Construction Law Seminar
construction law seminar

Construction and Autonomous Vehicles

Considerations for Increased Adoption

By Marin Leci, Robert Love, and Edona Vila

As the United States continues to trend toward historic post-pandemic economic growth, the increased demand for construction resources and expertise represents a tremendous opportunity for the further development and widespread adoption of autonomous construction equipment on construction sites across the United States. To effectively deliver the high-quality infrastructure of the future, construction industry players should and must continue to leverage autonomous construction equipment in order to improve efficiency, safety, and project outcomes. Given such benefits, it is no surprise that the global autonomous construction equipment market is projected to grow from $9.47 billion in 2020 to $10.52 billion in 2021 at a compound annual growth rate of 11.1 percent. More importantly, and in light of the double-digit projected growth of the autonomous construction equipment market, the increased use of autonomous construction equipment opens the door for construction industry players to compete for more work with less resources. As a result, the adoption of autonomous construction equipment represents one of the single biggest growth catalysts for construction industry.

As the use of autonomous construction equipment continues to accelerate, it is expected to drastically change the dynamics of the global construction industry. While the first autonomous testing for construction began in Japan approximately 30 years ago, it was not until recently that autonomous construction equipment saw meaningful deployments on North American job sites. Unlike a parking lot or busy highway, construction sites are highly controlled and fixed geographic locations that have clearly delineated boundaries. Within these boundaries, trained personnel operate in an organized and safety-conscious manner. This creates an opportunity for deployment of autonomous vehicles with varying degrees of autonomy —from user assisted through fully automated. Tightly structured and well-ordered construction sites allow partially autonomous vehicles and equipment to be deployed in order to increase efficiency and improve safety.

Start-ups like Built Robotics and SafeAI, and larger industry players like Caterpillar and Komatsu, have developed autonomous equipment to work on construction sites. The COVID-19 pandemic and associated social distancing mandates have served to accelerate the pace of development of autonomous equipment. Caterpillar boasts the largest fleet of autonomous haul trucks. In six years, these vehicles hauled two billion metric tons.

Built Robotics’ automated bulldozers and excavators have logged 10,000 hours of autonomous operations without a recorded safety incident and currently work on oil and gas, water distribution, and infrastructure projects across the United States. The rapid development of autonomous machinery, coupled with their successful use on construction sites today, means widespread use of autonomous equipment on construction sites is inevitable.

In this article, we highlight areas for stakeholders to consider in the development and adoption of autonomous vehicles in construction sites.

Contractual Risk Consideration

Autonomous construction technology represents transformative innovation. Its increased use will result in industry and legal disruption. Owners, equipment suppliers, contractors, and subcontractors must be prepared to implement and leverage the use of autonomous machines on construction sites. The disruptive impact of autonomous construction equipment will likely result in a fundamental shift in how construction firms approach owning/contracting for equipment. As a result, autonomous machinery is also expected to disrupt the traditional approach to construction contract negotiation, risk-sharing, and liability.

In this changing paradigm, insurers will require consideration of their traditional insurance coverage models and approaches as autonomous equipment and machine use increases. In this context, considerations around how to quantify risk, address questions of liability allocations, and pricing insurance premiums are likely to prevail.

The Changing Perspective of Owning Construction Equipment

Autonomous software guiding and controlling autonomous equipment is far more valuable than any individual piece of equipment it may control. As a result, akin to the movie rental industry, economic forces and the need to protect intellectual property may require industry players to accept something less than full ownership of a piece of equipment. Much like a piece of computer software, an end user may own a physical copy but uses the actual software as a licensee, not a property owner.

As the use and acceptance of autonomous construction equipment increases across construction sites in the near future, industry players will have to be flexible and creative about what ownership means. This may mean moving away from traditional purchase and sale agreements for equipment and moving toward a licensor/licensee model, where end users can negotiate for stronger technical and maintenance support while licensors are able to protect their intellectual property and fully monetize the value of the software they developed.

However, even this type of model comes with risk. From exclusivity arrangements to a power imbalance between licensor and licensee, construction firms, AI developers and their legal counsel must clearly delineate responsibilities, repercussions for contractual breaches and liabilities for both end user mismanagement and autonomous system failures.

