The risk of third party liability: A challenging construction contract case

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sheet metal lafayette
An image of a sheet metal worker inspecting drawings (stock image)

Lawyers Fisher Philips have published a post: “Employers Beware: Indiana Supreme Court Expands the Scope of the “Duty of Care” Owed to a Subcontractor’s Employees” that suggests contractors need to be very careful about their contract language or they could be nailed with third-party liability claims, especially for matters relating to safety.

In light of a recent decision from the Indiana Supreme Court, Indiana employers—and construction companies in particular—should review their contracts and subcontracts to determine if they have unwittingly assumed a duty of care for other entities’ employees.  In Ryan v. TCI Architects/Engineers/Contractors, Inc. et al., the Court ruled that a general contractor’s “form contract” with its client caused it to assume a duty of care to keep a worksite safe for a sub-subcontractor’s employee—even though the general contractor’s subcontract placed the onus of securing employee safety on the subcontractor.  — N.E.3d —, 2017 WL 148885 (Ind. Apr. 26, 2017).  As a result of this ruling, a general contractor can potentially be liable to a subcontractor’s employee who suffers a workplace injury.

The issue relates to the wording of the overall contract between the general contract and the project owner, which clearly assigns safety responsibilities to the general contractor. However, despite an appeals court ruling that said the general contractor didn’t have a duty of care to the sub-contractors (and sub-sub-contractors), this decision was overruled by the state supreme court.

The Indiana Supreme Court reversed the Court of Appeals’ opinion and found that TCI did assume a duty of care to keep the worksite safe for its employees and the employees of its subcontractors.  In reaching this holding, the Supreme Court first recognized the “long-standing rule” that a general contractor like TCI “will ordinarily owe no outright duty of care to a subcontractor’s employees, much less so to employees of a sub-subcontractor” because it has little to no control over the method by which the subcontractor completes the work.  It then recognized five exceptions to the general rule, one of which arises when a contract “affirmatively evinces an intent to assume a duty of care.”

gander mountain store
Image of the Gander Mountain store in Lafayette, IN, where the accident occurred. Gander Mountain is in Chapter 11 Bankruptcy (unrelated to this case) and the store may either close or be rebranded.)

In reviewing TCI’s contract with Gander Mountain—including the provisions considered by the Court of Appeals and a section heading titled “[TCI’s] Responsibility for Project Safety”—the Supreme Court concluded that TCI intended to assume the duty to keep the worksite safe.  The Court also determined that the contract gave TCI a “level of control” over the worksite, and that its agreement to appoint a safety representative was indicative of its intent to maintain a reasonably safe environment.

Another question raised by this issue: Why did the employee file a claim against the general contractor and not his actual employer?  The issue here is that the direct employer would be protected by workers’ compensation legislation.

You can read the overall review of this case here.

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