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First Department Confirms: In NYC Excavation Work, the Party Digging Bears the Risk of Protecting the Neighbor

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

The Appellate Division, First Department’s decision in 1992 Third Realty LLC v. Third Avenue NY Realty LLC is an important reminder for developers, contractors, adjacent property owners, design professionals, and insurers involved in New York City excavation and foundation work.

The Court held that an adjoining property owner could not be held liable in negligence for a developer’s construction delay damages allegedly caused by the poor condition of the neighboring building. The key takeaway is straightforward: under NYC Building Code § BC 3309.4, the party performing soil or foundation work bears the duty, at its own expense, to preserve and protect adjoining structures. That duty applies even where the adjoining building is allegedly old, unstable, defective, or non-code-compliant.

The case involved neighboring Manhattan properties. The developer began excavation and foundation work for a new building. The adjacent owner alleged that the work, including pile driving and dewatering, caused its nine-story building to settle and lean. The New York City Department of Buildings issued a stop work order identifying a potential hazard from soil or foundation work affecting the adjoining property and directing the developer to provide engineering remedial measures.

The developer responded with a negligence counterclaim against the adjoining owner. It alleged that the adjoining building had been defectively designed, poorly maintained, and left in an unsafe condition, which allegedly caused or contributed to the stop work order. The developer sought at least $16 million in delay-related damages. The trial court allowed that counterclaim to proceed. The First Department reversed and dismissed it.

The First Department held that the adjoining owner did not owe the developer a duty to design, construct, or maintain its building in a way that would protect the developer’s excavation project from delay.

The Court emphasized that § BC 3309.4 places the relevant duty on the person performing the excavation or foundation work. In other words, the developer — not the neighbor — controlled the excavation, the protection means and methods, the remedial measures, and the risk created by the project. Imposing a reciprocal duty on adjoining owners would conflict with the Building Code’s allocation of responsibility and could expose property owners to unpredictable, insurer-like liability for future neighboring projects.

The Court also rejected the developer’s attempt to recover purely economic delay damages in negligence. New York negligence law generally does not allow recovery for purely economic losses absent personal injury, property damage, contractual privity, or another recognized special duty. The developer claimed delay damages, not injury to person or property. That was not enough.

This decision strengthens the position of adjoining owners facing claims that their building’s preexisting condition delayed a neighboring development project. A developer cannot avoid its excavation-protection obligations by arguing that the neighboring building was already defective or unstable. The worse the condition of the neighboring building, the greater the practical burden on the excavator to plan, monitor, and protect against movement.

For developers and contractors, the lesson is equally direct. Before excavation begins, the project team should make sure it has a strong record of:

  • preconstruction surveys;
  • license/access agreements;
  • geotechnical and structural review;
  • vibration and movement monitoring;
  • support of excavation plans;
  • dewatering protocols;
  • DOB filings and correspondence;
  • insurance and indemnity protections; and
  • emergency stabilization procedures.

License agreements with adjoining owners should be carefully drafted to address access, inspections, monitoring, professional fees, insurance, indemnity, emergency work, DOB response obligations, and dispute procedures. A vague license agreement is not risk management; it is just a fight with better stationery.

The First Department’s message is clear: in New York City excavation and foundation work, the party digging bears the burden of protecting adjoining structures. A developer generally cannot shift delay damages to the neighbor by claiming that the adjacent building was old, defective, or unstable — especially where the developer seeks only economic losses.

Breaking News: Federal Court Enjoins New York’s Off-Site Custom Fabrication Prevailing Wage Amendment

Written by Gregory J. Spaun on . Posted in Legal Alerts.

At the end of last year, I wrote about New York’s continuing expansion of prevailing wage obligations. What began as a requirement tied to traditional public work has, over time, extended into private projects receiving public benefits, certain hauling operations, renewable energy projects, contractor registration requirements, and electronic certified payroll filing obligations. Of all these developments, the one that caused the most immediate concern in the construction industry was the amendment extending New York prevailing wage requirements to certain off-site custom fabrication performed for public works projects.

That amendment was scheduled to take effect on June 18, 2026, and was to apply to contracts put out to bid on or after that effective date. In general terms, the amendment would have required prevailing wages to be paid to workers performing covered custom fabrication for a New York public works project, even when that fabrication occurred away from the project site, and even when it occurred outside New York—or the United States. The applicable rate would have been the prevailing wage rate for the New York county where the public work project is located, not the wage rate where the fabrication facility is located.

The statute covers custom fabrication that is “solely and specifically designed and engineered for a specified public work project”. It identifies, among other items, exterior or interior wall panel systems, woodwork, electrical, plumbing, heating, cooling, ventilation or exhaust duct systems, rebar cages, and mechanical insulation. A later chapter amendment narrowed the definition by removing the prior open-ended phrase “but not limited to”, and by excluding components, portions, modules, or materials that are otherwise stocked or readily available absent a specified public work project. Even so, the statute still prefaces the list with the word “including”. Because of these issues, the practical line between a covered custom-fabricated item and an ordinary supplied component remains far from self-evident.

The compliance problems were obvious. Public owners and contractors would have needed to determine, at the bidding and procurement stage, whether off-site work qualified as covered custom fabrication. Contractors would then have had to push New York prevailing wage, certified payroll, and registration requirements down the supply chain—including to fabricators located in other states or foreign jurisdictions. That raises real-world questions that the statute did not adequately answer: How is a New York contractor supposed to compel an out-of-state or international supplier to register with the New York State Department of Labor? How are certified payroll obligations enforced against a supplier with no New York presence? How should a fabrication shop segregate covered and non-covered work when identical components may be manufactured side by side for public and private projects?

