Storm Damage to Construction Renovation: Who's Burden?

[mrbatesville]

Hello:

Our area has recently encountered heavy summer storms. We have an ongoing building renovation project that was recently damaged by the storm? A tree feel on top of the roof of the building causing significant water damage. It is generally known the Government is self insured and that the contractor is insured according to (FAR 52.2285). A copy of the insurance cert is on file. We do not have substantial completion nor beneficial occupancy or final acceptance. Being that the tree would have feel on the building regardless of ongoing construction or not. The plan of action I am planning to put in place is for the construction contractor to evaluate the data see if it is covered under the insurance, if not, we will considered a change order for the repairs. If you will, please let me know if this sounds like in heading down the correct street with my plan.

[Guest Vern Edwards]

Ask an attorney.

[ji20874]

mrbatesville,

Vern is right.

However, the notion that the Government normally self-insures is wholly IRRELEVANT to the matter at hand.

Also wholly IRRELEVANT is whether the contractor's insurance will or will not cover the damage.

It seems to me that your basis for action is being nice to the contractor. That's the wrong basis for action when administering a contract.

[joel hoffman]

I agree with Vern. A competent attorney should be able to research this for you. If this were totally new construction, normally contract clause 52.236-7, Permits and Responsibilities, places the cost risk on the Contractor for such damage to the work while in the Contractor's possession. I don't know for sure about damage to existing buildings in possession of the Contractor.

Your Contract should require that the Contractor provide Builder's Risk Insurance coverage. Some of the Internet sites that I visited did mention Builder's Risk Insurance coverage of buildings "under renovation" by a contractor. You can also review the Contractor's specific Builders Risk policy for exact wording. However - don't assume the contractual risk to be nice to the contractor...

A time extension for delays for damage due to Acts of God would probably be covered under an excusable delay by the Defaults Clause, 52.249-10

Here is the Permits and Responsibilities Clause:

"The Contractor shall, without additional expense to the Government, be responsible for obtaining any necessary licenses and permits, and for complying with any Federal, State, and municipal laws, codes, and regulations applicable to the performance of the work. The Contractor shall also be responsible for all damages to persons or property that occur as a result of the Contractor’s fault or negligence. The Contractor shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract. (End of clause) "

[Don Mansfield]

joel,

FAR 52.236-7 states that "The Contractor shall also be responsible for all damages to persons or property that occur as a result of the Contractor’s fault or negligence." How would that make the contractor responsible for storm damage?

[Don Mansfield]

Hello:

Our area has recently encountered heavy summer storms. We have an ongoing building renovation project that was recently damaged by the storm? A tree feel on top of the roof of the building causing significant water damage. It is generally known the Government is self insured and that the contractor is insured according to (FAR 52.2285). A copy of the insurance cert is on file. We do not have substantial completion nor beneficial occupancy or final acceptance. Being that the tree would have feel on the building regardless of ongoing construction or not. The plan of action I am planning to put in place is for the construction contractor to evaluate the data see if it is covered under the insurance, if not, we will considered a change order for the repairs. If you will, please let me know if this sounds like in heading down the correct street with my plan.

mrbatesville,

Which of the following happened?

(1) Contractor was renovating the entire building. The storm caused damage to parts of the building already renovated or to be renovated under the contract; or

(2) Contractor was renovating part of the building. The storm caused damage to parts of the building already renovated or to be renovated under the contract AND to parts of the building not included in the renovation contract.

[mrbatesville]

Don,

The first scenario is correct as to what occurred.

[Don Mansfield]

Don,

The first scenario is correct as to what occurred.

Ok. Then I would say that you are heading down the wrong street with the change order. A fixed-price contract would not generally entitle the contractor to a price adjustment due to damage caused by severe weather. As Joel explained, delays caused by severe weather are generally excusable so a time extension may be in order.

Ask an attorney as Vern advised. However, if the attorney tells you to issue a change order to repair the damage, ask a different attorney.

[joel hoffman]

joel,

FAR 52.236-7 states that "The Contractor shall also be responsible for all damages to persons or property that occur as a result of the Contractor’s fault or negligence." How would that make the contractor responsible for storm damage?

