DTCI: Guidance from the court in Shiel Sexton Co., Inc. v. Towe

By Melanie A. Kalmbach and Tyler S. Lemen

All project owners, designers, contractors and subcontractors can agree on the importance of maintaining and promoting worksite safety. The inclusion of safety obligations in contracts between owners, designers, general contractors and construction managers has become standard fare. These same safety obligations are often expressed in downstream agreements further emphasizing each participant’s worksite safety obligations and expectations. However, there is a distinction between contract language confirming safety obligations and contract language that potentially imposes a legal duty in favor of third parties. Disagreements about safety obligations often arise when an injured party seeks compensation for injuries sustained on a worksite. Given the inherent limitations of the worker’s compensation remedy, injured workers often turn to parties upstream in the chain of contracts for compensation. In that event, the parties’ (and the courts’) focus turns to the contractual allocation of safety responsibilities.

In Shiel Sexton Co., Inc. v. Towe, 154 N.E.3d 827 (Ind. Ct. App. 2020), the Indiana Court of Appeals addressed the impact of the parties’ contractual language on their legal responsibility for jobsite injuries.

Shiel Sexton was the general contractor and construction manager for the Ironworks project. It subcontracted with Circle B, which in turn subcontracted with Rose & Walker Supply Lafayette Inc. (“Supplier”) to deliver materials to the site. The plaintiff, Joshua Towe, was a temporary employee of Supplier and was injured on site after a leaking hydraulic line on the Supplier’s boom crane caused a hoisted load to tip and fall on him. Towe sued Shiel Sexton and Circle B.

The plaintiff alleged that Shiel Sexton had assumed a nondelegable duty of safety through its contract with the owner that could not be assigned to a subcontractor. Similarly, the plaintiff argued that Circle B assumed a duty of safety via its contract with Shiel Sexton. Shiel Sexton moved for summary judgment and asserted “it did not owe a duty of care to [Plaintiff] because it ‘did not contractually assume a duty to provide a safe workplace for the employees or agents of its subcontractor’s suppliers.’” Id. at 830. Circle B filed a similar motion and asserted it could not have assumed a duty of safety because Shiel Sexton’s duty was nondelegable.

The trial court denied Shiel Sexton’s motion and granted partial summary judgment in the plaintiff’s favor, holding that Shiel Sexton had “assumed, by contract, a non-delegable duty of safety to all persons working on the project,” including the plaintiff. Id. at 830. The trial court also denied Circle B’s motion and found that “Circle B assumed, by contract, a non-delegable duty of safety to all persons working under it on the project, including the Plaintiff.” Id.

The Indiana Court of Appeals reversed in part and affirmed in part, finding that Shiel Sexton had not assumed a nondelegable duty to protect the plaintiff but that Circle B had assumed such a duty. Id. at 829. Thus, the plaintiff could pursue his claim against Circle B but not against Shiel Sexton.

Does a general contractor owe a duty of care to the employees of its subcontractors?

The general rule in Indiana is that a general contractor does not owe an outright duty of care to a subcontractor’s employee because a general contractor has little to no control over the means and manner of a subcontractor’s work. Ryan v. TCI Architects, 72 N.E.3d 908, 913-14 (Ind. 2017). This general rule applies unless one of the following five exceptions is met: “(1) where the contract requires the performance of intrinsically dangerous work; (2) where the principal is by law or contract charged with performing the specific duty; (3) where the act will create a nuisance; (4) where the act to be performed will probably cause injury to others unless due precaution is taken; and (5) where the act to be performed is illegal.” Hunt Constr. Grp. v. Garrett, 938 N.E.2d 794, 789 (2010), aff’d, 964 N.E.2d 222 (Ind. 2012).

With regard to the second exception, actionable negligence can be predicated only on a contractual duty where the contract evinces an intent to charge one party with a duty of care. Stumpf v. Hagerman, Const. Corp., 863 N.E.2d 871 (Ind. Ct. App. 2007). This exception “is not triggered merely because a contractor may have the right to inspect and test the work, approve the work … or require the contractor to follow company safety rules. Rather, for this exception to apply, a contract must provide for a specific duty of care.” Gwinn v. Harry J. Kloeppel & Assocs., Inc., 9 N.E.3d 687, 692 (Ind. Ct. App. 2014).

The exceptions encourage the contractor’s employer to participate in the control of the work to minimize the risk of resulting injuries. Bagley v. Insight Communications Co., 658 N.E.2d 584, 588 (Ind. 1996). Where one of the exceptions applies, the duty imposed on the general contractor is deemed nondelegable, such that it will be liable for the negligent acts of its independent contractors. Walker v. Martin, 887 N.E.2d 125, 134 (Ind. Ct. App. 2008). In other words, “a contract that is found to demonstrate the general contractor’s intent to assume a duty of care exposes the general contractor to potential liability for a negligence claim where no such liability would have otherwise existed.” Ryan, 72 N.E.3d at 914 (Ind. 2017).

The ‘common thread’ in nondelegable duty cases

In Ryan, the Indiana Supreme Court analyzed whether a general contractor intended to assume the duty of keeping a worksite safe through language in its contract with the project owner. Id. at 915.

