Construction Law and Contractor Liability: Control is Key

By: Benny Agosto, Jr., Shakira Cruz, and Matt Scheele (1)

The Year 2002 in Review

The area of construction law/contractor liability was shaken up a bit in December of 2001 by the Texas Supreme Court in its decision in the Lee Lewis Constr., Inc. v. Harrison case, 70 S.W.3d 778 (Tex. 2001). Depending on what side of the bar you sit on, you were either happy or troubled by the court's opinion.

Once again, the Texas Supreme Court has revisited the area of construction law/contractor liability in the year 2002, in its opinion delivered October 17, 2002 of Dow Chemical Company v. Bright, 89 S.W.3d 602 (Tex. 2002). Similar to the Lee Lewis case, the Dow Chemical v. Bright case presented the question of whether the general contractor owes a duty of care to its subcontractor's employees. To that extent, the Dow Chemical case revisits similar issues in deciding whether Dow Chemical owed Bright a duty and held that a duty is governed by the Texas law concerning a general contractor's duties to a subcontractor's employees.

The facts in this case state that Larry Bright was a carpenter employed by Gulf States who was an independent contractor retained by Dow Chemical in the construction of an off-gas compressor in Freeport, Texas. While working at the job site, Mr. Bright was injured when an overhead pipe became unstable and fell on him. The pipe was put into place and improperly secured by one of Mr. Bright's coworkers. Both Bright and Dow Chemical filed traditional motions for summary judgments asking the trial court to decide whether or not Dow Chemical owed a duty as a matter of law to Bright to protect him from hazards associated with the work Gulf States was retained to perform.

The trial court granted Dow Chemical's motion for summary judgment and denied Bright's motion. The Court of Appeals reversed and remanded in an opinion which concluded that the summary judgment evidence raised a fact issue about the extent of supervisory control retained by Dow Chemical, and therefore a fact issue about the existence of the duty owed by Dow Chemical to Bright, 1 S.W.3d at 791.

It is well settled that a party can prove the right to control in two ways: first, by evidence of a contractual agreement that explicitly assigns the premises owner their a right to control; and second, in the absence of a contractual agreement, by evidence that the premises owner actually exercised control in the manner in which the independent contractor's work was performed. For a general contractor to be liable for its independent contractor's acts, it must have the right to control the means, methods, or details of the independent contractor's work. Further, the control must relate to the injury the negligence causes, and the contract must grant the contractor at least the power to direct the order in which work is to be done. Determining whether a contract gives a right of control is generally a question of law for the court rather than a question of fact for the jury.

Litigators in the area of construction law/contractor liability were anxiously awaiting the Texas Supreme Court's opinion in the Dow Chemical v. Bright case because it appeared that, unlike the Lee Lewis v. Harrison case, the contract between the general contractor and the independent contractor the Dow Chemical case would be analyzed. The court held that after reviewing the terms of the contract as a matter of law the agreement did not impose a duty on Dow Chemical because Dow Chemical did not retain the right to control the means, methods, or details of Bright's work. This becomes a key detail in the area of construction law/contractor's liability because it appears that the Supreme Court is indicating that the only way a general contractor can be held responsible under contract is to specifically find language that imposes a duty, which poses a right to control the means, methods, or details of an independent contractor's work. Outside this key language, it appears that the Supreme Court will not find a duty as a matter of law imposed by contract.

The Court, similar to its holding in the Lee Lewis case, recognized that a general contractor has actually exercised control of a premise when the general contractor knew of a dangerous condition before an injury occurred and approved acts that were dangerous and unsafe. An employer who was aware that its contractor routinely ignores applicable federal guidelines and standard company policies related to safety may owe a duty to require corrective measures to be taken or to cancel the contract. For that reason, the court stated in its opinion that had Dow Chemical safety representatives actually approved how the pipe in question was secured or instructed Bright to perform his work knowing of the dangers, the Supreme Court could have a fact scenario mirroring Lee Lewis.

Some final notes to keep in mind to the fact that a general contractor's failure to implement particular safety rules in and of itself is not actual control. Requiring subcontractors to attend safety meetings, or to report the name of any employees fired for safety infractions, or to require that subcontractors participate in specific safety incentive programs do not implicate the narrow duty of care not to promulgate safety regulation that increased the risk or severity of injury articulated in the Hoechst-Celanese Corp. v. Mendez, 967 S.W.2d 354 (Tex.1998) and its progeny. For that reason the Supreme Court restates that mere promulgation of safety policy does not establish actual control. What is most noteworthy about the Dow Chemical opinion is that, although the Supreme Court reversed the Court of Appeals, the Supreme Court was able to clarify and revisit the issues raised in Lee Lewis v. Harrison. It appears that many of the questions raised by Lee Lewis have now been clarified as of regards to any future cases with similar facts.

Contractual Right to Control

The importance of the contract dynamic between general contractors and independent contractors was further explored in a recent case decided by the Amarillo Court of Appeals. The court's opinion in Primrose Operating Co., Inc. v. Jones, 2003 WL 172788 (Tex. App.--Amarillo 2003, no pet. h.) hinged on whether a general contractor's right to control over a independent contractor could be established as a matter of law.

Primrose Operating Company, Inc. (Primrose) was the operator of an oil and gas well in King County, Texas and contracted with Palmer Oilfield Construction Company (Palmer) to drill the well and run casing down to a depth of 3,600 feet on a per-foot basis. Additional work on the contract, to a maximum of 3,650 feet, would be performed on a day work basis. Walter Jones was an employee of Palmer.

