Construction, Professional Liability, Publications

Modification to Form Contract and Construction Manager's Conduct, Collapses Defense

November 8, 2013

On Aug. 16, 2013, the First District of the Illinois Appellate Court affirmed an adverse jury verdict entered against a construction manager and in favor of plaintiffs stemming from an accident on a construction project where the construction manager was not a constructor.  Liability was found based upon a modification to a standard American Institute of Architects contract, and based upon the construction manager’s conduct on site that was inconsistent with the contract terms.

In June of 2005, a property owner was engaged in various construction projects, and hired a construction manager to assist in overseeing the work.  The owner and construction manager entered into the AIA “Standard Form of Agreement Between Owner and Construction Manager Where the Construction Manager is NOT a Contractor.”  The owner then hired a prime contractor to perform work in connection with the installation of underground sewer and storm pipes.  That prime contractor in turn hired the plaintiffs’ employer as a lower-tier subcontractor to perform the underground work.

The plaintiffs were injured when an unprotected trench they were working in collapsed.  A significant adverse jury verdict award was entered in favor of the plaintiffs and against the construction manager who appealed, contending first that they could not be subject to liability for the acts of an independent contractor because they did not hire and therefore did not “entrust” work to the independent contractor employer; and, secondly because they did not have safety responsibility on the job site as specified in their contract with the owner.

The construction manager first pointed to a similar factual situation that resulted in summary judgment being affirmed by the appellate court in favor of a construction manager in O’Connell v. Turner Construction Company, 409 Ill. App. 3d 819, 822 (2011). There the court found that Turner did not entrust work to the plaintiff’s employer despite having aided the owner in drafting contracts and handling construction bids. There was no evidence that Turner selected the subcontractor or signed any contract therewith.

The appellate court considered O’Connell but distinguished it and looked at two federal court cases, which, though not binding upon it, were deemed instructive as to whether a direct contract was necessary to establish entrustment. Based upon those opinions, the court ruled that it was not. Henderson v. Bovis Lend Lease, Inc., 848 F. Supp. 2d 847(N.D. Ill. 2012), (where the court stated that the existence of a direct contractual relationship as a prerequisite to determining entrustment could, with artful contract writing, result in no one having responsibility for safety) and Sojka v. Bovis Lend Lease, 686 F.3d 394 (7th Cir. 2012), (which also held that a direct contract was not a prerequisite to entrustment or control).  The appellate court believed instead that the issue of entrustment should be decided on a case-by-case basis, and that the facts of each case could establish that a construction manager actually entrusted work to a subcontractor despite not contracting with them.

The court therefore ruled in opposition to a bright line test, and rather in favor of a detailed analysis of the facts of each case to determine whether the conduct of a construction manager rises to the level of entrustment of work to an independent contractor subjecting it to liability under Section 414 of the Restatement Second of Torts.

With that premise the appellate court looked to the terms of the contract between the construction manager and the owner to determine the scope of responsibility assumed by the construction manager and found that a modification to the contract had been made which proved fatal as it subjected the construction manager to liability for entrusting work to the independent contractor employer.  In the contract the construction manager added extraneous language indicating that it “shall act as owner’s agent in connection with the services provided by the construction manager as determined by the owner under this agreement.”  The court found therefore that any actions taken by the construction manager in its capacity as the owner’s agent could be deemed an act of entrustment by the construction manager, and that although the construction manager did not sign the contract with plaintiffs’ employer, this modification to the standard form contract lended support to the jury finding that construction manager entrusted work to the employer based upon the actions it took as the owner’s agent.

Further, the contract included a second modification, deleting the owner’s ability to approve perspective bidders, and giving authority to the construction manager to recommend the lowest responsive and responsible bidder to the owner, which the owner was to accept. The court found this modification illustrated the construction manager acting in its authority as agent of the owner. Again, the court found this modification supported the jury finding that the construction manager had “entrusted” work to plaintiffs’ employer.

Based upon these modifications, the court found that the construction manager could be responsible for “entrusting” work to an independent contractor, and therefore could be responsible under Section 414 of the Second Restatement of Torts, which holds:

One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.

After reaching this conclusion the court turned its attention to whether the construction manager had control over any part of the work performed by the employer and, if so, whether it exercised its control with reasonable care for the benefit of the injured employees.  The court focused its attention on the activities of the construction manager’s representatives in the field and found that those activities in fact did indicate that the construction manager had “control” for safety on the job site despite the fact that the contract language in the construction manager’s contract with the owner specifically excluded that safety responsibility.  The court found that despite the fact that the contract left to the subcontractor control of the operative details of its work and the safety of its employees, the construction manager acted beyond its contractual scope, exercising more than a general right of supervision and thereby subjecting it to liability.  The court noted that the construction manager had a daily onsite presence to “ensure that all subcontractors and contractors complied with safety requirements.” The construction manager provided a safety plan to the contractors on site and required the employer to sign off on it.  The construction manager also required the employer to submit a safety plan of its own, held orientations and safety meetings, which all employees were required to attend, retained overall control of site safety, and appointed an on-site safety officer to oversee safety on the entire project.  Further, the construction manager dictated safety rules that had to be followed on site, had superintendents in the field who were required to ensure that the subcontractors followed those safety rules, and specifically had a rule that all trenching required the use of a trench box or sloping when working in an excavation over five feet deep.

Finally the construction manager’s field superintendent admitted he was present when the plaintiffs were working in the trench that was not properly sloped or secured with a trench box and saw the plaintiffs in the trench working in these unsafe conditions.  The person making the observation admitted that he had the ability to stop the work and order the men out of the unprotected trench and the fact that he saw them in the trench for approximately 30 seconds before the collapse and did not order them out was a violation of his duties.  The court therefore found that the jury was within its right, in reviewing that evidence, to have found that the construction manager, having entrusted work to the plaintiffs’ employer, had failed to exercise his control over that independent contractor with reasonable care. The court therefore upheld the jury’s verdict against the construction manager.

As in any case, the terms of the contract are of particular importance, and should be negotiated with care to ensure that the scope of one’s undertaking is indeed what is intended by the parties.  Further, when time is taken to consider the terms of the contract and to reach an agreement upon those terms, equal care should be taken to act in accordance with the terms of that contract and to not act beyond the terms of the agreement, or assume responsibilities or duties outside that which have been formed by the contract.  Modifications to contracts have serious consequences, as does acting in a manner inconsistent with the contractual terms to the acquiescence of the parties to the contract.  Said inconsistent actions can enlarge the scope of the undertaking, and subject one to responsibilities that it had not intended to accept.

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