Bill would boost subs’ legal protections

Published: February 8, 2010
Tags: Associated General Contractors of Wisconsin, Beiriger, Boullion, DeWitt Ross & Stevens SC, J.F. Cook Co., J.F. Cook Co. Inc., Larry Michael, liability, risk transfer, Selzer-Ornst, Selzer-Ornst Co. Inc., Taylor, The Brehmer Agency, Voss, Wisconsin Supreme Court

By Paul Snyder

Associations for subcontractors and general contractors are at odds over a new bill that would ban risk transfer in construction contracts.

State Sen. Lena Taylor, D-Milwaukee, is gathering co-sponsors for the bill, which would invalidate construction contracts requiring a company protect or insure another company.

The impetus, said Taylor’s spokesman, Eric Peterson, is a legal loophole in state law that has left subcontractors vulnerable to injury lawsuits for more than 20 years.

“We normally operate under a system of, ‘You break it, you bought it,’ which is fair,” Peterson said. “But as we examined contractual law, we found that liability on construction projects can be passed down to subcontractors, and it becomes a case of, ‘I broke it, you bought it.’”

Under state law, project owners and general contractors can pass to a subcontractor their share of liability on a construction project. The state Supreme Court in 1984 made that determination, and contractors have since used it as a way to pass on responsibility, said Jeffrey Beiriger, executive director of the American Subcontractors Association of Wisconsin.

“If I put my cynical hat on, the logic of it is if you can pass on responsibility to someone else, why wouldn’t you?” he said. “General contractors want site control and responsibility, but they only want responsibility up to a certain point.”

The state’s lack of protections for subcontractors has resulted in interesting decisions. In 2005, a state appellate court ruled an employee of J.F. Cook Co. Inc. — which had been hired to install doors and windows at the Miller Brewery in Milwaukee — could not hold Miller liable for damages sustained when the employee’s left hand was crushed in an elevator.

Although Miller owned the property and Milwaukee-based Selzer-Ornst Co. Inc. was the project’s general contractor, the project’s risk had been contractually transferred to Cook.

“So in addition to paying workers’ compensation, J.F. Cook had to pay the employee again under the liability agreement,” said Larry Michael, surety bond producer for The Brehmer Agency, Butler. “How is that fair? Cook wasn’t involved on the elevator work at all.”

Those are the kind of legal battles subcontractors are subject to now, Beiriger said, and the bill would protect them by making each subcontractor responsible only for its own negligence.

The problem is the bill opens the door for more lawsuits against general contractors, said Jim Boullion, government affairs director for the Associated General Contractors of Wisconsin Inc.

“Now we become subject to any lawyer looking for a company with deep pockets,” he said.

And for every harrowing story on the subcontractor’s side, Boullion said, general contractors have one to match — even under the current law. He mentioned a case a few years ago in which an employee of a subcontractor went onto a site that was closed for the weekend and was injured. Although the worker was not supposed to be there and the general contractor didn’t know anyone was on site, the worker was still able to sue the general contractor for injuries sustained by not providing a safe work place.

“Either side can spin a good yarn,” Boullion said. “But what we have in place now is a way to protect general contractors and keep risk as close as possible to the source of the accident.”

But Ken Voss, an attorney in the Brookfield office of DeWitt Ross & Stevens SC who was counsel to J.F. Cook in the case against Miller Brewery, said Wisconsin’s system is unfair.

“If legislators are interested in doing what’s fair to contracting parties,” he said, “this bill goes a long way.”

Beiriger said contractors might oppose the bill for fear of losing ground when it comes to contract agreement, but they have made his argument in the past.

“When the joint and several liability provision was still being discussed in the budget, the AGC wrote a letter that said it’s unfair that a contractor that is 51 percent responsible for an accident could be held 100 percent responsible,” he said. “That is the exact same argument I’m making right now.

“It’s easy to say, ‘Oh they’ll go after the deep pockets,’ but what if the deep pockets are responsible?”

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