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A Surprising Case Further Insulating Property Owners from Liability to Subcontractors

Question: In determining the applicability of Chapter 95 of the Texas Civil Practice & Remedies Code, is a live power line located near an area where subcontractors are inserting rebar into a concrete piling, a dangerous condition of the workplace or a dangerous condition of the improvement itself?

Answer: Because of its proximity to where subcontractors were constructing the piling, the power line is a dangerous condition of the improvement, not a dangerous condition of the workplace so Chapter 95 applies.

The Background

Chapter 95 of the Texas Civil Practice and Remedies Code significantly limits a property owner’s liability for personal injuries and property damage asserted by a general contractor, subcontractor or its employees. The statute applies to a claim, counterclaim, crossclaim, or third-party claim:

  1. for damages caused by negligence resulting in personal injury, death or property damage;
  2. asserted against a person or entity that owns real property primarily used for commercial or business purposes;
  3. asserted by an owner, contractor, or subcontractor or an employee of a contractor or subcontractor; and
  4. that arises from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement. (emphasis added)

If Chapter 95 applies, then the plaintiff must prove that the property owner had actual knowledge of the condition of the improvement, not just that the property owner reasonably should have known about the condition. But how do you know if a hazard is a condition of the workplace or a condition of the improvement? In Los Compadres Pescadores v. Juan G. Valdez and Alfredo Teran, the Texas Supreme Court provided a surprising answer.

The Story

Juan Valdez and Alfredo Teran were injured working on the construction of a condominium building on South Padre Island. Los Compadres Pescadores, LLC owned the property and was building the condominium. Instead of hiring a general contractor, Los Compadres hired Luis Martin Torres to manage and supervise the project. Torres obtained bids and Los Compadres hired Luis Paredes, Jr. d/b/a Paredes Power Drilling to construct concrete pilings for the foundation. Juan Valdez and Alfredo Teran worked for Paredes Power Drilling.

To construct the pilings, long rebar reinforcement rods needed to be inserted into each pilling hole to reinforce the concrete. A high voltage power line hung about 22 to 24 feet along the back of the property line. The line remained within the easement and met code requirements. Before Juan Valdez and Alfredo Teran began work Los Compadres hired another subcontractor to build a retaining wall along the back of the property so that fill dirt could be added. This caused the ground level in the back to be closer to the power line when Paredes began its work than it had before construction began.

Luis Paredes knew about the power line and told Torres (the property owner’s supervisor) that something needed to done because it was too close to the worksite. Torres replied that he would take care of it. When Paredes began work, however, the line remained in place. Paredes asked Torres about it, but Torres told him to go ahead and start working at the front of the property while they determined what to do about the power line.

After a few days of work, Paredes finished the pilings in front and was ready to start in the back.  Torres told Paredes that the power line was not going to be de-energized, but he needed to continue working because the pilings needed to be finished. Paredes started working on the pilings at the back and drilled one hole about 10 to 12 feet from the property line in the back. He drilled the hole for the piling at a slight angle to keep the boom on the crane he was using away from the live power line. The crew then started inserting 20-foot-long rebar rods into the piling. Each piece weighed over one hundred pounds which required multiple men to work together to insert the rods. Although it is not clear exactly how it happened, while Valdez, Teran, and Paredes were inserting one of the rods into the piling, the other end contacted the power line.

The electricity knocked the men off their feet, briefly knocked them unconscious, and caused burns to their hands and feet. The power line snapped, and the rebar was left leaning on a telecommunications line strung below the power line. Because the lower end of the rebar was already in contact with the concrete, it appears the circuit was grounded which the court suggested likely saved the men’s lives.  Amazingly, after taking one day off, Paredes returned to the site, and Los Compadres paid him to bury conduit along the back of the property so the power line could be buried.

The Result from the Trial Court and Lower Court of Appeals

Valdez and Teran sued the power company and Paredes for negligence.  The power company joined Los Compadres as a third-party defendant. Valdez and Teran then added ordinary negligence and premises liability claims against Los Compadres. The power line company settled, but the rest of the case went to rial. The jury found Los Compadres, the power company, and Paredes negligently caused the injuries. The jury also found Los Compadres liable under a premises liability theory. The jury awarded Valdez $150,000 and Teran $83,000 for pain and mental anguish. The trial court entered judgment for Valdez and Teran. The property owner appealed based on no liability under Chapter 95.  Valdez and Teran argued that Chapter 95 does not apply. The appellate court sided with Valdez and Teran, upheld the verdict and affirmed the judgment.

The Supreme Court’s Decision  

The Texas Supreme Court reversed and found that Chapter 95 did apply. The Court went on to hold, however, that even though Chapter 95 applies in this case, the plaintiffs established their claims and still should win.

The primary dispute about whether Chapter 95 applies revolved around whether the claims arise from the condition or use of an improvement that Valdez and Teran were constructing when the injuries occurred.

The question was whether the power line was a dangerous condition of the improvement on which Valdez and Teran were working. The Court holds that whether the power line constituted a dangerous condition of the piling they were working on depends on the piling’s proximity to the power line. The court reasoned that “[i]f a dangerous condition, by reason of its proximity to an improvement, creates a probability of harm to one who constructs, repairs, renovates, or modifies the improvement in an ordinary manner, it constitutes a condition of the improvement itself.” Chapter 95, therefore, applies so Valdez and Teran had to show that Los Compadres had actual knowledge of the dangerous condition and some control over the work of Paredes.

Although it seemed like a victory for Los Compadres, the Texas Supreme Court would ultimately hold otherwise. The Court examined the testimony and found that as a matter of law, Los Compadres had actual knowledge of the dangerous condition at the time of the accident. The Court also noted that the jury found that Los Compadres had some control over the work of Paredes. As a result, the Court held that even though Chapter 95 applied in this situation, the evidence was still sufficient to hold Los Compadres liable.

The Lesson

Chapter 95 can be a powerful tool to insulate property owners from liability by requiring a higher standard of knowledge for liability to injured subcontractors. Proximity of a dangerous condition to the improvement is an important factor in these cases. On its face, having a live power line near to but not part of an improvement would seem to create a dangerous workplace but not be a dangerous part of an improvement. The court, however, found differently because of the line’s proximity to the piling. Because the court found liability in spite of Chapter 95 applying, I wonder whether Los Compadres could have better insulated itself from liability, if Los Compadres had hired a sophisticated general contractor with a better contract dealing with subcontractors and implemented safety protocols. Nonetheless, the lesson is that Chapter 95 continues to provide a powerful defense to liability for property owners.

Scot Pierce, Esq. is a trial lawyer and transactional attorney.  Click on his picture for his profile page.

Disclaimer: This post contains general opinions and analysis, is solely for educational purposes, and should not be treated as advice for any specific case.

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