Expansion of Premises Liability for Construction Owners

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Expansion of Premisis Liability for Construction OwnersA property owner is generally liable for hazards on the property that injure others. On construction projects, this presents a significant risk for owners because there are always multiple hazards present, and the owner, generally, has very little control or knowledge of all the work being performed. Chapter 95 of the Texas Civil Practice and Remedies Code alleviates some of this risk by limiting a commercial property owner’s liability for personal injury claims by contractors and subcontractors under specific circumstances. The Texas Supreme Court’s recent decision in Los Compadres Pescadores, L.L.C. v. Juan G. Valdez and Alfredo Teran expands the applicability of Chapter 95 for the benefit of owners.

Chapter 95 requires an injured contractor or subcontractor to prove the owner had control over the work and actual knowledge of the hazardous condition causing the injury. This is a greater burden than under Texas common law, which imposes liability on a property owner who “reasonably should have known” of a condition or danger. However, Chapter 95 is limited in scope and only applies to claims that “arise from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement.”

The purpose of Chapter 95 is to shift risk back to the contractor for hazards that would normally be encountered during its work unless the owner exercises control and has knowledge of the hazard. However, Texas courts have grappled with determining the scope of Chapter 95 over the years. The Texas Supreme Court previously held the contractor’s injury must result “from a condition or use of the same improvement on which the contractor (or its employee) is working when the injury occurs.” Courts then had difficulty determining the breadth of the term “improvement.” One court held Chapter 95 did not apply to a repairman who was injured when he fell through a roof while working on an air conditioner unit because the roof was not part of the air conditioner (i.e., the “improvement”) on which the repairman was hired to work. In another case, Chapter 95 applied to a contractor hired to repair a furnace in a petrochemical plant even though he was injured when a valve burst in a different furnace nearby. Even though there were separate furnaces, the court stated that they were all connected as part of a single process system within the plant and, as such, were part of the same improvement.

In Los Compadres Pescadores, the Texas Supreme Court provided further clarification to Chapter 95’s application. In that case, the owner was building a condominium in South Padre Island. The owner hired a contractor to construct the pilings for the foundation. The pilings were drilled and pumped full of concrete using a crane. The contractor would then insert 20’ pieces of rebar into the pilings. The contractor notified the owner that there was a high-voltage powerline running about 20’ above the property line. The owner told the contractor that the line could not be de-energized or moved and instructed the contractor to finish the work. While working on a piling about 10’ from the powerline, the plaintiffs were electrocuted when the rebar they were installing touched the powerline.

The court first sought to define the “improvement” in this situation. The court rejected the owner’s argument that the entire condominium project was the improvement because “a workplace may include several different improvements, and each improvement may possess numerous conditions.” While the pilings were part of the foundation, which was in turn part of the condominium building, the court held that the “improvement” in this case should be defined narrowly to just the pilings, since that is all the contractor was hired to perform.

Under prior decisions, since the powerline was not part of the pilings (i.e., the “improvement”) Chapter 95 should not have been applicable. But the court expanded the scope of Chapter 95 in this case by focusing on whether the powerline could be a “condition… of an improvement.” If the dangerous condition “creates a probability of harm” due to its proximity to the improvement, then it is a “condition of the improvement” for purposes of Chapter 95. The court noted that if the building were on a large tract and the powerline were hundreds of yards away, then it wouldn’t be a “condition” of the pilings. Since it was nearby, its proximity made it a condition of the work being done such that Chapter 95 would apply.

The decision in Los Compadres Pescadores provides some clarification and gives courts the flexibility to apply Chapter 95 as it was intended. It certainly broadens the current scope of Chapter 95 to limit an owner’s liability for hazards that are likely to be encountered by the contractor. Even so, owners in Texas must still be aware that they could face liability despite the limitation in Chapter 95 if they exert control over the work being performed.