We all know that construction can be a dangerous business. Safety is one of the biggest issues any construction business deals with, and rightfully so. Unfortunately, in spite of the best safety programs, training, and precautionary measures, accidents still do happen. And sometimes, they are catastrophic. What do you do when you get the call that one of your employees has been badly injured or, even worse, killed?
First and foremost, the immediate welfare of your employee should take priority. Get them the immediate medical attention they need; when in doubt, error on the side of caution. Then alert their family so that the employee’s loved ones can get involved in the medical decision-making.
"Ok," you say, "my team member has been taken to the hospital. What do I need to be doing back at the job site?" Make sure that the site does not pose a continuing threat to anyone else. You’ve already had one injury, you certainly don’t want more. If it may take some time to determine whether the premises remains hazardous, limit access to the area until you’ve determined the threat is gone.
At this point of the situation, assuming that the employees health is being tended to and the job site no longer poses a danger, it is important to start documenting what happened. Find witnesses, get their account of what happened, and write down their contact information. Take photos of the accident scene; this is the only chance you will have to capture the image of what it looked like at the time of the accident. If your company has a policy in place about creating incident/accident reports, work through that protocol. Memories fade, and no one will ever have a better account of what happened than immediately after the event. Keep in mind, however, that the products of your investigation may be discoverable if litigation ensues.
Hopefully, your documentation began long before the accident. Your company should have a safety plan in effect, and you should have been following it. You also should have some documentation that your employees followed the safety protocol.
"Whew, I’ve taken the immediate response actions, and now I’m gong to head back to the office to catch my breath," you utter after a long day (or night). You plop down in your chair at your desk and then it hits you – things have only just begun. Time to start making phone calls. If the injured person was an employee, your workers comp carrier should be immediately notified of the accident. You should also call your commercial general liability (CGL) carrier as well and advise them of the incident. Depending on the nature of the accident, you may be required to notify OSHA as well.
You should also contact your legal counsel as soon as possible. If there is a fatality, they should be one of the first calls you make. The reality of today’s business climate is that there is a good chance that catastrophic (and even some non-catastrophic) accidents will result in litigation, particularly if the injured person is a non-employee (workers comp statutes provides some relief from lawsuits for employers when their own employees are injured). Because of this fact, you have certain duties to preserve evidence. You should preserve photos, witness statements, accident reports, documentation done surrounding the accident, written policies and procedures...the list could go on. In a nutshell, if the materials (including computer files and e-mails) have any relevance, they should be preserved. This may sound like common sense, but the penalties can be stiff if litigation arises and relevant materials have been altered or destroyed.
The best way to handle catastrophic accidents is to prevent them. The reality, however, is that at some point you will probably have to deal with one. This doesn’t represent an exhaustive list of everything that needs to be done, but it is a good start. By taking the proper steps, both before and after the incident, hopefully you will be able to keep the catastrophic accident from becoming a catastrophic liability for your company.
Thursday, October 23, 2008
Monday, October 6, 2008
Indemnity Agreements: What you see (and say) isn’t always what you get
During construction contract negotiations, indemnity agreements tend to be viewed one of two ways. One approach is that they are a critical component that serves to protect the indemnitee and limit liability related to the contract. The other approach is, "eeh, whatever."
The attitudes towards indemnity agreements change drastically on the back end, though. I can tell you that, as an attorney, the first thing I look at when analyzing a construction dispute is the contract that governs the relationship between the parties. And within the contract, I go straight to the indemnity agreement (if there is one) to see if someone else is going to be financially responsible for my client’s liability, including any settlement or judgment.
Like so many other items, indemnity agreements are deal points to be negotiated. However, I personally believe that if you can receive indemnity protection without having to give up too much in return, it is a good idea to ask for it because it can serve as an effective limitation of your liability. In some instances, it may even be worth giving up quite a bit to receive that protection.
Indemnity clauses are a little tricky, though, and if you don’t word yours properly, it can be worthless. A simple, yet important, general rule of contract law is that contracts should be interpreted consistent with a plain reading of the text. In other words, a contract says what it means and means what it says. Indemnity clauses are an exception to this general rule. What may look like a valid, clear indemnity provision may not satisfy the requirements imposed by Texas law.
