The Best Intentions
Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.
Workers with the O’Hanlon Construction Company are used to seeing the white pickup truck with the green municipal seal driven by Yakima County code inspector Ty Davis on the job site. Davis is a 25-year veteran of the position. So when Davis drives up to the site of a municipal tunneling project being run by O’Hanlon, no one is particularly surprised or concerned.
Affable, fit and seemingly inseparable from his mobile device and a Styrofoam cup of coffee with cream and sugar, Davis made his way from the pickup truck, waving a friendly hello to the foreman on the job, Hector Lopes.
“Hector my man, how are we today?” said Davis, walking up to the where Lopes was overseeing a crew of three that was building the forms to lay an asphalt hiking and biking path on the floor of the tunnel.
“I’d be a lot better if those Seahawks would play some run defense,” said Lopes, pausing from his work to shake Davis’ hand.
“Ahh, they’ll get it together, it’s early yet,” Davis said.
Davis nods to the crew doing the concrete work in the tunnel.
“How’s it goin’ down there?” he asked.
“Oh, it’s goin’,” said Lopes. “The rain ain’t helpin’, but we’re trying to get it done on time.”
“You mind if I go down and have a look?” said Davis.
“Sure thing,” said Lopes. “It’s break time, anyway.”
“Hey guys!” Lopes called to the crew. “Break. Ty’s comin’ down for a look, too.”
The crew complied, following Lopes up to the food trucks across the street.
Davis walked carefully down the existing bike path to the tunnel floor. Lopes no sooner got to the other side of the street when a horrendous noise shattered the calm of the morning. Lopes sprinted back to the site and couldn’t believe what he saw when he looked down to the tunnel.
“Ty!” Lopes screamed.
A portion of the tunnel wall had given way, burying Ty Davis under two tons of concrete, mud and water.
John O’Hanlon, the son of the company founder and a close friend of Ty Davis, was overwhelmed by Davis’ death. Even though the culpability for a faulty soil analysis could lie with many parties, O’Hanlon felt he must formally communicate his grief and his commitment to do the right thing by sending an e-mail to county officials.
“We will do everything in our power to see that Ty Davis’ family is provided for,” the e-mail read, in part.
“Words cannot express my shame and horror that mistakes our company made played a part in the death of my beloved friend,” the distraught e-mail concluded.
The same evening the e-mail is received, the head of the Yakima County Board of County Commissioners was interviewed on television saying that executives with long-time county contractor O’Hanlon Construction Company were devastated at their “failure” and had vowed to do what they could to make things right.
Sharon Holmes, the retail broker with whom O’Hanlon placed their professional liability coverage, was working on a renewal when something she saw in her e-mail inbox caused her to stop. It was a construction risk newsletter that contained news of the latest legal findings, settlements and other developments in the construction risk management world.
“What?” Holmes said as she clicked on the e-mail, her attention having been caught by the word “O’Hanlon” in the subject line.
“Contractor admits fault in death of county employee …” Holmes said, reading aloud.
“They can’t be serious,” she said out loud, reaching for her phone and hastily dialing a number.
“John, it’s Sharon Holmes,” Holmes said.
“I’m sorry … who?” John O’Hanlon said.
“Sharon Holmes, I’m your professional and general liability insurance broker,” Holmes said after a pause.
“Oh … yeah … what can I do for you, Sharon?” O’Hanlon said.
“What you can do for me …” Holmes began, and then stopped herself from saying something she might regret.
“Ummm …” she said, collecting her thoughts.
“John, I’m looking at an industry newsletter in my inbox that refers to you making a statement to public officials that seems to take responsibility for the death of a code inspector at one of your job sites.”
“Huh? Well, yeah. I had to say something, Ty was my friend. We’ve been working with Yakima County for more than 20 years,” O’Hanlon said.
“John, that may be true, but I wish you had consulted with me before you made any statements,” Holmes said.
“The truth is the truth, he died in our tunnel,” O’Hanlon said.
Holmes again composed herself, seeking the right delivery.