The general contractor’s contract with the owner provided that it: (1) “recognize[d] the importance of performing the Work in a safe manner so as to prevent damage, injury or loss to … all individuals at the Site, whether working or visiting”; (2) “assume[d] responsibility for implementing and monitoring all safety precautions and programs related to the performance of the Work”; (3) would “designate a Safety Representative with the necessary qualifications and experience to supervise the implementation and monitoring of all safety precautions and programs related to the Work”; and (4) would “comply with all Legal Requirements relating to safety.” Id.

The court referenced provisions reflecting the contractor’s obligations that touched on safety issues. Specifically, the court noted the general contractor had agreed to “exercise complete and exclusive control over the means, methods, sequences and techniques of construction” and to “provide all material, equipment, tools and labor, necessary to complete the work.” Id. The court concluded these clauses “demonstrate[d] an intent to control” the means and methods of completing the work, translating to “an intent to assume the duty of care.” Id.

Harmonizing all the contract’s provisions, the court concluded the contract affirmatively demonstrated an intent by the parties for the contractor to assume a duty of care toward the injured employee of a subcontractor. Id. at 916.

The court cautioned its decision was “solely guided by our contract interpretation precedent” as “conducting a phrase-by-phrase comparison of language in each Court of Appeals case to the contract involved here is not the preferred approach.” Id. However, there is a common thread in prior cases that found a contractor assumed a contractual duty of care where the general contractor’s contract includes requirements to “1) take precautions for safety of employees, 2) comply with applicable law and regulation, and 3) designate a member of its organization to prevent accidents.” Id. These common threads were identified after reviewing several previous cases with similar fact patterns.

Shiel Sexton’s contract did not evidence an intent to assume a duty of care

The appellate court in Shiel Sexton relied heavily on the Ryan opinion and even noted the directive to avoid a phrase-by-phrase comparison of contractual language at the beginning of its analysis. Starting with Shiel Sexton’s contract with the owner, the court noted that the contract provided that “[t]he safety and health of Contractor or Contractor’s employees, subcontractors and agents brought on Owner’s premises are and will be the sole responsibility of Contractor.” Shiel Sexton, 154 N.E.3d at 833-34. The plaintiff and Circle B argued that this sentence meant Shiel Sexton assumed sole responsibility for the safety of “anyone and everyone who would have been on the project site,” including the plaintiff. Id. However, the court noted there were no other provisions in the contract related to project-wide safety obligations, any responsibility to oversee all site safety measures by other entities, or any language suggesting Shiel Sexton intended to assume a legal duty to the employees of a downstream material supplier. Id.

Circle B further pointed out that Shiel Sexton was required to “ensure that Contractor’s employees, subcontractors and agents comply with all Owner rules and regulations while on Owner premises.” Id. at 834. Acknowledging this language, the appellate court determined this requirement was not as broad as the requirement in Ryan that the general contractor “exercise complete and exclusive control over the means, methods, sequences and techniques of construction.” Id.

Ultimately, the court held the contract did not “affirmatively evince[ ] an intent to assume a duty of care” and did not require Shiel Sexton to designate a safety representative to perform inspections or hold safety meetings with contractors. Id. at 834-35. Thus, the contract did not contain language by which Shiel Sexton assumed a nondelegable duty to protect the plaintiff. Id. at 835. In reaching this decision, the court stated, “[w]e decline to cobble together language from various portions of the Master Contract to change the meaning of the language provided in the provision about safety.” Id. Reversing the trial court’s grant of summary judgment to the plaintiff, the Court of Appeals remanded with instructions to enter judgment in Shiel Sexton’s favor. Id.

Circle B’s contract evidenced an intent to assume a duty of care

By contrast, the appellate court found Circle B had assumed a nondelegable duty to protect the plaintiff through its subcontract with Shiel Sexton. Id. at 837. Reiterating the common thread clauses espoused in Ryan, the court found all three provisions within Circle B’s contract with Shiel Sexton. Circle B was obligated to “take precautions for safety of employees,” was solely responsible “for the safety of its employees and agents” and was required to prevent hazardous and dangerous conditions “created or controlled by Subcontractor or its subcontractors.” Id. In addition, Circle B was required to comply with “laws, statutes, codes, rules and regulations, lawful orders and/or ordinances,” and OSHA and construction laws. Finally, Circle B had designated a “qualified and competent Safety Representative” on the project. Because Circle B’s contract contained all three common thread clauses, the Indiana Court of Appeals affirmed the trial court’s decision granting the plaintiff’s summary judgment as to Circle B. Id.

Promoting worksite safety while managing obligations to downstream employees

How do designers, contractors and subcontractors promote worksite safety without assuming a duty of care for the safety of third-party employees of subcontractors and sub-subcontractors? As tempting as it may be to simply avoid agreeing to any contract with common thread language, this misses the point of Ryan and Shiel Sexton. Rather than fixating on contract terms analyzed in prior cases, contracting parties should consider the Indiana Supreme Court’s statement in Ryan: “[n]otwithstanding whatever similarities to other contracts exist, we think this case is one best decided by taking into account our Court’s precedent on contract interpretation, as applied to the particular contract language at issue.” Ryan, 72 N.E.3d 908 at 916. Regardless of whether contract language is formulaic or unique, courts will seek to ascertain the parties’ intent at the time the contract was made. If the contract “affirmatively evinces an intent to assume a duty of care, actionable negligence may be predicated on the contractual duty.” Id. at 91.•

■ Melanie A. Kalmbach and Tyler S. Lemen are associates in Drewry Simmons Vornehm LLP and are members of the Defense Trial Counsel of Indiana. Opinions expressed are those of the authors.