Call Us: 415.956.2828
202.777.8950
In response to the growing number of Coronavirus (COVID-19) cases, on March 16, 2020, six counties [1] in the San Francisco Bay Area took the extraordinary measure of issuing identical, stringent, shelter-in-place (“SIP”) orders, requiring county residents to remain at home through April 7. [2] A few days later, on March 20, California’s Governor issued a state-wide executive order (“EO”) requiring anyone living in the State to stay at home until further notice. [3] Other counties across the State have adopted the EO, for example, Los Angeles, and/or issued their own order restricting business as usual to stem the spread of the Coronavirus.
These orders, which have been released quickly and do not contain identical language, have caused confusion in the construction field. While the gist of the orders is the same – individuals are required to stay at home, the exceptions (generally referred to as “essential activities”) that will dictate which projects may proceed differ and have evolved rapidly. For example, it was not clear under the original March 20 EO, whether residential or commercial construction would be allowed under the stay at home order. This was resolved on March 22, when the State Public Health Office clarified that the EO’s stay at home requirement did not apply to “Essential Critical Infrastructure Workers,” a group that includes any construction workers that “support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction).” [4]
However, local SIP orders may be more restrictive than the EO, limiting construction work in particular counties. In the Bay Area, residents may leave home to provide work in connection with “Essential Infrastructure,” which includes construction associated with public works, housing, transportation, communications, energy, and public utilities. This exception does not include construction associated with commercial structures, such as office or retail space. Counties do have the authority to be more restrictive than the State in determining which sorts of construction projects may move forward during the SIP orders.
Other public agencies have provided guidance to resolve confusion about projects under their jurisdiction. For example, the California State Water Resources Control Board and the nine Regional Boards (collectively, the “Water Board”) issued a joint advisory that neither SIPs nor the EO would excuse compliance or allow for delayed compliance with Water Board permits, orders, or directives such as site cleanup requirements. The Water Board considers regulatory compliance within any “essential activities” exceptions under the SIP orders or EO. The Water Board’s advisory document also creates a process for a responsible party to informally petition the Water Board if compliance, or timely compliance, cannot occur as a result of SIP order or the EO.
The Water Board’s advisory is a good reminder, for all project types, that project managers need to stay abreast of Coronavirus advisories, not just from public health officials but also any agency that might have jurisdiction over a project. Given the pace at which orders continue to evolve, the myriad types of construction projects, and various conflicting SIP orders, contractors should make it a priority to obtain the most up-to-date guidance in connection with their projects and consult with counsel as questions arise.
Continuing construction amidst the Coronavirus pandemic could create liability and additional costs for contractors and owners. Below are key areas that should be addressed as a part of any construction during the outbreak.
Even without the threat of Coronavirus, workers’ health and safety are a priority and are encapsulated in site-specific health and safety plans. The SIP orders require that additional precautions against the Coronavirus be taken: (1) workers maintaining social distancing (i.e., remaining six-feet apart); (2) regular washing of hands with soap and water as frequently as possible or using hand sanitizer; (3) hygiene practices such as covering coughs; (4) regular cleaning high-touch services; and (4) not shaking hands. Additionally, some counties, such as Los Angeles County, require exempt business to conspicuously post signage that, if an individual is experiencing symptoms of respiratory illness, including cough or fever, the individual is not allowed to enter. [5] Contractors may be required to dramatically change established work plans to allow for the safety of their workers, including extra coordination among trades and changing start and end times for various crews.
In line with the social distancing and added hygiene requirements, contractors should review their operative health and safety plans and amend them as necessary, while also assuring that the health and safety plans can be executed by ensuring that required personal protective equipment (PPE) is available amidst a growing demand. Contractors should look to the Centers for Disease Control [6], National Institute of Allergy and Infectious Diseases [7] and state and local health departments for listings of appropriate precautions and best practices to prevent the spread of Coronavirus in the workplace. Failing to meet a contractor’s own health and safety plan, or failing to create a safe work environment for employees, can open a contractor to liability if workers become infected as a result. That risk is compounded once a worker leaves the job site and has the potential to infect others with the virus. These additional liabilities may be covered by insurance but ultimately are an increased risk factor for work during the pandemic.
Many contracts have specific requirements for claiming delay due to a pandemic or other force majeure events. While some of these “Force Majeure” clauses attempt to limit the contractor’s damages to a time extension without compensation, most owners will find themselves liable for the additional costs of continuing work in the midst of the outbreak. This includes costs related to PPE, overtime to reduce the number of employees on-site, inefficiencies related to supply chain disruption, the increased cost of materials over time, and more.
Though the process is often described in the contract, the Force Majeure clause in a contract is rarely negotiated, and may not clearly define each party’s roles and responsibilities or be consistent with California law.
Contractors should also consider reviewing insurance documentation related to their projects now. At a minimum, contractors should have their insurance policies handy and know where to file a claim, either through their agent or directly with their insurance carrier. While many commercial business policies contain coverage for business interruption, absent a special endorsement covering infectious disease, this coverage generally requires a physical injury or property damage to pay out. Alternatively, a policy that provides civil authority coverage may allow a policyholder to recoup its losses based on an order from a government authority shutting the business down during a pandemic but likely also requires an element of damage to be triggered. Commercial general liability policies should respond to allegations by third-party claimants that job site practices lead to the spread of the virus and subsequent injuries, analogous to claims seen in the context of asbestos litigation. In the event that claims arise in this context and are denied by the insurance carrier, the insured should review the denial with counsel to assess its strengths or weaknesses of the denial.
There are further, pragmatic considerations, involved with continuing to work in the current environment. The stigma involved with possible Coronavirus exposure may prevent or delay certain work. For example, third-party property owners or tenants may push back when invasive work such as indoor air sampling or a foundation inspection is required. Though an adverse reaction to such an intrusion is understandable, it may not excuse compliance with the agency or owner demand. Contractors should have a communications plan ready to address Coronavirus-related concerns so as to allow work to proceed. As work proceeds, managers should take extra care to document relevant communications and events so as to keep owners or agencies informed of project status and potential roadblocks.
By taking the appropriate steps now to resolve the legal and pragmatic issues presented by the Coronavirus and making the extra effort to document a proactive response, contractors can reduce the risks involved in working during the pandemic.
[1] The six counties are San Francisco, San Mateo, Santa Clara, Alameda, Contra Costa, and Marin.
[2] See, e.g., https://coronavirus.marinhhs.org/sites/default/files/Files/Shelter%20in%20Place/Shelter%20in%20Place%20Order%2016%20March%202020.pdf
[4] https://covid19.ca.gov/img/EssentialCriticalInfrastructureWorkers.pdf
[5] http://publichealth.lacounty.gov/media/Coronavirus/COVID-19_March%2021-HOOrder-7_00_FINAL2.pdf