“John. I’m sorry you lost a friend. I’d be upset too if I lost a friend. But I need to meet with you and Billy [O’Hanlon, John’s brother and the company CEO] on this. We need to go over the insurance coverage implications as soon as possible.”
“Well, Ty’s funeral is today, so today is out,” O’Hanlon said.
“Tomorrow then, can you do it tomorrow?” Holmes asked.
“Sure … tomorrow,” O’Hanlon said weakly.
Holmes hung up with O’Hanlon and immediately dialed the Seattle offices of a major national construction risk carrier.
“Hey, Brian, it’s Sharon Holmes.”
“Hey Sharon, I had a feeling I’d be hearing from you this morning,” said Brian Snyder, the regional claims executive for the carrier.
“So you saw it,” said Holmes.
“Yep. Just hit my inbox this morning. I can check the policy … as can you … but I’m pretty sure what it’s going to say,” Snyder said.
“We go four days without being notified of a job site death, I’m pretty sure coverage will be denied,” Snyder said.
“I’ll check the policy,” Holmes said weakly.
“Suit yourself. Sorry about this,” Snyder said in conclusion.
A Direct Hit
Ty Davis’ widow and children filed a lawsuit against O’Hanlon Construction, Yakima County and three subcontractors alleging that their failure to conduct competent soil testing resulted in the inspector’s death.
An investigation commissioned by the Davis family concluded that the soil study ordered by O’Hanlon on behalf of the county failed to take into account possible shifts in the water content of the project soil due to variations in rainfall and the municipal water table.
Upon notice of the lawsuit, O’Hanlon’s carrier told the company that it had no plans to provide for the company’s defense. A recorded, broadcast admission of guilt and a failure to notify the broker or the carrier in a timely manner effectively voided the company’s professional liability coverage, said the carriers’ attorneys, in a letter to Sharon Holmes and the O’Hanlons.
“We should sue them! How were we supposed to know?” Billy O’Hanlon said to his brother John, after the grief of Ty Davis’ death faded and they started taking a more pragmatic assessment of their situation.
“Besides, being transparent in our dealings with the county has been a hallmark or our relationship. There’s no value in that?” Billy thundered.
At his older brother Billy’s urging, John O’Hanlon called Sharon Holmes and broached the topic of O’Hanlon disputing the carrier’s refusal to pay for a legal defense.
“I don’t see how you could win, and I think you’d be throwing good money after bad,” Holmes said.
“I strongly advise against it. I’m not trying to be harsh, John, but you should not have said what you said without A, talking to me or B, talking to an attorney,” Holmes said.
O’Hanlon’s attorneys mount a game defense, pointing to the contractor’s long, and nearly blemish-free service record with the county and good documentation of transparency being a hallmark of the company’s business dealings.
All to no avail.
A jury found O’Hanlon, the three subcontractors, and the county liable for the death of Ty Davis to the tune of $8 million in loss of income, pain and suffering.
O’Hanlon, which thought it was doing the right thing by apologizing, and was the only entity to apologize, is the only defendant uncovered by insurance.
O’Hanlon is out of pocket to the tune of $4 million, not including court costs.
Risk & Insurance® partnered with XL Group to produce this scenario. Below are XL Group’s recommendations on how to prevent the losses presented in the scenario. These “Lessons Learned” are not the editorial opinion of Risk & Insurance®.
1. Contact your broker first: At the first sign of trouble on any project, promptly contact your broker to report the circumstance. Late, or non-reporting of an incident, large or small, can result in your Professional Liability coverage being denied.
2. Be mindful of your actions post-incident: Understand that taking actions to explain, admit fault, mediate, finger point, or recommend fixes or alternatives to a circumstance prior to notifying your broker may also result in your coverage being denied.
3. Have a communication plan: Create a circumstance reporting protocol within your organization to be followed by all employees, including designating a “quarterback” to coordinate external communications.
4. Align your philosophy with your coverage: Ensure your own best practices are not in conflict with the terms of your insurance coverage.