Construction Project Litigation During COVID-19

Originally published by MehaffyWeber.

As the COVID-19 pandemic approaches the one-year mark in Texas, the effects of the pandemic on the construction industry are still being felt. Construction companies continue to face challenges in keeping job sites active, productive, and safe for contractors and employees. Texas may be recovering slowly as vaccine distribution has been delayed and new, more contagious virus strains are appearing; however, construction projects are moving forward, and construction companies must take preventative action to keep their projects and assets safe from coronavirus-related litigation. COVD-19 related lawsuits have been filed across the country and range in subject matter, from personal injury to breach of contract to insurance coverage litigation. Learn more about legal issues affecting current Texas construction projects.

Potential Personal Injury Liability Issues Related to COVID-19

Mitigating potential liability is the first step in preventing lawsuits related to contractors or employees suing for being exposed to COVID-19 and subsequently falling ill while working. A worker who files a personal injury lawsuit claiming they contracted the virus at work must prove they were exposed while performing their normal job duties at the worksite. While OSHA does consider COVID-19 to be a recordable illness, workers can be exposed outside of work, within the community. The virus also has an incubation period of 2 to 14 days, making it incredibly difficult to pinpoint exactly when and where an individual has been exposed. OSHA did issue a list of construction industry specific guidance designed to help keep employers safe, and has issued over $4 million in fines to businesses across all industries for failing to implement proper COVID-19 safety precautions. Businesses should also keep in mind that state governor orders do not pre-empt any federal regulations, including those from OSHA.

Multiple lawsuits are already pending, including several wrongful death lawsuits claiming businesses either failed to implement CDC guidelines, failed to properly respond when workers showed signs of COVID-19, or intentionally instructed workers not to wear masks – all allegedly leading to an employee’s illness and subsequent death. There has also been an increase in cases involving claims of public nuisance based on workplace safety, with allegations of businesses operating with unsafe conditions, such as forcing COVID-19 positive workers to continue working, failing to provide sufficient PPE, and failing to enforce safety guidelines. One recently filed case in federal court in California involves a “take-home” tort, with the spouse of the worker alleging he contracted COVID-19 at his workplace and brought the toxin home – causing her to subsequently contract COVID-19. The judge ultimately dismissed the case for lack of standing.

Many states have either passed or pending legislation to give businesses immunity from legal action brought by employees who contract COVID-19. On March 3, 2021, Texas House Bill No. 2782 was introduced, which states that a business entity or person who owns a business may not be held liable for injury or death caused by exposure to COVID-19 that occurs due to the entity’s operations. This protection would not apply, however, if there was gross negligence or willful misconduct involved. If passed, this Act would take effect on September 1, 2021.

Coronavirus-Related Contract Claims

COVID-19 has put many construction projects in a bad position due to labor shortages, supply chain issues, price increases, and falling construction costs. Some projects had to be delayed significantly due to city and state shut-downs and mandatory quarantines. State and local governments have also started to pull funding for some construction projects to redirect that financial support to pandemic needs. Some construction projects have been scrapped altogether, especially in the entertainment and hospitality industries, as companies realize new buildings or facilities will not be able to be used until the pandemic ends. All of these factors need to be considered when reviewing construction contracts that were executed before the pandemic began.

To help prevent lawsuits related to construction contract performance, all project contracts should be thoroughly reviewed. Determining the company’s rights and responsibilities under all active contracts as well as what risks are involved with delaying or stopping work on the project will be key to understanding where your business stands in a contract dispute. Is the company in danger of non-performance? Do the contracts have a force majeure clause that has been activated by COVID-19? What are the termination rights of the construction company as well as the business funding the construction project? Meeting with knowledgeable commercial litigation attorneys can help you find clarity with regard to what may happen if a lawsuit is brought against a construction company for COVID-19 related reasons.

If the project contract contains a force majeure provision, the company may be protected from breach of contract if it is unable to fulfill its contractual obligations during the pandemic. Many force majeure clauses include epidemics or acts of God that are beyond the control of the parties to the contract. The precise contractual language is crucial here, as courts may only excuse a party’s nonperformance if a specifically listed event has occurred. COVID-19 may be covered by a force majeure provision if it includes the terms “disease,” “pandemic,” or “epidemic.” If force majeure is unable to be activated or a provision has not been included in a contract, there are other defenses available if a lawsuit arises. Impossibility of performance and frustration of purpose may be applicable depending on the circumstances surrounding the construction project. The pandemic brought a variety of unforeseen circumstances to light which may provide sufficient evidence to support an impossibility of performance defense. If the pandemic rendered contractual obligations substantially or completely different from those originally set forth in the contract, for reasons beyond a party’s control, the frustration of purpose defense can also be considered.

Construction companies should communicate clearly with their customers to relay any current or future changes to the project, whether they are COVID-19 related or not. Litigation can often be avoided when the parties involved take the time to discuss challenges as they arise. There may be room for negotiation among all parties to a contract that will satisfy the necessary changes without the need for a breach of contract lawsuit. Maintaining strong business relationships with customers and vendors can be vital during these unprecedented times.

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