Owner's Acceptance of Work Paves Way for Contractor's No Fault Decision

In the matter captioned Wilson v. Dura-Seal, --S.W.3d (March 21, 2017), the Missouri Court of Appeals considered "negligent construction claim against paving contractor" where the injured party claimed that "that she fell as a result of the height differential between the gutter area and the new asphalt poured by contractor."  Id. The trial court had granted summary judgment in favor of the contractor and the appellate court affirmed.

The defendant contractor had performed work, an asphalt overlay of a drive lane, at a school. The work was performed, invoiced, and paid by the school.  But apparently, the work was not up to par. It was undisputed that the contractor failed to pave up to the curb and instead left a “gutter area” where the "asphalt in the drive lane [was] taller than the gutter area in between the drive lane and the curb." The injured plaintiff claimed the height differential was "three to four inches." Id.

In order for the plaintiff to proceed against the contractor, the plaintiff needed to present evidence that the school had not yet "accepted the contractor's work" and that the contractor "was still in control of or had a right to control the area." Otherwise,“[a]fter [an] owner accepts a structure, the general rule [under the Acceptance Doctrine] is that a general contractor is not liable to persons with whom he did not contract." Id. The court was not persuaded that the plaintiff had raised a question of fact as to control, especially where the contractor had been off the site for 2 months and had been paid by the school.  Likewise the court was unpersuaded that the plaintiff has raised sufficient way around the Acceptance Doctrine -- for example that the drive lane was left in "an imminently dangerous condition," which would "operate[] to impose liability on a contractor, even after the owner has accepted the contractor's work." The court noted that "the road was in plain view and discoverable through inspection" and therefore not imminently dangerous.  Moreover, that the contractor had warranted its work to the school for a year did not change the analysis either -- the contractor had not expressly assumed any "greater liability to third parties than is commonly the case under the acceptance doctrine." Id.

Incidentally, the school had already settled with the injured party when the case against the contractor was commenced.  It was not evident from the decision whether the school ever attempted to recoup its settlement payments from the contractor.  Also worthy of note is that the Restatement (Second) of Torts § 385 takes a different approach to depart from the Acceptance Doctrine:  "One who on behalf of the possessor of land erects a structure or creates any other condition thereon is subject to liability to others upon or outside the land for physical harm caused to them by the dangerous character of the structure or condition after his work has been accepted by the possessor, under the same rules as those determining the liability of one who as manufacturer or independent contractor makes a chattel for the use of others."
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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.

Massachusetts Appeals Court: GC’s Non-Payment for a Scope Dispute with Subcontractor is a Willful Act, but not an Intentional One

The plaintiff in D.A. Sullivan & Sons, Inc.V. City of Springfield was a general contractor who contracted with the defendant for a public-school construction project in Springfield, MA. Subsequently, the plaintiff contracted with a subcontractor to perform certain finish work on the project.  During the execution of that work, a scope dispute arose with the finish subcontractor as to who owned certain lath and plaster work.  The subcontractor completed the work under protest then filed suit seeking compensation for the “extra work.” The subcontractor prevailed in that suit and was awarded damages related to the disputed work.  The plaintiff in the current matter then initiated an action against the defendant for: 1) breach of contract; 2) unjust enrichment; and 3) indemnification. The trial court granted the defendant’s motion for summary judgement holding that the indemnification clause of the general contract bars the plaintiff’s claims due to the plaintiff’s obligation to indemnify the defendant for losses arising from the intentional acts of the plaintiff and its subcontractors.

The Court began its summary judgment analysis by examining indemnity agreements in Massachusetts by stating that, “[i]ndemnity agreements "are to be fairly and reasonably construed in order to ascertain the intention of the parties and to effectuate the purpose sought to be accomplished."” Shea v. Bay State Gas Co., 383 Mass. 218, 222 (1981)

The Court next presented the prime contract’s indemnification agreement in dispute:

"The [c]ontractor hereby agrees to and shall at all times defend, indemnify and hold the [c]ity…wholly harmless from any and all losses, cost, expenses..,claims, demands, suits by any person or persons, injuries, damages or death, and other liabilities of whatever kind or nature, caused by, resulting from, incident to, connected with, or arising directly or indirectly out of the negligent or willful act or omission by the [c]ontractor, any [s]ubcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable whether or not caused in part by any act or neglect on the part of the [c]ity, its officers, employees, agents or servants, or others, including parties indemnified hereunder. This indemnity shall survive termination of the contract.”

The Court reviewed the lower court’s ruling on the above indemnity language where the lower court found there was “no ambiguity in this extremely broad indemnification clause” which it interpreted to mean that willful is intentional, but it does not necessarily imply a “malicious motive.”  Consequently, the lower court found an indemnity right existed because the plaintiff’s claims arose out of: 1) its direction to its subcontractor to perform the disputed scope; or 2) the subcontractor’s intentional act of actually performing the work.

The Court stated that such an interpretation of the indemnity clause might be correct if the defendant was seeking indemnity for a tort, personal injury, or property action resulting from the activities of the plaintiff or its subcontractor.  The Court further stated that the plain language of the provision would not limit such an interpretation as it does not “expressly tie the city’s indemnity right to damage of a person or property caused by the work to be performed” or limits damages to specific types of actions or omissions, or even further explicitly excludes payment terms.  The Court found the provision “unusually broad” and it specifically identified the phrase “arising directly or indirectly out of the negligent or willful act or omission” as ambiguous.