Those concerns are not merely administrative. The amendment also presents serious constitutional questions because it attempts to regulate work performed (commerce) outside New York and, in some instances, outside the United States. Unsurprisingly, a coalition of construction industry organizations and contractors, led by the Associated General Contractors of New York State, commenced a federal lawsuit challenging the amendment, and sought emergency injunctive relief before the law took effect.

On May 28, 2026, the United States District Court for the Northern District of New York entered a Consent Order for Preliminary Injunction. The injunction prevents the off-site custom fabrication amendment from taking effect while the case proceeds through the initial motion practice. In practical terms, the amendment is on hold. It has not been upheld, struck down, or rewritten by the Court. It simply cannot be enforced at this time.

Under the Consent Order:

  1. The New York State Department of Labor and the New York Attorney General are barred from enforcing the amendment;
  2. Public owners, including state agencies, municipalities, and school districts, and private owners whose projects are otherwise subject to New York prevailing wage requirements, are not required to comply with the amendment or include its terms in their contracts;
  3. General contractors, subcontractors, fabricators, and other project participants, regardless of location, are not required to comply with the amendment or any of its conditions; and
  4. The State is barred from taking enforcement action, including civil penalties, debarment proceedings, or criminal referrals, based on alleged noncompliance with the amendment.

The injunction is good news for contractors, subcontractors, fabricators, taxpayers, and (ironically) public owners. Without the injunction, the amendment would have created immediate uncertainty in bidding, procurement, supply-chain management, certified payroll compliance, and contract administration. It also would have put contractors in the unenviable position of trying to impose New York public work obligations on suppliers who may have no operational connection to New York other than supplying a component ultimately used on a New York project.

That said, the injunction is only the first procedural step. Contractors should not treat it as the final word. The lawsuit will proceed, and the Court may ultimately uphold the amendment, invalidate it in whole or in part, or leave room for the Legislature to revise the statute. For now, the amendment is suspended until further order of the Court.

The takeaway is simple: the off-site custom fabrication prevailing wage amendment is not presently enforceable, but the issue is not over. Contractors bidding New York public work should continue to monitor the litigation, review bid documents carefully, preserve flexibility in subcontract and purchase order language, and avoid assuming that the injunction permanently eliminates the risk.

If you have questions about how prevailing wage requirements may apply to your company or your projects, please contact Gregory J. Spaun at gspaun@wbgllp.com or call (914) 607-6425. And, as always, stay tuned for further developments.

No License, No Lien – New York Court Bars Unlicensed Contractor from Recovery

Written by Brittany Lombardi on . Posted in Legal Alerts.

A Brooklyn plumbing subcontractor just learned the hard way that performing licensed work without a license, even with the owner’s apparent knowledge is a dead end in New York. In Glory R Construction Inc. v. 651923 18 Ave LLC, the Kings County Supreme Court vacated Glory R Construction’s $150,000 mechanic’s lien and dismissed its entire lawsuit, holding that because Glory R lacked the required plumbing and fire suppression sprinkler licenses, it had no right to recover anything—not under contract, not in quantum meruit, and not through a mechanic’s lien. 

The owners of a Brooklyn construction project hired New York H & Y Construction as general contractor, and H & Y subcontracted the plumbing and sprinkler work to Glory R. The problem was that Glory R did not hold the New York City licenses required to perform either type of work. According to Glory R, everyone involved knew that from the outset. Glory R claimed that before the project began, the parties agreed that Glory R would retain a licensed plumber to supervise the work and provide the necessary “license coverage,” with the contract price adjusted accordingly. The owners denied any such arrangement existed. 

After a payment dispute arose, Glory R filed a $150,000 mechanic’s lien, and later commenced a foreclosure action asserting claims for breach of contract, quantum meruit, account stated, and diversion of trust funds. 

The court ultimately found that none of those claims could survive because well settled case law takes an uncompromising approach to licensing violations in regulated trades. Citing a long line of appellate authority, the court reiterated that an unlicensed contractor performing work requiring a City license cannot recover payment under any theory. It does not matter that the owner allegedly knew of the licensing defect, nor does it matter that licensed professionals may have supervised the work, or that the work was actually completed. 

Glory R attempted to avoid dismissal by relying on the Court of Appeals’ decision in Charlebois v. Weller Assoc., which recognized a narrow exception where a contract expressly contemplates that a licensed professional will perform the regulated portion of the work. The court rejected that comparison because the subcontract here expressly required Glory R itself to be “lawfully licensed.” Ultimately, this distinction mattered. In Charlebois, the contract openly incorporated the licensed professional arrangement into the deal from the outset. Here, the subcontract treated Glory R itself as the properly licensed entity responsible for the regulated work. The alleged arrangement involving licensed plumbers existed only as a claimed side agreement outside the written contract. Because the subcontract also contained an integration clause stating that the written agreement represented the parties’ full understanding, the court refused to recognize the alleged supervision arrangement as a valid workaround. 

In practical terms, the court viewed Glory R as having held itself out contractually as the licensed plumbing subcontractor, even though it admittedly lacked the required licenses. That prevented Glory R from fitting within the limited Charlebois exception. 

