What’s Your Liability Nightmare?

July 1, 2000

“There’s more of an element of danger in excavating than in other fields,” emphasizes Cyndi Wheatley, president of Tab Construction Inc. in Colorado Springs, CO, a general excavation firm specializing in commercial-site prep and underground utilities operating with 25-30 employees. “And an emotional price goes with that. We feel accountable, and it’s not just about ‘Are we making money?’ It’s about what’s happening at your different sites, has anyone gotten hurt. Every day, when your men go out, you say a small prayer to yourself. In this business, you live, eat, and breathe liability.”

Liability concerns loom heavy for the grading and excavation (GX) industry. Across this liability spectrum stretches workers comp claims, contaminated soil, underground structure damage, destruction of adjacent property, blown deadlines, misreading of GX specs, violation of rental/lease agreements, and today’s headache-fiber-optic cable damage.

And the stakes are high. President Celane Cronbaugh runs Cronbaugh Excavating Inc. in Marengo, IA, a family business of four full-time employees, operating since 1976. “If you damage a fiber-optic line, you are out of business. If you damage a high-pressure gas line you are out of life,” he warns. How do you stay in business with financial and emotional pressure like this day in and day out? GX firms share their experiences and frustrations.

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What 20 Years Can Do

Across the board, GX contractors report that liability is a much bigger business issue than it was 20 years ago. Randy Jackson is project superintendent for Elam Construction in Grand Junction, CO, a family business with over 200 employees, focusing on asphalt paving since 1957. “I think part of the problem is the perception of our industry in general. I read somewhere that general contractors were rated 248 on list of 250 in an opinion poll with the general public.”

But the biggest culprit? A dramatic shift in liability itself. Jackson remarks, “In the country as a whole, there has been a change. Everybody wants to sue everyone. And it’s worse for GX contractors because we are a high-profile industry. We can’t move across town without someone seeing us. You definitely notice excavators, pavers, and construction vehicles. That potentially makes us more vulnerable to speculative liability lawsuits.”

“I’ve had 20 years in this business, and let me tell you it isn’t any fun anymore. Liability issues have gotten completely out of hand!” worries Dennis Rock, general manager of Dennis D. Rock Inc. in Anaheim, CA, another family business of four specializing in underground fuel systems, removal, installation, contamination remediation, and demolition. “Here is a great example: We had a job that had been completed more than 12 months ago. Suddenly we receive a letter from the client saying we damaged a water line. And he wants $2,700 in reimbursement for repairs done by somebody else! Because we take detailed photographs of our work pre- and postcompletion, we were able to prove he didn’t have a leg to stand on. But that kind of situation just wouldn’t have happened 20 years ago. It’s changed that much.”

Mike Akiens agrees. For 10 years he has served as safety manager for Granite Construction Company, one of the nation’s top-ranked civil heavy-construction firms, with annual billings topping $1 billion. “Our firm prides itself on always doing the right thing under every circumstance. To achieve that, we spend an enormous amount of time on training in our company. What is challenging is the amount of energy we have to focus on ensuring that everyone has maximum awareness regarding the potential of a lawsuit.”

Several GX contractors prefer to remain anonymous on this issue. One frustrated owner conveys, “There has been an increase in these suits due in part, I think, to the ease with which they can now be filed. Anyone who watches TV will be bathed in lawyer commercials sending the message, ‘Call me, I’ll fight for you.’ Basically they are tantalizing the public with the prospect of free money.” Another comments, “Lawsuits are today’s lottery ticket. The public figures, ‘What have I got to lose?’ It’s all a farce. I don’t care how safety-conscious your firm is or how excellent your safety and liability record is-if you get sued, none of that matters. Firms end up getting unfairly victimized.”

A-Lindberg & Sons Inc. in Ishpeming, MI, is a fourth-generation firm with 55-150 employees specializing in road building, sand, and gravel production. Longtime office manager Jerry Sicotte observes, “Everyone is lawsuit-crazy. People are just looking for the opportunity to sue. I think there is so much advertising by attorneys; it has made a difference in our society. ‘It won’t cost you anything, just give us a call.'”

“I have some great examples of this,” says one contractor. “We’ve had drunk drivers who have driven right through our barriers, our tape, our sawhorses; crashed their vehicles into our construction equipment; and sued us! Today everyone tries to pass blame onto someone else. And the larger your firm, the more vulnerable you are to this type of lawsuit. Lawsuits follow whoever is perceived to have the money. Lawyers look at lawsuits as a way to turn a buck and rip us to shreds to get what they want-one-third or more of any settlement they can squeeze out of us. In this universe, we are presumed guilty until proven innocent.”

Who’s Really at Fault

That guilty-until-proven-innocent conundrum pervades the experience of many GX owners. “It might sound like I’m whining, but I’m not,” confides Rock. “The number of inequities we get bombarded with by the regulators, the insurers, and the customers is unbelievable. It seems that all liability roads are presumed to lead to the contractor.”

