By Rebecca L. Reed, Attorney

The following focuses on the legal pitfalls of building a home (or engaging in any construction project) associated with the hiring of engineers, general contractors and subcontractors. Although building a home or doing construction involves many types of legal pitfalls, the following will only discuss the specific problems with hiring an engineer, general contractor or subcontractors and the potential of assuming liability for their actions in tort as a result of being the property owner.

A property owner can be liable for negligent or intentional actions that its construction professionals take whether or not the property owner had knowledge of the contractor’s actions. The most common case of a property owner assuming liability for its contractor’s actions is when the owner’s engineer is negligent in design, such that the construction of the design ultimately causes harm to a third party’s property. For example, a negligent design of a stormwater system that alters the normal course of water and ultimately damages a third party’s building. Or, when a contractor is negligent in building and trespasses on a third party’s property or harms the third party’s property in other ways. A property owner can take steps to prevent this from happening. The following information will assist the property owner in understanding what it needs to do to avoid liability for its engineer’s or contractor’s actions.

A. If an engineer or contractor is an employee of the property owner, liability can attach. If the contractor is an independent contractor, the general rule is that the property owner is not liable for the engineer’s or contractor’s actions.

The law will impose liability on a property owner for its engineer’s or contractor’s actions if that person acts negligently or intentionally in a way that damages another, if the engineer or contractor is deemed an “employee” of the property owner. Conversely, if the engineer or contractor is deemed an “independent contractor,” the property owner will not be liable for the torts committed by its contractor, unless an exception applies to the general rule.

There is much law in Washington State enunciating the “test” that is used to determine if a construction professional is an “employee” or an “independent contractor” of the property owner. The law defines an independent contractor as “a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.” Kamla v. Space Needle, Corp., 147 Wn. 2d 114, 119, 52 P. 3d 472 (2001) citing Restatement (Second) of Agency § 2(3). To boil this definition down to the most relevant point; a person is most likely an independent contractor where he is not controlled by the property owner. The fundamental question the property owner should ask is “am I contracting and acting in away where I can and will tell the worker how to do his or her job?”

In addition to this definition, the courts apply a “test” or factors to determine the independent contractor status. All are centered on the primary issue of “control.” (1) what does the agreement say about how much control the owner can exercise over the work of the contractor? (2) is the property owner in an entirely different and distinct profession or occupation than the contractor? (3) is the work the contractor is doing normally done under the direction of another or without supervision? (4) what is the skill that is required of the contractor’s occupation? (5) did the property owner supply tools and a place of work to the contractor? (6) how long was the contractor employed? (7) how was the contractor paid? By job or by time? (8) did the parties believe that the contractor was being employed by the property owner? (9) is the property owner in the same business as the contractor?

The courts don’t have to find all of the factors present but all of the questions do affect the determination of whether the contractor is an independent contractor. What is important is that the property owner retains less control over the professional so that the property owner does not become an employer. So, if the property owner is thinking about hiring an engineer and/or general contractor but retaining duties with regard to the project and/or directing the professional, the property owner should be aware that it could become liable for mistakes and acts that a contractor takes that may harm a third party.

B. Can a property owner inspect and supervise the professional without exerting control which may cause the professional to be an employee of the property owner?

The simple answer is yes. The property owner can retain the right to inspect the progress of the project and even supervise the contractor to make sure that the contractor is doing a good job without the professional falling into the category of “employee.” However, this is merely a general rule and practical application would serve the property owner well. Because the determination of whether a professional is an independent contractor or not is subject to the test above and analysis of various factors, it is plausible that too much inspection or supervision could alter the professional’s status from independent contractor to employee. In practical application, if the property owner is merely going to the site to take a look at the professional’s work, they are likely not exerting sufficient “control” over the professional to invoke potential liability. Yet, if the property owner is inspecting , supervising and telling the professional to modify things or to take specific action, the property owner may no longer be shielded by the general rule. A property owner should use common sense.

C. There are specific exceptions to the independent contractor rule. A property owner will assume liability for their construction professional under the following circumstances.

i. Retention of Control
A logical exception to the general rule that a property owner is not liable for torts committed by its independent contractor is if the property owner retains sufficient control over the project. This is not really an exception to the general rule but rather the fundamental basis of the determination of independent contractor.

ii. Inherently Dangerous Activities – Non-Delegable Duty
If a property owner retains the services of a construction professional to carry out activities that are “inherently dangerous,” and the professional acts in a way that is negligent and harms another person or a third party’s property, the property owner will be liable regardless of whether the professional would otherwise satisfy the test as an independent contractor. Property owners are always liable for their contractors when they are retained to carry out inherently dangerous activities.

What are inherently dangerous activities? Instances are as follows: Where an electrical company is hired by a property owner to work in the vicinity of high voltage lines. This work was deemed an “inherently dangerous activity” by our Washington State Supreme Court. Our Supreme Court also found that the work done by a contractor to haul and dispose of fruit pomace and earth, which can create a hazard when not hauled and disposed of properly, is an inherently dangerous activity. In that particular case, it was notable that the activity was governed by Washington State laws and regulations. The waste pit which the substance was being dumped into (in contravention of the regulations) eventually caught fire and injured a bystander. An age old inherently dangerous activity is the operation of fireworks.

iii. Permitting – Non Delegable DutiesI believe the most relevant exception for property owners is the “permitting exception.” Many property owners will apply for relevant City or County permits to expedite the process or to save money. However, this act itself will give rise to liability for an engineer or contractor’s actions.

In my practice, I have come across County permits which require a property owner to sign them, even where it is obvious that only an engineer can actually do the work contemplated by the permit. In fact, the property owner, not being an engineer, would be prohibited from doing the work by law. However, the law will hold a property owner liable for its engineer or contractor’s actions where the property owner applies for and secures the permit, regardless of this fact.

Interestingly enough, our law has enunciated the rule that a property owner must apply for and secure the permit for liability to arise. However, in application, the mere act of applying fora permit can be treated as “securing” the permit. Permits often involve the application for permit and the granting of the permit. The application must be signed by the applicant, yet the mere act of applying for a permit does not grant (or secure) the permit. When the permit is granted, it may or may not be required to be signed. Therefore, it is very difficult to differentiate the application and securing of a permit. The best rule is to avoid applying for and securing any permit under which another person will perform the work contemplated by the permit.

Our Courts hold that where a property owner secures a permit, the property owner agrees to perform the duties therein and by doing so, cannot delegate those duties to another person. The property owner will be liable for any work by its contractors which violates the duties in the permit, regardless of whether the property owner did any of the work under the permit him or herself.

What are the duties under a permit? Often they are not listed (at least in full) on the permit itself, but in application the duties will be long and possibly difficult to even understand because they are derived from City and County Codes and Washington State statutes that may or may not be even referenced in the permit. By signing a permit, the property owner may in essence be signing up for numerous duties it could be entirely unaware of. If a City or County insists that the property owner signs the permit, it would be in the owner’s best interests to work with the City or County to avoid this. The logical explanation above should be proffered.

It is more logical, practical and fair if the construction professional, who will be doing the particular work contemplated by a permit, applies for and signs the permit because they themselves are better to know what professional and statutory standards are required of them and their work product.

In summation, a property owner should think carefully about the role they will play in the construction process. They should review their contract with their professional carefully, looking for particular provisions which could alter the independent contractor status. A practical suggestion is to include provisions in the construction contract that clearly define the relationship between property owner and contractor. A property owner should avoid applying for and securing permits, under which they will not be doing any of the work and should act cautiously when inspecting and supervising their contractor.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.