Negotiating Contract Language

by Art Kirkner

The concrete pumping industry has become very specialized over the years. Running your business successfully is not easy and protecting it is essential. An effective risk management program that minimizes the frequency and severity of accidents can free you up to manage your business and customer relationships. And this not only helps you achieve sustained success; a risk management program can improve your profitability by controlling premiums and deductibles, as well as providing you with peace of mind.

Contract negotiation is a significant and fundamental part of the concrete pumping business. Besides finalizing the price and services to be provided, the contract sets forth the duties and responsibilities between you and your customer. Contract terms and conditions are vitally important, and you are best served by those with the experience and knowledge of the concrete pumping industry. The NBIS risk management, legal and claims team has been developing and refining the risk transfer process collectively for over 50 years, providing legally-sound contractual language for all your company’s contracts in accordance with current state law, thereby affording you the highest level of protection.

There really isn’t a “one-size-fits-all” type of contract out there. Here’s why: there are 10 states that have special indemnity provisions and need a separate state-specific contract; two states do not have an anti-indemnity statute; 13 states allow indemnity, but for one’s own negligence; and 11 other states permit indemnity, but only for one’s sole negligence. While there are many provisions within any contractual agreement, the following discussion is intended to offer insights into certain key considerations that will protect your pumping company, lessening the likelihood a general contractor or subcontractor will be able to shift their exposures onto you.

NBIS believes that a good contract or job ticket contains the following key provisions.\

Indemnification or partial indemnification: Simply, indemnity is a promise—a promise to pay for possible damage, loss or injury. Insisting that the language reads in such a way that your company only has to respond to losses that result from your own negligent operation is one way to ensure you’ve got a fighting chance in court.

Take a moment and compare these two indemnity provisions. Simply by adding the words “negligent operation,” we’ve successfully limited the instances in which your company will have to respond. The second example closes the door to claims that didn’t arise from something your company actually did.

1). To the fullest extent permitted by law, Vendor agrees to hold Contractor harmless from and to protect, defend and indemnify Contractor against any and all liability, damage (whether for personal injury, property damage, or direct or consequential damage or economic loss), costs, attorney’s fees and expenses arising from or suffered or incurred in or any manner connected with Vendor’s Services.

2). To the fullest extent permitted by law, Vendor agrees to hold Contractor harmless from and to protect, defend and indemnify Contractor against any and all liability, damage (whether for personal injury, property damage, or direct or consequential damage or economic loss), costs, attorney’s fees and expenses arising from or suffered or incurred in or any manner connected with the negligent operation of Vendor’s Services.

Insurance: An insurance provision in your agreement is the easiest way to shield your company from paying for claims that you do not owe. This provision specifies exactly what limits of coverage your customer needs to provide, the financial rating required of its insurance company (usually A.M. Best Company rating), and in what circumstances your customer’s insurance policy will extend coverage to you as an “additional insured.” We recommend that you include a requirement that your customer’s insurance carrier will name your company as an additional insured (AI). Basically this gives you the same rights as your customer, further protecting you under their insurance policy. This is one of the most critical components to contractual risk transfer in all types of construction liability claims and lawsuits, and realizes considerable success in recouping any loss and expense costs that had to be paid out on your behalf.

Also, since you are not usually supplying any product, you need to make sure that you do not have to provide “completed operations” coverage to any general contractor or subcontractor under a master services agreement or upper tiered-type contract.

Finally, you want to protect yourself from any excess of limits exposure. This can be done by including language limiting your concrete pump company liability to the amount of your available insurance coverage.

Operation of equipment provision: This is very important because it provides a strong “borrowed servant” argument for the actions taken by your operator. It is common in a concrete pump situation for the pump operator to be working under the direction and control of another party. Normally, your operator will be told by someone outside of your company where to set up, where to pour, and be given signals by another party. Therefore, the operator is acting directly under the orders of another company, not yours. In a successful borrowed servant situation, you increase your chance of being protected from any action brought against you by your customer’s employee, should they be hurt.

Ground conditions: This provision further outlines the responsibilities of your customer. One of the responsibilities assigned in this provision is for ground conditions and ground stability. Oftentimes, your operator will not be knowledgeable about the ground conditions where the pump will be operating, especially if this is the first day on a job site. There can often be subsurface voids that affect the stability of the ground on which the pump is located. Further, it is not uncommon to have water pipe culverts, tanks, etc., below the ground. These can break, causing ground problems, which can lead to pump overturns.

Power lines: Another problem area results from power line hazards. Our recommended provision states that it is the responsibility of the customer/lessee of the equipment to keep the pump away from power line hazards, and to get the power lines de-energized if the pump will be working around them. Even if you are operating under OSHA regulations, it is possible for this to occur. Power lines are sometimes hidden from your operator’s view and often, a signal person will be directing the operator.

Concrete mix quality: Concrete pump contractors need to be alert to any contract language that seeks to impose liability on them for the quality or physical characteristics of concrete mix itself. Contracts should not accept any responsibility for the mix and that should be spelled out in your work ticket or contract. Failure to do so could create the potential for future construction defect claims.

Waiver of consequential damages: “Time” is a crucial element in the concrete pumping business. Delays mean lost profits and can include liquidated damages. These are difficult to calculate, and costly. NBIS clients have enjoyed success when incorporating language in their contracts or job tickets that limit these potential damages. Consider including language to the effect that neither party is liable for any special, indirect or consequential damages resulting from or arising out of, or occurring in connection with this agreement, rental order or performance.

Contract signature consideration: In addition to incorporating these ideas onto the back page of your contract, NBIS recommends two signature areas on the front of the work ticket or contract, one to be signed at the start of the job and one to be signed at the end of the job. It is imperative that the operator have the lessee/customer sign the ticket at the beginning of the day, because in the event that an accident occurs on the job site later in the day, it is unlikely that contractual documents will be signed after the accident.

We at NBIS know that negotiating contract language can be a long and difficult process, but it’s ultimately one of the most important things you can do before commencing work on a job site. The NBIS Contract Management Program, designed with the help of our National Coordinating Defense Counsel, is a systematic process that we use to ensure you’ve got the best language, the best position and the best fighting chance in the event of a claim. If you’re a policyholder, we can help you re-underwrite your contracts to optimize your pump company’s protection. These suggestions are designed to help you think about the importance of your work ticket as a vital first-step tool when beginning a new project. This article is meant to provide general information on common terms and conditions in a subcontract agreement. NBIS recommends that you contact your own attorney regarding your specific contract issues.