Contracting into Liability

Contracting into Liability

By Arthur C. Johnson II, Managing Partner, Johnson Ivancevich, LLP

Modern day construction is ruled by contracts. Long gone are the days when a handshake was all that was needed to start a project. While this change has led to greater clarification regarding the various responsibilities on a construction site, it can also have unintended consequences if the language is not thoroughly reviewed and considered.

Generally speaking, Indiana’s longstanding rules is that a General Contractor (“GC”) will not be held responsible for the negligence of an independent contractor (e.g. a sub). A GC then owes no duty of care to a subcontractor’s employee, including the safety of a subcontractor’s employee, much less a sub-subcontractor. An exception to these general principles is when a contractual obligation imposes a specific duty on the GC. If a contract affirmatively declares the intent to assume a duty of care, an actionable negligence claim may arise and be based upon that affirmative contractual duty. In other words, if a contract is found to demonstrate the GC’s intent to assume a duty of care, then the GC is liable if it breaches its duty. Once the GC has assumed such a duty, it cannot delegate it to other parties (e.g. subcontractors).

The $40,000 question is what language creates the duty? Given that the specific language and facts determine the GC’s duty for safety, what is the magic language the Indiana Supreme Court found sufficient to create the duty?

In Ryan v. TCI Architects/Engineers/Contractors, Inc., et al., an employee of a sub-subcontractor injured on the job sued TCI, the GC, alleging that the contract between TCI and the owner created a duty to provide a safe work environment and that TCI breached its duty. In Ryan, the language the court considered in the contract between the owner and GC was:

  • “Assume responsibility for implementing and monitoring all safety precautions and programs related to the performance” of the project;
  • Designate a safety representative “to supervise the implementation and monitoring of all safety precautions and programs” related to the project; and
  • “Comply with all legal requirements relating to safety.”

Based on these terms, the court found the general contractor intended to assume a duty to keep the workplace safe.

The court also examined the contract to determine whether the GC had a sufficient level of control to impose liability. If the GC did not have a sufficient level of control, no liability would exist. In Ryan, the court pointed to the contract’s terms that afforded the GC “complete and exclusive control over the means, methods, sequences and techniques of construction.” Under the contract, the GC also assumed responsibility for the performance of the work of the subcontractors and any acts or omissions in connection with the subs’ performance.

Additionally, the GC agreed to provide all material, equipment, tools and labor needed to complete the project. Finally, the GC was charged with the duty of designating a safety representative to perform inspections and hold safety meetings with contractors. Based on all of the language, the court found that the GC was contractually obligated and had a duty to provide a safe work environment and could be found liable if it breached its duty to do so.

GC’s then are in the unenviable position that they can contract into liability when they assume a duty but cannot contract out of it. This is not to say that subcontractors and other individuals may not be comparatively at fault. But while comparative fault may limit damages, it does not eliminate the expense associated with litigation.

While most folks should be careful what they wish for, GCs should be careful what they contract for as they could be in for an unpleasant surprise.

Category Features, Rule of Law