August 2010

by Walker M. Duke

The BP oil spill has become one of the worst environmental disasters in history, and the consequences will be felt far and wide. But are there any bigger picture lessons to be learned and applied to the construction industry? Three major themes have developed that every contractor should take to heart.

Lesson #1: Be Aware of Risk-Shifting Provisions in Contracts

BP has been the primary focus of coverage of the Gulf oil spill, but will the company be held primarily responsible? Hyundai Heavy Industries built the Deepwater Horizon rig, and Transocean owned it and leased it to BP, but other parties were also partial owners of the well. So who is ultimately responsible?

Contracts between the parties most likely contained risk shifting provisions, such as indemnity provisions, additional insured clauses, limitations on liability, or even liquidated damages clauses. Could it end up that, if the explosion was caused by the negligence of some subcontractor, that subcontractor is financially responsible for the entire cleanup because of a “throw-away” indemnity provision that snuck into a contract during negotiations?

By now, the parties have scrutinized the contracts that touched upon the ownership, maintenance, and operation of the Deepwater Horizon rig to determine if another party might be financially responsible for the loss. Contractors would be wise to undertake this same analysis–before disaster strikes. Manage your responsibilities before the project starts, including potential liability for another party’s mistakes. This will not eliminate catastrophes, but it will better position you to financially handle them.

Lesson #2: Skeletons Always Come Out of the Closet

Old data never dies in this era of electronic communications. What we say and write has a much longer life than it used to. While a shredder used to capably destroy documents, it is no match for old data that exists in on a distant server.

Investigations of the oil spill will turn over every stone at every company remotely linked to the disaster in search of culpable parties. It would not be surprising if somewhere, on some server, there is an incriminating, deleted email that warned of what, at the time, seemed like an unlikely disaster.

The lesson is to be careful what you email, the files you create, and even the voicemails you leave. The passage of time naturally distorts context, and data will live long beyond employee memories.

Lesson #3: Accidents Happen – Plan for Them

A major reason the BP oil spill became such a disaster is because of the difficulty in capping the broken pipe. While some catastrophes were probably anticipated, the one that materialized did not have a firm response plan.

One thing is certain in the construction industry: accidents will strike eventually. Rigorous attention to safety can prevent the worst catastrophes, but accidents nevertheless happen. Who is your first call? Who is in charge on the ground? And when the dust settles, how do you move forward–first with addressing the accident, and second, by simply getting back to business?

The minutes, hours, and days following a catastrophic accident are no time to plan how your company will respond. That plan should be in place long before disaster strikes so that when it does occur, you and your company will know what steps to follow.

While the BP oil spill seems very remote from the daily dealings of most construction companies, much can still be applied to the industry. Heed the lessons that can be learned from this disaster to help minimize–or avoid–the smaller ones that may happen to your company.

Walker M. Duke is an attorney and founder of Duke Law Office, P.C., in Dallas, Texas, where he specializes in construction law and business litigation. He also writes a construction law blog that can be found at Walker can be reached at (214) 523-9033 or>.

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