Note: This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.

On Monday, April 18, 2005, Kansas Governor Kathleen Sebelius signed into law the Kansas Fairness in Private Construction Contract Act. This new law contains a provision that prevents enforcing waiver of subrogation clauses in construction contracts.

The Kansas Fairness in Private Construction Contract Act was enacted by the Kansas legislature primarily to give construction contractors and subcontractors guidelines to follow in sending and receiving payments. However, the new law also provides that any provision in a private construction contract that “purports to waive, release or extinguish rights of subrogation for losses or claims covered by liability or workers’ compensation insurance” are declared “against public policy and shall be void and unenforceable.”

This bill responds to a growing problem in the construction industry where it has become common practice for general contractors and property owners to require subcontractors to sign contracts that deny the subcontractors and their insurers the right to recover where a third party has caused injury to one of the subcontractor’s workers. As a result of this practice, contractors who regularly engage in unsafe practices at construction sites were insulated from workers’ compensation subrogation claims for the injuries they caused to other workers at the site. This new law significantly increases the ability of workers’ compensation carriers to obtain recoveries for accidents occurring at construction sites in Kansas. This new law becomes effective July 1, 2005.

Note that this law only prohibits waivers of subrogation provisions in private construction contracts. This law may not apply for accidents occurring in connection with construction or improvements to properties owned or operated by government or government agencies.

PRACTICE TIPS:

1.This law only pertains to contractual waivers of subrogation rights. It does not change the law in Kansas relating to statutory employer immunity. For most accidents occurring at construction sites in Kansas, an injured worker or subrogating carrier will be barred from bringing a third party action against a negligent general contractor because the general contractor will be deemed to be the “statutory employer” of the injured worker and will be immune from suit, pursuant to the provisions of Kansas’ Workers’ Compensation Act. The best opportunities for a third party action arising out of a construction site are when the injured worker is injured by the negligence of an employee of a subcontractor at the job site who is not the injured worker’s employer.

2. Although this law prohibits waivers of subrogation, it does not prohibit indemnification clauses in construction contracts. Therefore, in any construction accident, it is still important to review all contracts prior to pursuing a third party case so that you can determine in advance whether it is possible that your insured’s liability carrier might be compelled to provide coverage to the negligent third party.