Privity and product liability risks

Even without a radical shift in ownership models, the increased use of autonomous construction equipment will require meaningful changes to how parties view, assess, and allocate legal risk. The entry of autonomous software developers into the construction industry will add an additional layer of product liability risk that has to be identified and insulated against.

A defect within the connected and autonomous vehicle used on a construction site could cause delays on an interconnected construction site. Delays caused by software failures or malfunctions can have serious consequences for the contractor deploying the autonomous equipment. As a result, parties negotiating for the use of autonomous systems should consider the intersection between contractual privity and limitation of liability clauses in order to limit exposure to risk, while identifying who will bear responsibility for issues and disputes related to the performance of autonomous equipment. Finally, expanding indemnity clauses or stipulating that contractors and/or autonomous software developers carry robust insurance coverage are other potential risk mitigation strategies to hedge against autonomous performance risks.

Insurance Partnerships and Data Risks

At baseline, industry players will have to work closely with insurers to develop policies and products that fully encompass the traditional and novel risks inherent in deploying autonomous equipment to a construction site. Specifically, industry players must ensure that insurance polices cover novel perils like an autonomous system malfunction, and even cybersecurity breaches compromising an autonomous system.

As autonomous systems become smarter and more capable, insurers will need data to effectively quantify, price out, and develop commercial insurance products and coverage options. Specifically, insurers will need significant amounts of real-world data. Autonomous software developers, construction firms and insurers have an opportunity to generate synergy by exchanging data that insurers need to develop products, while obtaining the kind of insurance coverage required to foster further innovation in this sector.

In addition to assisting insurers, this data can be used by developers to further improve autonomous systems. As a result, the data generated by autonomous systems is valuable and must be protected. Software developers and construction firms will need to collaborate on contractual provisions that obligate both parties to develop appropriate safeguards that reflect the significant value of data generated by autonomous construction equipment. Finally, as autonomous equipment and smart sensors and devices transform construction sites into data-driven workplaces, industry players will have to consider privacy concerns, cybersecurity, and data ownership when negotiating construction contracts.

Takeaways

The risks will evolve as use of autonomous construction equipment becomes universal across construction sites. The increased use of autonomous construction equipment will likely pave the way for the automation of construction workflow altogether, involving the synchronous coordination of multiple machines and different types of devices, creating a data-driven site capable of improving productivity while minimizing execution risks and site hazards.

Smart concrete testing companies have developed sensors capable of testing, analyzing, and assisting in the production of concrete. Solutions like these represent the foundation for future data-driven construction sites. Coupled with autonomous construction equipment, technology like smart concrete testing sensors could exponentially increase the overall safety and quality of a construction project. That being said, automated construction workflow will create new challenges and generate new risks. More importantly, this emerging facet of automation will require developing and negotiating standards for digital data, cybersecurity frameworks and data protection protocols.

A proactive approach to the rise of autonomous solutions in the construction industry will best position those looking to take advantage of the productivity and efficiency improvements offered by these solutions. As discussed, the rise in deployment of autonomous solutions will likely disrupt the traditional approach to construction contract negotiation, risk-sharing, and liability. Further, there is a growing need for digital data management and to develop standards for safe and effective autonomous operations in this sphere.

Bob LoveRobert L. Love is a partner at Borden Ladner Gervais LLP in its Toronto office. Bob is focused on effectively defending a range of clients against product liability claims and resolving disputes. His expertise also includes aviation, subrogation, insurance defence, and municipal and professional liability. Bob also leads the national autonomous vehicle and automotive sector groups. Bob regularly advises clients on regulatory and risk management issues. He has appeared as lead counsel at all levels of the trial and appellate courts of Ontario.

Edona VilaEdona C. Vila is a partner at Borden Ladner Gervais LLP in its Toronto office. Edona is passionate about the intersection of innovation and the law. She specializes in complex commercial disputes and risk advisory services. She represents national and multi-national corporations, government authorities, and insurers in cross-border and domestic product liability, commercial, and insurance disputes across many different industries ranging from manufacturing and financial services to life sciences. In her disputes practice, Edona has defended clients throughout all levels of court in Ontario and successfully driven claims to resolution in formal and informal alternative dispute resolution forums. Clients turn to Edona for sound guidance and timely advice. Her in-depth understanding of how business and technological innovations are transforming the status quo allows her to better support her clients.

