In Hunt, Hunt Construction Group (“Hunt”) was the construction manager for the Lucas Oil Stadium Project.   Garrett, a subcontractor’s employee on the Project,  was injured when he struck by a piece of forming material being removed by a co-worker.

Hunt’s contract with the Project owner obligated Hunt to: routinely inspect whether the contractors erected and implemented appropriate safety measures, notify the contractors of violations, and notify the owner and architect if the contractors failed to take corrective measures.  Hunt’s contract also obligated Hunt to develop and coordinate a safety program for the Project but expressly stated that such actions should not be construed as Hunt’s assumption of the individual contractor’s safety obligations.  The contract further stated that Hunt’s services were solely for the benefit of the project’s owner and that Hunt’s review of the contractor safety programs did not equate to direct control over the acts and omissions of the contractors.

Garrett sued Hunt on grounds that it had assumed a non-delegable duty to her through its contract with the Project owner and on grounds that it had assumed a duty to her through its conduct.  The trial court granted summary judgment in favor of Garrett on both grounds.

That decision was affirmed by the Indiana Court of Appeals, which concluded that Hunt was liable despite the contract language limiting Hunt’s jobsite safety duties. The reasoning behind the Indiana Court of Appeals’ conclusion was that Hunt had “significant duties regarding safety on the jobsite.”

Judge Frielander dissented from the decision.  He concluded that Hunt did not assume a duty to Garrett based on contract or conduct and reasoned that the majority’s opinion rendered meaningless the contract language limiting Hunt’s safety duties.  He further noted that “the Majority’s holding will fundamentally alter contracts of this nature and make it virtually impossible for a contractor taking on the role of construction manager to limit its liability so as not to become an insurer of safety for workers of other contractors.”

On appeal, the Indiana Supreme Court sided with Judge Frielander.   It noted that, in light of the limiting language included in Hunt’s contract,  Hunt’s safety obligations to the project’s owner did not extend to all jobsite workers. Further, the Court concluded that Hunt’s contract limited and excluded Hunt’s liability for subcontractor jobsite safety.  Accordingly, the Court found that Hunt did not contractually assume a duty of jobsite safety to Garrett.

The Court next addressed whether Hunt assumed a duty to Garrett through its actions. Garrett argued that Hunt’s actions resulted in a voluntary or gratuitously assumed duty to provide a safe jobsite. The evidence indicated that Hunt’s safety representative completed daily safety observation reports with Hunt’s safety observations, including the activities of the subcontractors on the project. The safety reports were sent to all subcontractors and included a description of any corrective action required. Garrett relied upon Plan-Tec, Inc. v. Wiggins and a series of similar cases for the proposition that because Hunt undertook these types of actions the court was obligated as a matter of law to find that a duty of care was assumed by the construction manager.

The Indiana Supreme Court disagreed with Garrett’s bright-line interpretation of Plan-Tec, Inc. but agreed that Plan-Tec, Inc. provides a “durable template for resolving” cases involving post-contract conduct resulting in assumed duties for jobsite safety.  The Court concluded that “for a construction manager not otherwise obligated by contract to provide jobsite safety to assume a legal duty of care for jobsite-employee safety, the construction manager must undertake specific supervisory responsibilities beyond those set forth in the original construction documents.” In Plan-Tec, Inc., the construction manager agreed to take on specific supervisory responsibilities beyond those set forth in the original construction documents after the project was underway. There was no evidence that Hunt undertook any jobsite-safety actions beyond those initially required by its contract. Therefore, the Indiana Supreme Court concluded that Hunt did not assume by its actions any legal duty of care for jobsite-employee safety.

Lessons learned from the Hunt case include:

• A construction manager can shield itself from jobsite safety liability to onsite contractor and subcontractor employees even when certain provisions of the construction manager’s contract with the owner charge it with duties pertaining to onsite safety measures (including enforcing OSHA safety requirements and offering safety programs).
• A construction manager accomplishes this by inserting language “explicitly disclaiming duties concerning onsite safety with respect to all parties except the owner, most notably including subcontractors.” All construction managers should carefully review the language of their standard form or negotiated contracts, subcontracts, general conditions and safety programs with a competent construction law attorney to confirm whether the contract sufficiently disclaims or excludes liability to all contractors, subcontractors and their employees for jobsite safety pursuant to the State laws where the project is constructed, unless the contract documents explicitly provide that another State’s law shall govern.

