Masonry Magazine August 1965 Page. 9
Insurance For Contractors
(continued from page 7)
2) "For any injury to person or property, occasioned by any wilful violations of this Act, or wilful failure to comply with any of its provisions, a right of action shall accrue to the party injured for any direct damages sustained thereby", including widows and dependents of any person killed within its provisions.
Now, at first glance this does not look like much to worry about. It seems to concern only those owners or contractors who are "in charge of" the work involved and they always did have common law liability for their negligent acts or omissions. Then, Paragraph refers to "wilful violation" or "wilful failure to comply" with the safe erection provisions of the Act; and we may think that anyone who deliberately erects an unsafe scaffold, knowing that it is unsafe, well deserves to be sued. However, the courts, by broadly extending the intent of these qualifying phrases, changed its character completely.
It was ruled, first of all, that the owner or contractor remained subject to the Act and legally "in charge of" the work even when performed under contract by another contractor or subcontractor. Next, the courts took "wilful violation" and "wilful failure" to be synonymous with "knowingly". Reckless disregard of the Act became unnecessary and "knowing or should have known, under the circumstances" was the test applied to determine violation of the statute. Therefore, one one did not have to be negligent or, for that matter, even directly involved in the construction to be held liable. There was even a question whether the wrongful death limit applied to actions brought under this Act.
You can see, then, that we are no longer talking about a simple and relatively harmless statute. The effect of this obsolete legislation on the cost of doing business in the state is staggering to contemplate. Once property owners learned of their liability under the law, many of them the hard way, they took steps to avoid future involvement. Hold Harmless Agreement executed by general and subcontractors were already commonplace, some broad enough to pass any such liability on to the indemnitor. Other agreements were made to accomplish the same thing through addition of an indemnifying clause specifically designed for the purpose. If justification were needed, the owners found it; someone else was really "in charge of" the work performed, why should he not protect the owner from such responsibility?
Matters went along this way for some time until April, 1960, when Bodily Injury premium rates for Contractual Liability and Protective Liability doubled because of the number and severity of Scaffold Act claims reported. There were two rays of hope, however. The first was a famous and hard fought case (Gannon v. Chicago, Milwaukee, St. Paul & Pacific Railway
THE AUTHOR
Walter T. Derk is Assistant Vice President of the Fred S. James & Company, national brokerage firm with headquarters in Chicago. He has over 19 years of experience in the casualty insurance field and is one of the leading national speakers on this subject. Mr. Derk has lectured architectural classes at the University of Illinois on the subject of contract specifications and is the author of many comprehensive articles on insurance.
Co.) in which the defendants sought to prove that they were not "in charge of" the job at all and, in fact, did nothing to control or direct work in progress. The Appellate Court eventually upheld this position; then it was heard by the Illinois Supreme Court. In a much heralded March 29, 1961 decision, the case was decided in favor of the appellee-owner. This at least took some of the heat off the property owner and, indirectly, the contractor who paid most of the owner's judgments under Hold Harmless Agreements. Owners' Protective Liability rates were promptly reduced, but not those applying to the contractor, who remains liable under the statute.
The second hopeful sign involved strong efforts to repeal the law, or at least drastically curtail its effect by legislative action. Perhaps because the Gannon decision seemed to make such action less important, neither repeal nor amendment was accomplished in the last session. Court decisions have a way of contradicting themselves, however, and there is no question but that the best solution to the problem is outright repeal.
CERTIFICATES OF INSURANCE
While you are most often in the position of providing someone else with a certificate of insurance as evidence of adequate protection, it is equally important that you be aware of the need for certificates from your subcontractors and suppliers. Most insurance carriers have their own version of the printed form and most require close examination to determine exactly what is provided.
In general, you should look to your subcontractors and suppliers for the same coverage required of you under contract specifications. To give you the greatest (continued on page 23)