“For example, out here you have to be licensed by the contractor’s board,” states Rock. “The consumer at the residential-homeowners level has a lot of protection from unscrupulous contractors via this board. But we don’t get the same protection. We are provided no protection from unscrupulous subcontractors or general contractors.”

Rock points out another area of potential inequity. “When you call Dig Alert, they will mark in with color-coated paints all the different lines. If you miss those marks and hit a line, you are liable. But if they mismark it and you hit it, you are liable! Water mains, gas lines, fiber optics-you name it. Excavators are uniquely vulnerable. This is an area where ‘CYA’ really pays off! We take photos of everything we do as a job progresses.”

Absorbing Losses: The Cost of Being in Business Today

Adding insult to injury, many firms report that they have to absorb their smaller losses or risk increasing or losing their insurance. Wheatley advises, “If you turn in every little claim, your rates go up or you get dropped, so you absorb as many of the little ones as you can.” Absorbing these has become one of the costs of doing business. “We had $1,000 worth of vandalism occur last week,” continues Wheatley. “A generator and a compressor were stolen from one of our sites. An employee wanted to call it in, but I told him no. We can’t afford to have it on our record.”

Mickey Morgan, 20-year office manager for Urban Contractors in Oklahoma City, OK, echoes Wheatley’s advice. “If a claim is small we pay it so our rates won’t go up. It’s less expensive to pay them out of pocket than to deal with increased rates or a dropped policy.”

Beyond the fear of speculative lawsuits, frustration of liability inequities and having to absorb smaller claims, firms agreed on other areas of liability concerns.

Smaller Can Be Better

“My son has been with me 10 years, my brother almost the same length of time,” says Cronbaugh. “As a result, we don’t have the personnel turnover other firms have. We all think on the same level. And I think that has made being safe and staying safe easier for us. We’ve never had a claim that we couldn’t fight or settle amicably.”

“We probably have less liability because I can keep a handle on everything since we are so small,” notes Rock. “We have noticed that larger firms with bigger crews have a tendency to put less than 110% into the work. The chances are greater that something is going to be overlooked with the more people you have to manage.”

But even when you are small, workers comp rates can be a huge frustration. Rock stresses, “Workers comp in California eats you up. Claims are usually found to be the fault of the employer, and the awards are extremely high. Therefore, our rates keep going up. I feel very little is done to make it equitable for employers and even less for contractors. We always get the short end of the stick.”

Suffering From Growing Pains

When firms are larger or expand, there are consequences that can increase liability risk. Off the record, one firm owner warns, “When there is heavy growth and employees are hard to find, there is a much higher tendency to overlook details. And it’s the details that will kill you in a liability situation.”

Says Wheatley, “In five and a half years, we had only one claim. But in the past year, one of our foremen – in examining a leaking line – had hydraulic fluid under extreme pressure forced into the flesh of his thumb. Six surgeries later he still hasn’t recovered full mobility in his hand. And it could have been much worse. Right after him we had a wave of claims! One worker dropped a pipe on his foot, another jumped off a 10-foot-high trench box and suffered knee damage. Now our insurer is dropping us. We had years with no problems, and now we are being dropped. Part of the problem has been our growth. We are probably considered ‘high risk’ because we have more employees, which brings increased exposure.”

When a firm crosses the size threshold, then low employee turnover and high longevity can make the difference. Morgan comments, “We are very safety-conscious. Random and before-hire drug testing sends the message that we want good employees. And we are lucky: We have no turnover, we have good people, and we work hard to keep those good people. We have health and dental benefits for everyone, which shows that we care about each employee. The payoff? Our employees have a greater commitment to the firm and in keeping everyone safe.”

“We’ve had to pay increased attention to safety beyond even our original high standards,” states Wheatley. “Beyond the safety meetings we conduct on the job site every week and the monthly general safety meetings in the office with everyone, we now also give out safety awards at our annual meeting, accompanied by monetary bonuses. We’d rather spend the money that way than pay insurance companies. We recognize both safety and attendance – $500 cash for each. We recognize that if we put our employees first, they’ll put our firm first.”

The Challenge: Finding Safe Employee

Sicotte shares, “We’ve had our fair share of workers comp claims. It used to be that we might have one bad workers comp year out of three years. Now it’s getting so we are lucky to have one good year out of two. The problem is that it’s getting harder and harder to find good people and your longstanding employees are aging. You end up with too many people who don’t have the experience and too many who are older, and both are more likely to experience injury. There are just fewer young people out there interested in this industry. In the past, the father encouraged the son to take up the job, but today they all want them to go to college.”

Chad Connell finds himself in the same situation. He’s vice president of High Country Construction Inc. in Lander, WY, a 20-year-old family firm specializing in heavy highway. “Employees? There is a lack of qualified people. Here in Wyoming the wages are low and our cost of living is out of whack. Not very attractive for young people to settle and stay.”

