Once again, I present my Top 10 New Year's Resolutions for everyone in the construction industry.
10. Take time to laugh a little.
9. Be consistent in your contract drafting to avoid fighting the same battles in litigation AND in arbitration.
8. Promptly report all potential losses and claims to your insurance company and specifically request defense and indemnity for you and any employee named in the claim or lawsuit. And document your reporting!
7. Beware of lien waivers!
6. Safety first on the job site. It avoids litigation, keeps OSHA away, maintains employee morale, and most importantly–it’s the right thing to do.
5. Know who you’re contracting with and make sure they are financially viable (or have a bonding or insurance company that is). This is so important I repeated it from last year’s list and moved it up.
4. Sometimes, the best decisions you make are the decisions to turn down business. A marginal, slow, or non-paying customer that brings headaches is sometimes worse than no customer at all.
3. Don’t put all your eggs in one basket. In other words, don’t rely solely on one large project, as problems with that project (including nonpayments) will put you at the upstream party’s mercy and drastically hurt your business.
2. Properly document your change orders and don’t just rely on unsigned letters or emails.
And once again, the #1 New Year’s legal resolution for 2011 for everyone in construction:
1. Read your contracts! Understand your contracts! Enforce your contracts!!!
Showing posts with label Construction Accidents. Show all posts
Showing posts with label Construction Accidents. Show all posts
Friday, January 7, 2011
Tuesday, June 22, 2010
What Can the Construction Industry Learn from the BP Oil Spill?
For way longer than anyone would prefer, BP and the Deepwater Horizon explosion and oil spill in the Gulf of Mexico have been front and center in the news. By even the most conservative accounts, it has become one of the worst environmental disaster in U.S. history. The consequences of the BP oil spill will be felt far and wide, particularly in the oil and gas industry and on the Gulf coastline. But apart from the technical aspects of the Deepwater Horizon explosion and subsequent oil leak, are there any bigger picture lessons to be learned? And can those lessons apply to a construction industry based a long way away from that broken pipe at the bottom of the sea.
As I watch news of the BP oil spill develop, I see three major themes that have direct application to everyone in the construction industry, whether they are working on billion-dollar stadiums and factories or residential remodels. Every contractor should take these lessons to heart so that they need not be learned the hard way.
Lesson #1: Be Aware of Risk-Shifting Provisions in Contracts
BP has been the primary focus of news coverage of the Gulf oil spill, not to mention Congressional hearings and a primetime address by President Obama. However, when all the investigations have been completed, will BP be the party held primarily responsible (at least financially)? Hyundai Heavy Industries of South Korea built the Deepwater Horizon rig for its owner, Transocean. Anadarko Petroleum was a partial owner of the well. Transocean leased the rig to BP. You can rest assured that the various contracts between these parties contained risk shifting provisions, such as indemnity provisions or limitations on liability. Was Transocean contractually obligated to indemnify BP for BP’s negligence (or vice versa)? Contracts between BP and Transocean and their various subcontractors may have contained similar provisions, or even liquidated damage clauses. Could it end up that, if the explosion was caused by the negligence of some contractor, that contractor is financially responsible for the entire cleanup because of a throw-away indemnity provision that no one paid any attention to during contract negotiation?
Finally, while everyone is focused on the environmental disaster and the price of clean-up, one thing has been overlooked. Millions upon millions of dollars worth of oil are being lost on a daily basis. That oil, or at least the rights to it, were acquired at a very significant cost. Additionally, BP’s lease on the Deepwater Horizon rig from Transocean was almost $500,000 per day, so it clearly had to be generating significant income for BP and the other leesees. Who will be responsible for these lost profits, or are the parties’ potential liability mitigated through limitation of liability clauses? While lost profits are definitely not the primary focus of the media, with the high price of cleanup you can rest assured that this issue will come up eventually.
One thing is certain–the first thing BP’s and Transocean’s lawyers did was to review all the contracts that touched upon the ownership, maintenance, and operation of the Deepwater Horizon rig to determine if another party might be responsible for the enormous tab this oil spill has generated. Contractors would be wise to undertake this same analysis–before disaster strikes. Know what your responsibilities are before the project starts, including whether you will be responsible for another party’s mistakes. This won’t eliminate all catastrophes, but it will better position you to deal with them when they do strike.
