Faultless Subcontractor Was Punished American Subcontractors Association
ALEXANDRIA, Va. - Imagine that you are the employee of a construction subcontractor and your hand is injured by the closing doors of a freight elevator owned and maintained by the owner of the facility where you are performing work. You receive compensation for the injury through the subcontractor's workers' compensation policy, and decide to take the facility owner to court for failing to maintain safe conditions. Instead of dismissing the case or making the property owner pay, however, a court decides that the property owner should bear no responsibility and that, despite no allegation of wrongdoing against them, the subcontractor and its insurer should pay.
Far from being fictional, these events and allegations are part of a real Court of Appeals decision that the American Subcontractors Association (ASA) and its chapter in Wisconsin, ASA of Greater Milwaukee (ASAGM), are asking the Wisconsin Supreme Court to review. ASA and ASAGM filed a motion in the high court requesting permission to intervene on the side of the subcontractor, together with an amici curiae ("friends of the court") brief explaining why the high court should review the appeals court decision.
"When faultless subcontractors are forced to pay for others' mistakes, there is a miscarriage of justice," said 2004-05 ASA President Mat Glover, chairman, Glover Masonry Associates Inc., Arvada, CO. "Transfer of risk is part of doing business, but abusive risk transfer practices like making subcontractors pay when they have no fault at all should not be acceptable to anyone."
In the case Mikula v. Miller Brewing Company, the project owner, Miller Brewing, was sued by an injured employee of the subcontractor after the doors of the owner's freight elevator slammed together and crushed the employee's hand while the employee was performing subcontract work at the owner's brewery facility. Miller Brewing claimed, and the appeals court agreed, that Miller Brewing has the right to be held harmless by the subcontractor under a "hold harmless" clause, by the subcontractor's insurer under an "additional insured" endorsement, and also by the general contractor's insurer under yet another "additional insured" endorsement.
In their brief, ASA and ASAGM argue that:
--Transferring risks to faultless subcontractors and general contractors runs contrary to the accepted practice of insurance in the state, which encourages the reduction of risk of loss. Such reduction is impossible with "additional insureds" because they have no incentive to reduce losses when they receive coverage for losses for which they alone are at fault.
--The appeals court failed to consider Wisconsin's "safe place" statute [§ 101.11], which was enacted to ensure that buildings and properties are safe for employees and others who frequent them. If building owners can transfer this liability to others, then the purpose of the statute is undermined.
--The Court of Appeals erroneously accepted the argument that the "additional insured" coverage for the owner would be rendered illusory if it did not apply to the "additional insured" party in this case. ASA and ASAGM give a counter-example to this argument in which an "additional insured" or indemnitee is covered for "imputed" or "vicarious" liability.
ASA tapped the Subcontractors Legal Defense Fund (SLDF) for the funds to pay its legal fees in this case. The SLDF is funded entirely by voluntary contributions, and is earmarked for cases in which ASA determines that important legal precedents affecting subcontractor rights are at stake.
For more information, contact ASA Construction Law & Contracts Counsel Brian Cubbage at bcubbage@asa-hq.com or (703) 684-3450, Ext. 1311. Or, visit ASA's Web site at www.asaonline.com and click on "Subcontractor Advocacy."
Founded in 1966, ASA serves 5,000 member companies and is dedicated to improving general business conditions for all subcontractors through unified and cooperative actions. ASA's vision is to be the united voice dedicated to improving the business environment in the construction industry. ASA provides its members with advocacy, leadership, education and networking. |