Here is a typical lawyer response: It depends.  It depends on the nature of the claim, the date the bad work was discovered and the laws of the state in which the project is located.  In some states, the period can be as long as 16 years.  In Indiana, the outside limit is 10 years from the date of substantial completion, although the period may be longer or shorter if the claim relates to deficient design.

Indiana’s “statute of repose” mandates by law the outside time limit for the liability of a contractor or design professional for bad work or deficient design, including claims for personal injury and property damage.  Most states have a statute of repose, although the time limits differ between the various states; each set a cap on the maximum time allowed for the filing of a lawsuit.  If defects are discovered after the mandated period expires, the claim is barred by operation of law.  Unlike a “statute of limitations,” which requires a lawsuit to be filed within a specified period of time after a legal right has been violated, a statute of repose is designed to bar lawsuits filed more than the time allowed by the statute no matter when the legal right was violated.

Indiana’s statute of repose was first passed by the Indiana General Assembly in 1967.  Although it has been amended since it was enacted, the statute still requires lawsuits to be filed within 10 years from the date of substantial completion or 12 years after the completion and submission of the plans and specifications if the claim is for deficiency in design.  The statute has been characterized as being “broad in its application,” and acts to bar claims no matter what legal theory is advanced by the claimant’s lawyer.  The statute applies to nearly every type of claim and entity involved in the improvement of real estate.  Indiana courts have declared that the statute cannot be stopped (extended), or “tolled,” by any action or inaction on the part of the contractor of design professional.

In one Indiana case, a homeowner discovered serious defects in a new home, including the movement of brick and associated cracks and gaps caused by the virtual lack of any footings in the foundation.  The court concluded that the structural problems had been intentionally concealed by the builder by the use of double moldings in the window and door frames, shrubs around the base of the home and fascia along the top of the brick work.  The homeowner sued the builder 14 years after the home was built.

The builder argued that the claim was barred by Indiana’s statute of repose.  The homeowner claimed that the statute should be extended because of the builder’s obvious fraud.  The court sided with the builder and strictly enforced the statute of repose, stating that the statute was “an absolute time limit beyond which liability no longer exists” and, as a result, “is not tolled for any reason ….”

By:  Greg Easter

In Imperial Restoration & Remodeling v. Costello, Imperial entered into a home improvement contract to repair water damage in the Costellos’ home.  James Costello signed the contract for the work, but the contract did not contain the provisions necessary to comply with the HICA.  The repairs were completed, Costello received a check from his insurance company for the amount invoiced by Imperial, Costello cashed the check and failed to pay Imperial, and Imperial sued for the amount owed under the contract.  Costello claimed that the contract with Imperial for the home improvement repairs should be void, and Imperial should not be allowed to collect the amount due, because the contract did not comply with the HICA.

The Indiana Court of Appeals ruled that the contract was not void, in part, because the statute does not specifically provide that a non-conforming contract is void or voidable and because the homeowner has other specific remedies under the statute.  The homeowner’s proper recourse would have been to sue Imperial for a deceptive act (failure to provide a contract containing all of the information required under the HICA) under the Indiana Deceptive Consumer Sales Act.  Since Costello did not sue Imperial directly or file a counterclaim in the Imperial lawsuit claiming Imperial had committed a deceptive act, he was not allowed to avoid paying the invoice by claiming the home improvement contract is void.

The lesson for home improvement contractors is to make sure the contracts with homeowners comply with the HICA.  Even though the homeowner in the Imperial case was not able to avoid paying the amount owed under the contract, Imperial escaped liability only because the homeowner failed to exercise his proper remedy under the HICA.  If the homeowner had made a claim for a deceptive act as a result of Imperial’s failure to comply with the HICA, Imperial could have been liable for damages actually suffered by the homeowner but a minimum of $500.  At the very least, Imperial would have lost almost the entire $669 amount owed under the contract.