The Court also questioned whether the plaintiff’s actions of: 1) performing, or directing its subcontractor to perform the work was within its contractual obligation for the contemplated work; and 2) if performance of such an obligation would be considered “willful” within the context of the indemnity agreement, thus requiring the plaintiff to indemnify the defendant against the plaintiff’s own claims for payment.  The Court examined the meaning of the word “willful” and stated it could be synonymous with “intentional” or “deliberate” depending upon the circumstances, but “we question whether intentional or deliberate actions are necessarily willful in the instant context, where willfulness will arguably trigger an indemnity right as to payment claims arising from the very same acts alleged to be willful.” 

Accordingly, the Court overturned the motion for summary judgement stating that it disagreed with the legal determination that “willful” within the indemnification clause was unambiguous and synonymous with intentional.

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The author, Brendan Carter, is a contributor to The Dispute Resolver and a former Student Division Liaison to the Forum on Construction Law.  He is an attorney and a Senior Consultant with Navigant’s Global Construction Practice based in Boston, MA.  He may be contacted at 617.748.8311 or brendan.carter@navigant.com

Alex Corey, Pepper Hamilton LLP

Fifth Circuit Holds That Spearin-like Provision of Louisiana Civil Code Bars Negligent Failure to Warn Claim

LaShip, LLC v. Hayward Baker, Inc., 2017 U.S. App. LEXIS 3694 (5th Cir. Mar. 1, 2017)

Beginning in 2007, LaShip, LLC (“LaShip”) undertook the construction of a large shipbuilding facility in Houma, Louisiana (the “Project”), situated on its own private land as well as land owned by the Terrebonne Port Commission (“TPC) – a subdivision of the Louisiana state government. In July 2008, LaShip accepted a bid from Hayward Baker, Inc. (“HBI”) to complete the soil mixing and drill shaft work on the Project.

The contract between LaShip and HBI (the “Contract”) provided for HBI to install subterranean soil-mix columns to form the foundation of the shipbuilding facility and prevent it from collapsing into the soft and compressible Louisiana soil. Pursuant to the Contract, HBI obtained soil samples to ascertain the columns’ strength.  Laboratory testing revealed that, in general, the soil possessed the requisite compressive strength provided for in the Contract.  Nevertheless, as the work progressed the columns exhibited spiraling, and HBI experienced several cave-ins during its installation of the drill shafts and unwanted settlement of the foundation columns.

On January 21, 2011, LaShip filed suit against HBI in the Louisiana Federal District Court alleging that HBI violated Louisiana law by not warning LaShip about alleged defects in the design of the columns. TPC joined the lawsuit on March 6, 2013, also claiming that HBI acted negligently in failing to warn of a dangerous condition.  The District Court ruled that LaShip failed to prove by a preponderance of the evidence its claims against HBI.  LaShip and TPC then appealed.

The Fifth Circuit reviewed the District Court’s ruling de novo and fully affirmed the decision.  In regards to LaShip’s arguments that HBI is liable for its failure to warn of the column defects, the Fifth Circuit found that HBI was “statutorily immune” from this claim under Louisiana Revised Statute 9:2771 (“LRS 9:2711”), which provides that:

No contractor . . . shall be liable for destruction or deterioration of or defects in any work constructed, or under construction, by him if he constructed, or is constructing, the work according to plans or specifications furnished to him which he did not make or cause to be made and if the destruction, deterioration, or defect was due to any fault or insufficiency of the plans or specifications.

Pursuant to LRS 9:2711, a contractor is shielded from liability for any defects that may arise as a result of the contractor’s adherence to plans and specifications that were provided to the contractor. This wording of the provision resembles the common law doctrine announced in Spearin.  See U.S. v. Spearin, 247 U.S. 128 (1918) (“if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications”).  However, as the Fifth Circuit noted, a contractor will be liable “if he has a justifiable reason to believe that adherence to plans and specifications would create a hazardous condition.”

Applying LRS 9:2711, the Fifth Circuit reviewed the record and found that the problematic settlement of the structure in the Project stemmed from a design defect in the length of the columns. As such, HBI was afforded immunity based on its installations of the columns according to specifications in the Contract.

The Fifth Circuit rejected LaShip’s argument that based on HBI’s geotechnical expertise, its knew or should have known that the design was allegedly defective and thus had an affirmative duty to warn LaShip. The Fifth Circuit opined that such an argument would unduly broaden the affirmative tort duty of contractors under Louisiana law.  In affirming the District Court’s decision, the Fifth Circuit distinguished prior case law where a contractor was found to have breached a duty to warn the owner of a potential defect in the construction of a grain storage tank, noting that in that situation, the liable contractor “both designed and constructed” the storage tank.  HBI did not design the soil-mix column specifications.

The Court also affirmed the dismissal of LaShip’s breach of contract claim, finding that HBI fulfilled its contractual requirement in confirming that the soil tested met the minimum threshold for unconfined compressive strength. The dismissal of TPC’s claims was also affirmed on the basis that TPC failed to initiate the action within the one-year prescription period provided by Louisiana law for tort claims not governed by a contract.