Glory R also leaned heavily on the another appellate court’s decision in Matter of Migdal Plumbing & Heating Corp., which held that an unlicensed plumbing subcontractor on a commercial project was not automatically barred from enforcing contractual rights. That Court in t reasoned that the New York City plumbing licensing scheme imposed civil and criminal penalties for unlicensed work but did not expressly require forfeiture of payment rights. That court also distinguished plumbing licensing rules from consumer-protection statutes governing home improvement contractors, where the Legislature specifically barred unlicensed contractors from suing for payment. The Kings County court acknowledged the differing approaches,  but emphasized that it was bound to follow the stricter precedent. 

The court ultimately vacated the mechanic’s lien, dismissed the foreclosure action and contract claims, and canceled the lien discharge bond. 

The decision is a strong reminder that there is no practical workaround for licensing requirements on regulated New York City construction work. Contractors performing plumbing, fire suppression, electrical, HVAC, or similar licensed trades must hold the required license themselves. Using a licensed subcontractor or supervisor will not cure the problem, and an owner’s knowledge or participation in the arrangement will not save an otherwise unenforceable claim. 

If you would like more information regarding this topic please contact Brittany Lombardi at blombardi@wbgllp.com or call (914) 607-6439

Taking Steps to Stay Ahead of Electrical Hazards When Working with High-Voltage on Aerial Cable

Written by Costas Cyprus on . Posted in Safety Policy.

Electrical safety remains one of the most unforgiving challenges in the construction and utility sectors. The decision by the Occupational Safety and Health Review Commission in the matter of Secretary of Labor v. Armstrong Utilities Inc. is a reminder of what can happen when routine telecommunications work intersects with energized electrical infrastructure. Although the Commission ultimately vacated the citation, the facts easily resonate across the construction industry: the margin for error around high-voltage lines is incredibly thin and the strength of a safety program is tested in real-time.

The case involved a four-man Armstrong  crew installing new fiber-optic cable along a mile-long stretch of rural roadway in Ohio. The work was standard in many respects. One employee operated the bucket truck, another handled the cable spool, a foreman managed traffic and the aerial lineman worked in the bucket attaching fiber to a pre-installed steel strand. The terrain was wooded, the poles were mixed between I-poles and T-poles, and the crew had to use a weighted ball and mule tape to get the line through trees. This was all part of their normal process. Yet even familiar tasks become dangerous when performed under energized lines. A 7.8-kilovolt primary line ran above the telecommunications space, and the lineman ultimately contacted it, sustaining electrical shocks and burns. 

The cited safety standard that was at issue was §1910.268(b)(7), which requires that an employee maintain a 24-inch minimum approach distance (MAD) “unless” one of the provision’s enumerated exceptions has been implemented: the employee is wearing insulated gloves or otherwise guarded; the lines are insulated or grounded; or  the lines are deenergized. The main question for the Commission was whether Armstrong could have known about the violative condition with reasonable diligence. To prove a violation of the cited safety standard,  the Secretary had to show the standard applied, the minimum approach distance was breached, employees were exposed and the employer knew or could have known about the hazard.

On the first two elements, there was no real dispute. Telecommunications field work of this nature falls under §1910.268, and not the construction electrical standard (for which OSHA had initially cited Armstrong). Moreover, because the minimum approach distance for voltages between 2kV and 15kV is 24 inches, actual contact is definitive proof of noncompliance. The employee was exposed to a deadly hazard the moment he touched the conductor.

The dispute centered on employer knowledge. The terrain created a changing clearance between the energized line and the steel strand. Measurements taken later showed 10 feet, 5 inches of separation at one pole, 5 feet at the next, and 4 feet, 9 inches at mid-span. Although the Administrative Law Judge reasoned that this significant change in clearance should have been detected and communicated, the Commission disagreed, noting that the stipulated distances still exceeded the 24-inch requirement and that the foreman’s pre-work inspection reasonably indicated adequate clearance. 

The foreman drove the run, reviewed blueprints with the crew, and discussed the T-pole section and the trees. He emphasized caution in the area where the terrain changed. The crew was experienced, and the injured lineman had over two decades of field work, including extensive training on energized-line hazards and minimum approach distances. The Commission emphasized that specific instructions must match the training and experience of the employee, and nothing in the record suggested the lineman lacked the ability to judge his clearance or had any history of unsafe conduct. The Commission found that the foreman had reasonably relied on both the crew’s experience and the inspection performed that morning. Because there was no evidence the company knew or should have known the lineman would breach the approach distance, the citation was vacated. 

For the construction industry, the lessons go beyond the legal outcome.  

First, approach-distance discipline must be absolute. Whether the governing standard is a construction electrical rule or, as in this case, the telecommunications standard, the hazard is the same. A minimum approach distance is a line that cannot be crossed, and every crew member must treat it as non-negotiable. Even when clearances exceed the minimum, the slightest misjudgment, footing issue, or unexpected boom movement can erase the margin instantly.

Second, terrain changes matter. Variations in elevation between poles can alter the vertical relationship between energized lines and the work area. Hills, dips, and tree canopies can distort sightlines. The Armstrong case involved a shift of more than five feet between poles, which the judge found “easily observable,” though the Commission viewed it differently. Regardless, construction employers benefit from incorporating terrain-specific observations into pre-task planning. A simple reminder to workers that clearances may vary, even along the same run can prevent a moment of complacency.

Third, pre-work inspections must be deliberate. Here, the foreman rode the run, visually evaluated the clearances, reviewed blueprints, and issued instructions. The Commission found this adequate, but the decision still underscores how important documentation, communication, and follow-through are when a crew is working under energized lines. Even if a hazard seems obvious, articulating it reinforces awareness.

