Shared Immunity for Third-party Claims in Public Construction Projects
A construction contractor may be entitled to sovereign immunity from third-party claims for liability when performing work pursuant to a government contract. This immunity defense has been recognized in some form by both federal and state courts where the contractor followed the government’s plans and specifications and did not exceeded its authority under the contract or commit some independent act of negligence.
In Yearsley v. W.A. Ross Const. Co., 309 U.S. 18 (1940), a landowner brought suit against a contractor engaged by the federal government to construct several dikes that diverted a river and eroded 95 acres of the landowner’s property. The U.S. Supreme Court held that there can be no liability on the part of a contractor for executing the will of the government, unless the contractor exceeded his authority under the contract. Id. at 20-21. The defense recognized in Yearsley “derives from the principle that where a contractor acts under the authority and direction of the United States, it shares the sovereign immunity that is enjoyed by the government.” Harduvel v. Gen. Dynamics Corp., 878 F.2d 1311, 1316 (11th Cir. 1989).
The decision in Yearsley was, in part, the basis for the government contractor defense later articulated in Boyle v. United Tech. Corp., 487 U.S. 500 (1988). The issue in Boyle was the design of a helicopter manufactured by an independent contractor under a procurement contract with the Navy. The U.S. Supreme Court likened a contractor performing his obligations under a government contract to a federal employee performing an official duty. The Supreme Court noted that it would make little sense to insulate the government from liability when the government acts itself, but not when it acts through a contractor. Id. at 505, 512. The Court stated that in Yearlsey “we rejected an attempt by a landowner to hold a construction contractor liable under state law” and “[t]he federal interest in justifying this holding surely exists as much in procurement contracts as in performance contracts; we see no basis for a distinction.” Id. at 506. Although Boyle, by its terms, related only to design defects in military procurement contracts, other federal courts have used the same analysis to apply the defense to non-military contracts and to service contracts. Compare Hudgens v. Bell Helicopters/Textron, 328 F.3d 1329 (11th Cir. 2003) (stating that the government contractor defense is not limited to military procurement contracts because the analysis in Boyle is equally applicable to other types of government contracts), and Carley v. Wheeled Coach, 991 F.2d 1117 (3rd Cir. 1993) (holding government contractor defense is not limited to military procurement contracts), with Grispo v. Eagle-Picher Ind., Inc., 897 F.2d 626 (2nd Cir. 1990) (holding defense available only to procurement contracts for military products).
In Virginia, the reach of the government contractor immunity defense is untested. In Taylor v. Kellogg Brow & Root Srvcs., Inc., 2010 WL 1707530 (E.D. Va. 2010), the U.S. District Court for the Eastern District of Virginia (Norfolk Division) noted that the government contractor defense has generally been limited to a small subset of product liability cases. The court acknowledged, however, that the defense was dramatically extended by the D.C. Circuit in Saleh v. Titan Corp., 580 F.3d 1 (D.C. Cir. 2009) to bar claims by prisoners who were allegedly abused by private contractors. The Eastern District found the opinion in Saleh persuasive and extended the government contractor defense to service contracts in combatant activities. In 2011, the Fourth Circuit Court of Appeals followed suit and upheld the government contractor defense in a similar claim by prisoners against private contractors. Al Shimari v. CACI Intern, Inc., 658 F3d 413 (4th Cir. 2011). However, the Fourth Circuit cautioned against using of the government contractor defense in performance-based service contracts where there is no governmental exercise of control, which was integral to the reasoning in Boyle. Id. at 431.
There is even less guidance on the application of the defense in Virginia state courts. The Virginia Supreme Court suggested in a footnote that the government contractor defense in Boyle was limited to defects in design. Hazard v. Panco, 240 Va. 438, 442 n. 1 (1990). The Hazard opinion, however, came out just two years after Boyle, and before many federal courts extended the government contractor defense to other types of government contracts. This is significant because most of the federal court decisions that extended the application of the government contractor defense reasoned that Boyle was merely an extension of the U.S. Supreme Court’sdecision in Yearsley, which barred recovery against a private contractor for claims related to work performed in a construction contract.
Although in Hazard the Supreme Court of Virginia questioned the applicability of the government contractor defense, it has separately recognized a similar defense for construction contractors engaged in public contracts with state and local government entities. In Green & Co. v. Thomas, 20 Va. 903 (1965), a landowner brought suit against a contractor seeking damages sustained during blasting that was performed as part of a highway construction project. The contractor defended the action on the basis that the work was performed pursuant to the plans and specifications provided by the highway department and that the blasting was done under the supervision of the highway department. In reversing a judgment for the plaintiff, the Virginia Supreme Court stated that
one who contracts with a public body is entitled to share the immunity of the public body from liability for incidental injuries necessarily involved in the performance of the contract, where he is not guilty of negligence. In other words, when the act or failure to act which causes an injury is one which the contractor was employed to do and the injury results not from a negligent manner of doing the work, but from the performance thereof, the contractor is entitled to share the immunity from liability which the public enjoys, but he is not entitled to the immunity of the public from liability where the injury arises from the negligent manner of performing the work.
Id. at 906. A year later in Finley v. Waddell, 207 Va. 602 (1966), the Court distinguished Green and held that a government contractor could be held liable to a third party for damage caused by actions that, although related to the contract, are not required by or essential to the contract.
Like the federal court decisions, these two Virginia state court decisions indicate some level of shared immunity when the contractor has performed work in accordance with the government’s plans and specifications.