By:  George Abel

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Facts: Chris Sweeney Construction, Inc. (“CSCI”) provided a quote to Kevin Walsh to perform various remodeling work on his home.  Walsh agreed to the price, and CSCI performed the work—but it did not execute a written contract.  When a dispute arose over the work, CSCI recorded a mechanic’s lien on the property for $4,150 in unpaid work.

HICA generally requires a home improvement contractor to provide a consumer with a written home improvement contract containing certain provisions.  At the bench trial, CSCI only pursued claims on its mechanic’s lien and unjust enrichment, knowing that it would not be able to prevail on its breach of contract claim because of its failure to comply with HICA. Walsh filed a counterclaim based on CSCI’s violation of HICA.

The trial court held that CSCI was entitled to the unpaid amount plus its attorney’s fees (under Indiana mechanic’s lien act). Walsh appealed and argued that because HICA prevented a breach of contract claim, CSC should also be precluded from recovering on a theory of unjust enrichment or under the mechanic’s lien.

Decision: The Indiana Court of Appeals affirmed the trial court’s decision. In the absence of a contract, a party may recover under a theory of unjust enrichment—an equitable doctrine that permits recovery when the circumstances are such that justice requires recovery as though there has been a promise.  A mechanic’s lien is equitable in nature and is based upon a theory of unjust enrichment. The Appellate Court found that it would be unjust for Walsh to retain the benefit of CSCI’s services despite CSCI’s non-compliance with HICA.

Walsh also lost on his counterclaim for violating HICA.  HICA provides that a supplier’s failure to give the consumer a written contract is a deceptive act. However, to establish entitlement to those remedies, the homeowner must show that the deceptive act was either uncured, meaning that notice was given and the deceptive act was not cured, or incurable, meaning that the supplier acted with intent to defraud or mislead the consumer. Walsh offered no evidence that he notified CSCI of its deceptive act or offered it the opportunity to cure the deceptive act.  The Court also found that CSCI’s deceptive act was not willful or intentional and that it was not part of a scheme, artifice, or device intended to defraud or mislead Walsh.

The Walsh case is “unpublished,” which means that it cannot be regarded as precedent for other cases; but it likely illuminates the Court’s approach to a contractor’s non-compliance with HICA if there is no evidence of intent to defraud or mislead.  Nevertheless, home improvement contractors should ensure that their contracts comply with Indiana law.

By:  Roy Rodabaugh

Our construction litigation team consists of Roy, Mike Cavosie, and Theresa Ringle.

Facts: Dave’s Excavating (“Contractor”) contracted to perform work on a sanitation project for New Castle (“City”). Liberty Mutual (“Surety”) posted the statutorily-required payment and performance bonds. During work on the project, Contractor submitted a differing site conditions claim and stopped work: The contract stipulated that “Contractor shall not further disturb such condition or perform any Work in connection therewith . . . until receipt of written order to do so.”

The contract also contained a clause obligating Contractor to continue performance during a dispute:

4.03.A.  Contractor shall carry on the Work and adhere to the progress schedule during all disputes or disagreements with Owner.  No Work shall be delayed or postponed pending resolution of any disputes or disagreements except as permitted by [the contract] or as Owner and Contractor may otherwise agree in writing.

Relying on that clause, City directed Contractor to resume  its work.  When Contractor refused, City terminated it, made a demand upon Surety under Contractor’s performance bond, and hired a replacement contractor.

The trial court awarded City $900,000 in damages and attorneys’ fees, and Contractor and Surety appealed.  The Court of Appeals affirmed the award.

First, the Court of Appeals agreed that Contractor had breached the contract.  It noted:  ”In sum, [Contractor's] refusal to return to work when directed to do so constituted a breach of 4.03.A of the construction contract.”

Second, the Court of Appeals rejected Surety’s argument that City had “usurped [Surety's] right to mitigate its damages” by hiring a replacement contractor.  Because of statutory requirements for installing utilities after an annexation, City had declared the project an emergency and notified Surety of its intent to promptly hire a replacement contractor.  Surety’s letter acknowledging City’s bond claim instructed City of its obligation to mitigate its damages–standard language in a surety’s acknowledgment.  The Court sanctioned City’s hiring of a replacement contractor for that reason:  ”By hiring a replacement contractor, [City] worked to mitigate its damages–as instructed in [Surety's letter]–and in fact hired a contractor that worked faster than [Contractor] had and completed the Project ahead of schedule.”