Finally, a strong safety program is not a guarantee against field-level decisions. Armstrong’s safety manual contained clear rules matching the regulation. Employees received classroom and hands-on training, recurring bucket-truck certification, and monthly safety meetings. Even with that foundation, injuries can occur, especially when work involves close proximity to overhead power lines. This makes on-site real-time supervision, hazard recognition, and ongoing communication critical.  Moreover, consistent reinforcement of basic electrical safety principles remains essential, regardless of tenure and experience. 

Workers near energized lines should take this decision as an opportunity to reinforce electrical-hazard awareness, examine how field conditions influence approach distances, and ensure every employee from the most junior apprentice to the most seasoned lineman treats energized infrastructure with the caution it deserves.

About the author: Costas Cyprus, Esq. is a partner at the firm of Welby, Brady & Greenblatt, LLP, in White Plains, NY.   He practices construction law and commercial litigation and can be reached at 914-428-2100 and at ccyprus@wbgllp.com. The articles in this series do not constitute legal advice and are intended for general guidance only.

Contractor Found Liable for Willful Exaggeration of Lien

Written by Frank Gramarossa on . Posted in Legal Alerts.

The mechanic’s lien is one of the most fundamental instruments to secure a contractor’s right to payment.  However, many contractors are unaware of the potential exposure that lie beneath them if they should file a defective mechanic’s lien.  What happens when a contractor fails to follow the regulations set forth under the Lien Law?  The lien becomes subject to dismissal and, in certain instances, may subject the lienor to civil liability for willful exaggeration.  The issue of willful exaggeration was recently analyzed by the New York Supreme Court, New York County, in a case captioned G Builders II LLC. v. Great Midwest Ins. Co., 2025 NY Slip Op 35010[U] [Sup Ct, NY County 2025]).

In G Builders II LLC., Summit, as owner, entered into a lease with a tenant by which Summit was to construct and operate a food hall at a property in the Financial District of Manhattan.  Plaintiff, G Builders II (“Plaintiff”), was hired as the general contractor, and a dispute arose over the amount due to Plaintiff.  Plaintiff filed a mechanic’s lien in the amount of $1,484,238.29, and later filed an action to foreclose on the lien.  Defendants served a demand for itemized statement pursuant to Lien Law §38, to which Plaintiff responded by itemizing its purported costs upon which the Lien was based. Afterwards, Plaintiff filed partial releases of Lien to reduce the Lien amount to $1,230,434.90. In response to the foreclosure action, Defendants filed a counterclaim for willful exaggeration of lien under Lien Law §§39 and 39-a.  

After discovery, Defendants filed a motion for summary judgment to dismiss the complaint,and on its willful exaggeration counterclaim, on grounds there was no basis for Plaintiff’s itemization of its Lien, which was calculated as follows: $545,035 owed to subcontractors; (ii) $99,660 in labor costs (ii) $385,374.36 for insurance and bonds; (iv) $184,079.72 for overhead and lost profits; (v) $13,499.18 for general computer costs; (vi) $41,100 for pre-construction services; (vii) $47,294.38 for COVID-related costs; (viii) $43,200 for metals; and (ix) $111,495.65 for increased material costs.

The Court found that Plaintiff based its calculations on a percentage of completion method, which was inappropriate given the contractual obligations for which Plaintiff was to submit requisitions for payment.  In addition, Plaintiff did not claim to have started physical construction,and it could not provide proof that any of its subcontractors were actually paid.  Furthermore, Plaintiff failed to substantiate its other itemized costs to comport with the contractual obligations for submitting requests for payment, specifically the provision stating “the Contractor shall submit [documentation] to demonstrate… payments already made by the Contractor on account of the Cost of the Work.”  Based on the substantial lack of documentation and substantiation of costs used in calculating the lien, the Court found that this was “not a case involving a mere inaccuracy or honest mistake in setting the amount of the lien”.  Based on the fact that Plaintiff included costs not allowed by the contract, combined with a “general lack of records evidencing costs and number of alleged good faith errors”, the Court concluded that Plaintiff willfully exaggerated its Lien.

As a result, Defendants’ motion was granted, the complaint was dismissed, and the lien wasordered to be discharged.  The presiding justice also ordered a subsequent hearing to determine the amount of damages to be awarded under Lien Law §39-a, which provides that a lienor who files a willfully exaggerated lien is liable in damages for a) the amount of the premium for a bond discharge the lien, b) reasonable attorney’s fees for services in securing the discharge of the lien, and 3) an amount equal to the difference by which the amount claimed to be due exceeded the actual amount due.  As such, Plaintiff’s exposure here is quite significant given the Court’s findings.

While exaggerating a mechanic’s lien will certainly get someone’s attention, this case shall serve as another harsh warning to contractors to first understand its contractual rights and obligations, and, if one should seek legal remedies to secure its right to payment, one must understand what types of costs are permitted under the Lien Law.  A failure to understand these legalities—and that exaggerating a mechanic’s lien is a really bad idea—may lead to serious consequences as seen in G Builders.  Consultation with an experienced construction attorney is vital in understanding and securing your rights as a contractor under the Lien Law.  

Circular Saw Injury Results in OSHA Citation that Underscores Proper Power Tool Training

Written by Costas Cyprus on . Posted in Safety Policy.

The recent decision in Secretary of Labor v. Sunbelt Rentals Scaffold Services, LLC offers important insight for construction firms navigating the fine line between assumed employee experience and OSHA’s expectations for hazard-specific safety training. The matter arose from a June 6, 2023 incident in which a yard worker at a temporary construction facility in Port Arthur, Texas was hospitalized after sustaining a severe hand injury.

