Participants in a construction project typically understand the importance of precision in the drawings, plans and specifications, no matter the size or scope of the project. However, precise and clear language in the contract documents creating legal relationships between owners, contractors, subcontractors and construction managers is equally important. In other words, parties must be clear on what a contract requires and recognize any unexpected legal implications from seemingly customary and innocuous language.
Two recent Indiana cases, one from the Indiana Supreme Court and one from the Indiana Court of Appeals, demonstrate how seemingly similar language in two contracts can have vastly different meanings depending on the relationship between the contracting parties. A summary and comparison of these two cases follows.
The General Contractor’s Responsibility for Safety
For many years, Indiana law has been clear that a general contractor is under no obligation to provide an independent contractor with a safe place to work. Over the last 150 years, very little has changed with regard to a general contractor’s duties to its subcontractors and the employees of its subcontractors. Indiana law has long held that the general contractor should bear no liability for the negligent acts of the subcontractor over whom the general contractor bears limited control. However, as with almost every area of the law, there are exceptions to the general rule. Recently, the Indiana Supreme Court not only reiterated certain exceptions to the general rule but significantly expanded one, which may leave general contractors exposed to liability for the acts of subcontractors even under common contract terms that do not appear to allow such liability.
Michael Ryan was an employee of a sheet metal contractor hired to perform heating and ventilation work on the construction of a retail store in Lafayette, Ind. Ryan’s employer was hired as a subcontractor by a mechanical company that was itself hired by the general contractor to work on the project. Ryan fell from a ladder while working and suffered significant injuries. He later sued both the general contractor and the subcontractor that hired his employer, arguing that each breached their duty of care to provide a safe work space. (Michael Ryan v. TCI Architects/Engineers/Contractors, Inc. and BMH Enterprises, Inc., d/b/a Craft Mechanical). Both the trial court and the Indiana Court of Appeals found in favor of the general contractor under the general rule discussed above. The Supreme Court, however, reversed the lower courts and found in favor of Ryan, holding that the general contractor had assumed a duty of care for Ryan by virtue of specific language in its contract with the owner of the project. The general contractor’s agreement with the owner contained the following provisions:
- “[The general contractor] … recognizes the importance of performing the Work in a safe manner so as to prevent ... injury ... to all individuals at the Site.”
- The general contractor was required to “… assume responsibility for the implementing and monitoring of all safety precautions and programs.”
- The general contractor was required to “designate a safety representative ... to make routine daily inspections of the Site ... and hold weekly safety meetings with [all personnel working on the Site]”
- The general contractor agreed to “comply with all Legal Requirements relating to safety.”
The Supreme Court, viewing the contract language as a whole, found that the general contractor agreed to assume safety obligations for all individuals working on the project. Because the contract vested the general contractor with “complete and exclusive control over the means, methods, sequences and techniques of construction” and required the general contractor to provide all “material, equipment, tools and labor, necessary to complete the work,” the Supreme Court held that the general contractor affirmatively demonstrated its intent to assume a duty of care toward the subcontractor’s employee. This contract language, and the court’s conclusion, each lie in stark contrast to the general rule that a general contractor typically bears no responsibility for the safety of subcontractors.
It is important to keep in mind that a general contractor’s exposure to liability for injuries to employees of subcontractors often hinges on the level of control the general contractor maintains over safety programs and over the means and methods by which the work is performed. General contractors working in Indiana should take care to recognize potentially expansive language in their own contracts, which may be misconstrued as the assumption of a duty to ensure the safety of all workers working on the site. It is impossible to know which of the several contractual provisions cited by the court might have changed the result if it were absent, but the first one seems particularly risky: “[The general contractor] … recognizes the importance of performing the Work in a safe manner so as to prevent ... injury ... to all individuals at the Site.” This language runs contrary to the terms of industry-standard construction contract forms, which only require contractors to take reasonable precautions and do not include the absolute obligation to “prevent injury to all individuals.”
An Agency Construction Manager’s Responsibility for Safety
In another recent case, the Indiana Court of Appeals addressed a similar contract to the owner-general contractor agreement in the Ryan case but reached a seemingly opposite result. The contrast between the Ryan case and Mark Gleaves v. Messer Construction Company and PERI Formwork Systems, Inc. was based on two important distinctions.
