Construction Manager Who ‘Controls’ Site Can Be Liable For Subcontractor Employee’s Injury

Calloway v. Bovis Lend Lease, Inc., 2013 WL 4428894 (1st Dist. 2013) examines a construction manager’s negligence liability to a subcontractor’s employee where the construction manager entrusts work to the subcontractor but still exercises some control over its work.

Facts: A father and son were piping installers for a subcontractor on a construction project managed by the defendant.  They sustained fatal (father) and permanent (son) injuries when a trench wall collapsed. The father’s estate sued the defendant for wrongful death and the son sued for negligence.

Held: The First District upheld the jury verdict of over $8M for the son and just over $1M for the Estate (after a 49% damages reduction for contributory negligence) against the defendant.

Reasoning:

Affirming the jury verdict, the court held that the defendant construction manager entrusted the underground piping work to the subcontractor (the father and son’s employer).  However, it also exercised a sufficient amount of supervisory control over the subcontractor and was responsible for overall project safety.  These rules were integral to the court’s decision:

– one who employs an independent contractor is not liable for the independent contractor’s acts or omissions;

– If the employer retains control over the operative detail of the contractor’s work, the employer is liable under agency law principles (i.e. respondeat superior);

– if the employer retains only supervisory control – such as power to direct timing of the work or to forbid the work from being done in a potentially harmful way – the employer can be liable unless he exercises that control with reasonable care to prevent injury to others;

– when a contractor entrusts part of work to a subcontractor but superintends the entire job through a foreman, the entrusting contractor can be liable if  he (1) fails to prevent the subcontractor from jeopardizing the safety of others; (2) knows or should know that the subcontractor is engaging in unreasonable dangerous activity; and (3) has the opportunity to prevent the dangerous activity by exercising his retained power of control;

– a principal contractor’s right to order work stopped or started, to inspect its progress or receive reports, or make recommendations is not enough – standing alone – to confer liability on the principal contractor;

– the key inquiry in determining whether a contractor owes a duty of care under negligence rules turns on whether the contractor retains control or the right to supervise the contractor.

¶¶ 47-50; Restatement (Second) of Torts, Section 414

The court found that defendant entrusted the underground piping work to plaintiffs’ employer and did more than just administrative work on the job.  The contract documents gave defendant the authority to act as the owner’s agent and afforded it wide latitude in bidding and choosing contractors on the project.  ¶¶ 60-63.

The court cited as support for its findings the evidence that defendant was in charge of overall project safety and even produced safety videos and published safety protocols.  Several witnesses also testified that defendant had day-to-day control over the project and actively monitored its progress.  ¶¶ 68-75.

Witness Discovery Deposition Admitted Into Evidence As A Party Admission

The court affirmed the trial court’s allowing defendant’s former employee’s discovery deposition to be read to the jury.  Rule 212(a)(5) allows a discovery deposition to be used at trial where the deponent isn’t a retained expert, his evidence deposition hasn’t been taken and he can’t testify due to death or infirmity.  SCR 212(a)(5).

The First District found that Rule 212(a)(5) didn’t apply since the deponent wasn’t dead or sick. He was just out of the country.  However, under Rule 212(a)(2) and (3), the discovery deposition was properly read to the jury as a party admission.  These sections specifically allow discovery depositions to come into evidence as party admissions.  A statement is not hearsay if (1) it’s a statement offered against a party; (2) is a statement by the party’s agent (3) concerning a matter within the scope of the agency and (4) is made during the existence of the relationship.  ¶ 88.

The court found that the deposition met all of the rule’s requirements for a party admission and was properly read to the jury.  ¶ 89.

Conclusion: Calloway discusses an entire gamut of important and recurring substantive, procedural and evidentiary topics including compensable damages, contributory negligence, the Dead Mans’ Act, the hearsay rule and exceptions, proper discovery sanctions and the importance of jury instructions.  The case is especially instructive on the entrustment rule – derived from Section 414 of the Restatement (Second) of Torts.  Calloway makes clear that regardless what the contract documents say, if a construction manager retains a sufficient level of supervisory or “superintending” control over a project, it can be subject to negligence liability to third parties if it fails to exercise reasonable care.

 

 

 

 

New Illinois Law To Impose Strict Timing Requirements on Settling Defendants

Getting a settling defendant to pay is sometimes a Herculean task. So much so that it often spawns multiple rounds of satellite litigation just to enforce the settlement terms. I recall one case I had in McHenry County that required no less than five or six 2-hour drives to the courthouse in order to enforce a settlement agreement.  The defendant’s continual delays in making good on its settlement payment obligations caused my client considerable frustration and unnecessary expense.