Sunbelt Rentals, a large equipment rental company with specialized divisions, including scaffolding and materials staging operations,  is a well-known player in the construction industry.  It had assigned two employees – a yard helper with five weeks of service and a yard associate with eight months of experience – to build the floor of a temporary “paint hooch” using a battery powered circular saw.  The yard helper had prior experience using the saw as a tree trimmer while the yard associate had experience with the tool having previously worked in roofing. The work took place at a staging yard supporting an LNG project.  While the floor was being constructed from plywood and braces, the injured employee attempted a solo cut without his partner holding the material steady. The saw jumped and his hand was drawn into the blade, resulting in significant injury, which included six severed tendons and a fractured bone.

Following a mandatory employee hospitalization report, OSHA conducted an inspection and issued a “Serious” citation. The Secretary alleged that Sunbelt had failed to provide adequate instructions and training regarding the safe use and set-up of the battery-operated circular saw, in violation of 29 CFR § 1926.21(b)(2). This standard requires that employers instruct each employee in the recognition and avoidance of unsafe conditions in their work environment.

During this proceeding and at trial, Sunbelt produced documentation that its employees had received both general orientation and site-specific safety briefings.  Its safety program included training through the Houston Area Safety Council (HASC), internal job safety analyses (JSAs), weekly toolbox talks and visual reminders such as posters at each branch. Significantly, Sunbelt also had a task-specific JSA created in 2017 covering circular saw hazards, including instructions on avoiding kickback, among the risks present in this incident.

Both employees had signed off on JSAs from June 3 and June 6, which included references to saw hazards. The foreman testified that he had instructed the crew to use both hands, brace materials with a partner, and keep hands clear of the blade. The yard associate corroborated these instructions and recalled similar guidance from his earlier general training.

Sunbelt’s safety director further explained that company policy required saws to be used only on flat, stable surfaces and it emphasized the prohibition against holding materials in the air during cuts. These safety principles were included in the 2017 saw-specific JSA, made available online and posted prominently at Sunbelt’s yards. Sunbelt also maintained a progressive disciplinary policy and terminated employees for safety violations.  In fact, it had a documented culture of safety observation and reinforcement.

The Administrative Law Judge  found that the Secretary failed to prove non-compliance with the cited standard. First, the ALJ held that the cited standard clearly applied, as the circular saw posed recognized hazards. However, the ALJ determined that Sunbelt had met the standard of a reasonably prudent employer by providing adequate instruction on the hazard through a combination of general training modules (that included power tool use), daily JSAs identifying saw risks, direct verbal instructions from the supervisor, a task-specific 2017 circular saw JSA, and it posted reminders in training rooms and yards.

The ALJ also rejected OSHA’s reliance on unverified interview notes that conflicted with employee trial testimony. These notes were unsigned and not reviewed for accuracy and the ALJ afforded them limited evidentiary weight. Where they conflicted with credible, corroborated testimony from the yard associate and foreman, the latter was favored.

Consequently, the Citation was vacated. Yet, this decision still underscores the need for companies to proactively document and reinforce safety instructions through both formal training and daily on-site communications, particularly when assigning hazardous tools to workers in temporary or transient yard conditions, or rotating assignments. Some key takeaways are as follows:

Training Must Be Hazard-Specific: A general orientation alone is not enough. Employers must demonstrate that training addresses the specific tools and tasks employees will use.

Documentation Matters: Signed JSAs, training logs, disciplinary records, and job-specific instructions (like Sunbelt’s 2017 circular saw JSA) are crucial when facing scrutiny.

Don’t Rely on Experience Alone: It is not enough that employees say they’ve used a tool before. Employers must verify and document that proper instructions have been provided.

Verbal Instructions Still Count, if Credibly Delivered and Corroborated: The ALJ accepted verbal safety briefings as adequate when supported by written materials and consistent testimony.

The Sunbelt decision may offer relief to employers who fear that even well-designed safety programs can be second-guessed after an accident. However, it should not be read as a license for laxity. Rather, it highlights the importance of layering safety communications, documenting hazard-specific training and reinforcing expectations through site supervision.

Just because a tool is portable doesn’t mean the risks are too.  Employers must ensure that safety instructions follow the worker from the shop floor to every jobsite. Doing so satisfies regulatory expectations,  and it can prevent injuries before they occur.

About the Author: Costas Cyprus, Esq. is  a partner at the law firm of Welby, Brady & Greenblatt, LLP, in White Plains, NY. He practices construction law and commercial litigation. He can be reached at 914-428-2100 and at ccyprus@wbgllp.com. The articles in this series do not constitute legal advice and are intended for general guidance only.

Appellate Court Reminds Contractors of the Proper Uses of Statutory Trust Funds

Written by Thomas H. Welby on . Posted in Attorneys' Column.

New York is among a handful of states where funds paid to a contractor are trust funds, and must be first used to satisfy the claims of unpaid laborers, suppliers, and subcontractors. This is to prevent the practice of “pyramiding”, where a contractor uses the funds received on Project-B to pay a subcontractor for work on Project-A. The obvious problem with pyramiding is that eventually, like all Ponzi-type arrangements, it collapses under its own weight, leaving laborers, suppliers, and lower-tier subcontractors holding the proverbial bag. In the recent case of L.C. Whitford Co., Inc. v Babcock & Wilcox Solar Energy, Inc., an appellate court reminds us that trust funds received by a general contractor must first be used to satisfy downstream claims before it can reimburse itself for what are also legitimate construction costs.

