COVID-19 has created chaos in the construction world. One of the biggest problems is staffing projects to meet deadlines on the project. But, what if your company is hit with a COVID-19 outbreak and you cannot staff the job? Have you already agreed to indemnify the upstream contractor or owner for any damages stemming from a COVID-19 outbreak? We recommend reviewing your indemnity obligations to determine your risk and the steps you should take to minimize those risks.
Most construction contracts contain indemnity clauses and owners and general contractors are loath to limit their application. Here is a pretty typical indemnity clause:
9.1.1 GENERAL LIABILITY INDEMNIFICATION
To the fullest extent permitted by law the Subcontractor shall defend, indemnify and hold harmless upstream contractor from and against claims arising out of or resulting from performance of the Subcontractor’s Work, provided that such claim, demand, damage, loss, cost or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) but only to the extent caused in whole or in part by the negligent acts or omissions of the Subcontractor.
Here are some things to consider.
- Is COVID-19 the type of “sickness” contemplated by this clause?
- If your employees infect others on the worksite, are you now responsible for even greater indemnity obligations?
- Is compliance with a workplace policy that meets CDC guidelines enough to limit your liability?
- At what point does it become negligence to allow workers suspected of COVID-19 to continue to work?
- Do any other provisions of the contract allow you to limit your liability?
- Can you terminate the contract and avoid liability?
These are just a few questions that are raised from an indemnity clause and problems associated with COVID-19. A close review of your contract and the prime contract will be necessary to fully understand the scope of your potential liability and opportunities you have to limit that potential liability.
If you need help reviewing your construction contracts, we recommend you consult with experienced construction counsel to navigate these difficult situations.