Marin LeciMarin Leci is a senior associate at Borden Ladner Gervais LLP in its Calgary office. Marin maintains a general commercial litigation practice with a focus on construction litigation and arbitration. He acts on behalf of owners, contractors, and subcontractors in construction and engineering disputes. Marin also specializes in advising national and international military, cybersecurity, and technology contractors navigating Canada’s naval and aviation procurement and defence landscapes. He acts as counsel to international aerospace and naval corporations seeking to enter Canadian aerospace and defence sectors. He has experience with civil aviation regulations, government relations, and trade and export control issues.

Line-Item Guarantees and Coordination

Two Sneaky Clauses That Present Unanticipated Risks

By Drew Colby

Line-Item Guarantees

Virtually everyone in the construction industry believes line items in cost-plus contracts do not constitute individual guarantees. By and large, this belief is correct. However, those provisions are often stricken, and their protection should never be presumed.

Both the A102-2017 § 12.1.5.2 and the A133-2019, § 11.1.5.2 expressly provide that line items are not individual guarantees. However, owners will frequently modify or strike these provisions. It is imperative to scrutinize these provisions to ensure their protections have not been comprised. If they have been compromised, however, it is incumbent upon the contractor to either reinsert them or, alternatively, ensure that the contract has a contingency sum that is available to fund any line-item overages.  

The potential risk associated with individual line-item guarantees can only be described as catastrophic. It is essential, therefore, to ensure the contract either contains a suitable provision or that one is added to it.

Coordination

Typically, owners are responsible for coordinating their workforces with their contractors’ workforce. Likewise, contractors are responsible for coordinating the work of their various subcontractors. Nonetheless, when a lack of coordination causes problems on a job site, we are seeing increased examples of contractors taking the position that their subcontractors are responsible for coordinating their work with the work of each subcontractor impacting their work.

This framework is unworkable for many reasons. First, subcontractors do not have authority to control each other. Only the contractor has that control. Therefore, if one subcontractor needs exclusive access to a portion of the project occupied by another, that subcontractor cannot force the other subcontractor to leave. Second, many coordination issues are determined at the owner/contractor level. Therefore, subcontractors might not be privy to that information.

In short, most subcontractors pay little attention to the coordination clauses until a project goes sideways and the contractor is looking for someone to blame. Coordination provisions should never be ignored.

Drew ColbyDrew Colby’s construction law practice encompasses both transactional matters and payment and performance disputes. Drew’s clients comprise the entire spectrum of the construction industry from owner/developers to subcontractor, as well as design professionals. He is recognized as one of the foremost leaders in construction law by industry members and counsel, a reputation earned over the course of his 35-year career. Clients appreciate Drew’s hallmark honesty, accessibility, and proactive style. Drew often acts as Outside General Counsel for clients on a wide range of issues. Drew earned an AV Preeminent Rating from Martindale Hubbell, which represents the highest possible rating on both legal ability and ethics based upon the confidential opinion of peers and judges.

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War Story

The Jury Spoke

By Anonymous

Editor’s Note: This story from anonymous is the second in our new series of personal tales of construction practice triumph and tragedy in which we revel in your glory and commiserate when you find you’ve snatched defeat from the jaws of victory. We hope the series shares valuable knowledge and/or amusing anecdotes among our members. Please send your stories directly to pmulry@griffithdavison; rest assured that we will gladly anonymize the author’s name to protect the guilty, whether that be counsel or parties.

Several years ago, I was involved in a case involving some support infrastructure for Reliant Stadium, as it was then known. Destined to be the home of the Houston Live Stock Show & Rodeo and Houston Texans, two bridges were built across the major street by the stadium to provide for pedestrian access.

After the bridges were built, a contractor built 25-foot-high berms that would support walkways and stairs to access the bridges. Unfortunately, the contractor used some suspect fill materials, and the berms began to sink, which caused the access to be non-ADA compliant. Understandably, the Harris County Sports Authority did not want to pay the contractor for the noncompliant work. Thinking the county had no choice, the contractor said it would scarify the berms and rebuild them, all on a short time frame because the Rodeo – which lasts three weeks and accommodates 3.5 million visitors – was going to be the stadium’s first event in a few months. The contractor demolished the berms and then walked the job, thinking the county would pay to get the contractor back and the job finished.