Background

In February of 2021, Babcock & Wilcox entered into contracts to construct several solar energy projects. Under these contracts, B&W was to have been paid over $12 million. B&W retained L.C. Whitford and others as subcontractors. Disputes arose on the project, and the owner ceased paying B&W. At that time, B&W had been paid only $9.5 million, but had paid out over $20 million to its subcontractors. Notwithstanding these payments, there were still nearly $7 million in subcontractor mechanic’s liens outstanding.

Ultimately, B&W settled its dispute with the owner for just over $1.2 million. Once the subcontractors learned of the settlement, they notified B&W that these funds constituted statutory trust funds under Article 3-A of New York’s Lien Law, and then demand payment accordingly. B&W responded that as the amounts B&W previously paid out exceed the amount of trust funds received, the trust had been exhausted, and thus it was free to reimburse itself for those subcontractor payments out of the settlement funds. The subcontractors immediately moved for a preliminary injunction prohibiting B&W from reimbursing itself, arguing that the settlement monies constituted statutory trust funds, and thus should be segregated. B&W pressed its position that even when adding the settlement funds to the trust funds already received, the math was clear that B&W expended over $10 million more than it received. In light of that math, B&W argued, the trust was extinguished, and the settlement funds were no longer trust funds.

Decision

The motion court issued an injunction prohibiting B&W from reimbursing itself, and requiring B&W to segregate the settlement funds. In doing so, the motion court noted the broad purpose of the trust fund statutes to protect laborers, suppliers and subcontractors who provided work and materials to the project, and that the trust also extended to unmatured rights to future payment. Further, the motion court cited well settled case law that the trust continued until all trust claims are satisfied, or until all such trust assets have been applied.

B&W appealed, and a divided appellate court affirmed with a 3-2 majority. The majority of the appellate court also cited the broad purposes of the trust fund statutes, and noted that the contractor’s trust needed to be used to pay claims of subcontractors, laborers, and suppliers, amongst other specific beneficiaries, whereas an owner’s trust permits the owner to pay for the “costs of improvement”, which is a broader category. The dissent argued that B&W’s payment of subcontractor claims with non-trust assets was for a trust purpose, and the reimbursement of those monies was proper as the monies were not going towards paying B&W’s personal debts. The dissent also noted that the practical effect of requiring a contractor in B&W’s position to pay later acquired funds to subcontractors would be that such contractors would simply withhold payment, potentially indefinitely, until such funds were received from the owner, and would refrain from making advance payments of such claims.  In order to avoid what would be viewed as penalizing a contractor from advancing its own funds to keep a project moving, the dissenters would have denied the injunction.

Comment

Both the motion court and the appellate court (both the majority and the dissent) reiterated the broad, laudable purposes of the trust fund statutes, which is to protect those who most directly provided the labor and materials for a construction project. Any time a contractor sees a payment by an upstream entity not flowing down to a trust fund beneficiary, it should be on guard for a potential diversion of trust funds. Also note that an owner who receives proceeds from a construction loan is similarly the Trustee of a separate statutory trust relating to those funds, to which the contractors are the beneficiaries. Additionally, an individual who diverts or misapplies trust funds takes on personal liability for the diversion.  These trust issues are often helpful in collecting contract funds downstream.

The fact that the Appellate Division’s decision was 3-2 gives B&W the right to a direct appeal to the Court of Appeals without having to make the usual motion requesting permission to do so. In the event that B&W does undertake such an appeal and we get an answer to the question of whether the reimbursement for non-trust funds advanced for trust fund purposes is permissible, we will follow up on this article. In the meantime, if you have any questions as to what funds can be expended, and for what purpose, do not hesitate to reach out to experienced construction counsel.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

Appellate Court Reminds Contractors to Understand the Difference Between “Additional Insured” and “Named Insured”

Written by Thomas H. Welby on . Posted in Attorneys' Column.

With insurance claims (and costs) skyrocketing thanks to New York’s infamous scaffold law, it is more important than ever to be sure to understand the insurance coverage afforded to you under the various insurance policies you rely on to protect you. While you may have a thorough understanding of your own insurance policy, contractors frequently obtain insurance coverage from their subcontractors, and contractors routinely also provide insurance to other entities, such as upstream contractors and owners. In that regard, it is also important that you understand the terms of the policies of others which are affording you coverage. A federal appellate court, in the recent case of BCC Partners, LLC v Travelers Property and Casualty Company of America, reminds us of the importance of understanding the language of the applicable policy; here, the differences between being an “additional insured” and a “named insured”.

Background

BCC Partners was the owner of a project to build an apartment complex. BCC contracted with Ben F. Blanton Construction to be the general contractor for the project. Blanton, as required by its contract with BCC, procured insurance with Travelers; Blanton was the “named insured” on the policy, and BCC was the “additional named insured”.

During the construction, a retaining wall failed, causing significant property damage, as well as delays to the project. BCC placed a claim under Blanton’s policy with Travelers, as an “additional named insured”, to recover its lost rental income and other soft costs arising out of the collapse and resulting delays. Travelers denied the claim, noting policy language that only the “named insured” is covered against such losses. BCC sued Travelers for breaching the policy, and Travelers moved for summary judgment dismissing the lawsuit, arguing that the policy language was clear that such losses were only covered for the “named insured”.