After installation of the well casing had begun in July 1997, Palmer began having difficulty in raising the casing joints because some of the elevator equipment was too large. As a result, a part of the elevator equipment was caught on the well derrick, causing a free-hanging end of the casing joint to swing out and strike Jones in the back of the head. The resulting injuries to Jones were the basis of the ensuing lawsuit, in which Jones filed suit against Primrose. Primrose then sought indemnification from Palmer under their written contract agreement.

The trial court returned a verdict for Jones in which it found Primrose negligent and ninety percent responsible for Jones' injuries. The trial court also found that Primrose was entitled to indemnification from Palmer. Both Primrose and Palmer filed a notice of appeal. Primrose's main issue on appeal as relates to contractor liability queried whether Jones' failure to secure a finding on Primrose's control over Palmer required a reversal of the judgment against Primrose. Palmer similarly posited that the trial court was in error by refusing to submit an issue to the jury on Primrose's right of control over Palmer.

The court, in analyzing Primrose's potential liability to Jones, discounted any duty owed to Jones by Primrose as the occupier of the premises under premises liability theories for defects on the well property. The court instead found that any liability on Primrose's part for Jones' injury would stem from a negligent activity claim based on Primrose's status as general contractor. The court stated that typically a general contractor does not have a duty to see that an independent contractor performs the work pursuant to their contract in a safe manner. However, an exception to a general contractor's lack of duty arises when the general contractor retains or exercises control over the subcontractor's activities. Under those conditions, the general contractor owes a duty to exercise reasonable care in the supervision of the subcontractor's activity.

The contract between Primrose and Palmer stipulated that Palmer "shall direct, supervise, and control drilling operations" for all drilling that occurred on a per-foot basis up to the contract depth of 3,600 feet. The day work portion of the contract (from 3,600 to 3,650 feet) was to be performed by Palmer under the direction and supervision of Primrose. It was undisputed in the facts of the case that the well drilling exceeding 3,600 feet. Jones argued that Primrose gained control of the operation and had a duty to supervise Palmer's work the moment the drill bit exceeded 3,600 feet. Jones further asserted that all activity subsequent to exceeding a depth of 3,600 feet, including the event of Jones' injury, occurred while work was being performed on a day work basis and under Primrose's control and supervision. Appellants Primrose and Palmer claimed that the provisions regarding day work applied only to work actually performed below the 3,600-foot contract depth. Once the work returned to above 3,600 feet, the operation was under the control and supervision of Palmer.

The court examined various provisions of the contract in attempting to ascertain Primrose's and Palmer's shared intent as expressed in the agreement as it related to activity conducted on a footage and day work basis. In construing the contract, the court reached the conclusion that the contract did not reveal a shared intent that all operations conducted after the well exceeded the contract depth of 3,600 feet were to be conducted on a day work basis. Therefore, the court found that the parties intended and agreed that Primrose was only supervising Palmer's drilling activities during the time work was being performed below 3,600 feet.

The evidence was not clear in revealing the depth at which work was being performed when Jones' injury occurred. However, the record did show that six to ten joints were run after Jones' injury, indicating that the injury did not occur while working at the bottom of the well. In order to establish Primrose's right to control over Palmer as a matter of law, Jones was required to show that Primrose and Palmer were operating under the day work provision of the contract. The court held that the evidence was legally insufficient to support a finding that Jones had met his burden of showing Primrose's duty of care pursuant to its right to control. Therefore, the court rejected Jones' argument that Primrose's right to control over Palmer's operations was established as a matter law.

The court refused to review the evidence to determine if it was legally and factually sufficient to establish Primrose's right to control over Palmer's operations because Jones failed to obtain a jury finding on the issue at the trial court level. As a result, Jones could not show that Primrose retained the right to forbid unsafe practices on the well drilling project in order to hold Primrose liable for Palmer's purported negligent actions that caused Jones' injuries. Jones was thereby limited to showing that Primrose's control over Palmer was established as a matter of law, a showing for which Jones did not meet the necessary burden.

Finally, Jones asserted that even though he failed to obtain a finding from the trial court jury regarding Primrose's control over Palmer's operations, any error brought by appellants had been waived because Primrose and Palmer failed to orally argue each question regarding right to control to the trial court. The court disagreed, stating that Primrose's written request for jury questions discussing Primrose's absence of right to control, as well as Primrose's objections to the trial court's jury charge, were sufficient to call the trial court's attention to the control issue. As such, any error on the issue of control was preserved for appellate review.

The court ruled that Jones failed to establish Primrose's duty to him because the evidence was insufficient to show as a matter of law that Primrose exercised a right to control over Palmer's operations. Because Primrose had no right to control over the work being performed by Palmer when Jones was injured, it necessarily followed that Primrose had no duty to exercise reasonable care in the supervision of Palmer's activity. Since a finding of duty was necessary to Jones' negligence claim against Primrose, the judgment of the trial court was reversed and judgment rendered that Jones take nothing against Primrose and Palmer.

Conclusion

Thus, in light of the opinions discussed above, a prudent practitioner should reread and understand the Lee Lewis v. Harrison case, as well as, the Dow Chemical case in conjunction, so that the practitioner can become familiar with the potential attacks and/or defenses when handling a construction law/contractor liability type case.

For that matter, based on recent Texas Supreme Court and Court of Appeals decisions regarding this area of law, litigators should pay close attention to the details regarding the contracts between general contractors and independent contractors, as well as, clearly understanding the facts in order to establish actual control or right to control as a matter of law.

1 Benny Agosto, Jr. is a personal injury trial lawyer with the law offices of Abraham, Watkins, Nichols, Sorrels, Agosto & Aziz, in Houston, Texas. Shakira Cruz is a licensed attorney in Houston, Texas. Matt Scheele is in his second year at South Texas College of Law Houston.

A portion of this article appeared in the January 2003 issue of Texas Bar Journal.