The Construction Advantage, OSHA Penalties and Construction Claim Insurance Coverage Insights


The Construction Advantage, OSHA Penalties and Construction Claim Insurance Coverage Insights

No Quarantine for OSHA – Penalties are Alive and Well

By Michael R. Bosse

Although we did get some early COVID guidance from OSHA, as it turns out, OSHA has had to focus on the regular run of the mill violations during the last quarter of the year, amidst the raging pandemic. Here are the top violations alleged and proposed penalties (thankfully none of them from our region) from around the country. As you will see, these violations are more of the same in terms of what we usually see for alleged violations that result in large OSHA fines and penalties:

  1. $236,642 for Alejandro Vasquez Gallegos in Columbus Ohio. Gallegos had four serious violations, some of which were repeat offenses and some of which were serious. On two separate jobsites, he had workers on roofs without sufficient fall protection and safety glasses and who were using ladders inappropriately. These are serious issues; recently a local case involving a roofer in ME turned into a criminal case in light of a fatal accident.
  2. $224,459 for Unnerstall Contracting from Pacific Missouri. This case involves four serious and three willful citations for an injury involved in a trench collapse. Employees were allowed to ride in a bucket on an excavator, water was accumulating at the bottom of the trench, and there was no safe egress from the trench. Unnerstall was placed in the Severe Violator Enforcement Program – not something you advertise on your website.
  3. $224,424 for D&R Construction in Palatine Illinois. Four violations from two jobsites were found involving inadequate head protection. In addition, D&R was cited for repeat violations for failure to properly use ladders and a failure of training in fall hazards.
  4. $146,491 for ELQ Industries in New Rochelle, New York. ELQ is a heavy sitework contractor and got tripped up by OSHA’s general duty clause, involving trenchwork and general excavation requirements.
  5. $138,118 for Elmer Julio Perez Mendez from Mobile, Alabama. Citation for a 9-foot fall removing weatherproofing from a roof surface. The employee died seven days later from severe head injuries. Part of Mr. Mendez’s penalty concerns a failure to report the accident in a timely fashion.

That’s a wrap on the top five OSHA violations from the last quarter, amounting to almost a million dollars, while most of us were working from home. These citations confirm for us that OSHA will continue to focus on standard issues such as reporting, fall protection, trench work, with major increases to penalties if the violations are intentional or repeat violations.

If you have been cited by OSHA, whether its pandemic related or not, contact us. The 15-day negotiation period immediately after the citation is issued is of critical importance, as well making the appeal if you need to do so. If you have been cited by OSHA, the worst thing you can do is nothing. Give it the attention it needs, and seek counsel immediately.


Do I Have Insurance Coverage for That Construction Claim? You Might!

By Arnold C. Macdonald

Recently, I have handled several matters where contractor-clients have not recognized that they have insurance coverage to for damages and/or to cover their legal fees in a dispute with an owner. Contractors need to understand their insurance coverages, and when they have a serious loss or dispute, they should work with their insurance broker or counsel to review and question their coverage.

There are several coverages that could be applicable to construction claims, but here I will focus on what is sometimes a surprising coverage – defense and indemnity for defective work by subcontractors under standard commercial general liability (“CGL”) policies.

As background, most CGL insurance is written on standard forms prepared by the Insurance Services Office, Inc. (“ISO”). Whoever your insurance carrier, your CGL coverage is most likely written on the 1986 version of the ISO CGL form. This form is not for the faint of heart; it is dense, with layers of cross-references, and includes terms of art with meanings that may be surprising. Even though this form has been in place for over thirty years, many provisions are interpreted differently in jurisdictions around the country – sometimes even in exact opposite ways.

Generally, CGL policies pay losses for personal injury or property damages caused by some negligent act or inaction of the policy holder. CGL policies do not provide an additional warranty to fix or rebuild a contractor-policy holder’s own defective work. Damage to the work must be caused by an accident. These concepts are defined in core provisions of the ISO CGL policy, which say that the insurer will pay for “bodily injury” or “property damage” caused by an “occurrence.” An “occurrence” is defined as “an accident,” including “continuous or repeated exposure to substantially the same general conditions.” “Accident” is not defined, but a separate part of the policy says that the bodily injury or property damages cannot have been “expected or intended by the insured.” Another section tells the insured that the policy does not cover “your work.” Despite the above, contractors may be surprised to learn that their CGL insurance may cover defective subcontractor work, under the Subcontractor exception to the “Your Work” exclusion.

A recent New Jersey case illustrates some key points of the Subcontractor exception to the “Your Work” exclusion: a condominium association hired a general contractor to build a condominium project. Subcontractors improperly installed the roof, flashing, and gutters, which caused mold and water damage in common areas, individual units, and other interior areas of the building. At the trial court level, the insurance company successfully argued that there was no “occurrence” because a subcontractor’s faulty workmanship is not an “accident” and any property damage was excluded by the “your work” exclusion as the general contractor was responsible for the whole project. The State Supreme Court disagreed, and the contractor recovered its defense costs and the damages to the building interior from the insurer. The state’s highest court held that there is an “accident” when negligent conduct causes unintended harm; so even “intentional” acts of mis-installation can be an “accident” if the results are not intended. The court went on to hold that the subcontractor’s work was excepted from “the your work” exclusion by the terms of the policy.

There are a few important takeaways here:

  • First, all contractors should check with their insurance broker or their legal counsel to ensure that their insurance policies contain the Subcontractor exception to the “Your Work” exclusion.
  • When in doubt, make a claim and do not guess at which is the right policy to make a claim under; have your broker send notices on them all. I have been amazed at the claims that insurers have paid, and equally amazed by some claims where I thought coverage was obvious and the insurers have declined.
  • If coverage for a claim is denied, especially if it is a large claim, contact counsel to review the denial letter. Insurers get it wrong sometimes and a letter from counsel may set them straight.
  • How you describe the claim can be very important to establish coverage. If you have questions regarding how to describe a claim, talk to your insurance broker or discuss with counsel. In the New Jersey case, it was important to establish that the subcontractors caused the damage and the damage was to their work. Also, when looking at something like mold or water damage that takes place over time, characterizing when the “occurrence” happened may be important.
  • Even though the language in policies stays the same, circumstances can change; thousands of lawsuits have been filed nationally seeking interpretation of insurance policies for COVID damages.

For all these reasons, where there is a large claim or a claim involving new issues it makes sense to consult with legal counsel to review coverage, make sure that your claim is explained well, and submitted to the right carriers. Review by counsel is even more critical if a large claim is denied.