There has been a wave of looting in the City of Philadelphia over the last month. Unlike previous events across the United States—where these episodes seemed to be somewhat spontaneous reactions to external occurrences—it has become apparent to law enforcement that there is no clear nexus between these incidents and other happenings. It is assumed that the attacks are coordinated and that the details are shared with those involved in carrying out the plan on social media. Retail establishments and small business owners have been hit hard. While some of the perpetrators involved are looking for the latest iPhone for “free,” others are stealing for purposes of resale to make money. This raises the following question: What happens if looters decide to raid a construction site for similar purposes?
At the outset, everyone involved in a construction project has some responsibility to protect that site as a default setting. The overall site protection plan is then usually shifted into the hands of the general contractor (GC) or construction manager (CM) under the terms of the contract between the GC/CM and the owner. This responsibility can be, and often is, passed down to the subcontractors depending on the scope of work and the size of the project site. At a minimum, most contractors and subcontractors have responsibility to “protect” their own materials, equipment, and work in place. Responsibility for looting, then—as with any other project risk—is allocated in the contract documents.
These contract provisions have traditionally envisioned the risk of negligence and not intentional criminal conduct. This is an important distinction, as the practical standards of what a party can be expected to guard against are different; and this standard has a direct connection to whether an insurance product is available to cover such losses. While the risk of someone looting a construction jobsite remains low, the cost of such an event is high enough that companies should evaluate this risk when they take on a project. Planning correctly can prevent the problem from even happening; but, if it does, a proper risk assessment will help mitigate the losses.
The first step is to do your due diligence on the project. Will the work be performed in an area of high crime? Will the project schedule and sequencing require that unincorporated materials and equipment be on-site for long periods of time? How easy will it be to access the jobsite? Will individuals be able to view what is on the jobsite from outside the fence line? Will there be a security plan for the site (e.g. guards, cameras)? These are just some of the questions worth considering.
Once you have evaluated the potential risks, practically speaking, it is time to create a contract that takes those risks into account. The contract documents should clearly outline who is responsible for site security and what steps will be taken to protect the site. The plan should include details for how unauthorized personnel will be kept off the site; if, and where, cameras will be used to discourage unlawful activity; whether a security guard or guards will be used (and if those guards will be armed); placement of alarms or alarm systems; and how materials and equipment will be stored on-site. Keep in mind that lowering the risk of criminal conduct causes other secondary challenges that will need to be addressed in the contract documents. Higher security levels create more inefficiency, which adds to cost and time. So, adjust project pricing and schedules accordingly.
It is also important to check into what insurance products might be available for looting and other similar conduct. Fidelity bonds and the employee dishonesty coverages that can often be included in general liability insurance do not cover this kind of loss, so do not assume you are covered with the insurance you already have in place. If and when you have a policy that works, you can then turn your attention to ensuring the indemnity clauses allocate responsibility in an equitable way for any event that might occur. Risk should generally be shared and allocated in some way that correlates with who can control it effectively.
In the end, understanding who is responsible for looting is the same analysis as any other project risk. It is best to understand the nature of the risk and the likelihood it might materialize into an actual incident. Consider who is in the best position to control the risk and put a good plan in place to prevent that risk from becoming a reality in the first instance. And, of course, the actual looter should be held responsible, so ensure you report what happens to
law enforcement.
Once you have evaluated the potential risks, practically speaking, it is time to create a contract that takes those risks into account. The contract documents should clearly outline who is responsible for site security and what steps will be taken to protect the site.
Josh Quinter is a commercial litigation attorney, with a focus on construction law. He is also a member of the board of directors and a department chair at his law firm, Offit Kurman. Active in a number of construction trade and business organizations, Quinter is past president of the Mid-Atlantic Chapter of the Metal Building Contractors & Erectors Association (MBCEA), serves on the MBCEA national board, and is the organization’s general counsel. He can be reached at jquinter@offitkurman.com.
