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Workplace injuries on construction sites are common occurrences. For large projects that span multiple years with deca-million dollar budgets, even contractors with the best safety practices can expect dozens of injuries and related incidents to be reported in a given year. Many more incidents will go unreported, either because the incident is not deemed significant enough, or for other reasons, including the immigration status of the injured. 

Every state has developed some form of workers’ compensation insurance that protects the statutory employers of those workers in the event of a jobsite injury. While the general structures are similar in each state and provide fairly broad protections for those involved on a construction project, there are pitfalls to be considered and protected against.

Developers rarely need to consider liability for specific project-site injuries because they are generally immune from liability under applicable state laws when they cede control over the means and methods of the construction of the project to a general contractor. Additionally, developers typically shift any obligation for project safety to the general contractor under the prime contract and require that workers’ compensation insurance cover all workers on the site. For example, the American Institute of Architects construction contracts between an owner and general contractor require the general contractor to assume responsibility for safety on a project and indemnify the owner from any and all claims resulting from jobsite injuries.

Meanwhile, general contractors typically are able to limit liability for injuries to workers on the jobsite by securing workers’ compensation for their employees and requiring subcontractors to provide similar coverage. Workers’ compensation immunity usually extends vertically from contractor to subcontractor (and vice versa), and horizontally from subcontractor to subcontractor. The benefits attributed to workers’ compensation laws, including no-fault coverage and established benefits, are exceedingly important for construction site injuries because claims relating to jobsite injuries are commonplace.

There are, however, a number of ways that developers and contractors can become liable for injuries that occur on construction sites, even when worker’s compensation insurance is secured. Some of those events are rather unexpected. Both developers and contractors would be well-advised to familiarize themselves with these pitfalls and implement strong institutional controls on projects to ensure that the following scenarios are avoided.

Employing Workers Without Coverage

Subcontractors occasionally employ sub-subcontractors without informing the general contractor and without ensuring that the sub-subcontractor is enrolled in the project’s insurance program when the project is insured through an owner- or contractor-controlled insurance program (OCIP or CCIP or wrap policies). If a subcontractor fails to enroll a particular employee in the workers’ compensation insurance program, immunity can be lost, and the general contractor and subcontractor can be held liable for uncovered workers. Thus, contractors need to be keenly aware of who is working on the project at all times to ensure coverage for everyone.

When wrap policies are not used on projects, it is important to have contractual requirements that subcontractors maintain workers’ compensation and––more importantly––that the contractor requires that all subcontractors include similar language regarding workers’ compensation insurance in their sub-subcontracts. The idea is to create an unbroken vertical chain of contractual requirements to obtain and maintain proper insurance. In general, implementing on-site controls to ensure that workers do not ‘slip through the cracks’ of coverage is key.

Allowing Third Parties to Provide Services on the Project

Third parties are often hired for specific tasks outside of the scope of the prime contract, such as materialmen, material suppliers, safety training or oversight companies, or specific non-construction craftsmen, such as artists. Workers’ compensation insurance that covers the contractor and subcontractors typically does not extend to these third parties, which, in most cases, will serve as an exception to immunity. Thus, when third parties are allowed on the project outside of the scope of the contractor’s role, it is critical to ensure that independent workers’ compensation insurance and general liability insurance covers those third parties and that the owner, contractor and subcontractors are contractually indemnified and held harmless for any injuries to those third-party employees.

Failing to Emphasize Safety and Heed Warnings

Workers’ compensation does not provide blanket immunity. There are exceptions, and while they vary in degree from state to state, the most common exception is the intentional tort exception. This exception typically applies when a substantially similar injury or incident has occurred earlier in the project and the general contractor or subcontractor subsequently fails to take any steps to prevent a similar action from occurring before it happens again. To avoid this exception, contractors (and subcontractors) need to pay particular attention to incidents that have already occurred on a project in order to ensure that another injury does not occur under substantially similar circumstances, among other things, which might otherwise give rise to a claim that immunity has been waived. 

The Developer Becomes the Co-Contractor

On larger projects, developers typically employ project managers to maintain more routine oversight over the progress of the construction and address buyouts, changes to the scope of the project and general accounting issues. On occasion, a developer may believe that the project is not progressing at a sufficient pace and may begin to exercise more control over the operations of the project and––in some cases––even control the means and methods of construction. While understandable, a developer must be wary of becoming so involved and dictating the construction process to an extent that it loses the protections of being an owner. 

Indeed, in these scenarios, the developer runs the risk––if it exercises too much control––of inadvertently assuming liability for safety on project site and being subject to liability claims without the benefit of workers’ compensation immunity. Maintaining enough control to ensure progress while avoiding liability can be a delicate balance, and developers would be well advised to seek state-specific counsel on this issue, particularly on larger projects where a developer’s daily presence on a project would be expected.

While developers and contractors usually avoid litigation and traditional liability issues arising from workplace injuries through each state’s respective workers’ compensation laws, there are a host of ways that plaintiffs’ attorneys may try to argue that either or both remain liable for jobsite injuries. It happens more often than one might think. To avoid direct liability for unforeseen circumstances that fall outside of the workers’ compensation laws, developers and general contractors would be wise to ensure that their general commercial liability policies broadly cover liability for injuries related to the project. Likewise, to the extent that third parties are invited to perform work or services in connection with a project, it is vitally important to ensure that those third parties maintain sufficient insurance to cover any potential liability arising from their services or injuries to their employees and agents. In short, the right insurance needs to be in place to cover the unexpected, and proper risk management is key to ensuring that owners and contractors get the full benefit of all insurance purchased to protect the respective companies. 


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