Decision

The lower court granted Travelers’ motion, finding that the policy language was clear that only the “named insured” qualified for loss of income coverage under the policy. BCC appealed, and the appellate court affirmed. In doing so, the appellate court noted that the policy’s coverage extends to “the actual loss of ‘rental value’ you sustain” and “your ‘soft costs’” that result from certain construction delays, but that the policy explicitly states twice that “the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations” (i.e.: Blanton). As to the “additional named insured”, the appellate court noted that the policy specifically limited the available coverage to: “Owners of Covered Property”; “Mortgagees or loss payees”; “Contractors, sub contractors and sub-sub contractors”; and “Lessors or lessees” of “Covered Property”, which the policy defined as the sum of: “Permanent Works,” such as construction equipment and materials, and “Temporary Works,” such as scaffolds, fencing, trailers, or other “temporary buildings or structures incidental to completion of the project”, but only “to the extent of their financial interest in the Covered Property”. Given this specific definition of “additional named insured”, BCC’s argument that it was an additional “named insured” under the policy (and, therefore, the “named insured” coverage should also be afforded to it) was rejected.

Comment

Many owners and upstream contractors are content to allow construction to proceed merely upon a downstream party’s provision of a certificate of insurance showing that an insurance policy is in force which shows that a required entity may be afforded coverage under the policy. Not only are these certificates specifically provided “for informational purposes only” (meaning that they are legally unenforceable), they do not go into same detail as the terms of the actual policy itself, and can easily leave someone believing that there is insurance coverage when there is not. An insurance policy is a contract, and will be interpreted as such.  In order to remedy the issue, contractors would be well advised to review the terms of not only their own insurance policy, but any other policy on which they (or any other person or entity for whom they are providing coverage) will rely in the event of a loss. Here, simply comparing the policy’s definitions of “named insured” and “additional named insured” side by side would have revealed the significant gap in coverage. Accordingly, while the property damage itself was covered under the policy, after Blanton’s bankruptcy BCC was left to shoulder a $1.4 million dollar loss without the prospect of recovery.

About the Authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

Court Reminds Us That While It Can Correct a Mutual Mistake in a Contract, It Cannot Address “Buyer’s Remorse”

Written by Gregory J. Spaun on . Posted in Attorneys' Column.

In today’s highly technological world, computer generated documents are still subject to the limitations of the human/keyboard interface, which limitations are manifested by the typographical error. While many of these errors are simply embarrassing, others can have financial import—such as those which work their way into price terms. Where this happens, a contractor is not without recourse because courts maintain the inherent power to correct clearly established mutual mistakes that make their way into contracts. However, a court, in the recent case of Titan Construction Services v Board of Managers of PS90 Condominium, reminds us that the tool of reformation is limited to genuine mistakes, and not what would be termed as “buyer’s remorse” in pricing.

Background

In July of 2016, Titan Construction Services entered into an agreement with the Board of Managers of the PS90 Condominium for Titan to perform certain terra cotta repair work on the PS90 building. The contract provided that the price for “TRC 02” work was $2.06 per square inch. The contract included an addendum which provided that the price for that work was $285 per square inch. The contract also had a unit price provision under which any additional terra cotta work added would be performed at the same price.

The original contract required Titan to repair 832 square inches of terra cotta. The condo ultimately added another 50,000 square inches, which Titan refused to do at the $2.06 per square inch rate, claiming that the rate was actually $285 per square inch. Titan submitted a $14 million change order accordingly. The condo refused to pay that rate, claiming there was a mutual mistake in the contract as to price, and $2.06 per square inch was the correct number. Titan proceeded with the work under protest, and sued to recover the monies it was claiming under the contract. The lawsuit ultimately went to trial on the issue of what the intended price was.

Decision

After trial, the court found that the agreed upon price was $2.06 per square inch, and that $285 was a square foot price (mathematically, $2.06 per square inch works out to slightly over $285 per square foot). The court relied upon statements made by Titan which conceded that “there was a bid submission of $2.06 that was changed later that day to $285 a square inch. In our view it should have been $285 a square foot, not square inch”. This concession was supported by other evidence, such as Titan’s field reports, and other documents, which referred to the $2.06 number. In fact, the evidence established that the dispute arose only after the condominium sought to include extra work because Titan found it “financially infeasible” to perform so much work at $2.06 per square inch. The court found that Titan’s financial infeasibility could not control its decision, and that the mutual mistake had to be resolved at $2.06 per square inch, not $285. Accordingly, the court entered judgment in Titan’s favor for only $59k, which was the amount for the work at $2.06 per square inch, minus some backcharges.

Comment

The court’s decision here made it clear that the parties always intended to proceed at $2.06 per square inch, and that the claim that the price was $285 for that same unit was a product of bidder’s remorse.  While contractors may, for business reasons, price smaller, introductory jobs much lower than standard rates (think of that 99 cent per pound turkey at Thanksgiving; the store is losing money at that price, but is making it up when you buy the stuffing and the rest of the trimmings), that does not give them the right to walk away from that price under a mistake theory once it is agreed upon.

One thing that strikes us about this case is the scope of the change order being a 6,000% increase in the scope of work (832 square inches of original work, with a 50,332 square inch change order). While mutual mistake did not work, there is a doctrine in the law that provides that where a change order is so significant that it was not within the reasonable contemplation of the parties at the time of the contract, it actually constitutes an entirely new contract because the change is considered a “cardinal change”, rather than simply a change order. As such, it would give the contracting party the opportunity to decline the work absent reaching a completely new agreement. It is not known whether a cardinal change argument would have prevailed here (because it wasn’t tried). Contract law and interpretations are not always simply plain reading and common sense. If you are faced with a similar situation, you should reach out to experienced construction counsel so that you can determine all of your options before proceeding.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

Failure to Enforce Lock-Out/Tag-Out Rules Leads to Serious Injury Due to the Unexpected

Written by Costas Cyprus on . Posted in Attorneys' Column.

