Recent Andorran Bridge Collapse Should Make Contractors Double Check Risk-Shifting Contract Provisions

Question: If/when a catastrophic accident hits your job site, what is your immediate response? What if the accident happens to your subcontractor or a third party, then how do you respond (or does it make a difference)?

Unfortunately, construction crews in the tiny Pyrenees principality of Andorra are now having that conversation. Recently, five workers died and six more were injured when they fell 50 feet as bridgework they were on collapsed.

This tragic accident serves as an obvious reminder that safety should always remain job #1. However, it should also be a wake-up call to contractors to make sure their risk-shifting and risk management is up to date.

If or when that catastrophic accident hits your job site, your contract documents–believe it or not–should be one of the first things you look at. In fact, they may be the thing that guides your next move. Why? Because they will be probably be the documents that determine if you or some other party will be responsible for the defense and indemnification of the injured worker’s claims.

Most construction contracts contain some sort of risk shifting provision, whether it be an indemnification clause, a limitation of liability provision, or an additional insured requirement. Prudent contractors include these in their favor in anticipation of a catastrophic accident. These contractual provisions essentially shift potential liability away from you and place the risk of loss on another party.

When a serious construction injury occurs, rest assured that every company remotely connected to the accident site will be brought into the claim and, perhaps, into litigation. Before this happens, contractors should carefully analyze their contract documents to determine if another party owes them indemnity or if a third party’s insurance will cover them. Conversely, contractors should determine whether they owe indemnity or insurance to a third party.

Shifting the defense and indemnification for a claim to a third party, particularly in catastrophic accident situations, can result in significant savings (depending on a contractor’s own insurance). It could lead to the savings of a deductible, a large self-insured retention amount, and even premiums. All of a sudden, those seemingly mundane deal points are worth a whole lot. But these provisions must be explicitly stated in the contract documents.

The tragic Andorran bridge collapse should remind contractors to be vigilant in their contract negotiations and not to ignore risk shifting mechanisms such as indemnity clauses and additional insured provisions. Just like any construction project, proper planning and attention to detail will pay off down the road when your company is dealt a curve ball.