Section 4.32 Owners’ and Contractors’ Protective Liability

• Library: Construction Law 2016 Supp

A. (§4.32) Owners’ and Contractors’ Protective Liability

An owner or general contractor is faced with the possibility of contingent legal liabilities when they have hired an independent contractor. Generally speaking, when an owner hires a general contractor or when a general contractor hires a subcontractor, the owner may and the general contractor does:

[R]etain [some] broad general power of supervision and control as to the results of the work so as to insure satisfactory performance of the contract—including the right to inspect, to stop the work, to make suggestions or recommendations as to the details of the work, or to prescribe alterations or deviations in the work—without changing the relationship from that of owner [general contractor] and [general] contractor [subcontractor], or changing the duties arising from th[ose] relationship[s].

Robertson v. Morris, 546 S.E.2d 770, 773 (W. Va. 2001). Therefore, even though the independent contractor controls most of the results of the work, the owner or the general contractor still may be held liable in certain situations, such as those involving:

· laws that impose nondelegable duties on the party who is having the work performed;

· work deemed to be inherently dangerous; or

· negligent hiring of contractors.

Certainly, as discussed in §4.11 above, the owner or the general contractor has coverage for these and other independent contractor exposures. But each wishes to have these risks placed with the “rightful owner.” As a result, either may wish to insure these liabilities under a separate policy (such as an OCP Policy) versus or in addition to being named as additional insured under another party’s commercial general liability (CGL) policy.

Either may perceive that there may not be adequate limits available when the need arises under the CGL policy of the other party or under their status as an additional insured or indemnitee under the contract for construction work. Therefore, owners or contractors can protect themselves against these concerns through the purchase of an OCP Policy. In most cases, the general contractor is usually the OCP Policy buyer, purchasing it for the benefit of the owner. But, as mentioned earlier, a subcontractor could purchase the OCP Policy for its general contractor. This purchase would likely occur when a subcontractor crucial to the particular project does not have adequate CGL limits to protect the general contractor from the independent contractor exposure the latter...