Risk of contractor liability for construction defects increases after Pennsylvania court ruling

A decision issued in April by the Supreme Court of Pennsylvania means that contractors may now be exposed to additional risk of liability for any injuries caused by defective work.

Typically, most contractors assume that once the owner accepts the work, any future risk of liability rests with the owner. This makes sense, because once the owner accepts the work, the owner is then in control of the property and may make its own decisions on repairs, modifications, or safety.

But in Brown v. City of Oil City, et al., the Supreme Court ruled that a contractor may be held liable to third party users of the property, years after the construction work was completed. The case’s background facts were that a contractor performed work to replace the concrete entry stairs to the Oil City public library. Within a few months after the contractor’s completion of the new stairs, the city received several reports about dangerous imperfections, such as deterioration, that were beginning to appear in the concrete. The city notified the contractor about the dangerous and defective concrete stairs, but no action was taken by either the city or the contractor to repair the stairs or warn the public about the danger.

Four years after the work was completed, a patron fell down the stairs, tragically dying as a result. The decedent’s family sued Oil City, the contractor and the project’s architect. The contractor argued that it should not be liable because the city was well aware of the dangerous stairs, and the city failed to correct the condition.

The court rejected the contractor’s argument and held that a contractor whose work creates a dangerous condition may be held liable to third parties suffering injuries caused by that condition, even if the condition was obvious to the owner and the owner failed to correct it.

Prior Pennsylvania case law was in conflict on this point, though most contractors believed that under the law and most circumstances the owner’s acceptance of the work cut off liability for future repair or issues. This belief was especially strong in instances where the defects were known and obvious.

With the recent ruling, Pennsylvania joins just Alabama and New Jersey as states that impose the widest reach of liability on contractors for future accidents after the work is completed. The rule from Brown is that the contractor will not be liable to the owner/possessor if the defect and risk are open and obvious. But the contractor could be liable to the owner/possessor if the defect and risk are latent (unknown). As to third party patrons or users, who are not the owner/possessor, any defect, whether latent or obvious, could impose liability on the contractor.

Because of the decision, contractors, subcontractors, suppliers, and design professionals are more likely to be named as defendants in litigation arising from personal or property damage. It may be possible, however, for a contractor to reduce this risk by negotiating specific indemnity, insurance, and risk allocation terms and conditions in their contracts. The risks also can be reduced by actions and practices such as timely responding to conditions and offering to repair or remediate the work, posting of notices/warnings and other actions could reduce risk of liability or injury.

Saxton & Stump attorneys Aaron Scheibelhut, Ron Pollock, Matt Chabal, Mike Traxler, and Ben Pratt are available to advise contractors on risk allocation, negligent construction claims, defective construction claims, construction contract terms and negotiations, insurance and indemnity litigation, and other construction-related matters. Contact any of these attorneys at any time with your construction law concerns.