Gleaves was an employee of a subcontractor hired to perform concrete work on a construction project at Indiana University in Bloomington. Messer was the construction manager hired by IU to oversee the project under an approach commonly known as construction manager as agent or advisor and not as constructor (i.e., the construction manager is not the general contractor and performs no construction work itself or through subcontractors; instead it only acts as an advisor to the owner). Gleaves was injured when part of a concrete form fell and hit him in the head. He later filed suit against both the manufacturer of the form system and against Messer. Gleaves’ claims against Messer were based on Gleaves’ contention that Messer stepped beyond the scope of its contract and assumed a duty of care toward Gleaves. As to Messer, the Court of Appeals held that it did not owe a duty of care to Gleaves.
In a construction manager as agent or advisor arrangement, the construction manager will contract directly with the owner of the project to provide the advisory construction management services. Separate and apart from that contract, the owner will contract with one or more trade contractors to perform the actual work, and those trade contractors may in turn engage subcontractors to perform various components of the project. On large scale projects, it is common to have multiple layers of contractors and subcontractors. One unique aspect of the construction manager as advisor arrangement is that the construction manager has no contractual relationship with any of the contractors performing work at the job site. Also, this arrangement typically means that the construction manager has no control over the specific means, methods and techniques used by the various contractors to perform their work.
Messer’s contract with IU required it to provide onsite administration of the construction contract and to “provide and maintain an effective safety program.” However, the contract also provided that Messer did not have control over the means, methods, techniques or safety precautions and programs in connection with the work of each individual contractor. All workers on the site were required to observe Messer’s safety program. Messer also had the authority to immediately rectify unsafe situations and to remove individuals committing safety violations from the site.
Under Indiana law, there are two ways in which a construction manager may assume a duty for the safety of individuals working on the job site. First, the construction manager can expressly contract to assume that duty. Second, even in the absence of an express contract assuming such a duty, a construction manager can take affirmative steps through its actions to assume a duty of safety to the workers on the site. Gleaves’ claim against Messer was based on the latter. Gleaves contended that by requiring subcontractors working on the site to take certain safety precautions, and by imposing penalties on workers of subcontractors when unsafe practices were observed, Messer exceeded the scope of its contract, and in doing so assumed a duty of safety to workers on the job site. Relying on the Indiana Supreme Court’s 2012 holding in Hunt Construction Group, Inc. v. Garret, the Court of Appeals rejected Gleaves’ arguments, holding that Messer took no actions other than those it was specifically required to take in its contract with IU. Although Messer’s contract with IU did require it to take responsibility for certain safety programs, the fact that Messer did not exceed the scope of its contractual obligations protected it from liability in this case. Had Gleaves argued that Messer assumed a duty of safety by virtue of the language of its contract, as opposed to its actions, it is likely his argument still would have failed, given the lack of a direct-line contractual relationship between Gleaves’ employer and Messer and the absence of any contractual right on Messer’s part to control the means and methods of the work. Although Gleaves attempted to appeal this result to the Indiana Supreme Court, that request was denied and the opinion of the Court of Appeals remains binding on the parties.
On the surface, the Ryan and Gleaves cases may leave contractors confused as to their exposure, especially in light of the highly similar language in both contracts regarding safety. However, these cases illustrate the critical difference between the role of a general contractor and of a construction manager-advisor in Indiana.
As Ryan illustrates, general contractors desiring to limit their liability for injuries to workers of subcontractors should consider the scope of control placed on them by their contract with the owner and their contracts with various subcontractors. Construction managers should likewise be mindful of the language in their contracts with owners. While construction managers do not typically have a direct contractual relationship with an injured worker, language in the construction management contract that places safety obligations exclusively with the construction manager may still result in a duty of care to the injured worker. Also important for agency construction managers is to limit safety-related activities to those specified in the contract with the owner. Construction managers that exceed the scope of those activities, even with the best intentions, may find themselves unknowingly assuming a duty of care not contemplated in their contract.