The court filings in the lawsuit between Mears Group and Kiawah Utility sure make for some great summer reading. For one thing, there’s drama and suspense. Earlier this month, nearly two years into the lawsuit, Kiawah asked the court to put a pause on things, so that Kiawah could go after some of the insurance companies that might be on the hook for Mears’ losses. Kiawah sued those insurance companies just last month. One wonders why Kiawah didn’t think to start its lawsuit earlier, say two years ago when it was sued by Mears, or last year when Westport Insurance, one of the defendants in Kiawah’s new lawsuit, denied Kiawah’s claim for coverage.
Did Kiawah just now discover it could sue an insurance company? Given that the lawsuit appears to be in its final stages, Kiawah’s belated request to stop everything while it goes after the insurance companies seems like too little too late. Does Mears have Kiawah up against the ropes? I can’t wait to read the next chapter.
As I’ve mentioned in an earlier post, the judge in the Mears case has already decided that Kiawah’s failure to procure BR insurance amounted to a breach of the parties’ contract. But that’s only one part of Mears’ claim. Mears must also prove its damages were caused by Kiawah’s breach because the insurance would have covered its losses. So, one of the questions the parties continue to litigate is this: would the policy that Kiawah should have obtained covered Mears’ losses. As the court states in its order:
There is a possibility that even if [Kiawah] procured primary builder’s risk insurance, the insurance would not have covered the $7 million damage because it was caused by Mears’s faulty workmanship. If that were the case, then Mears’s damage would not be caused by [Kiawah’s] breach of contract but instead by Mears’s faulty workmanship.
I assume that Kiawah believes it can trigger the “faulty workmanship” exclusion to builder’s risk coverage by proving that Mears’ losses are the result of its own negligence. To that end, Kiawah has retained a number of experts to testify about Mears’ work. One of Kiawah’s witnesses is Dr. David Bennett of Bennett Trenchless Engineers. Dr. Bennett, along with Dr. Sam Ariaratnam, co-authored NASTT’s Horizontal Directional Drilling (HDD) Good Practices Guidelines. As it happens, Dr. Ariaratnam is also involved with the lawsuit, as one of Mears’ expert witnesses.
I mention NASTT’s book because I’m concerned that the book’s “good practices guidelines” are being treated as objective legal standards of care; that is, “rules” that a contractor must follow in all cases. I have not researched this issue in any detail, but a quick glance at the case law suggests that there are problems with equating an industry or profession’s “best practices” guidelines as a legal standard of care by which to judge a contractor negligent or not.
Does it matter whether NASTT’s book sets a legal standard of care? Yes, because claims of negligence or “faulty workmanship” are often asserted in lawsuits involving HDD work, as in the Mears-Kiawah case. Answers to questions about the standards applied to a contractor’s decisions on a project—and who decides those standards—can be worth millions of dollars.
And consider this: engineers are reluctant to involve themselves in a contractor’s “means and methods”–the “how” of performing the work. Most contractors are judged on results, aren’t they? But treating the book’s “good practices” as mandatory rules could be seen as a back-door way for a group of engineers to insert themselves into contractors’ means and methods. And we all know that there can be problems once this line is crossed.
Does NASTT’s book set a legal standard that can be applied to HDD contractors? I’m not in a position to do anything but guess at this time. My hunch is that the book’s guidelines may be used as evidence of the standard of care but don’t themselves establish the standard (and, one might ask, are most engineers even qualified to define a contractor’s standard of care and whether it was violated under a particular set of circumstances?). What does emerge from the court filings in the Mears lawsuit, however, is that the book’s two authors don’t seem to agree on the answer to this question.
Dr. Bennett takes a “nice to have” view of the book’s guidelines. It would be “nice to have” a contractor follow the book’s guidelines but the decision to do so is ultimately left up to contractor to make. This view is evident in Dr. Bennett’s deposition testimony in the case:
So the guidelines, consistent with my philosophy, try to stay out of specifying prescriptive means and methods, leaving that to the people that are more informed for a particular project. And that might vary from project to project, from the owner to the engineer to the contractor; but I think the general tone in those guidelines is: “These are suggested or recommended good practices. Your conditions, your case, may vary. You are going to be responsible for your job, so it’s up to your experience and judgment and wisdom.” (pg. 56)
In contrast to Dr. Bennett, Dr. Ariaratnam appears to treat the book’s guidelines as “must haves.” According to his deposition testimony (of which only a few pages were filed with the court), Dr. Ariaratnam believes that NASTT’s guidelines “would be one source for the industry standard of care.” (pg. 53). As I read his testimony, Dr. Ariaratnam believes that an HDD contractor must follow the book’s guidelines. By this logic, the failure to do so amounts to breach of a legal standard of care.
It occurs to me that any contractor wanting to challenge the book’s standard-setting status could possibly prevail by arguing that the two co-authors’ seemingly incompatible positions is enough to show that the book’s guidelines have not been accepted as the industry standard.
I hope it’s obvious that questions about the book’s role in judging a negligent, or its workmanship “faulty,” has consequences beyond the Mears lawsuit and may become more pressing in the future. I have encountered the book in two separate lawsuits involving HDD work, including a multi-million dollar claim under a builder’s risk policy (where my client prevailed, thank you very much). As the HDD industry grows, legal disputes and litigation involving HDD contractors will grow along with it. At some point, the book’s legal implications will need to be settled, either by the NASTT, the book’s authors, or a court of law.