often included on those forms. Most contain language that reads:

This certificate is issued as a matter of information only and confers no rights upon the certificate holder. The certificate does not amend, extend or alter the coverage afforded by the policies below.

If the certificate holder is an additional insured, the policy must be endorsed. A statement on the certificate does not confer rights to the certificate holder in lieu of such endorsement(s).
When issues over coverage arise, the Courts begin with the premise that “the presentation of a certificate alone does not create coverage or legal duties.” American Family Ins. Co., 774 N.E.2d 932, 939 (Ind. Ct. App. 2002), quoting G.E. Tignall & Co., Inc. v. Reliance Nat'l . Ins. Co., 102 F.Supp.2d 300, 304 (D. Md. 2000). The purpose of a certificate of insurance is to inform the recipient that insurance has been obtained. It does not, however, clarify the terms or extent of that coverage. It is expressly not intended to serve as the equivalent of an insurance policy. Id.

A Seventh Circuit Court of Appeals case explains how the courts generally analyze an additional insured provision on a certificate of insurance. See T.H.E. Ins. Co. v. City of Alton, 227 F.3d 802 (7th Cir. 2000). In Alton, the insurer (“T.H.E.”) provided a general commercial liability policy to a company (“FPI”) contracted by the City of Alton to launch fireworks. FPI procured a certificate of insurance, which named the City as an additional insured. That certificate of insurance read: “[it] neither affirmatively nor negatively amends, extends or alters the coverage afforded by the policy (ies) described hereon.” Id. at 804. After a fatal accident during a fireworks display, the decedents' families filed suit against a number of defendants including the City. The City then sought indemnification from T.H.E. The Seventh Circuit Court of Appeals found that the certificate of insurance alone afforded no insurance coverage.
The operative phrase in [the] disclaimer is the language stating that the certificate does not alter, amend or extend the coverage of the underlying policy. The phrase puts the insured on notice that the insurance contract will be governed by the terms of the underlying policy and not by the certificate itself. The certificate issued to the City . . . contained adequate warning that the insured could not simply rely on the certificate for the terms and conditions of coverage.
Id. at 806.

The best business practice to assure that an entity has been added as an additional insured would be to require an endorsement to a policy being provided rather than just a certificate of liability insurance. Thereafter, to assure that the policy stays in effect and that there are no changes to the policy, a current certificate of liability insurance should always be retained. In addition, an additional insured covered under a policy by endorsement should assure that the insurance company be directed to provide it with a notice or a mailing of the certificate of liability insurance each time it is issued anew or each time it is issued pursuant to changes to the policy. This latter information will assure the property owner or contractor that the policy remains in effect and that changes have not been made that would impact the coverage afforded the property owner or contractor seeking the liability coverage as an additional insured.

Ultimately, many factors may impact whether coverage is provided pursuant to a certificate of liability insurance or a policy of insurance but getting started with the right documentation will always serve those seeking coverage well. As each policy and situation may be different in the analysis of coverage, please contact us at www.hwelaw.com if you have questions regarding this article or if we may provide analysis or advice to you with respect to an insurance coverage issue.

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