Lesson #2: Skeletons in the Closet Always Come Out
As the investigation into the causes of the BP oil spill deepens, BP has come over increased scrutiny for what some spectators have called “shortcuts” that the company took in the face of significant risks. The upcoming investigations by Congress, various governmental agencies, and eventually, discovery conducted by attorneys in litigation, will turn over every stone at BP, Transocean, Anadarko, Halliburton, and every other company remotely linked to the Deepwater Horizon platform in search for the culpable parties.
Old data never dies in this era of electronic communications and near-infinite storage. The emails you deleted and then deleted out of your Deleted box still exist on a server somewhere. Voicemail has gone digital too, meaning it lives on well past its removal from your New Messages folder.
For better or worse, what we say and what we write has a much longer life than it used to. While a paper shredder used to capably cover ones tracks, it is no match for the data that exists in slack space.
It is likely that somewhere, on some server, there is an email from some underling at BP or Transocean that warned about what, at the time, seemed like an unlikely disaster. And the warning may in fact have been absurd at the time it was written. But when a tech team, paired with a legal team, gets a hold of that obscure email, it will cause unmitigated headaches for whoever was the subject of that note.
The lesson to keep in mind is be careful what you email, and even the voicemails you leave. The passage of time distorts context, and the raw data will live long beyond your memory of the setting in which the note was emailed.
Lesson #3: Accidents Happen - Plan for Them
Finally, a major reason the BP oil spill has become such a disaster is that they have had difficulties stopping the oil from flowing out of the broken underwater pipe. While some catastrophes were probably anticipated, clearly the one that materialized did not have a firm response plan.
If there is one thing that is certain in any business as dangerous as the construction industry, it is that accidents will strike at some point. With rigorous attention to safety, most of the worst catastrophes can be prevented. However, accident nevertheless happen.
How will you respond? Who is your first call? Who is in charge on the ground? And when the dust settles, how do you move forward–first with addressing the accident, and second, by simply getting back to business?
The minutes, hours, and days following a catastrophic accident is no time to plan how your company will respond to it. That plan should be in place long before anything bad ever happens so that when it does occur, you and your company will know what steps to follow for everything from immediate medical care to documenting the accident scene to insurance coverage.
In many ways, the BP oil spill is very remote from the day-to-day dealings of most construction companies. After all, the uniqueness of working on a broken pipe one mile under water is the source of many of the issues. However, if you stop to look at the bigger picture and the themes that have unfolded, there is much that can be applied to the construction industry. Accidents do happen despite the best planning. But by paying attention (and controlling) risk shifting provisions in contracts, being careful about the electronic data you generate, and planning in advance for disaster, your response can keep a bad situation from getting worse.
As I watch news of the BP oil spill develop, I see three major themes that have direct application to everyone in the construction industry, whether they are working on billion-dollar stadiums and factories or residential remodels. Every contractor should take these lessons to heart so that they need not be learned the hard way.
Lesson #1: Be Aware of Risk-Shifting Provisions in Contracts
BP has been the primary focus of news coverage of the Gulf oil spill, not to mention Congressional hearings and a primetime address by President Obama. However, when all the investigations have been completed, will BP be the party held primarily responsible (at least financially)? Hyundai Heavy Industries of South Korea built the Deepwater Horizon rig for its owner, Transocean. Anadarko Petroleum was a partial owner of the well. Transocean leased the rig to BP. You can rest assured that the various contracts between these parties contained risk shifting provisions, such as indemnity provisions or limitations on liability. Was Transocean contractually obligated to indemnify BP for BP’s negligence (or vice versa)? Contracts between BP and Transocean and their various subcontractors may have contained similar provisions, or even liquidated damage clauses. Could it end up that, if the explosion was caused by the negligence of some contractor, that contractor is financially responsible for the entire cleanup because of a throw-away indemnity provision that no one paid any attention to during contract negotiation?
Finally, while everyone is focused on the environmental disaster and the price of clean-up, one thing has been overlooked. Millions upon millions of dollars worth of oil are being lost on a daily basis. That oil, or at least the rights to it, were acquired at a very significant cost. Additionally, BP’s lease on the Deepwater Horizon rig from Transocean was almost $500,000 per day, so it clearly had to be generating significant income for BP and the other leesees. Who will be responsible for these lost profits, or are the parties’ potential liability mitigated through limitation of liability clauses? While lost profits are definitely not the primary focus of the media, with the high price of cleanup you can rest assured that this issue will come up eventually.
