Contractor May be Liable for Injury Caused by Work Installed According to Customer SpecificationsAn Illinois appellate court recently addressed the scope of negligence liability for a slip and fall injury on a newly installed roof at the Chicago White Sox Stadium. In 2013, a maintenance employee slipped on the roof at the stadium and suffered severe muscle tears. The employee filed suit alleging negligence and strict liability against the White Sox, the roofing contractor, and the manufacturer of the roofing product. All three defendants moved for and were granted summary judgment by the trial court, and the employee appealed.

On appeal, the manufacturer argued that it owed no duty of care to the employee and, regardless, had provided sufficient warning to its immediate vendee, the contractor, so as to relieve the manufacturer of any liability. The contractor argued that it owed no duty of care to the plaintiff because it relied on the customer’s specifications and performed the work in accordance with the specifications.

After reviewing the manufacturer warnings, the appellate court agreed that the manufacturer had provided adequate warnings to the contractor regarding use of its roofing product and affirmed summary judgment in favor of the manufacturer. However, the appellate court reversed the trial court’s grant of summary judgment with respect to the White Sox and the contractor. Although the contractor cited past Illinois rulings that relieved contractors from liability to third parties when contractors followed the plans, specifications and instructions provided by an owner, the appellate court here found that the contractor still owed a duty of care to third parties. The court reasoned that, because the White Sox sought the contractor’s “expertise, advice, and direction” to make recommendations regarding roofing materials and necessary safety equipment, the contractor was not just “blindly replicat[ing]” specifications and plans.

The court was particularly persuaded by evidence that the White Sox and contractor negotiated the contract over several iterations and meetings. Unlike a traditional design-bid-build work scenario, the contractor had input on the specifications, plans and materials to be used in the construction of the roof, not unlike a design-build project.

The court’s decision places the contractor in a precarious position, where it may be held accountable for an injury to a third party, despite following its customer’s plans and specifications. Contractors, especially those involved in negotiated private work and, in particular, those performing construction manager roles with input into design and constructability decisions, should be mindful of the Illinois court’s decision and the implications the decision may have on future claims.  A careful contractor can do several things to mitigate the risk of liability to third-party plaintiffs such as the White Sox employee in this case:

  1. pass on any manufacturer warnings explicitly to the owner;
  2. expressly disclaim liability for defective specifications or plans and seek indemnity from the owner for the same; and
  3. evaluate, during negotiations, the potential unintended consequences of recommending different materials, equipment or systems, especially if the recommended alternatives are to satisfy a demanding customer’s price concerns.

Additionally, contractors should ensure their applicable insurance policies cover such third-party injuries. If you have any questions about this case or subject matter, please contact Aman Kahlon.

Bid Protests: What’s Hot and What’s NotPlease join Aron Beezley of Bradley and Bill Walter and Brad Tress of Dixon Hughes Goodman LLP, on Wed., March 13, 2019, from 11:00 AM (Eastern) to 12:00 PM (Eastern), for a FREE webinar on the latest trends and hottest topics in the world of bid protests. Among the important topics to be addressed by this panel of experts are the following:

  • The most important bid protest decisions from 2018;
  • GAO’s Bid Protest Annual Report to Congress for Fiscal Year 2018;
  • The Rand Report on bid protests; and
  • Section 809 Panel bid protest recommendations.

Please visit the Dixon Hughes Goodman LLP website for registration information.

Please also feel free to contact Aron Beezley directly if you have any questions about the webinar or the topics to be covered during the webinar.

On January 25, 2019, a Florida appellate court certified the following question to the Florida Supreme Court:

WHERE A CONTRACT EXPRESSLY REQUIRES A PARTY TO INSPECT, MONITOR, AND OBSERVE CONSTRUCTION WORK AND TO DETERMINE THE SUITABILITY OF MATERIALS USED IN THE CONSTRUCTION, BUT THE PARTY FAILS TO DO SO AND INFERIOR MATERIALS ARE USED, ARE THE COSTS TO REPAIR DAMAGE CAUSED BY THE USE OF THE IMPROPER MATERIALS GENERAL, SPECIAL, OR CONSEQUENTIAL?

The answer to this question is of interest to the construction community because of the prevalence of consequential damage waivers in construction contracts.

Appellate Court asks Florida Supreme Court: What Kind of Damages Are Repair Costs?In Keystone Airpark Authority v. Pipeline Contractors, Inc., an owner contracted with a general contractor for the construction of an airplane hangar and taxiways in Clay County, Florida. The owner separately contracted with an engineering firm to inspect, observe, and monitor the contractor to ensure compliance with the plans and specifications, including the use of suitable materials by the contractor. After the contractor completed the project, the owner alleged that the hangar’s concrete slabs and the concrete taxiways began to deteriorate prematurely because of the contractor’s use of the substandard stabilization materials underneath the structures. The owner sued the contractor and the engineering firm for the costs to repair and replace the hangar, taxiways, and underlying subgrades.

In response, the engineering firm moved for summary judgment arguing that the incidental, special, and consequential damages waiver in its contract precluded award of the repair and replacement costs sought by the owner. The firm argued that the owner could only recover the costs of the inspection services provided under the inspection contract for any breach. The trial court agreed and enforced the consequential damages waiver, and the owner appealed.

On appeal, the court analyzed whether the damages sustained by owner were general, special, or consequential in nature. The court determined that the repair costs were not special damages because the costs of repair were likely to result from the engineering firm’s failure to fulfill its explicit inspection obligations and did not involve special circumstances for which actual notice may have been required. In other words, the cost to repair and replace the hangar and taxiways was a natural and reasonable consequence of failing to inspect and verify the suitability of the materials used.

However, the appellate court also concluded that the repair costs were not general or direct damages since they did not arise from the immediate transaction between the engineering firm and the owner for provision of inspection services. Per the court, even assuming the engineering firm failed to inspect, the contractor could have completed construction correctly, so the repair costs were not a direct result of the engineering firm’s breach.

The court, instead, analogized the facts in Keystone Airpark to other failure to inspect cases, where Florida courts categorized repair costs as consequential damages, or foreseeable damages that stem from losses incurred by the non-breaching party’s dealings with third parties. But, the court also acknowledged that other failure to inspect cases did not address an express contractual duty to inspect and determine suitability of construction materials, as at issue in Keystone Airpark. Because of this concern, the appellate court, while affirming the trial court’s summary judgment ruling, certified the question recounted above to the Florida Supreme Court for final determination on how to classify repair cost damages arising from a breach of an express inspection requirement.

If the Florida Supreme Court determines that the repair costs should be treated as general or direct damages, that ruling may transform risk allocation under many Florida construction contracts. Where parties, like architects and engineers, have typically relied on consequential damages waivers to limit liability when performing services like inspections or submittal review, the treatment of repair and replacement costs as general damages will seriously undermine the effect of such waivers and create exposure to significant damages awards. Such damages may substantially exceed the actual costs of the services provided.

To prepare for such a contingency, contracting parties should consider other avenues to limit liability. For example, parties with this potential exposure may pursue hard liability caps tied to insurance policy limits or the price of the services provided. Ultimately, it may be that the Florida Supreme Court sides with past precedent and determines repair costs arising from the failure to inspect are consequential damages, but you should be prepared and plan for an alternative result when negotiating contracts in the interim. Of course, further guidance on this issue depends not only on the Florida Supreme Court’s decision, but also the extent to which other states follow the Florida Supreme Court’s lead on this issue. If you have any questions about this decision or other Florida construction law issues, please contact Aman Kahlon.