Instead, the county balked, and the contractor sued the county and the design professionals, one of whom was my client. To no great surprise, the county countersued and brought in the contractor’s surety. The litigation was fairly contentious, and we were frequent visitors to the courtroom. In other words, the judge got to know us very well. The design professionals and construction manager settled out a couple of weeks before trial, leaving the contractor, its surety, and the county to go to trial. The remaining lawyers did not like each other, and that personal animus seemed to add to the length of the trial. Several of my client’s engineers were called to testify, which took several days. (As an aside, one of my engineers called me frantically one Sunday. He testified on a Friday and did not finish. He and his family had gone to dinner on Saturday night, and one of the jurors was his server. I had never approached the bench with that before). After a six-week trial, the jury returned a verdict in which it found that the contractor, the surety, and the county’s sports authority had each breached their various contractual responsibilities but found no damages for anyone.

Two weeks after the verdict, I had a summary judgment hearing in the same court. When the judge called my case, and I walked up to the bench, the judge said, “Welcome back, ‘Anonymous.’ We have missed you here.” To the utter dismay of my opposing counsel, I responded “Judge, I’m not sure that I would say the same thing. I heard about a verdict in your court.” After making sure that the court reporter had her hands off of her machine, the judge looked at me and asked if I had heard what she told the lawyers in the case after the verdict had been returned.

I had, but I figured that she had a story to tell, and I wanted to hear it from the bench. So as to not be heard by the entire courtroom, she leaned forward, covered her microphone and said, “I told them that, after six weeks, that jury had just given us all the proverbial finger.”

I still see the defense lawyers in that case, and we do laugh about the jury’s wisdom. I’d been told that the attorney’s fee bills alone were in excess of a couple of millions of dollars. In spite of that, those 12 folks, after sitting through six weeks of painful testimony about dirt and concrete, let everyone win and everyone lose.

I was able to sit on a jury a couple of years ago, and our jury had a similar outcome to the Reliant Arena case. When I talked to the judge after the case, he told me that the case had to go to trial because the parties had grown to hate each other so much that they could not get past their emotions and lost the ability to resolve the case. (With attorney’s fees in excess of $1 million per party, both had a lot of litigation costs to lose.)

All in all, I learned that judges and juries don’t care much about the emotions of the parties, and they will certainly send a hand signal if they feel that their time has been wasted because of it – a warning to all of us.

From the Chair

It Was the Best of Times ... It Was the Worst of Times

By David L. Jones

It’s not often that I'm at a loss for words. Actually, it just doesn't happen. Yet in recent days, I find that I am. For the past two years, I've had the pleasure of serving as chair of this Committee. During that period, I've presided over what Charles Dickens' famous quote aptly describes as the best and worst of times. It all started with a tremendous sense of optimism for what was possible and a long list of intended initiatives. At the time I was quoting Walt Disney and feeling terribly confident that my time working beside Diana Gertsberger and Mike Sams had prepared me for the job ahead. The fact that our Committee had managed to draft Danielle Waltz to its leadership ranks as Vice Chair further bolstered my confidence.  It truly felt like our Committee was at the precipice of something special.

Perhaps no truer statement has been uttered than when Mike Tyson said, "[e]verybody has a plan 'til they get punched in the mouth." Over the last two years, punched in the mouth is exactly what we've gotten. The pandemic seized the country fresh on the heels of our steering committee's 2020 leadership meeting, which was long on ideas and energy and short on foresight and precognition. We came together in Chicago, recommitted ourselves to the common cause and then scattered to the four corners of the country, fully believing that 2020 would be a transformative year. Little did we know how right — and wrong — we were. In all of my hubris, never in a million years would I have guessed that a national crisis would be the driving force behind the change that we had so eagerly discussed and desired at our fly-in meeting. But that is exactly what happened, as many of you know from the not-so-distant chronological history.

And that, my friends, is exactly how I went from quoting Dickens to quoting Tyson, all in the span of two terms as your committee chair. For those keeping score, the punches have just kept on coming. First, we weren’t able to present our in-person annual boot camp, a scheduled joint program with the Illinois Association of Defense Counsel. Then we were unable to present our annual 2020 Construction Seminar in-person. Then we were robbed of the opportunity to meet and network with each other at the 2020 DRI Annual Meeting. Then our Committee's 2021 leadership fly-in and in-person annual construction seminar were panned. Bluntly, we were forced to shelve much of our plans in favor of surviving a pandemic.