Don, that is not the part of 52.236-7 that would apply here to assign risk of damage to the Contractor, while in possession of the construction site. The Contractor doesn't necessarily have to be negligent or at fault to be responsibile for damage. I was taught years ago that we assign the responsibility for protection of work to the Contractor and that they purchase builders risk coverage to cover this risk. I've seen fires, theft, storm damage, etc. over the years and the Contractor has been required to assume the cost to replace and repair the work.

Reading on further in the clause:

"The Contractor shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract. (End of clause) "

I suggest that mrbatesbateville and his lawyers read the discussion, cases and reference book on page 655 of the 4th Edition of Administration of Government Contracts by Nash and Cibinic.

[Don Mansfield]

Joel,

Thanks.

[C Culham]

Following the thread I concerned with the “severe” and "acts of God"creeping in the discussion. Isn't it just "weather" at this point? Likewise why has not FAR Clause 52.236-9 been referenced as possibly having an impact on the situation?

I would agree seeking counsel is the best route but determination, or not, that the heavy summer storms equal anything covered by the Default clause seems a questionable reference, especially when the standard and possible coverage is is with regard to “unusually severe weather”. Additionally a discussion of whether the contractor has adequately complied with 52.236-9, the latter especially having impact on the a decision on how to move forward with the contractor, is important.

[joel hoffman]

Following the thread I concerned with the “severe” and "acts of God"creeping in the discussion. Isn't it just "weather" at this point? Likewise why has not FAR Clause 52.236-9 been referenced as possibly having an impact on the situation?

I would agree seeking counsel is the best route but determination, or not, that the heavy summer storms equal anything covered by the Default clause seems a questionable reference, especially when the standard and possible coverage is is with regard to “unusually severe weather”. Additionally a discussion of whether the contractor has adequately complied with 52.236-9, the latter especially having impact on the a decision on how to move forward with the contractor, is important.

Carl, Clause 52.236-9 is a clause that is used to cover contractor caused damage to existing site improvements. Example, contractor's equipment damages, utilities. Example: contractor's equipment damages trees. Example: contractor's equipment cracks sidewalks. This is not an uncommon problem. Example: contractor's backhoe ruptures a marked gas line. I've run into each of the above examples, both on Government construction and outside construction jobs. We always included similar clauses in our private and municpal contracts

I was taught early on as a consultant and as a city engineer to perform a condition survey prior to construction, including mapping every nearby fence or landscaping, map and mark every crack in sidewalks, every nicked tree, every broken limb, etc. on private property adjacent to our construction sites. We had to mark every utility on, near or running along the construction site. "Check Before You Dig" is a huge campaign in every city and is a constant problem. Neighbors were often trying to get a new sidewalk or fence, landscaping, etc. - whether warranted or not.

Having said that - that clause has no application to the instant situation.

I mentioned Acts of God and severe weather as excusable delays for time extensions when such cause delays to completion, pursuant to the Defaults Clause. That clause provides grounds for a time extension under those certain conditions. Other clauses might allocate cost risk but not time. For instance, a government directed or constructive suspension of work for an unreasonable period provides for a cost adjustment, but no time extension. The defaults clause is used to grant the associated time extension under such suspensions.

Thus, for Acts of God or unusually severe weather that topples a tree onto the roof of a building under construction, the Permits and Responsibilities clause (probably) would allocate repair cost risk to the contractor but the Defaults clause would provide for an excusable delay and no cost time extension to repair the building. Check with your lawyer.

[joel hoffman]

Hello:

Our area has recently encountered heavy summer storms. We have an ongoing building renovation project that was recently damaged by the storm? A tree feel on top of the roof of the building causing significant water damage. It is generally known the Government is self insured and that the contractor is insured according to (FAR 52.2285). A copy of the insurance cert is on file. We do not have substantial completion nor beneficial occupancy or final acceptance. Being that the tree would have feel on the building regardless of ongoing construction or not. The plan of action I am planning to put in place is for the construction contractor to evaluate the data see if it is covered under the insurance, if not, we will considered a change order for the repairs. If you will, please let me know if this sounds like in heading down the correct street with my plan.

mrbatesville, did you get enough info to decide what to do? There is plenty of information for your lawyer to delve into. I think it would be unwise to take the route you suggested, without checking with a competent attorney - who either is familiar with the cited clauses or who will investigate the information in the cited reference.

