Typically, general contractors provide scaffolding and stair tower equipment at a jobsite for all subcontractors to use during a project. It generally saves the general contractor money and it is impractical for subcontractors to provide their own equipment.
The general contractor is in the best position to provide supervision at the construction project and to transfer the risk of liability in the use of the scaffolding or a stair tower to each subcontractor through indemnification agreements or additional insured insurance requirements.
Yet, a general contractor may ask a subcontractor, usually the one with the broadest insurance coverage and highest umbrella limits, to provide this equipment so all subcontractors on the jobsite can use it. This allows the general contractor to use its insurance program as excess coverage, which protects it from most claim situations, such as injury to subcontractors’ and architects’ employees. This approach can save the general contractor thousands of dollars in insurance and related costs. As a result, the subcontractor assumes a tremendous amount of liability without the ability to transfer risk to others and control the jobsite supervision.
Scaffolding and stair tower service contractors usually provide this equipment at a construction jobsite utilizing equipment rental/lease agreements. They furnish, install and dismantle the equipment at the jobsite. The lessee, whether the general contractor or subcontractor, assumes much of the responsibility in these agreements. Several key points in the lease agreements include:
- lessee agrees to release, defend, protect, indemnify and hold harmless the service contractor from every kind of loss, liabilities, expense, demands or claims;
- lessee agrees to carry at least a $5,000,000 in commercial general liability insurance and to add the service contractor as an additional insured;
- lessee is responsible at all times for the scaffolding or stair tower while on the jobsite; and
- lessee acknowledges that the installed scaffolding was in good order and adequate for the purpose.
The lessee shoulders substantial risk by accepting liability for the use of this equipment by others, which makes it essential to have someone on the job supervising the use of the equipment and inspecting its condition at all times.
It’s quite likely that the general contractor or subcontractor leasing the equipment will be found partially negligent at the time of an injury or claim based on these responsibilities alone. By signing an indemnification agreement with the general contractor or scaffolding service or stair tower contractor, a subcontractor is assuming 100 percent of the damages, even if only partially responsible.
Scaffolding and stair towers present a significant risk of serious injury or death to workers on the job. The potential risk for multi-million-dollar claims is significant and occurs more frequently than one might think. The assumption of this risk requires purchasing much higher umbrella limits to properly protect the lessee of the equipment from large claim settlements.
Subcontractors that are asked to provide the scaffolding and or stair tower equipment in a bid should do the following.
- Decline to accept it. Ask the general contractor to consider another subcontractor because the insurance carrier has declined to accept this risk. When advised of this situation, most insurance companies will likely decline to insure.
- Decline to accept it. It would not be practical for a subcontractor to enter into separate construction contract agreements with all the subcontractors at the jobsite. While most subcontractors are not in a position to do this, the general contractor is. If the general contractor does not provide subcontractors with significant advance notice of this arrangement, it’s unlikely that they could get all the certificates of insurance and indemnity contracts from the subcontractors that would potentially use the equipment. It’s also likely that one or two of the contractors might not have sufficient insurance coverage or limits of coverage. Know whether the contractor can disqualify the subcontractor from the job because of this situation.
- Decline to accept it. A subcontractor is not in a position to supervise the other subcontractors that may use the scaffolding or stair tower equipment at the jobsite.
- Decline to accept it. Advise the general contractor that this arrangement has a severe loss potential and the subcontractor cannot increase umbrella limits for just one job. Insurance carriers will typically require a subcontractor to increase its umbrella limits for the entire insurance program and not for this one job.
- Although this is not recommended, a subcontractor should get significantly more compensation to cover additional costs should he choose to accept it. Require the general contractor to pay for the additional premium required by the insurance company to cover this increased exposure, including the cost of higher umbrella limits, the risk associated with excessively high claim settlements, and the cost associated with implementing a risk transfer program with all the subcontractors on the jobsite. If the subcontractor does not have an approved equipment use contract in place, he should hire an attorney to draw it up and monitor the certificate of insurance process. The project manager will be required to spend a significant amount of time procuring the proper paper work from all subcontractors.
The general contractor is in the best position to manage this situation, so subcontractors should do everything they can to avoid it.