A recent Illinois appellate court opinion illustrates how a construction manager may be found to have entrusted work to a trade contractor and, ultimately, how the construction manager can be held liable for the acts of the trade contractor.
Construction managers generally do not enter into contracts directly with the contractors who perform work on a project. Rather, construction managers typically solicit and receive bids, prepare bid analyses and make recommendations to project owners for the award of contracts, while the owners typically enter the agreement with project contractors. Ordinarily, construction managers also coordinate site activities and administer the construction project. Because construction managers typically do not hire or contract with trade contractors, construction managers have successfully argued that they are not liable for injuries resulting from a trade contractor’s work.
Generally under Illinois law, one who hires an independent contractor is not liable for the acts or omissions of the independent contractor. Under an exception to this rule, a construction project owner, construction manager or general contractor may be held liable for a trade contractor’s actions where the owner, manager or general contractor (1) entrusted the work to the trade contractor and (2) retained control over some aspect of the trade contractor’s work.
The Illinois appellate court recently adopted a totality of circumstances approach to determine whether a person has entrusted work to another. Under this new approach, it can be established that a construction manager entrusted work to an independent contractor even where the manager did not enter the contract with the contractor. Calloway v. Bovis Lend Lease, Inc., 2013 IL App (1st) 112746, at *61 (Aug. 16, 2013). Instead of only considering whether or not a construction manager actually contracted with a trade contractor to determine the element of entrustment, a court may now consider the overall contract structure of the project as well as the actions of the construction manager in making the determination. This includes contracts between the owner and the construction manager and contracts between the owner and trade contractors.
In Calloway, the appellate court upheld a finding that that the defendant construction manager entrusted work to a subcontractor. Under its contract with the project owner, the construction manager had the authority to identify the lowest responsive and responsible bidders and was required to recommend to the owner those bidders who should be given contracts. The contract between the manager and owner reduced the owner’s role in contractor selection. The court concluded that through the manager’s actions as the owner’s agent in selecting contractors, the manager entrusted the work to the subcontractor. Ultimately, the court went on to find that the construction manager retained a sufficient level of control over the subcontractor’s work that led to the plaintiff’s injuries and upheld a jury verdict in favor of the plaintiffs.
Of concern in Calloway was the ability of project owners, construction managers and general contractors to easily avoid liability under the exception to the general rule of no liability for the acts of independent contractors based purely on the various agreements between the parties. The Calloway opinion illustrates that a construction manager’s activities must be considered in addition to the relevant contracts in evaluating subrogation recovery against a construction manager for losses arising from construction defects.