LAW: The Contractor's Side

When it rains, fines pour in

Article December 28, 2000
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Contractors, you are wanted


Contractors, you are wanted. By whom? You are wanted by environmental interest groups, the United States Environmental Protection Agency (EPA), state environmental agencies, your own state DOT and even private citizens. What are you wanted for? You are wanted for potential criminal and civil liability for storm water run-off occurring during construction of your highway and bridge projects.


Over the last several months, I have become aware of contractor personnel and state DOT personnel who have been indicted for willful or negligent violations of environmental laws in connection with storm water run-off. I have become aware of other contractors who have been threatened with indictments by enforcement officials and some who have been asked to indemnify their state DOT for fines it has paid to state environmental agencies as a result of storm water run-off.


Storm water run-off was specifically addressed when Congress enacted the Water Quality Act of 1987, containing amendments to the CWA, which established a new means of regulating storm water run-off. Section 402(p), as amended, required EPA to develop a phased approach regulating storm water discharges, which was designed to allow EPA and the states to focus their attention on most serious problems first. Phase I, which has and continues to be implemented, requires permits for storm water resulting from construction activity involving at least five acres. On October 29 the EPA administrator filed the final storm water Phase II rule. Under Phase II, the storm water permitting requirements apply to construction activities from one to five acres, although actual requirements to apply for a permit will not be in effect until February, 2003.


In a report posted on its web page, EPA states that during FY 1998 it referred 266 criminal cases to the Department of Justice and assessed $92.8 million in criminal fines. The EPA further states that it also referred 411 civil cases and assessed $91.8 million in civil fines. Needless to say, not all of the criminal cases or civil cases involved pollution caused by construction activities. Yet, I believe the report shows the EPA’s increased focus on enforcement and compliance. State environmental agencies are likewise stepping up enforcement measures and penalties in response to citizen complaints.


Missing the curb


Historically, state DOTs have included detailed soil erosion devices in their plans. Those measures have included silt fences, silt traps, stove filters, sediment basins, diversion dikes, inlet protection and temporary retention ponds. State environmental agencies historically trusted and relied upon the state DOT to make sure the erosion control devices selected were appropriate and were properly maintained by the contractors. Recently, citizens and environmental agencies have challenged state DOTs and contractors when heavy rains rendered the erosion control devices ineffective. There are not many reported cases on storm water run-off problems. However, one case in which a contractor was sued is R.D. Andrus v. State of Utah, 571 P.2d 1117 (Utah Sup. Ct. 1975). In that case private citizens filed suit seeking to recover damage sustained to their property from flood water, gravel and other debris which occurred during construction of a segment of the interstate in Salt Lake County, Utah.


In 1968, Gibbons & Reed Co. was awarded a contract by the state of Utah to construct a segment of interstate. The highway, called Wasatch Boulevard, was relocated on a new alignment to the east of the new highway. In constructing the highway, a cut was made along the slope of the mountain in which the travel portions and median strip were established. In the process of construction, the curb along Wasatch Boulevard was removed.


During April and August of 1969 two floods occurred which washed earth and debris from the construction onto the properties owned by the plaintiffs. Had the curb been in place along Wasatch Boulevard it would have tended to divert the water.


The court found the state of Utah’s storm drain system was unreasonably defective and dangerous, and the cause of the damage suffered by the plaintiffs. The court also found that because Gibbons & Reed Co. had carried out its work in a skillful manner in accordance with the state’s plans, specifications and directions, it was not liable to the plaintiffs. For the same reason the court refused to find Gibbons & Reed liable to the state under the indemnification clause in the standard specifications, or the clause making the contractor responsible for damage or injury to property.


Cash flow for erosion control


The case discussed above was decided 22 years ago. The lesson of the case is the importance of being able to prove the contractor complied with state DOT plans and specifications. I believe state DOTs will increasingly seek indemnification from contractors claiming either that the erosion control plans are performance specifications or alternatively claiming that the cause of the damage was the contractor’s failure to maintain the erosion control devices. State DOT may simply insist that contractors design the erosion control measures.


Contractors should be forewarned that they face a materially greater legal risk than before. Hopefully, they will include adequate funds in their bids to maintain the erosion control devices.


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