Texas (among many other states) has adopted the "express negligence doctrine." See Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705 (Tex. 1987). The express negligence doctrine provides that parties seeking to indemnify the indemnitee from the consequences of its own negligence must express that intent in specific terms. Under the doctrine of express negligence, the intent of the parties must be specifically stated within the four corners of the contract.
"Great," you say, "but what does that actually mean?" In a nutshell, it means that to be covered by an indemnity agreement, that provision must explicitly state that it includes indemnification for the indemnitee’s own negligence.
Let me illustrate by showing you what not to do. In Ethyl, the owner was sued by an employee of a contractor for injuries related to the owner’s and the contractor’s negligence. The owner sought indemnity from the contractor pursuant to the following provision in their contract:
So how do you create a valid indemnity agreement? First, I would recommend working with an attorney on your specific contract, as the difference between a valid and invalid indemnity clause could be thousands, and even millions of dollars. Second, be sure your contract can pass the express negligence test. Include explicit wording that the indemnity extends to cover the negligence of indemnitee. This language may be a harder sell in contract negotiations, but without it, your indemnity agreement may be unenforceable.
The attitudes towards indemnity agreements change drastically on the back end, though. I can tell you that, as an attorney, the first thing I look at when analyzing a construction dispute is the contract that governs the relationship between the parties. And within the contract, I go straight to the indemnity agreement (if there is one) to see if someone else is going to be financially responsible for my client’s liability, including any settlement or judgment.
Like so many other items, indemnity agreements are deal points to be negotiated. However, I personally believe that if you can receive indemnity protection without having to give up too much in return, it is a good idea to ask for it because it can serve as an effective limitation of your liability. In some instances, it may even be worth giving up quite a bit to receive that protection.
Indemnity clauses are a little tricky, though, and if you don’t word yours properly, it can be worthless. A simple, yet important, general rule of contract law is that contracts should be interpreted consistent with a plain reading of the text. In other words, a contract says what it means and means what it says. Indemnity clauses are an exception to this general rule. What may look like a valid, clear indemnity provision may not satisfy the requirements imposed by Texas law.
Texas (among many other states) has adopted the "express negligence doctrine." See Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705 (Tex. 1987). The express negligence doctrine provides that parties seeking to indemnify the indemnitee from the consequences of its own negligence must express that intent in specific terms. Under the doctrine of express negligence, the intent of the parties must be specifically stated within the four corners of the contract.
"Great," you say, "but what does that actually mean?" In a nutshell, it means that to be covered by an indemnity agreement, that provision must explicitly state that it includes indemnification for the indemnitee’s own negligence.
Let me illustrate by showing you what not to do. In Ethyl, the owner was sued by an employee of a contractor for injuries related to the owner’s and the contractor’s negligence. The owner sought indemnity from the contractor pursuant to the following provision in their contract:
Contractor shall indemnify and hold Owner harmless against any loss or damage to persons or property as a result of operations growing out of the performance of this contract and caused by the negligence or carelessness of Contractor, Contractor’s employees, Subcontractors, and agents or licensees.The Texas Supreme Court ruled that this provision did not provide indemnity to the owner for the owner’s own negligence. Because the injured employee asserted negligence against both the owner and the contractor, and the indemnity provision did not provide indemnity to the owner for its own negligence, the owner was not entitled to indemnity from the contractor. The Court stated that "indemnitees seeking indemnity for the consequences of their own negligence which proximately causes injury jointly and concurrently with the indemnitor’s negligence must also meet the express negligence test."
So how do you create a valid indemnity agreement? First, I would recommend working with an attorney on your specific contract, as the difference between a valid and invalid indemnity clause could be thousands, and even millions of dollars. Second, be sure your contract can pass the express negligence test. Include explicit wording that the indemnity extends to cover the negligence of indemnitee. This language may be a harder sell in contract negotiations, but without it, your indemnity agreement may be unenforceable.
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