And yet … I'm overwhelmed with optimism about our Committee's future. Here's one thing that no one really considers or appreciates when she or he is in a fight, we weren't just getting punched, we were learning how to fight. We learned how to bob and weave, slip, duck, roll, and pivot. Incredibly, we've also learned how to effectively counter punch. When the pandemic eliminated our ability to meet in-person for our last two annual construction seminars, we pivoted and presented the first-ever, and I believe the most recent, virtual seminars for DRI. We did the same for our joint program at DRI's 2020 Virtual Annual Meeting and for our joint boot camp with the Illinois Association of Defense Counsel. We rolled out Toolbox Talks to keep our members appraised of rapidly changing legal and practical concepts important to our clients and practices. We also bolstered our on-line and on-demand educational offerings. When we could easily have gone dark, we went virtual with meetings, professional networking, check-ins, and just plain socializing.

Let there be no doubt, I'm proud of what you've accomplished. I'm also equal parts proud and humbled that you entrusted me to preside and help to construct a bridge over this turbulent time. But my current optimism flows from the thought of what this Committee can accomplish now that it has learned how to fight. As I relinquish the mantle of leadership, I do so with the knowledge that I'm tagging in Danielle Waltz, a true FIGHTER and strategist, who will be your next chair. Andy Ferguson will serve as vice chair and a backstop for Danielle, in much the way that she has done for me over these past two years. Neither Danielle nor Andy is likely to soon forget the lessons and tactics that we've gleaned over the last couple of years. Both are highly capable and likely to weaponize this knowledge and use it to ensure that any championship belts are fastened tightly around this Committee's metaphorical abdomen.

In short, Danielle and Andy are not just our friends, they are the best of our Committee and leaders who will ensure that the hard-earned lessons of the past two years slingshot us to future success. I, for one, look forward to encouraging, helping, and watching. I hope that you will do the same.

David JonesDavid Jones is a Partner with Wright Lindsey Jennings in Little Rock, AK. He is the immediate past chair of the DRI Construction Law Committee and was elected last month to serve as a national director on the DRI Board of Directors. He focuses his practice in the areas of business law and litigation, commercial litigation and construction law. Jones advises individuals and businesses in wide ranging industries including construction, banking, manufacturing and distribution, real estate, transportation and insurance on issues related to risk management, pre-litigation resolution, and all aspects of civil litigation.

Third Time's a Charm

DRI's Construction Law Seminar: Jan. 26-28, 2022, Austin

By Mark D. Shifton

After two long dark years of COVID-19 (including two seminars held virtually), we are finally looking forward to the 2022 Construction Law seminar, which will be held (in-person!) on January 26–28, 2022, in Austin, Texas. Although by April 2021 much of the country had made significant progress beating back COVID-19, we were unfortunately unable to move forward with our seminar as planned. Rather than wallow in self-pity, however, we went to work converting our seminar into a virtual one, which turned out to be a great success!

Now, the Construction Law steering committee is hard at work planning for our first live seminar in nearly three years. What do we have planned for our members? Only some of the finest educational programming and networking opportunities money can buy! As always, we will be providing informative and entertaining programs on cutting-edge topics that are critically relevant to the work we do each and every day. There will be networking receptions, dine-arounds, opportunities to hear from distinguished speakers, and interesting people to meet from around the country (and beyond). Additionally, this year we will have the unique opportunity to partner with DRI’s Women in the Law Committee, which is having its annual seminar in Austin as well. As always, there will be plenty of opportunities for networking and fun, including an event in memory of our long-time committee member and friend, David Wilson.

Do you even remember what it was like to get on a plane and enjoy a few days with colleagues and friends? Be sure to join us in Austin from January 26–28, 2022, and relive the good times! Save the date now, and we hope to see you soon!

Mark ShiftonMark D. Shifton is a Partner with the Princeton, New Jersey and New York City offices of Gfeller Laurie LLP. Mark focuses his practice in the areas of complex civil and commercial litigation in the state and federal courts in New Jersey and New York. He routinely represents owners, design professional, and contractors in cases involving construction disputes and catastrophic property losses.