Lock-out/tag-out (LOTO) procedures constitute critical safety requirements in the construction industry. Whether working with conveyors on a site, cranes, mixers, compactors, or other energized equipment, the risk is the same: unexpected start-up or release of stored energy can maim or kill workers.  

The recent decision of Secretary of Labor vs.  Packers Sanitation Services, Inc. offers important lessons that translate directly to construction workplaces, where energized equipment is common and the hazards are equally severe.

Packers Sanitation Services, Inc. (PSSI), a large sanitation contractor, was cited after a worker suffered a fractured arm at Illinois food processing facility on April 20, 2023, when his arm was caught in a running conveyor. Following the incident, OSHA investigated PSSI’s operations and cited PSSI for violation of the federal safety rules pertaining to lock out/tagout procedures that govern the established procedures of energy controls and hazardous energy.  The conditions in this case can easily mirror conditions at construction sites and jobsites where employees have to clean, maintain, and/or troubleshoot heavy equipment.

PSSI did have various written policies regarding safety at this facility from their employee handbook that referenced certain LOTO procedures including the following:

  • Maintaining a safe distance when working near running equipment.
  • Requiring equipment to be locked out if a worker had to remove any type of machine guarding or to have secondary guarding in place if they had to work near an operation pinch point (where any part of the body can be caught between the moving parts).
  • Mandatory lockout/tagout any time a worker crossed the plane of operation of a machine (by exposing a body party to the operating mechanics of equipment by reaching, stepping, leaning, crawling).  

PSSI also had equipment specific de-energization procedures as well as mandatory safety training on LOTO, pre-shift safety meetings, weekly safety meetings and LOTO refresher training all overseen and enforced by PSSI management.  They professed a zero-tolerance policy for violation of lifesaving rules like LOTO. 

However, at this facility, workers would routinely clean conveyor belts without locking them out.  Instead, they used air hoses and relied on foot pedals to intermittently move the belt.  Here, the injured employee wedged the foot pedal, so the conveyor ran continuously while he worked underneath when his sleeve was pulled into the sprockets, causing serious injury.  

Construction projects rely on powered equipment such as pumps, elevators, rebar benders, compressors, and excavation machinery that must be serviced, maintained, or cleaned. Just as in PSSI’s facility, workers are often tempted to bypass lock-out/tag-out procedures  to “get the job done faster.” Supervisors may even tacitly allow it, especially when project schedules are tight.

The Administrative Law Judge (ALJ) affirmed OSHA’s citation and rejected the company’s defenses.  The ALJ found that the cited safety standard applied because the conveyor could inadvertently start or continue running without warning.  Although PSSI had multiple procedures and a robust safety and audit program, the ALJ also found that written rules were contradicted by training, which therefore constituted ineffective communication of the work rules leaving them not properly protected.   

PSSI’s employees were routinely permitted in the zone of danger,  which was not considered as an isolated act of misconduct but as an accepted practice. Given that supervisors were continuously present on the floor, they knew or should have known of the widespread unsafe practice (wedging the foot pedal). Supervisors failed to enforce rules, and discipline was inconsistent.  The violation was affirmed as a “serious” with the imposition of a $15,625 penalty.  

This decision made it clear that any time a worker crosses the plane of operation or works within reach of moving parts, the equipment must be de-energized and locked out. The worker’s awareness that a machine is “running” does not excuse the employer from compliance because the safety regulations protect against inadvertent or unexpected energization, not just surprise start-up.

Moreover, this decision translates into several critical lessons for employers.  

Consistency between Training and Safety Rules. Workers cannot be told one thing in a manual and another in the field. Contradictory instructions such as “arm’s length” in writing versus “six inches” in practice can create confusion. Clear, consistent messaging ensures workers know exactly when LOTO is required.

Supervisors Must Enforce, Not Overlook. On a jobsite, supervisors are often just feet away from unsafe practices. Turning a blind eye because “everyone does it” is not a defense. OSHA will impute knowledge to the employer when hazards are in plain sight.

Avoid Shortcuts with Safety.  Using tools, hoses, or makeshift controls does not eliminate the need for lock-out. Just as the PSSI worker was injured despite using an air hose, construction workers are at equal risk when they rely on “workarounds” instead of true de-energization.

Machine-Specific Procedures Are Essential. Construction companies must have step-by-step LOTO procedures for each piece of equipment such as saws, mixers, conveyors, pumps, (etc.) and not just general “safety handbooks.” Group procedures are allowed, but only if they fully address the hazards of each machine type.

Enforcement of Safety Rules is Required.  If a company claims “zero tolerance,” it must mean exactly that. Selective or inconsistent enforcement undermines the rule and exposes the employer to liability even if they have a strict policy on paper. 

If employees are near energized equipment, they are in danger unless LOTO is strictly followed.

About the Author: Costas Cyprus, Esq. practices construction law and commercial litigation with Welby, Brady & Greenblatt, LLP, in White Plains, NY. He can be reached at 914-428-2100 and at ccyprus@wbgllp.com. The articles in this series do not constitute legal advice and are intended for general guidance only.