Month: July 2013

Claims Relating to Violations of Moving and Hauling Permits

Violations of moving and hauling permits can be expensive for construction companies.  The local police usually consider the permit to be invalid if any of the requirements of the permit are violated.  In those cases, the police impose penalties based on the general weight limitations and not the weight established in the permit.  This can result in civil citations that include very high fines for “liquidated damages” based on the amount the load exceeds the statutory limits.

In many cases, and in addition to the civil fine against the company, the police also issue criminal summons to individuals involved in the violation of the permit.  Often, these charges are brought against the employee driving the overweight vehicle and the escort drivers.  In one case, the police even charged the dispatcher who allegedly directed the driver to travel on a route in violation of the permit.  Violation of an overweight or oversize vehicle permit is a Class 1 misdemeanor that can result in a fine of up to $2,500 and a sentence of up to a year in jail.  Violations of hauling permits can also impact the employee’s commercial driver’s license.

The possible defenses to the civil penalty and the criminal charges are not always the same.  To further complicate matters, the court dates for the criminal charges are usually scheduled before the court date for the civil citation.  A plea agreement by the driver of the vehicle may have adverse consequences if the company wants to contest the civil penalty.  This means that the company needs to take steps early to evaluate the potential claims and prepare its defense.  In some cases, the company may need to hire separate legal counsel for its employees, if it wants to provide a defense for its employees.

The variety of claims that can result from a violation of a moving and hauling permit can create complicated and expensive legal situations for construction contractors.  Construction companies should take early actions to evaluate these circumstances and consult with an attorney before any of the parties involved in the violation make any court appearances.

These articles are meant to bring awareness to these topics and are not intended to be used as legal advice.

Risks of Indemnification Clauses

Authored by attorney Patrick A. Genzler

Virtually all construction contracts and subcontracts contain an “indemnification” provision, which obligates one party to the agreement – the “indemnitor” — to “indemnify” or to pay certain liabilities that the other party – called the “indemnitee” – may incur during the contracted work.  Indemnification agreements are one of the most common ways of ‘shifting risks’ from one party to the other.  If those risks are within the control of, or otherwise the fault of, the “indemnitor” that is appropriate.  Sometimes, however, contracts will require indemnification for losses, claims or damages that are not the fault of, or within the control of, the indemnitor.  Are these clauses valid ?  How can a contractor or subcontractor protect itself from unplanned liabilities that come from indemnification agreements ?

First, Virginia law limits the scope of indemnification agreements that are contained in:

“ …any contract relating to the construction, alteration, repair or maintenance of a building, structure or appurtenance thereto, including moving, demolition and excavation connected therewith, or any provision contained in any contract relating to the construction of projects other than buildings …” See Va. Code §11-4.1.

Indemnity agreements in these construction-related contracts cannot require indemnification of:

“ …liability for damage arising out of bodily injury to persons or damage to property suffered in the course of performance of the contract, caused by or resulting solely from the negligence of such other party or his agents or employees .…”.  §11-4.1.

Any agreement that provides for indemnification of losses due to the indemnitee’s “sole or partial negligence” in causing the injury is against public policy and unenforceable.  See Uniwest Construction, Inc. v Amtech Elevator Services, Inc., 280 Va. 428, 699 S.E.2d 223 (2010).  However, an indemnification agreement that holds a party harmless for the negligence of others, including unrelated third parties, is enforceable.  So it is critical that you read indemnification agreements carefully and understand what risks they transfer.

The Uniwest case was significant for another point – the court held that an indemnification agreement in the “prime contract” was incorporated into a subcontract by general “flow down” and incorporation by reference provisions, and therefore the subcontractor ended up being liable to indemnify the general contractor under an indemnification clause the general contractor had negotiated with the project owner.

Finally, a critical concern is whether or not any liabilities that you assume under an indemnification agreement are covered by your insurance.  Most standard general liability insurance forms contain an “insured contract” provision that provides coverage for indemnification claims.  However, insurers sometimes change or limit the coverage for insured contracts by endorsement – so this should be carefully checked.

Indemnification obligations can represent a significant financial risk.  Before agreeing to one, you should understand the risks being assumed and what insurance coverage exists to cover this liability.

These articles are meant to bring awareness to these topics and are not intended to be used as legal advice.

ASBCA Declines to Presume Knowledge by Government

In a recent decision involving differing site conditions in a ship repair contract, Appeal of Atlantic Drydock, ASBCA No. 54936 (20 June 2013), the Armed Services Board of Contract Appeals declined to presume that the Government had knowledge regarding the square footage requiring work. The contract argued that since the Navy built and maintained the ships, it clearly knew the vessels non-vertical square footage, and thus was responsible for misleading the contractor by indicating in the contract documents what turned out to be less square footage than was required. The contractor did not request or perform a ship check prior to bidding. The Government claimed it did not have documents establishing a measurement, and its estimator testified he only did a rough estimate for the Government estimate.

The ASBCA declined to adopt the Contractor’s position that the Board should presume that the square footage information existed somewhere in the Navy’s data repositories. In doing so, the ASBCA noted its rejection of the adoption of a “should have known” standard under those circumstances, holding that principle only applied to unilateral mistake / bid verification cases and unconscionability cases. The ASBCA noted further that it was unaware of any case law supporting a finding of failure to disclose superior knowledge based on knowledge the Government should have known, and expressly declined to adopt such a premise for this case.

The case also has a good, detailed discussion of the admissibility of trade practice evidence, and when it is admissible. In that case, the Board rejected the Contractor’s trade practice evidence because it held it was not supported by substantial evidence, finding instead that the applicable decision by the Contractor was an exercise of business judgment only.

Worker’s Compensation in Virginia: Employer Basics

Authored by attorney Megan B. Caramore

Under Virginia’s Workers’ Compensation Act, employers have certain obligations to their employees.  Below is a list of the basic information that every employer should keep in mind.

  1. An employer who regularly employs three or more full-time or part-time employees is required to purchase and maintain workers’ compensation insurance.  Employers with fewer employees may also elect to obtain coverage for workers’ compensation liability by purchasing insurance.   Keep in mind that apprentices and trainees are generally considered employees when their training related to their jobs.  Part-time employees and working family members may also count toward the three employee limit.  Additionally, employees of an independent contractor or sub-contractor may count when they are performing the same kind of work as the employer.  Both minors and aliens (regardless of status) may be employees if working under an apprenticeship or contract for hire.  You may not deduct any cost of workers’ compensation insurance from employee wages.
  2. An employer must post a notice of workers’ compensation benefits in a prominent place.  A copy of this notice is available from the Virginia Workers’ Compensation Commission and is typically referred to as VWC Form 1.
  3. The employer must ensure that every accident is reported to its insurance carrier on the Employer’s Accident Report form.
  4. After receiving notice of an accident or occupational disease, the Employer should provide the employee with a panel of at least three unaffiliated physicians and allow the employee to choose a treating physician from the panel.  In an emergency, the employee may be treated at an emergency care facility and the employer should provide a panel as soon as possible following the emergency treatment.
  5. Make sure to give employees thirty days’ notice if your workers’ compensation policy is cancelled or not renewed.

Employers who refuse or neglect to obtain workers’ compensation coverage where required can be fined up to $5,000.00 and where such failure continues, it may result in the employer being prohibited from conducting business in Virginia.  Additionally, uninsured employers place themselves at risk of a suit for damages outside of the workers’ compensation system.

These articles are meant to bring awareness to these topics and are not intended to be used as legal advice.

Upcoming Events
Stay Connected
    Your Cart
    Your cart is empty