The Contractor's Liability for Loss Caused to the Orderer by the Orderer's Employee

What happened?

Industrial company A had ordered contractor B to perform electrical work at the orderer’s production plant. The tasks included maintenance work on earthing wires of power poles and replacing a lightning conductor with a new one. While this work was underway, the manager at A’s power plant and B’s supervisor had agreed over the phone that B was allowed to use A’s truck-mounted boomlift and its driver, free of charge. However, the parties had not agreed on work supervision or monitoring resposibility regarding the driver, or liability to compensate damage regarding the use of the boomlift.

A’s Manager had brought the driver and the truck-mounted boomlift to an agreed place at an agreed time, where B’s fitters but no supervisors were present. Having discussed the boomlift’s ability to work in the narrow facilities with the fitters, the boomlift driver then, on his own initiative, began hoisting the boomlift towards the power lines. Since the wires were live, ground contact occurred as a result of this action. The earthing cable was damaged and there was a power cut at the plant, the resulting damage rising to approximately EUR 200,000.

Technically, the damage was caused by the actions of the boomlift driver. In the courts’ opinion, he was a competent worker, although guilty of negligence in this case. The accident also happened because the voltage was not cut off in the power line in question. As a matter of fact, it was agreed that the work was not to start until A had taken care of that and given B permission to begin working. However, the driver was unaware of this. He was informed that his work input was to be at B’s disposal, but at the time of the accident, B had not managed or supervised the work in any way. Neither party had told the driver of the voltage and what was agreed regarding it. It would not have been possible to perform the work at that point.

Judicial assessment: whose work was performed?

In A’s opinion, the driver was working under B’s management and supervision. B had not paid sufficient attention to this supervision and was thus liable for the damage, even though the driver was employed by A.

According to the Tort Liability Act, the employer is liable for any damage caused by an employee’s negligence. However, in this case, it was a question of liability based on an agreement between the two parties, to which the Tort Liability Act does not apply, giving way to what was agreed between the parties. The parties had agreed on the matter verbally but made no agreements concerning liability.

All three judicial instances – the District Court, the Court of Appeal and the Supreme Court – were unanimously of the opinion that contractor B was liable for the damage caused to orderer A. B had neglected to manage and supervise the work performed with the truck-mounted boomlift. However, one of three members of the Court of Appeal would have dismissed the claim. In that member’s opinion, the work management responsibility had not transferred from A to B yet, since permission to begin the work had not been issued.

According to the grounds presented by the Supreme Court, in a contractual relationship such as this, liability in such a case of loss is defined on the basis of which party’s contractual liabilities required the use of the boomlift and whose responsibility it was to tell the boomlift driver about the voltage, in relation to the order of proceeding with the work and cutting off the voltage. B had requested the use of a boomlift and its driver from A and justified this request by stating that the boomlift was needed in order for traffic not to be closed on a road within the plant area during the handling of wires crossing the road. Furthermore, B’s representative had reported that he was planning to use the lift for other tasks as well. Hence, the work performed with the boomlift was work related to B’s electrical work. Since it has not been established that the parties would have agreed separately on the performance of these tasks or the management of this work, the work was part of the contractor’s auxiliary tasks performed to meet his contractual obligations. Therefore, responsibility for performing these auxiliary tasks in the proper manner, as well as the related work management and supervision resposibility, rest with the contractor. This evaluation is not affected by the fact that the truck-mounted boomlift belonged to the orderer and the driver was employed by the orderer, since the vehicle was in the appropriate condition and its driver was competent.

What can we learn from this case?

The cornerstones of risk management include identifying risks and minimising them, either by removing them, reducing the risk or transferring liability, for example, by taking out insurance.

In this case, the parties’ contractual performance and safety-related issues were probably very clearly agreed on in the original contract. There was no dispute about that matter. According to the principle of contractual legislation, when performing a contractual duty, each party is responsible for the assistants and subcontractors used and for instructing them. The end result of the court’s decision was clear after having analysed and established to which party the work causing the damage belonged. The case shows how important it is to agree clearly on liabilities even when, for practical reasons, the contractor engages in efficient cooperation with the orderer at the worksite.

The most important safety-related tasks of the orderer include the compiling of the worksite’s joint safety instructions and coordinating the operations of parties working there. The justifications of this court case do not refer to these duties. The situation might have been different had the loss involved bodily injury rather than the orderer only incurring a property and business interruption loss.

If changes are made to the previously agreed distribution of work and the duties of contractual parties, the following should be done:

• agree clearly on the distribution of liabilities
• document any changes in contract documents or minutes
• take care of communication within the worksite organisation and possibly also through special actions
• take changes into account in the management and supervision of the work.

From the point of view of liability insurance, it is difficult to take a stand on this case simply on the basis of the report of the events which occurred. A contractor must have liability insurance against losses, but so must the orderer. In properly made contracts, liability insurance is required of both parties. When performing work in running factories, the contractor must also be aware of the content of the orderer’s property and business interruption insurance and, if necessary, agree with the insurance company on how the different insurances shall apply when loss affects existing property. 


Matti Sjögren