Highlights: Fourth in a series. Two chapters of the Ohio Revised Code control the protection of underground utilities on a construction project. They lay out the duties of the three parties involved—the project owner, the utility owner, and the contractor. To explain some of the complexities of these statutes and how they allocate responsibilities among the parties, Doug Shevelow draws upon his background as both a civil engineer and a construction attorney in this article. If you are an owner, an owner’s agent, an excavation contractor, or just someone with an interest in how construction projects work, you should find this article informative.
In the previous three articles on this topic, the duties of a project owner, utility owner, and contractor under Ohio’s statutes and case law covering underground utility protection on construction projects were covered. Now it’s time to examine the potential liabilities that await parties who fail to live up to their duties. This article focuses on the liability of the owners—the project owner (public and private) and utility owner. In future articles, the discussion will focus on the liability of the contractor and other parties.
But first, it may be helpful to repeat some key points regarding utility protection in general.
The Statutory Scheme
Ohio Revised Code §153.64 governs the protection of underground utilities on publicly funded construction projects. It was passed by the General Assembly in 1982. Ohio Revised Code §§ 3781.25 through 3781.32, specifically governing the protection of underground utilities on private projects, were passed by the General Assembly in 1989. The public works and private works statutes are mostly complementary, but the private works statutes are generally more detailed and comprehensive.
The “2-3-2 Rule”
One helpful way to keep things straight is something I refer to as the “2-3-2 Rule.” There are two main statutes regarding utility protection: public and private. There are three main parties to a construction project: the project owner, the utility owner, and the contractor. And there are two phases to a construction project: design and actual construction. The statutes assign particular duties and liabilities depending on what party is involved with which phase of the project.
When considering a question of what duty someone owes under the law regarding utility protection on a construction project, consider the following questions:
- First ask, “Do the public or private project statutes apply?”
- Followed by, “Who am I—the project owner (or owner’s design professional), utility owner, or contractor?”
- Followed by, “What stage of the project are we dealing with—design or construction?”
When must you follow the statutes?
The most fundamental question is when do the utility protection statutes apply? R.C. § 153.64(A) includes a very broad definition of “public improvement,” and requires that its utility protection provisions be followed during the construction of any public improvement “which may involve underground facilities.”
Another section of the Ohio Revised Code, R.C. § 3785.25(H), includes a very broad definition for “excavation,” including “the use of tools, powered equipment, or explosives to move earth, rock, or other materials in order to penetrate or bore or drill into the earth, or to demolish any structure whether or not it is intended that the demolition will disturb the earth.” So, odds are that if you think a constructionrelated activity may be considered an excavation by the statutes, triggering particular duties on your part, then that is probably so—everything from driving survey lath to excavating with a massive hydraulic excavator triggers certain legal duties.
Who is OUPS?
The Ohio Utility Protection Service (OUPS) is not a utility marking service, but it is many other things. OUPS is a clearinghouse of information, a consortium of utility owners organized under R.C. § 153.64(A) (4) as an “underground utility protection service” and registered with the Secretary of State and Public Utilities Commission.
OUPS takes requests from contractors and project owners for utility locations and relays those requests to the actual utility owner. It is the utility owner who has the legal duty to provide project owners with utility locations for planning purposes and to mark utility locations on the ground during construction. OUPS also preserves the record of these requests. OUPS is very active in educating the public and construction industry about underground utility safety.
Public Project Owner’s Liabilities
Every excavating contractor and every owner of a project that involves underground work should know about Ohio Revised Code Section 153.64(D)(2). The statute requires that if the public project owner fails to mark utility locations on the plans or fails to arrange for the temporary or permanent relocation of utilities “the contractor, upon notification to the public authority, is entitled to an increase to the contract price for itself or its subcontractor for any additional work that must be undertaken or additional time that will be required” as a result of the owner’s failure.
The statute essentially requires that a contractor be given a site free of utility interferences and entitles the contractor to time and money when that is not the case. This is a powerful statutory entitlement for contractors impacted by unforeseen utility interferences.
Private Project Owner’s Liabilities
Private project owners have no such express statutory duty to furnish a site free of utility interferences. However, well established case law requires that a private project owner provide the contractor access to the work. A utility interference arguably could be construed as hindering access to the work.
Utility Owner’s Liabilities—Simple Negligence
The primary question when a contractor suffers damages as the result of a mismark by a utility is what has been damaged, because the law does not treat all types of damages equally. For damage to a contractor’s equipment or personal injury, the utility will likely be subject to damages under traditional tort principals— it will be required to pay for the value of the damaged equipment and the damages claimed by the injured workers. These personal injury damages typically include costs of medical treatment, lost wages, loss of consortium, and pain and suffering.
But potential plaintiffs should be aware of one case where it appeared the plaintiff, an injured worker, had a sure fire case against an electric utility, but failed to make a recovery. In Bede v. Dayton Power & Light Co., 2002-Ohio-2378, the plaintiff, who was installing a fence post, was able to prove that the underground electrical cable that shocked him was mismarked. But the power company was able to demonstrate that it still was not negligent because it was using an experienced operator and well maintained, state of the art equipment. The locating equipment malfunctioned due to a nearby low voltage line over which power company had no control.
Utility Owner’s Liabilities—Economic Loss
What happens when a pipe crew nicks a mismarked gas line and no construction equipment is damaged and nobody is injured, but the contractor loses an entire day of productivity while the gas line is closed down and the danger of explosion is mitigated? Depending on the size of the project, the contractor’s damages could be substantial.
The law refers to these types of damages as purely economic losses, because there is no personal injury or property damage, just a money loss. Purely economic losses are addressed by a legal doctrine referred to as the economic loss doctrine, which generally means that one cannot recover non-contract damages from another party with whom it has no contract if there is no personal injury or property damage involved. The law demands the presence of a contract, otherwise known as contractual privity.
Utility damage cases are almost always subject to the economic loss rule because the contractor generally does not have a contract with the utility owner. Unfortunately for the sake of clarity, Ohio’s appellate courts are split on the issue of the contractor’s ability to recover its economic losses. Two different courts have held that a contractor is entitled to prove that there is a “nexus,” i.e. some other link between the contractor and utility owner that is a sufficient substitution for privity of contract, making the utility owner potentially liable for the contractor’s downtime. See United Telephone v. Williams Excavating (Allen App. 1997), 125, Ohio App.3d 135 and East Ohio Gas Co. v. Kenmore Construction Co., Inc. (Summit App. 2001), 2001 Ohio App. LEXIS 1444.
But the most recent appellate decision, Columbia Gas v. Crestline Paving, (Lucas App. 2003), 2003- Ohio-793, expressly rejected the privity substitute arguments in Williams Excavating and Kenmore Construction, and held that the utility owner was not liable for the costs of the contractor’s downtime.
What happens when equipment damage causes lost production and the lost production damages far outweigh the cost of the equipment damage? Under the theory of indirect economic damages, the contractor may be able to recover. See Queen City Terminals v. General American Transportation Corporation (1995) 73 Ohio St. 3d 609, where in a non-construction case, the Supreme Court of Ohio held that physical damage to a plaintiff’s property allows for recovery of consequential damages such as economic loss despite the lack of a contract.
In future articles, the liabilities of the contractor, the owner’s engineer, and even the utility owner’s third party locating service will be explored. In the meantime, before you dig, call OUPS!