“We’ve learned to focus on simple things that seem to make a difference,” points out Wheatley. “In the interview process we ask them if they have a valid driver’s license. If they don’t, then they aren’t our type. It also gives you insight into how responsible that person is and serves as an initial screener for us. We’ve found that stressing ‘If we make money you make money’ is now saving our firm money. We now link raises and bonuses to safety with our lead people. We have never had a problem with OSHA and work very hard at this. Though we experienced some challenges with workers comp recently, our OSHA record is flawless, and our people are compensated in a way that rewards safety superiority, adding up to a strong overall liability profile despite the challenges of our continued growth.”

Investing in Extra Safety

Beyond educating employees in safety procedures and providing the right protective equipment, some fleets find it worthwhile to provide an extra safety margin. Whenever trucks and heavy equipment are involved, vehicle safety cameras to provide rear vision for the driver can help avoid backing accidents. Limiting that kind of liability is as important for municipal fleets as it is for contractors.

Jose Mercado, fleet manager for the City of South Lake Tahoe, CA, has been using rear-vision cameras on his vehicles for more than eight years. A closed-circuit TV system allows the operator to view on a small in-cab monitor what the wide-field-of-view camera picks up behind the vehicle. “We started off putting them on our snow-removal equipment. Since this is a tourist town, a lot of people don’t understand the dangers of being around this equipment. We put signs on the equipment telling them to stay back 100 feet, but you’re always going to have somebody come up behind you,” says Mercado. The 12 motor graders that clear snow from the city’s streets each have a camera system from Intec Video Systems Inc. of Laguna Hills, CA. “Since we’ve put them on, we’ve pretty much dropped our accident rate of backing over vehicles down to zero. Prior to this we’d had accidents where a motor grader would actually back up over the hood of a vehicle.” The waterproof, shock-resistant cameras have since been added to storm-drain cleaners, loaders, and heavy-duty trucks.


Vandalism is another common frustration GX firms must contend with. Wheatley shares her firm’s latest horror story: “We were on a job adjacent to an apartment complex. It was during winter – muddy – and a lot of equipment was on-site. Morning after morning we’d arrive to discover that someone had been driving one of our heavy pieces of equipment, having races at night! We alerted the local police. At first there was no damage, but then they graduated to a backhoe. So we made a triangle around it with other machines to keep them off the backhoe. The next morning they had damaged three machines trying to get that backhoe out. The police provided no help. Finally we put up reward money. Then one of our employees caught them on Sunday evening by staying there all night. It was a 15-year-old boy doing all this damage. The kid was prosecuted and is doing restitution. Kids have time on their hands, parents are working, and no one knows where the kids are. I can’t tell you how many broken windows we’ve had. There is no place in Colorado Springs for teenagers to go. When I was a kid there were places to go. Not anymore.”

Fiber Optics: The Mistake That You Can’t Afford to Make

Connell shares a close call. “We got a power line once. The insurance company covered part of it and $5,000 had to come out of our pocket. If the same thing had happened with a fiber-optic line, it would have cost in the millions.” Wheatley’s firm operates in Colorado Springs, home to NORAD-the Air Force’s huge military-surveillance-system installation. “There have been huge fiber optics running from that installation since the ’60s. Because one-third of our claims come from misidentified or unidentified lines, and fiber optics exist in high concentration in our area, we have to always be extremely careful. You can’t entirely trust where the lines have been marked. We start slowly and then do hand exposure. Some of it is intuitive. You know where the city puts lines, where easements are. Fiber optics is a major issue and the risk is growing.”

Challenges of Highway Work

Jackson faces unique challenges on his large highway contracts. “We try not to inconvenience the public. They are all in a rush. Though we try to impact traffic as little as possible, we can’t pave a road without detouring traffic or putting them in one lane. Anytime you slow someone down for five minutes, they are going to get upset. I see road rage every day.

“We’ve won awards for our quality, but experience fatalities every year. People don’t realize when they are driving that we are out there in 95-degree [Fahrenheit] heat working 12 to 14 hours trying to get our job done. It can be frightening to manage situations in which you have a driver experiencing road rage in a 4,000-pound vehicle. We pull people aside; sometimes state police get involved. We have drivers that throw things at flaggers, swerve at people, and think it’s cute. What they don’t realize is one little mistake at 45 miles an hour can really hurt someone. At the very least they cause rear-enders because they just won’t slow down. We’ve got cars driving on new asphalt because they don’t want to be inconvenienced, driving over paint and making my crews angry and frustrated. We have to deal with the consequences of people’s behavior every time we are out on a job. And there is much more road rage than there used to be.”

“We try to schedule our work to accommodate the public and our firm. I’ve pulled crews off because we’ve stopped up traffic that badly, but then that impacts us from a production/contract standpoint. The work has to be done. And in scheduling I have to respect that our crews have families too. It can be a challenge to manage all these variables.”

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Keeping You and Your Business Healthy

So what’s a GX contractor to do? Advises 20-year veteran Rock, “You’ve got to have a sense of humor and remain calm. You can never take yourself too seriously. You can never forget where you came from. I started out as a framer and concrete pourer. Hard work, but at least it prepared me for what I am doing now,” which for all GX firms includes more than a small amount of wrestling liability frustrations to the ground.