At a recent construction law conference, a speaker from the Attorney General’s Office of Maryland talked about criminal laws applicable to construction and contractors. A contractor later told me that, based on what he heard, his company had committed crimes just about every day for the last 10 years.
That statement was probably incorrect, but it made a point: There are substantial numbers of federal and state statutes and regulations that carry fines, penalties and incarceration for contractors.
For those of you who collect legal terms, many of these statutes have “qui tam” provisions. Qui tam is part of the Latin phrase “qui tam pro domino rege quam pro si ipso in hac parte sequitur,” meaning “who sues for the king as well as himself.” Under qui tam provisions, a citizen can sue for money damages under certain statutes designed for enforcement by the state or the federal government. A contractor’s violation of these laws can result in a charge of negligence where personal injury or property damage ensues.
The term, environmental laws, is used broadly to include flood control plans, hazardous waste, wetland legislation, the Clean Water Act, etc. A note of caution: the laws discussed here do not amount to a comprehensive survey.
As electrical contractors, you are already aware of the Toxic Substances Control Act, regarding polychlorinated biphenyls; the Clean Air Act; and those by the Occupational Safety and Health Administration, regarding asbestos and other job site hazards. There also is the major legislation known as CERCLA, concerning the release, disposal and transportation of hazardous substances, and the broad Clean Water Act (CWA), which regulates discharge of pollutants into the water as well as the placement of fill in water and wet lands. In addition, there is the Oil Pollution Act of 1990, which generally concerns oil spills, and the Endangered Species Act, which applies to construction that causes harm to habitat.
You should know that these laws are completely unaffected by contract rights, so they are a matter of serious concern to subcontractors. If your company, in strict compliance with the plans and specifications, violates an environmental law, you will be held responsible regardless of any express direction given to you by the general contractor, the owner or the architect.
A case in point comes from Oregon, although the federal law, which applied, would net the same result in any state. In Sierra Club v. MasTec North America, the court ruled, “To the extent MasTec caused any CWA violations, intentionally or unintentionally, it is responsible and may not avoid that responsibility merely because it was only a contractor.”
MasTec proved that it followed, to the letter, the owner’s layout for piping and the specified erosion control methods. Regardless, the court cited a contract clause that required compliance with environmental laws. The contractor was not permitted to assume that the owner’s details met those requirements.
A similar result was reached under a state environmental law in St. Paul Fire & Marine Ins. Co. v. Nolen Group. In that lawsuit, a subcontractor was held liable for contributing to flood damage, although its work was at the express direction of the general contractor. The subcontractor was held to be responsible under Pennsylvania’s Water Management Act for investigating and reviewing applicable environmental laws and permits, regardless of what its contract required.
Clearly, the burden imposed on the subcontractor in these instances is substantial. The subcontractor is expected to perform its own investigation of all applicable environmental laws, regulations and permits. There also is the conundrum of how to inform the owner or general contractor that you will not proceed with the work because you understand that it is environmentally impermissible.
With hazardous materials, this last contract-versus-law problem was expressly addressed in many standard form contracts. For example, the 1997 edition of AIA’s subcontract form A401, Sections 4.3.3 and 4.3.4, provide that where materials or substances pose risks of bodily injury or death, the subcontractor “should, upon recognizing the condition, immediately stop work in the affected area.” In addition to this right given to the subcontractor, Section 4.3.4 mandates that the general contractor indemnify the subcontractor for claims and damages arising out of the sub’s work in the affected area.
There is good reason to consider an expansion of the Section 4.3 approach to go beyond safety precautions for hazardous materials and possibly include environmental impacts. For an argument in favor of such an expansion, consider the matter of Unocal Corp. v. United States (9th Cir. 2000).
In Unocal, a backhoe mishap led to a 45,000-gallon crude oil spill in a California town. The facts of the case indicate that the contractor and its subcontractor took reasonable precautions to avoid puncturing a pipeline. The contractor had contacted Dig Alert, an assistance program to prevent underground pipe damage. Unocal, the owner of the pipeline, marked the course of its underground pipeline with paint. The court found that no one at the site knew that the pipeline was less than a foot underground in the area being graded, and they were informed that the underground storm drain was supposed to be above the pipeline. It wasn’t.
After the rupture, the contractor, along with the fire department, blocked off a storm water inlet near the spill zone and covered it with dirt to keep the oil from reaching a stream. Unfortunately, the spill became large enough to cover and hide this temporary cover. Fifty gallons of oil seeped into the storm drain.
Negligence in the normal legal sense was not at issue. Under California statute, the contractor has the duty to find the exact location of a pipeline. Whether the exact location of the punctured pipe would have been found in advance was not discussed.
In addition, under the federal Oil Pollution Act of 1990, the contractor was held to be strictly liable (i.e., liable without proof of negligence) for removal costs and damages caused by the oil discharge. The contractor and the project owner shared the damages award.
There is little serious question that environmental protection is necessary or that environmental protection laws are needed. The penalties for violations are so severe that the laws serve as a great inducement to companies to investigate and prevent damage. The “strict liability” components of these laws, as well as their own definitions of negligence (creating explicit “duties”) make enforcement more predictable and afford the government sources of funds for remediation.
As the federal and state governments expand the groups of those who may be liable, contracting parties should look to indemnity clauses, as well as insurance, for reallocating the risks.