NRLRC Annual Seminar

Transcription

1 NRLRC Annual Seminar What Are the Greatest Risks of Major Liability Exposures for Roofing Contractors? Austin, Texas September 11, 2014 Stephen M. Phillips, Esq. Hendrick, Phillips, Salzman & Flatt, P.C. 230 Peachtree Street, Suite 2500 Atlanta, Georgia (404) Hendrick, Phillips, Salzman & Flatt, P.C. Sept. 2014

2 1. Overly broad indemnification provisions in contracts that expand the roofing contractor s liability beyond their own fault 2

3 2. Moisture laden roof decks 3

4 3. Risk of personal liability posed by performance bonds and duration of performance bond liability 4

5 5. Falls through roofs particularly in re-roofing situations Areas of deteriorated decking steel, lightweight concrete, wood Skylights Openings made for mechanical units 5

6 6. Claims from building occupants or third parties based on exposure to fumes emitted from roofing products 6

7 7. Roof performance problems and failures due to use 0f marginal roof systems 7

8 8. Inadequate adhesion or attachment of roofing materials 8

9 9. Wind uplift failures: pre-roof acceptance wind uplift testing and in situ performance 9

10 10. Building code violations 10

11 11. Lengthy statutes of limitation and repose and nullum tempus doctrine potential applicability to public projects 11

12 12. Signing one-sided contracts 12

13 13. Job site fires and wind storms 13

14 4. No CGL insurance coverage because of occurrence definition or contractual liability exclusion 14

15 14. Performance specifications 15

16 15. Misclassification of Employees vs. Independent Contractors 16

17 Be professional and knowledgeable Plan and prepare for potential risks Gain technical expertise NRCA Roofing Manual, building codes, design considerations, manufacturer s requirements and product data Be careful, thorough and detailed and retain key employees who are knowledgeable and conscientious in performing their jobs 17

18 1. Preparation, planning and precautions 2. Communication and documentation 3. Contract provisions 4. Insurance 5. Good relationships with all parties 18

19 Typical indemnification provision that commonly appears in General Contractor-drafted (and some Owner-drafted) construction contracts: To the fullest extent permitted by law, Subcontractor shall defend and indemnify GC and all others whom GC is obligated to defend and indemnify by the Contract Documents, (collectively the indemnified parties ) from and against any and all suits or claims alleging damages, losses and expenses, including attorneys fees, arising out or resulting from Subcontractor s Work or performance of the Subcontract Work, including all suits and claims for which any or all of the indemnified parties may be or may not be claimed to be liable, and including all suits and claims that arise that arise during and after construction of the Project... 19

20 Subcontractor understands and agrees that this Paragraph obligates Subcontractor to defend and indemnify the indemnified parties from all suits and claims that allege negligence or other wrongful conduct on the part of the indemnified parties, and to pay all costs of defense of the indemnified parties, including attorneys fees and ancillary costs and expenses incurred by the indemnified parties; provided, however, that Subcontractor s obligation to defend and indemnify an indemnified party under this Paragraph shall exclude liability for such injuries or damage when such injuries or damage are caused by the sole fault or by the intentional or willful wrongful acts of the indemnified party. 20

21 Subcontractor understands and agrees that this Paragraph also obligates Subcontractor to pay any and all attorneys fees and expenses incurred by any of the indemnified parties in connection with enforcing the obligations of this Article. 21

22 Subcontractor shall purchase and maintain insurance during the course of construction and for a period of three years thereafter covering this indemnification obligation. Can you obtain such insurance? 22

23 What is a reasonable indemnification provision? Refer to indemnification provisions in American Institute of Architects (AIA) standard construction contract documents: AIA Document A General Conditions of the Contract for Construction, Article AIA Document A , abbreviated Agreement between Owner and Architect, Article 9.15 AIA Document A , Agreement between Contractor and Subcontractor, Article

24 Use the indemnification in the standard construction contract documents promulgated by the American Institute of Architects (AIA) as an exemplar. AIA Document A General Conditions of the Contract for Construction, Article : To the fullest extent permitted by law the Contractor shall indemnify and hold harmless the Owner, Architect, Architect s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including attorneys fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or 24

25 indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph AIA Document A Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction Projects of Limited Scope, Article same provision as in A

26 AIA Document A Standard Form of Agreement Between Contractor and Subcontractor, Article same provision, modified to apply directly to Subcontractors: To the fullest extent permitted by law the Subcontractor shall indemnify and hold harmless the Owner, Contractor, Architect, Architect s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including attorneys fees, arising out of or resulting from performance of the Subcontractor s Work under the Subcontract, provided that any such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or 26

27 death, or to destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Subcontractor, the Subcontractor s Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph

28 KEY CONCEPTS: Applies to claims caused by negligent acts or omissions of the Indemnitor Limited to the extent the claim is caused by the negligent acts or omissions of the Indemnitor so that if Indemnitor s negligence is 20% of the cause of the damages, the Indemnitor pays 20% of the damages, not 100%. 28