By the way, if anyone is contracting for construction, they really need to become familiar with the construction contract clauses that have been established over the years to allocate risk. Another reason to not take shortcuts and try to treat construction as a "commercial item" acquisition.

[Guest Vern Edwards]

I'd like to summarize, because the discussion has gotten a little complicated.

As I understand it, the problem is that a tree fell on the roof of the building and caused some damage, including consequential water damage. I think there are two concerns. First, will the damage affect schedule? Second, who is responsible for the costs?

Under the applicable default clause, FAR 52.249-10, the contractor is off the hook for delays caused by acts of God, which would include the fallen tree and the consequent water damage. (To address Carl's concern, this is not a weather-caused delay. The contractor's performance has not been impeded by weather, per se. It is impeded by damage caused by a fallen tree, an act of God. That could have happened without any bad weather at all. Thus, the weather need not have been unusually severe.)

Since the government did not cause the damage, it is not responsible for any damage to contractor work that has not yet been accepted, whether completed or in-progress. As Joel said, that is covered by the Permits and Responsibilities clause, specifically the third sentence. The contractor must bear that burden. It will have to repair its work at its own expense. Presumably, hopefully, the contractor has insurance to cover that.

But what about damage to a part of the building on which the contractor has not yet done any work? Suppose the tree damage changes the work that the contractor has yet to do? The specs and drawings no longer describe the work that the contractor will have to do now. I do not think that is covered by the Permits and Responsibilities clause. I think in that case the government will have to change the specs and drawings and that if the new work will cost more and/or take more time the contractor will be entitled to an equitable adjustment.

Joel? Don? Do you agree?

[joel hoffman]

Vern, I agree with you except that I am not certain about your last point. I didnt get a chance to read the case law cited in Nash and Cibinic or do further research as to whether the contractor is fully responsible for damage to existing buildings within its possession. That's why I agree that mrbatesville needs to consult an attorney who can research that point. But - we dont know if the roof of the building has also been replaced under the renovation contract, so that point may be moot.

EDIT: 21 JULY 2012: See my post #21 on next page. See generally, discussion concerning this topic in Construction Claims Deskbook at :

http://books.google....work%22&f=false

[Don Mansfield]

But what about damage to a part of the building on which the contractor has not yet done any work? Suppose the tree damage changes the work that the contractor has yet to do? The specs and drawings no longer describe the work that the contractor will have to do now. I do not think that is covered by the Permits and Responsibilities clause. I think in that case the government will have to change the specs and drawings and that if the new work will cost more and/or take more time the contractor will be entitled to an equitable adjustment.

Joel? Don? Do you agree?

That's a good question. I'm going to defer to Joel.

[Retreadfed]

Joel, I have a question just based on curiosity. Would your advice be different if the government knew the tree posed a hazard to the building and had planned to remove it?

[Guest Vern Edwards]

The Permits and Responsibilities clause provides, in pertinent part:

The Contractor shall also be responsible for all damages to persons or property that occur as a result of the Contractor's fault or negligence. The Contractor shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract.

The clause does not allocate to the contractor any responsibility for any damage to any part of the building is not "work performed" and for which it was not the result of the contractor's fault or negligence. The contractor is responsible only for damage to materials delivered and to work performed that has not been both completed and accepted. That responsibility continues until the entire job has been completed, unless the contractor completes some part ("unit") of the work and the government accepts it. Under that clause, damage to anything else is the government's responsibility. If damage to any other part of the building requires a change in the government's specification and drawings, the contractor will be entitled to more money and time.

[Retreadfed]

I guess my question goes to whether the contractor would be liable for damage to the building under the clause you cite, if the damage was caused in whole or in part by the fault or negligence of the government. I'm trying to learn something here.

