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Contract liability bill splits industry

By Paul Snyder

A bill that would change the way construction contracts are written inserts fairness into the industry’s pass-the-buck pecking order, according to those who argue companies should be responsible only for their own mistakes.

“At what point do we talk about what’s right?” said Jeffrey Beiriger, executive director of the American Subcontractors Association of Wisconsin. “If four cars are involved in an accident and you have to pay 100 percent of the damages just because it’s easy, is that fair? How do you think it affects your insurance?”

State Sen. Lena Taylor, D-Milwaukee, is trying to protect companies from having to answer that question.

Taylor on Thursday introduced a bill that would void provisions in construction contracts that require one company protect or insure another company.

Neither Taylor, nor her chief of staff, Eric Peterson, were available for comment.

Under state law, project owners and general contractors can pass to a subcontractor their share of liability on a construction project. Subcontractors can pass on that liability to other subcontractors.

The result is one company can be liable for damages and legal costs associated with accidents, even if the company has little or nothing to do with an accident, Beiriger said.

“The courts already decide who’s at fault,” he said. “We’re not trying to turn the tables on general contractors or anything. Subcontractors could be just as liable as before.

“What we’re saying is that if the court determines I’m 70 percent liable, then I should pay 70 percent, not 100 percent.”

Taylor’s bill is a heavy-handed approach to changing state law, said Brian Mullins, a construction attorney with Madison-based Axley Brynelson LLP.

“I could understand a bill that looks at the broadest (contractor protection) clauses that transfer 100 percent of responsibility from one party to another that’s not at all responsible,” he said. “But excluding all types of clauses is detrimental to the whole process.”

Furthermore, Mullins said, litigation costs and insurance for companies likely will increase if multiple companies can be held liable for on-site accidents.

“I’ve had hundreds of these cases in my life, and I’d say about 95 percent of them were settled in advance because you had contracts that held one party responsible,” he said. “If now you have 10 parties that need to come to an agreement, that’s going to be a lot harder to settle.”

The issue is the court decision, Mullins said.

“The system that’s in place works,” he said. “It provides a cleaner, simpler setting as far as the parties that need to be involved in litigation.”

Beiriger disagreed. He said if multiple parties have to come to an agreement on who’s responsible for damages, the prosecution is more likely to focus on those who are liable.

“It’s not like they’re going to call in some sub that wasn’t even on site when the accident happened,” Beiriger said. “What we’re saying is be responsible for what you’re responsible for.”

But few things in life are fair, Mullins said. He said he knows there are cases where subcontractors were unfairly saddled with expenses because of indemnification clauses, but an outright ban on them will just lead to more lawsuits.

If any of the bill’s opponents want to offer amendments or their own ideas, Beiriger said, they’re welcome to. But negotiations to this point, he said, have gone nowhere.

“If I did it, I pay for it,” he said. “If you did it, you pay for it. That’s it.”

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