One thing is certain–the first thing BP’s and Transocean’s lawyers did was to review all the contracts that touched upon the ownership, maintenance, and operation of the Deepwater Horizon rig to determine if another party might be responsible for the enormous tab this oil spill has generated. Contractors would be wise to undertake this same analysis–before disaster strikes. Know what your responsibilities are before the project starts, including whether you will be responsible for another party’s mistakes. This won’t eliminate all catastrophes, but it will better position you to deal with them when they do strike.
Lesson #2: Skeletons in the Closet Always Come Out
As the investigation into the causes of the BP oil spill deepens, BP has come over increased scrutiny for what some spectators have called “shortcuts” that the company took in the face of significant risks. The upcoming investigations by Congress, various governmental agencies, and eventually, discovery conducted by attorneys in litigation, will turn over every stone at BP, Transocean, Anadarko, Halliburton, and every other company remotely linked to the Deepwater Horizon platform in search for the culpable parties.
Old data never dies in this era of electronic communications and near-infinite storage. The emails you deleted and then deleted out of your Deleted box still exist on a server somewhere. Voicemail has gone digital too, meaning it lives on well past its removal from your New Messages folder.
For better or worse, what we say and what we write has a much longer life than it used to. While a paper shredder used to capably cover ones tracks, it is no match for the data that exists in slack space.
It is likely that somewhere, on some server, there is an email from some underling at BP or Transocean that warned about what, at the time, seemed like an unlikely disaster. And the warning may in fact have been absurd at the time it was written. But when a tech team, paired with a legal team, gets a hold of that obscure email, it will cause unmitigated headaches for whoever was the subject of that note.
The lesson to keep in mind is be careful what you email, and even the voicemails you leave. The passage of time distorts context, and the raw data will live long beyond your memory of the setting in which the note was emailed.
Lesson #3: Accidents Happen - Plan for Them
Finally, a major reason the BP oil spill has become such a disaster is that they have had difficulties stopping the oil from flowing out of the broken underwater pipe. While some catastrophes were probably anticipated, clearly the one that materialized did not have a firm response plan.
If there is one thing that is certain in any business as dangerous as the construction industry, it is that accidents will strike at some point. With rigorous attention to safety, most of the worst catastrophes can be prevented. However, accident nevertheless happen.
How will you respond? Who is your first call? Who is in charge on the ground? And when the dust settles, how do you move forward–first with addressing the accident, and second, by simply getting back to business?
The minutes, hours, and days following a catastrophic accident is no time to plan how your company will respond to it. That plan should be in place long before anything bad ever happens so that when it does occur, you and your company will know what steps to follow for everything from immediate medical care to documenting the accident scene to insurance coverage.
In many ways, the BP oil spill is very remote from the day-to-day dealings of most construction companies. After all, the uniqueness of working on a broken pipe one mile under water is the source of many of the issues. However, if you stop to look at the bigger picture and the themes that have unfolded, there is much that can be applied to the construction industry. Accidents do happen despite the best planning. But by paying attention (and controlling) risk shifting provisions in contracts, being careful about the electronic data you generate, and planning in advance for disaster, your response can keep a bad situation from getting worse.
Monday, February 22, 2010
Builders Should Learn From Olympic Luge Tragedy
If you have turned on the television, listened to the radio, or picked up a newspaper recently, then you’ve probably been inundated with coverage of the Vancouver Winter Olympics. Unfortunately, the 16-day period that is generally regarded as one of the most joyous in sports began on a very sad note. During a training run, Georgian luger Nodar Kumaritashvili had a horrific accident that resulted in his death.
While Olympic officials and many commentators cited athlete error for the unfortunate event, many felt that the luge track was too fast–that designers and builders created a course that simply allowed its users to reach unsafe speeds.
I live in Texas, where luge is an event that is watched every four years (and not too often in between) and luge track building is a construction niche that never enters the mind. However, I have seen construction projects in other fields lead to unfortunate accidents and even deaths. For that reason, everyone in the construction industry can use this Olympic tragedy as a learning moment.
Every builder should ask themselves this question: "What happens if someone is severely injured or, heaven forbid, killed on a project I’m working/worked on?" If you don’t know the answer, then you need to immediately start doing some homework.
