By: Robert W. Bannon II Published: May 2014

Failure to Obtain a Written Contract & Insurance Before Commencing Work May Subject Contractors to Unintended Liability

Too often, due to timing constraints, “this is how we do business attitudes” or just bad practice contractors fail to obtain signed contracts, submit written invoices and deliver contractual or statutory notices. Unfortunately, this opens a contractor to unexpected liability. Two recent cases provide an excellent example of how crucial it is to follow proper procedure and document construction projects every step of the way. This is especially important in the context of limiting liability for personal injury claims and obtaining contractual indemnification.

In DiNovo v. Bat Con, Inc. (2014 NY.Slip.Op. 02989 [3rd Dept. 2014]) defendant, Bat Con, contracted with the County of Onondaga to perform emergency repairs to a municipal sewer in the Spring of 2008. Bat Con, subsequently, solicited subcontractors to perform a portion of the emergency repair work and accepted a proposal from PGC. PGC immediately began work at the project and in May, 2008 PGC’s employee was injured when a drill rig tipped over into an excavation trench. Barred from suing his employer PGC’s employee sued Bat Con alleging violations of the New York State Labor Law. Bat Con, in short order, answered and commenced a third-party action seeking contractual indemnification from PGC. Thereafter, PGC moved for summary judgment on the contractual indemnification claims. The trial Court denied summary judgment as to PGC.

At issue, was whether there was an express written agreement between Bat-Con and PGC with an indemnification provision. In support of PGC’s motion for summary judgment it was established that the parties had never worked together. Moreover, it was undisputed that PGC’s proposal which was submitted and accepted prior to the start of work briefly defined the work to be performed, the price, and other details of the project. The proposal included an attachment containing what PGC's president described as “standard” terms and conditions, including an indemnification provision expressly limiting PGC's responsibility to its own negligence. . It was also undisputed, that after both PGC began work and the alleged accident occurred, Bat Con forwarded a contract to PGC that contained an indemnification provision. PGC acknowledged receipt but maintained that it never accepted or signed the subcontract. Bat Con countered that PGC expressly accepted that contract by both performing the work and obtaining insurance certificates. The Appellate Division, was ultimately unpersuaded, and issued a ruling in favor of PGC dismissing all claims by Bat Con and awarding PGC the costs of the appeal.

Bat-Con failed to provide any evidence that PGC knew of the subcontract or acted in conformity with it... Bat Con is stuck paying the costs of PGC’s appeal and the continuing costs and attorneys’ fees associated with defending the injured employee’s lawsuit.

Properly drafting and executing construction contracts can prevent situations like Bat Con. It is important to ensure that contracts are executed and insurance and indemnification are in place prior to permitting the commencement of any work...

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