Facts: Shook Construction served as general contractor for renovations to Ball State’s football stadium. It subcontracted with Boyer Corp. to perform a variety of tasks on the Project. After the Project’s completion, Boyer sought additional compensation.

After a bench trial, the trial court judge held, among other things, that many of Boyer Corp.’s requests were untimely. Boyer appealed that finding and argued that Shook had waived its right to enforce the 21-day change order time limit because that provision wase not routinely followed over the course of the project.

Decision: The Indiana Court of Appeals affirmed the trial court decision. Boyer admitted that it had submitted its request for additional compensation after the deadline but argued that the trial court erred in failing to find that Shook, by its conduct, waived its ability to enforce the 21-day limit. The appellate court disagreed:

We need not engage in a thorough examination into whether the court erred in not concluding that Shook waived its right to assert the Change Order Provision and the Claim Notice Provision, and in concluding that Boyer’s claims for additional compensation were therefore untimely, because Boyer agreed in the Subcontract that no action by Shook (or Ball State) shall constitute a waiver of a right. Specifically, Section 13.4.2 of the prime contract (the “No Waiver Provision”) states:

No action or failure to act by [Ball State], Architect or [Shook] shall constitute a waiver of a right or duty afforded them under the Contract, nor shall such action or failure to act constitute approval of or acquiescence in a breach thereunder, except as may be specifically agreed in writing.

Thus, Shook did not waive the right to enforce the 21-day limit.

Although the Boyer decision is “unpublished”–and thus cannot regarded as precedent for other cases–it follows the holding in a published 2010 decision, Weigand Constr. Co., Inc. v. Stephens Fabrication, Inc.  In that case, which involved identical no-waiver language, the Indiana Court of Appeals held:  “even if the record showed undisputed facts that would support a waiver argument—which it does not,” the no waiver provisions “would prevent us from finding that Weigand waived its right to enforce the Claim Provision.”

Facts: The Tippecanoe County Public Library solicited bids for the Stein Building Project. JR Kelly Company, Inc. claimed the local preference and submitted a bid of $686,000. Non-local contractor Mattcon submitted a bid of $630,000. JR Kelly Company filed a lawsuit in the Tippecanoe County Circuit Court challenging the subsequent award to Mattcon.

Indiana Code section 36-1-12-22 grants a preference–in the form of a percentage deduction to a bid–to local Indiana businesses. That statute then states:

(d) Notwithstanding provisions of this chapter that require the award of a contract to the lowest responsive bidder or the lowest responsive and responsible quoter, but subject to subection (e), a contract shall be awarded to the lowest responsive and responsible local Indiana business that claims the preference provided by this section.

(e) Notwithstanding subsection (d), a contract shall be awarded to the lowest responsive and responsible bidder or quoter, regardless of the preference provided in this section, if the lowest responsive and responsible bidder or quoter is a local Indiana business.

JR Kelly Company argued that the “shall” language in subsection (d) required the Library to award the project to it.

Decision:  The Court disagreed.  After analyzing the language of the statute, it held:

While it appears unclear in the statute how the price preference scale is to be applied, it does seem relatively clear that some sort of price preference scale is to be applied and an absolute preference was not the intention.

Moreover, the Court argued that interpreting the statute to require an absolute preference for a local Indiana businesses could produce an absurd result clearly not intended by the Indiana Legislature:

All a company has to do, under Plaintiff’s interpretation of an absolute preference, is to submit a bid, and claim preference, and then hope they are the only local Indiana business submitting a bid.  If they are the only bidder that can be found to have a local preference then their bid “shall” be accepted.  The implications of this could be great.  It could become general practice, encouraged by this law, for local Indiana businesses to submit high bids for local projects, and hope they are the lowest of the high bids.

The Court confirmed the award to Mattcon.

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