If the project is still in the midst of construction, you should be sure you are taking all the safety precautions needed to project your own crews. First, it is the right thing to do, and secondly, companies do not want OSHA conducting an investigation only to find your company liable for a preventable accident.
Assuming the project is post-construction, the first thing any builder or contractor should do when they hear about an accident is grab their contracts. These will lay out if there is indemnity to you from another party, or if you were a named insured under another contractor’s insurance policy. If you do have indemnity, you can breath a little easier as another party will be responsible for your defense and all settlements/judgments.
Conversely, if you are the party providing indemnity to another, it is imperative that you immediately notify your insurer of this incident. Insurers are typically not obligated to provide coverage until their insured ask for a defense. Also, third party notification is not sufficient–the actual insured needs to demand coverage and defense from their carrier.
Once these preliminary steps are taken, the case will probably turn into an investigative matter on causation. In other words, what caused the injury or death, and who was responsible for that cause. In the Georgian luger death, most commentators who did not blame the athlete cited the course design (that it was designed to be too fast for even elite lugers to safely navigate). That is an element that would most likely fall to the architect and engineers. There have not been allegations of defects in construction, so the parties swinging the hammers would probably not be the target.
On other projects, however, the design might be just fine, but the execution flawed. In those situations, the general contractor and subs would probably be the parties facing potential liability.
It is indeed a shame that the Vancouver Winter Olympic Games began on such a sad note. This Georgian luger’s death should remind us how fragile life is and how much we should treasure every moment. But let it also be a reminder to all in the construction industry to follow best practices. Protect your own crews and provide a safe working conditions for others. Know your indemnity obligations, and make sure they are enforceable. Stay in close contact with your insurer and do not give them any basis to deny coverage. And thoroughly investigate the true cause of accidents to defend current claims and prevent future ones.
While Olympic officials and many commentators cited athlete error for the unfortunate event, many felt that the luge track was too fast–that designers and builders created a course that simply allowed its users to reach unsafe speeds.
I live in Texas, where luge is an event that is watched every four years (and not too often in between) and luge track building is a construction niche that never enters the mind. However, I have seen construction projects in other fields lead to unfortunate accidents and even deaths. For that reason, everyone in the construction industry can use this Olympic tragedy as a learning moment.
Every builder should ask themselves this question: "What happens if someone is severely injured or, heaven forbid, killed on a project I’m working/worked on?" If you don’t know the answer, then you need to immediately start doing some homework.
If the project is still in the midst of construction, you should be sure you are taking all the safety precautions needed to project your own crews. First, it is the right thing to do, and secondly, companies do not want OSHA conducting an investigation only to find your company liable for a preventable accident.
Assuming the project is post-construction, the first thing any builder or contractor should do when they hear about an accident is grab their contracts. These will lay out if there is indemnity to you from another party, or if you were a named insured under another contractor’s insurance policy. If you do have indemnity, you can breath a little easier as another party will be responsible for your defense and all settlements/judgments.
Conversely, if you are the party providing indemnity to another, it is imperative that you immediately notify your insurer of this incident. Insurers are typically not obligated to provide coverage until their insured ask for a defense. Also, third party notification is not sufficient–the actual insured needs to demand coverage and defense from their carrier.
Once these preliminary steps are taken, the case will probably turn into an investigative matter on causation. In other words, what caused the injury or death, and who was responsible for that cause. In the Georgian luger death, most commentators who did not blame the athlete cited the course design (that it was designed to be too fast for even elite lugers to safely navigate). That is an element that would most likely fall to the architect and engineers. There have not been allegations of defects in construction, so the parties swinging the hammers would probably not be the target.
On other projects, however, the design might be just fine, but the execution flawed. In those situations, the general contractor and subs would probably be the parties facing potential liability.
It is indeed a shame that the Vancouver Winter Olympic Games began on such a sad note. This Georgian luger’s death should remind us how fragile life is and how much we should treasure every moment. But let it also be a reminder to all in the construction industry to follow best practices. Protect your own crews and provide a safe working conditions for others. Know your indemnity obligations, and make sure they are enforceable. Stay in close contact with your insurer and do not give them any basis to deny coverage. And thoroughly investigate the true cause of accidents to defend current claims and prevent future ones.
Tuesday, November 10, 2009
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.
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.
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