29 Key Concepts of AIA Indemnification Applies only to bodily injury and property damage claims and losses; excludes the Work itself. Indemnification obligation is limited to what is covered by commercial general liability (CGL) insurance Applies to claims caused by the negligence of others for whose conduct the indemnitor is liable 29

30 Moisture within the concrete deck, particularly lightweight structural concrete decks, is trapped within the roofing assembly due to a metal deck underneath the lightweight structural concrete and the roofing membrane at the top of the assembly. 30

31 Traditional concrete decks, using hot-applied asphalt to adhere insulation and a roof membrane, provided a roof assembly that performed satisfactorily. Roof systems installed in recent years over concrete decks, particularly lightweight structural concrete decks, where there is no opportunity for venting and cold, foam and water based adhesives have been applied to the concrete deck, have been problematic. 31

32 Lightweight structural concrete has a much higher moisture content then normal weight concrete Different concrete mixtures are being used. Curing compounds and sealing agents can inhibit adhesion to the concrete deck. Use of thicker insulation boards makes adhesion more difficult. Self-adhering ( peel and stick ) vapor retarders can be problematic. 32

33 Problem not limited to new construction. Cannot ascertain from a visual observation whether the deck is lightweight structural concrete or normal weight concrete. Moisture in lightweight structural concrete decks can adversely affect not only the original roof, but also affect the replacement roof, if the moisture has remained in the lightweight structural concrete deck and can only escape upwards. Undulations in the deck and rough surface of the concrete deck will adversely affect adhesion of roofing materials. 33

34 Be pro-active Be professional Be technically knowledgeable Study project plans and specifications carefully prior to bid or proposal submittal Look out for and do not agree to adhere fully the insulation boards Be communicative: alert other parties to the problem 34

35 Moisture Laden Decks - Learn About the Deck If so, communicate promptly to others involved in the project the risk posed to the roofing assembly due to retained moisture in the concrete deck. Pre-bid conference on public projects and communication to other parties On private jobs, explicitly exclude deck conditions that can adversely affect roof performance. 35

36 Notification by Roofing Contractor 36

37 Manufacturers disclaim liability for any condition due to the deck. Owner and Architect naturally look to the roofing contractor when there is a roof problem and expect the roofing people to know what conditions are suitable for roof installation. 37

38 Roofing contractor s commencement of work is commonly viewed as roofing contractor s acceptance of the deck and there is quite often an express provision in the contract documents to this effect. Project specifications often include express and explicit requirements regarding the roofing contractor s determination that the deck is satisfactory and acceptable. 38

39 3.2 Preparation A. Clean substrate of dust, debris, moisture, and other substances detrimental to roofing installation according to roofing system manufacturer s written instructions. 1. Surfaces to which insulation is to be applied shall be even, smooth, sound, thoroughly clean and dry, and free from all defects that might affect the application. 39

40 3.1 EXAMINATION 6. Verify that concrete curing compounds that will impair adhesion of roofing components to roof deck have been removed. 7. Proceed with installation only after unsatisfactory conditions have been corrected. 40

41 3.2 PREPARATION A. Clean substrate of dust, debris, moisture, and other substances detrimental to roofing installation according to roofing system manufacturer s instructions. 41

42 It is commonplace for roofing contractors to accept the roof deck by commencing work. Project specifications routinely include such a provision. Historically, prudent contractors would seek to limit acceptance of the deck to acceptance of the surface of the deck. Today, more explicit language is needed by roofing contractors. 42

43 Commencement of roof installation indicates only that XYZ Roofing has visually inspected the surface of the roof deck for visible defects. 43

44 DECK CONDTIONS XYZ Roofing is not responsible for the structural sufficiency, quality of construction (including compliance with FMG criteria), undulations, fastening or moisture content of the roof deck or other trades work or design. 44

45 CONCRETE DECKS In the event that roofing is to be installed over a concrete or other wet deck or substrate, the determination as to when the concrete or wet substrate is sufficiently cured and dried so that roofing materials can be installed without potential future adverse effect shall be made by the General Contractor in consultation with the concrete subcontractor, concrete manufacturer and design professional. XYZ Roofing is not responsible to test or assess moisture content of the deck or substrate or for the effects of moisture emitted from the deck. 45

46 Disclaim liability for deck conditions other than visible surface deficiencies. When on the roof, scrutinize the deck. Be certain that the deck is acceptable. You have the right and it is your legal obligation to ascertain that the deck is acceptable to you. Do not proceed with roofing unless and until the deck is acceptable to you. Recommend that the General Contractor make probes into the concrete deck to determine moisture content 46

47 If the General Contractor will not take the steps you deem appropriate to have a suitable substrate (i.e. smooth, dry, flat, secure), then prepare documentation indicating your non-acceptance, your disclaimer of liability of problem emanating from the deck and obtain a clear directive that you are to proceed. Seek to have the General Contractor expressly accept responsibility and liability for deck conditions that are not remedied to your satisfaction. This is the time when you are in the driver s seat. 47