Enter Public Act 98-548 (Raoul, D-Chicago; Sims, D-Chicago). This law goes into effect January 1, 2014 and amends the Code of Civil Procedure to provide personal injury plaintiff’s with an enforcement tool to enforce settlement agreements. It requires a settling defendant to (a) provide a release within 14 days of written confirmation of a settlement agreement; and (b) to pay the settlement funds within 30 days of receiving signed settlement documents from a plaintiff.  If a particular case requires court approval of a settlement, the plaintiff must provide to the defendant a copy of the court order approving settlement.

To protect third-party lien claimant’s (such as physicians or attorneys), a plaintiff receiving settlement funds should provide (a) a signed release of the lien to the defendant and (b) a letter from the plaintiff’s attorney or from health care provider, Medicare or health insurer in which the parties agreeing to hold the full amount of the third-party’s claimed lien in the plaintiff’s attorney’s client-fund account pending final resolution of lien amount.

The rule’s “teeth”: if the court finds, after a hearing, that payment has not been made within 30 days of tender of the necessary documents, judgment must be entered against that defendant for the amount in the executed release, costs (but not attorneys’ fees) incurred in obtaining the judgment, and 9 percent interest from the date of the plaintiff furnishing the necessary documents.  The Act exempts units of local government, the State of Illinois, and state employees. Effective January 1, 2014. 

Defense firms should notify clients of these rule changes with sufficient lead time to ensure a seamless transition to the new settlement payment obligations.

For additional reading see:

http://iln.isba.org/blog/2013/09/05/new-law-requires-timely-executed-settlement-releases-most-cases

Insurance Co’s Substantial Compliance With Termination Notice Defeats $20M Suit

Life Plans v. Security Life of Denver Insurance Company, 2013 WL 4052678 (N.D.Ill.2013), presents high-dollar contract dispute involving two insurance companies.

The plaintiff insurance agent entered into a written agreement with the defendant, a multi-national insurance company.  The plaintiff agreed to market defendant’s life insurance products on a nation-wide basis.  The contract term was “indefinite” and terminable on 30-days’ written notice delivered by certified mail.

Four months into the contract, the defendant terminated the plaintiff by written notice delivered by UPS and not certified mail.  Plaintiff, expecting a multi-year arrangement, sued for breach of contract and sought damages of nearly $20M.  The parties filed cross-motions for summary judgment.

Held: The Court granted defendant’s motion and denied plaintiff’s.

Why?

(1) The Termination Notice Issue

The defendant didn’t strictly comply with the contractual termination notice provision.  Instead of sending the cancellation by certified mail, defendant sent it via UPS.

This was good enough though. “When confronted with less than literal compliance with a notice provision, courts have required that a party substantially comply with the notice provision.”  *2.  Since the plaintiff admitted receiving defendant’s termination notice and even signed a receipt acknowledging as much, the Court found substantial compliance with  the notice provision.  It would undermine the notice provision’s purpose and exalt form over substance if it found that defendant breached by sending the notice UPS rather than certified mail.

(2) Was the Insurance Co.’s Right to Terminate Absolute?

Aside from challenging the defendant’s method of terminating the contract, the plaintiff also argued that the defendant’s termination of the contract was wrongful.  The plaintiff claimed that defendant’s cancelling the contract only a few months into its term was a breach because at one part, the contract referenced premium payments over a twelve-month period and additionally, defendant sent e-mails which referenced projected premiums over a three-year period.   *3.

According to plaintiff, these contract references to twelve months and three years clearly demonstrated that the parties contemplated a multi-year agreement.

The Court rejected these arguments.  On its face, the contract was terminable on 30-days’ written notice.  The parties’ right to terminate was unqualified.  Because the defendant substantially complied with the contractual notice provision by sending the notice via UPS, plaintiff couldn’t prove the defendant’s breach.

(3) Breach of Good Faith and Fair Dealing Claim

The Court granted summary judgment for the defendant on plaintiff’s breach of good faith and fair dealing claim.

The implied covenant of good faith and fair dealing isn’t a substitute for express contract terms. A contracting party can’t use the implied covenant to create contractual rights that don’t exist in the contract language. are absent from the contract.

Here, since the contract termination clause was clear, the Court had no basis to imply any conditions or qualifications on defendant’s right to cancel. *4.

Take-aways: Drafting precision is critical.  Parties should clearly delineate the grounds for termination and method of providing termination notice.  If in the insurance agent’s (plaintiff) position, I typically request a cure period or “for cause” provision as a condition to termination.  This mitigates the harshness of an unexpected termination.

I also may propose a liquidated damages term in situations where it’s conceivable a party may prematurely terminate a lengthy contract.

Life Plans also presents a good example of court refusing to elevate form over substance by finding the contract’s notice provision’s purpose was served even without literal compliance.