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TAP Electrical Contracting Service, Inc. v. Dep't of Environmental Protection
OATH Index No. 1046/06, mem. dec. (May 10, 2006)
Petitioner entered into a contract with respondent to perform electrical work in the construction of a storage facility in Flushing, Queens. Petitioner sought compensation for items lost due to several burglaries occurring at the site outside work hours. Board found that petitioner was entitled to reimbursement for some losses that were attributable to respondent’s failure to supervise security arrangements at the jobsite.
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NEW YORK CITY OFFICE OF
ADMINISTRATIVE TRIALS AND HEARINGS
CONTRACT DISPUTE RESOLUTION BOARD
In the Matter of
TAP ELECTRICAL CONTRACTING SERVICE, INC.
Petitioner
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DEPARTMENT OF ENVIRONMENTAL PROTECTION
Respondent
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MEMORANDUM DECISION
KEVIN F. CASEY, Administrative Law Judge/Chair
KENNETH JOCKERS, Deputy Counsel, Mayor's Office of Contracts
KYLE-BETH HILFER, Prequalified Panel Member
Pending before the Contract Dispute Resolution Board (the Board) is the petition of TAP Electrical Contracting Service, Inc. (Petitioner) seeking $28,883.73 in additional compensation from the Department of Environmental Protection (Department). For the reasons set forth below, petitioner's claim is granted in part.
BACKGROUND
Petitioner entered into a contract (CS4-4E) with the Department for electrical work involved in the construction of a storage facility in Flushing, Queens. The project involved three other prime contractors, including E.E. Cruz & Co., Inc. (E.E. Cruz), the general contractor (CS4 4G) that was required to provide jobsite security by employing an armed guard to safeguard the site and prevent access by unauthorized persons (Response, Exs. L & M).
There was a continuing problem with burglaries at the jobsite. Petitioner asserted that there were five break-ins where the culprits forcibly cut locks or chains and stole tools or equipment. The burglaries occurred on the following dates: November 21-24, 2003; August 16, 2004; October 11, 2004; January 15-16, 2005; and February 1, 2005 (Response, Ex. B).
On March 21, 2005, petitioner wrote to the Department seeking compensation for losses incurred as a result of the five burglaries (Response, Ex. C). On May 11, 2005, the Department denied petitioner’s request on the ground that, pursuant to the contract, each contractor was responsible for safeguarding its materials, tools, and equipment (Response, Ex. D).
Petitioner filed a Notice of Dispute on May 17, 2005, alleging that the Department failed to enforce the contract provision that required E.E. Cruz to provide adequate and competent security (Response, Ex. E). On June 14, 2005, the Department denied petitioner’s claim and adhered to its position that petitioner was responsible for safeguarding its own material, tools, and equipment (Response, Ex. F). Petitioner filed a Notice of Dispute with the Comptroller on July 7, 2005 (Response, Ex. H). On November 25, 2005, the Comptroller denied petitioner's claim on the ground that the contract made petitioner responsible for safeguarding its own material, tools and equipment (Response, Ex. K).
Petitioner filed a timely application with the Board on December 27, 2005. Respondent filed its response on January 31, 2006. Oral argument was held on March 24, 2006. The record was held open until April 10, 2006, to allow the parties to submit additional documentation relating to the timing of petitioner's complaints about the burglaries (Tr. 36-37).
ANALYSIS
The Board has reviewed the arguments made in the parties’ submissions, applicable case law, and the relevant provisions of the contracts. This review forms the basis for the Board’s findings.
Article 16 of contract CS4-4G (General Contract) provides:
Security Guards and Fire Guards at the Site
The Contractor for Contract CS4-4G shall employ security guards at all times, except as otherwise modified by the Detailed Specifications and as approved by the Commissioner for the purpose of safeguarding and protecting the site...
All Contractors will be responsible for safeguarding and protecting their own work, materials, tools, and equipment.
The Contractor for Contract CS4 4G shall provide adequate and competent Security Guards on the site until final completion of the work, or earlier, if so notified in writing by the Commissioner…
Should the Commissioner find that any security guard is unsatisfactory, such guard shall be replaced by the Contractor upon the written demand of the Commissioner.
Detailed Specification D-0.46 of contract CS4-4G states:
Site Security
The Contractor shall provide one (1) armed security guard to safeguard the entire site and prevent access to unauthorized persons. [] The Contractor shall provide a vehicle for the security guard for 24 hrs/day, seven days/week up to the completion of the Storage Facility…
Detailed Specification D-0.46 of petitioner's contract CS4-4E states:
Site Security.
The contractor for Contract CS4-4G shall provide one (1) armed security guard in accordance with Article 16 of the General Conditions to safeguard the entire site and prevent access by unauthorized persons. Provision of guards under Contract CS4-4G shall not diminish in any way the responsibility of the Contractor for safeguarding and protecting his own work, materials, tools and equipment.
Neither the Department nor the Comptroller ever disputed that petitioner suffered losses as a result of a series of break-ins on the jobsite. Their lone ground for denying petitioner’s claim is that the contracts provide that each contractor is responsible for safeguarding their own materials, tools, and equipment.
Exculpatory contract provisions, such as those relied upon by respondent in this proceeding, are generally enforceable. But generally is not the same as always. In Kalisch-Jarcho, Inc. v. City of New York, 58 N.Y.2d 377, 461 N.Y.S.2d 746 (1983), the Court recognized that there are situations where an exculpatory clause contravenes public policy. The Court held:
[A]n exculpatory agreement, no matter how flat and unqualified its terms, will not exonerate a party from liability under all circumstances. Under announced public policy, it will not apply to exemption of willful or grossly negligent acts. More pointedly, an exculpatory clause is unenforceable when, in contravention of acceptable notions of morality, the misconduct for which it would grant immunity smacks of intentional wrongdoing. This can be explicit, as when it is fraudulent, malicious, or prompted by the sinister intention of one acting in bad faith. Or when, as in gross negligence, it betokens a reckless indifference to the rights of others it may be implicit.