48 Seek to eliminate personal liability obligation in agreements of indemnity with your bonding company Change bonding agents and sureties if necessary 48

49 Be certain performance bonds contain time limitation Don t agree to execute general contractordrafted bond forms 49

50 Roofing contractors need to focus not only at preventing falls at edges, but falls through decks Deteriorated or rusted decks Skylights Deck openings Deck repairs Installation and flashing of mechanical units 50

51 DECK CONDITIONS Customer warrants that structures on which roofing contractor is to work are in sound condition and capable of withstanding roofing construction, equipment and operations. Roofing contractor is not responsible for structural sufficiency, undulations, moisture content or construction (including compliance with Factory Mutual Global criteria) of the roof deck or other trades work or design. 51

52 Owner warrants that structures on which XYZ Roofing personnel are to work are in sound condition and capable of withstanding roofing construction, equipment and operations. Owner is unaware of any deck conditions that may present a safety hazard to roofing contractor personnel, such as areas of rusting, deteriorated or crumbling deck or areas where there has been extensive leakage or leakage has occurred for a substantial period of time. 52

53 Potential Contract Provisions Owner acknowledges that odors and emissions from roofing products will be released as part of the roofing operations to be performed by roofing contractor Owner / General Contractor shall be responsible for interior air quality, including controlling mechanical equipment, HVAC units, intake vents, wall vents, windows, doors and other openings to prevent fumes and odors from entering the building 53

54 Owner is aware that roofing products emit fumes, vapors and odors during the application process. Some people are more sensitive to these emissions than others. Owner shall hold Subcontractor harmless from claims from third parties relating to fumes and odors that are emitted during the normal roofing process. 54

55 Use roof systems and materials with which you are familiar Avoid marginal roof systems Choose the right roofing industry partners technically astute, committed to contractors 55

56 Workmanship Implement quality control procedures to ensure that attachment and adhesion of roofing components comply with contract specifications and manufacturer s requirements. Modify language requiring contractor to fully adhere roof components. 56

57 o Develop and Use a Purchase Order Form That Includes: Indemnification due to defects in materials or services provided by the vendor Express reference to industry standards: ASTM, UL, FMG o Add a reciprocal indemnification provision in approved applicator agreements covering defective materials 57

58 Check Factory Mutual Approval Guide for the exact, full configuration Design Professional is responsible to design the work to be in compliance with applicable codes and regulations and to specify or show the work that is to be performed. Contractor is not responsible for design, including calculation or verification of wind-load design. To the extent minimum wind loads or uplift pressures are required, Contractor s bid is based solely on manufacturer s printed test results. Contractor itself makes no representation regarding wind uplift capacity and assumes no liability for wind uplift. 58

59 Clarification of designer and contractor roles in contract documents Check appropriate code prior to submitting proposal Be knowledgeable on current code requirements or have someone on your staff who is your code specialist 59

60 Add a statute of limitations to your proposal/contractor form Example: If a dispute shall arise between Contractor and Customer with respect to any matters or questions arising out of or relating to this Agreement or the breach thereof, Contractor and Customer will seek to mediate the dispute. If mediation is not successful, arbitration shall be administered by and conducted in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association unless the parties mutually agree otherwise. Any legal claim against Contractor alleging any breach of this contract or negligence by Contractor must be initiated no later than two (2) years after Contractor performed the roofing installation covered by this contract. 60

61 Condition your proposals on use of standard AIA construction contracts Review carefully and evaluate contracts drafted by others you are asked to sign Delete or modify unreasonable provisions Add contract provisions to reduce risks and cover issues that arise in roofing work Develop and use your own contract forms 61

62 Be sure that a Builder s Risk or Installation Floater Policy is in place before you order materials. Builder s risk and installation floater policies: apply to a building under construction at the location described on the policy s declaration page 62

63 Need to have insurance in place in case your work (or materials stored for the job) is destroyed or damaged prior to final acceptance in order to protect against the risk of loss. Builder s risk is property insurance that applies to the contractor s work. It covers risk of (certain) losses to the contractor s work. 63

64 Regardless of whether the builder s risk policy is an all-peril or a named peril policy, these perils are commonly covered: explosion falling objects fire and smoke hail lightning strike theft weight of ice, snow or sleet wind storm vandalism accident to the vehicle while carrying Covered Property 64

65 Meet with your insurance broker and carrier to discuss the issue Send a writing confirming your understanding regarding coverage and intent of provision, i.e. that claims based on breach of contract where there has been property damage to property other than your work is covered and claims alleging defective workmanship are covered. 65

66 Check to make sure that you are not classifying a person as an independent contractor who, based on current legal requirements, needs to be treated as an employee Check that your subcontractors are not treating their workers as independent contractors if those workers should be employees and that they indemnify and hold you harmless if you incur any liability based on this classification 66

67 1. Proposal/Contract 2. Warranty 3. Purchase Order 4. Subcontract 67