Month: April 2012

Am I Really Responsible for That?

Landowners hire contractors to perform work for the landowner. Contractors then typically hire multiple subcontractors to perform various portions of that work. And, subcontractors then hire sub-subcontractors to perform various portions of their work. And, so on depending upon the nature of the particular project. Often the work being performed is dangerous, and this can result in personal injury or property damage. Who is responsible when that happens?

There is a general rule in Virginia that one is not liable for the acts of an independent contractor. But as with many things in the law there are exceptions to that rule. One of those exceptions is liability for inherently dangerous work done by someone one hires. So what is inherently dangerous? Unfortunately, there is no simple or single answer to that, and obviously much of what is done in for a typical construction project could qualify.

Some guideline conditions to something being inherently dangerous include the following: 1) work must be dangerous in and of itself and not just dangerous because it might be negligently performed; 2) the inherent danger must be naturally apprehended or reasonable recognizable by the parties when they contract; and 3) the inherently dangerous activity must be one in which injury to others will definitely occur unless special precautions are taken.

An easy example is blasting activities. But the fact that most things in construction are dangerous make creating a definitive list very difficult, and so ultimately this is decided on a case by case basis by the courts. One recent construction activity example that was determined as inherently dangerous is the digging and laying of a waterline under a road, which a Roanoke judge ruled last year met each of these guideline conditions.

Duties owed to third parties affected by inherently dangerous activities are not delegable to independent contractors. Therefore, where inherently dangerous activities are concerned, the delegating party remains liable for the negligence of independent contractors doing those activities. But that liability is not without limits. For example, this liability doctrine is intended to protect third parties and not the independent contractor or its employees. Similarly other defenses to liability would apply as in any other claim, including for Virginia negligence suits such things as contributory negligence.

In later blogs I will discuss potential protective measures to try and avoid or limit such liability exposure. To learn more about this before then or to discuss the concepts in this blog, please contact me at nlowenstein@vanblk.com or (757) 446-8600, or one of the other construction professionals in Vandeventer Black’s Construction and Public Contracts Department.

Subcontractor Not Third Party Beneficiary to Prime Contract

In Environmental Staffing Corp. v. B & R Construction Mgmt., 283 Va. ___ 111067, ___ S.E.2d ___ (2012), just recently decided by the Virginia Supreme Court on April 20, 2012, the court held that a subcontractor was not a third party beneficiary to its contractor’s prime contract with the owner.

The court noted that the prime contract expressly noted that it was intended for the benefit of project developer, and reasoned that this express inclusion therefore necessarily permitted an intended third party beneficiary conclusion on the part of the subcontractor. The court also rejected the subcontractor’s argument that the project’s bond requirements supported the third party beneficiary claim, reasoning that while the subcontractor was indeed a beneficiary under the bond itself, that did not extend to being a beneficiary under the prime contract itself.

Although the surety was bankrupt, the court noted that the subcontractor still could have pursued its bond remedy against the surety’s principal, but chose to not do so.

Amount of Benefits to be Determined by the Date of Injury, Not the Date an Award is Issued, per the US Supreme Court

On March 20, 2012, the U.S. Supreme Court announced its decision in Roberts v. Sea-Land Services. This case involves the Longshore and Harbor Workers’ Compensation Act (LHWCA), which provides compensation in cases of disability but caps benefits at twice the national average weekly wage for the fiscal year in which the injured worker is “newly awarded compensation.”  The question here was whether the determination as to when the worker is “newly awarded compensation” is affected by the issuance of a compensation order on the worker’s behalf.
After his employer discontinued voluntary workers compensation payments in 2005 for an injury the claimant received in 2002, claimant filed a claim. The ALJ awarded benefits at the 2002 statutory maximum rate under the LHWCA. Claimant disagreed, arguing his benefits should be based on the statutory maximum compensation rate in effect on the date the award was issued, not the date of his injury. The BRB and the Court of Appeals for the Ninth Circuit affirmed the ALJ’s decision.
In an opinion delivered by Justice Sotomayor, the Court affirmed the ALJ and held by a vote of 8-1 that “an employee is ‘newly awarded compensation’ when he first becomes disabled and thereby becomes statutorily entitled to benefits, no matter whether, or when, a compensation order issues on his behalf.”
The Supreme Court conducted a thorough analysis of statutory construction, utilized dictionary definitions of key terms and considered congressional intent. In the end, however, the Supreme Court affirmed due to the potential negative repercussions of basing the compensation amount on the order date. For example, the alternative would make it more difficult for an employer to calculate benefit costs; result in granting disparate awards to similarly situated employees; reward employees who initiate unnecessary administrative proceedings in order to secure higher rates, and frustrate the LHWCA’s purpose in compensating employees for the wages the employee was receiving at the time of injury.
This decision unifies the Circuit Courts, and lays down the law for ALL injured workers. It eliminates on of the incentives for injured workers being voluntarily paid benefits to seek unnecessary adjudication in order to secure a compensation award, thereby allowing employers and carriers to avoid unnecessary litigation costs.
If you have a claimant who is entitled to the statutory maximum compensation rate, and you have questions about the impact of this new decision, or want to ensure that you do not ‘overpay’ the injured worker, please contact us.

HB 153 is now Chapter 654 of the Virginia Code

On April 6, 2012, Governor McDonald signed HB 153, which excludes a person who suffers an injury on or after July 1, 2012 from coverage under the Virginia Workers’ Compensation Act if there is jurisdiction under either the Longshore and Harbor Workers’ Compensation Act or the Merchant Marine Act of 1920.

The full text of the new law can be found here, and is located in Va. Code. Ann. §65.2-101 as an amendment to the definition of what is NOT considered an “employee” for purposes of entitlement to benefits under the Virginia Workers’ Compensation Act.

Certified Claim Not Necessary to Appeal LD Assessment

The Civilian Board of Contract Appeals recently ruled that it had jurisdiction over a Department of Agriculture contractor’s challenge to a liquidated damages assessment even though the contractor failed to submit a certified claim (National Fruit Product Co. Inc. v. Department of Agriculture, CBCA, No. 2445, 3/26/12). The Government had argued that the Board lacked jurisdiction because NFPC had not “certified” a claim for the LD challenge amount, apparently trying to take advantage of newer precedent respecting board jurisdiction.

The Board rejected that argument, noting that the Contracting Officer had issued the LD assessment as part of a final decision that NFPC timely appealed. On the merits, though, the Board rejected NFPC’s appeal, finding that the Government had cause to assess the LDs because NFPC failed to mitigate. But the Board did modify the LD amount, and made award to NFPC for that reduction.

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