58 N.Y.2d at 384-85, 461 N.Y.S.2d at 749-50 (citations omitted).
In Novak & Co., Inc. v. New York City Housing Auth. et al, 125 Misc.2d 647, 480 N.Y.S.2d 403 (Sup. Ct. N.Y. Co. 1984), modified on other grounds, 108 A.D.2d 612, 485 N.Y.S.2d 68 (1st Dep’t 1985), the court held that an exculpatory clause did not automatically bar a contractor’s claim arising from extra costs associated with vandalism. There, a plumbing contractor alleged that excessive vandalism on a jobsite resulted from inadequate security due to improper supervision by a housing authority. Despite a contract that contained broad exculpatory language and shifted responsibility for security to a general contractor, the court held that the plumbing contractor alleged sufficient facts that, if established at trial, would support a finding of gross negligence. The key facts relied upon by the court were allegations that the plumbing contractor had repeatedly complained to the housing authority regarding the vandalism and that the housing authority did not totally relinquish supervisory control over its project. 125 Misc.2d at 657, 480 N.Y.S.2d at 410.
Here, too, the contracting agency was on notice that there was an ongoing problem with security. Petitioner advised the Department that security was deficient and specifically requested enforcement of a contract provision requiring security to patrol the entire jobsite. Moreover, as in Novak, the contracting agency did not relinquish complete control over security. The Department explicitly retained the authority to demand that the general contractor, E.E. Cruz, replace inadequate security guards. This evidence, if credited, is sufficient to support a finding of gross negligence that would entitle petitioner to recover for damages despite the exculpatory provisions in the contracts.
Notably, the Department never alleged that it took any steps to improve supervision of the security arrangements even after there had been multiple break-ins. Nor did it insist that existing security was sufficient. Instead, respondent disavowed any responsibility for inadequate security:
Each successive theft incident allegedly occurring at the jobsite, in fact, gave further notice to petitioner that its property may not have been adequately protected, and that neither the CS4-4G contractor, nor DEP, would assume additional responsibility for protecting petitioner’s property from theft (Response, ¶ 32).
In respondent’s view, any deficiencies in the security arrangement were petitioner’s problem. This is precisely the sort of “reckless indifference to the rights of others” that amounts to gross negligence. Kalisch-Jarcho, Inc., 58 N.Y.2d at 385; 461 N.Y.S.2d at 750.
It is unrefuted that each of the break-ins occurred during non-working hours and that the thieves forcibly broke locks and chains. The stolen tools were either locked inside “gang boxes” or steel “cargo” containers, or securely fastened to such objects (Response, Ex. E). Moreover, after discovering the third break-in, petitioner sent a memorandum to respondent specifically asking respondent to make sure that the security company was regularly patrolling the entire jobsite. See Memorandum, dated October 11, 2004 (Petitioner’s Post-Argument Submission). Although that request simply sought enforcement of the contractual provisions for security, it was ignored. Petitioner subsequently alleged that despite the continued break-ins, “the location where our field trailer is set has never been patrolled by any security force.” See Petitioner’s Memoranda, dated March 2, 2005 and May 11, 2005 (Response, Exs. B & E).
Based upon this record, it appears that respondent knew prior to the fourth burglary that its security provisions were inadequate. It further appears that respondent ignored petitioner’s modest request for routine patrols of its section of the jobsite. This unrefuted evidence showed that respondent was grossly negligent in its supervisory capacity because it ignored petitioner’s protest regarding the inadequate security and disregarded petitioner’s request for security patrols of the entire jobsite as required by the contract.
Under these circumstances, the Board finds that petitioner is entitled to recover the cost of the tools and equipment that were stolen during two burglaries that occurred after October 11, 2004. There is no dispute that the total losses resulting from those thefts, which occurred on January 15-16, 2005 and February 1, 2005, amounted to $6,079.56 (Response, Ex. B).
However, petitioner is not entitled to recover the value of equipment reported stolen on October 11, 2004 or earlier. There is no clear indication that respondent had been alerted to any problem with security prior to that date. At oral argument, petitioner maintained that it discussed inadequate security during a progress meeting in December 2003. According to the minutes of that meeting, a safety representative for the general contractor had “written two memos citing safety deficiencies” that required a response (Response, Ex. B). Although the record was left open to give the parties an opportunity to provide those memos, or any other documentation regarding the timing of petitioner’s complaints concerning security, no further evidence was provided regarding complaints in 2003 or earlier. Without the memos referred to in the minutes, the record was insufficient to show that petitioner placed respondent on notice, prior to October 11, 2004, that jobsite security was inadequate.
The Board makes no determination as to whether petitioner is entitled to recover the cost to repair metal doors that were damaged during an attempted break-in on May 27-30, 2005. That incident occurred after petitioner filed this claim with DEP. Thus, that claim was not properly before the Board.
CONCLUSION
The Board finds that petitioner’s claim should be granted to the extent that it should be awarded $6,079.56 in additional compensation. All concur.
Kevin F. Casey
Administrative Law Judge/Chair
Dated: May 10, 2006
APPEARANCES:
TAP ELECTRICAL CONTRACTING SERVICES, INC.
Petitioner
BY: ANTHONY P. CARDILLO
MICHAEL A. CARDOZO, ESQ.
Attorney for Respondent
BY: BRETT T. PERALA, ESQ.