[Guest Vern Edwards]

I found this in a decision by the Corps of Engineers Board of Contract Appeals, which has since been merged with the Armed Services Board of Contract Appeals, Potashnick Construction, inc., ENGBCA 5604, 92-2 BCA ¶ 24985, March 23, 1992:

A contractor assumes the risk of loss or damage to its equipment and loss or damage to the work itself under its “builder's risk,” as set forth in the contract's “Permits and Responsibilities” clause. Westinghouse Elevator Co., ENG BCA No. 5579, 91-2 BCA para 24,474. Thus, a construction contractor assumes the responsibility for any loss or damage occurring to its equipment and to the work performed until completion and acceptance of the entire work. For that matter, a contractor also assumes the risk of any loss because of injuries to third persons. Westinghouse Elevator Co., supra. See George Okano Electrical Contracting Corp., ASBCA No. 20978, 78-1 BCA para. 12,914. See also Fraser Engineering Co., Inc., VABCA No. 3265, 91-3 BCA para. 24,223. A contractor's “builder's risk” shifts to the Government only if the contractor is able to demonstrate that some Government action, such as the Government's negligence or defective specifications, directly interferes with its work and proximately results in damage for which it incurs additional costs. Fidelity Construction Co., ASBCA No. 24882, 81-1 BCA para. 15,022; George Okano Electrical Contracting Corp., supra; Winston Brothers Co. v. Unites States, 198 Ct.Cl. 37, 458 F.2d 49 (1972). See also B & L Construction Co., Inc., ENG BCA No. 5708, 91–2 BCA para. 23,840; Robert McMullan & Son, Inc., ASBCA No. 21455, 77–1 BCA para. 12,456; Winston Bros. Co. and Green Construction Co., ENG BCA Nos. 2732, 2768, 68–2 BCA para. 7240.

Thus, the contractor is not responsible under the Permits and Responsibilities clause for damage caused by the government. According to Westlaw, the decision is still good law. However, I'm not sure enough of my research to answer the question with confidence. That's why its important to consult an attorney.

[joel hoffman]

Joel, I have a question just based on curiosity. Would your advice be different if the government knew the tree posed a hazard to the building and had planned to remove it?

Just got home from CA and tuned in. I would have answered this as "yes", even without Vern's cite above.

Note that the Contractor doesn't necessarily have to be negligent or at fault to be responsible for repairing damage to the work. See Construction Claims Deskbook, Section 10.3, "Destruction of Work" on page 118 in at:

http://books.google....work%22&f=false

...But what about damage to a part of the building on which the contractor has not yet done any work? Suppose the tree damage changes the work that the contractor has yet to do? The specs and drawings no longer describe the work that the contractor will have to do now. I do not think that is covered by the Permits and Responsibilities clause. I think in that case the government will have to change the specs and drawings and that if the new work will cost more and/or take more time the contractor will be entitled to an equitable adjustment.

Joel? Don? Do you agree?

Vern, I found this in the Construction Claims Deskbook. at the URL cited above. Under Section 3.10, "Contractor's Risk of Loss" on page 42, it states that "the risk assumed by a contractor for damages or costs incurred because of an Act of God extends only to work that was within the original scope of the contract. For instance when a contrasctor alters or repairs an existing structure its risk and consequence of loss are limited to the work covered by the contract, not the entire structure on which the contractor is performing work" (Footnote 52: See H.G. Chambliss, ASBCA No. 5138, 59-1 B.C.A., (CCH) ¶ 2059, 1959).

[wvanpup]

Sorry to be late to the party, but it does not look like this was finally resolved. Obviously you need to contact your attorney so you can get advice based on the specific facts of your situation. I am going to posit some different situations as illustrative of what I would want to know.

Assume it is a BIG tree. It falls on both the north facing and south facing slopes of the roof. The work on the slopes involved replacing the shingles. The contractor had already replaced the shingles on the north slope, but had not begun work on the south slope. The tree not only damaged the shingles but damaged the trusses on each slope of the roof. The contract did not require any work on the trusses.

1. Who is responsible for the cost of repairing the damaged shingles on the north slope?

2. Who is responsible for the cost of repairing the damaged trusses on the north slope?

3. Who is responsible for the cost of repairing the damaged trusses on the south slope?

These are essentially the situations Vern addressed, except that he did not (at least I don't think he did) address the question of additional damage to the area where the work was completed.

While your attorney is the one to provide final answers, the result should be that the contractor is responsible in question one and the Government is responsible in the other two questions.