Industrial Act may injure owners

As a property owner, did you know your contractor’s or subcontractors’ employees could sue you for on-the-job injuries even if your contractor has agreed to make the workplace safe? An owner can face considerable liability for claims that should, in fairness, be the contractor’s responsibility.

Why? Washington’s State Industrial Insurance Act grants contractors/employers immunity for on-the-job injuries. This can leave the owner forced to defend against these claims on his own.

In one horror story, an owner contracted to reroof his house. The contractor’s employee was injured when he fell from the roof. Since the injured worker was barred by the Industrial Act from suing his boss, he sued the owner. When the owner turned the claim over to his contractor under the parties’ indemnification agreement, he was mortified to learn the contractor’s statutory immunity trumped the parties’ agreement. The bewildered owner then had to single-handedly defend against the employee’s claims, despite the fact that the contractor was responsible to maintain a safe workplace.

Why couldn’t the owner look to his contractor for relief? The standard indemnification provisions are not sufficient to waive the contractor’s immunity under the Industrial Act.

Is there anything to protect against such consequences? Yes. Owners can require contractors or subcontractors, as part of their indemnification agreements, to waive their immunity in the event their employees sue the owners for workplace injuries. Although the employer is still immune from suits brought directly by his workers, a properly drafted indemnification provision protects an owner from lawsuits, which, in fairness, should be defended by the party most responsible for the workplace: the contractor.

Washington’s Industrial Insurance Act
Employers are generally immune from their employees’ lawsuits for "on-the-job" injuries. Injured employees are limited to recover their lost wages and medical costs from the state’s industrial insurance funds. However, an injured employee can sue third parties for injuries he suffers while on the jobsite. A contractor’s employee can sue an owner for his injuries even if the contractor is principally responsible for providing a safe workplace.

Indemnification and hold harmless provisions
The good news is owners can protect against this unjust result by insisting upon a provision in their construction contracts that expressly requires contractors to waive, as part of their indemnification, their immunity under the Industrial Act. Under this type of a provision, a contractor must defend the owner against a suit brought by one of its employees. If an injury occurs, and the contractor’s employee sues the owner, then the employer/contractor must step up and defend the owner against the contractor and be responsible for any damages awarded to the injured employee, at least to the extent of the contractor’s negligence.

General indemnification provision insufficient
How do owners protect themselves against this unfair result? Owners should ensure that they have a properly crafted indemnification agreement that specifically addresses this scenario.

A general indemnification provision will not overcome the contractor/employer’s immunity. Instead, the indemnification agreement must be in writing, specifically waive the contractor’s statutory immunity and be mutually negotiated. If the provision fails to meet these requirements, the indemnification will not cover claims filed by the contractor’s employees.

Be cautious! While these provisions add protection, they will not protect against all liability. Generally, a person cannot be indemnified from liability caused by his own fault. An indemnification provision is, therefore, not enforceable to the extent that an injury was caused by the owner’s sole negligence.

Ensure contractor accountability
Since a contractor is usually in the best position to ensure a safe workplace, an owner is wise to insist upon an indemnification provision to protect himself against claims of workplace violations brought by the contractor’s employees. However, because the law on what qualifies as a valid waiver is strict, an owner should ensure that his contracts properly shift the risk of an unsafe workplace to his contractors.