Court Weakens Government Contractor Immunity

March 2011Newsletters In the Zone

In September 2010, the U.S. Court of Appeals for the Fifth Circuit denied a government contractor immunity protection from damage claims by residents impacted by Hurricane Katrina. The court held the specifications approved by the government were not precise enough to qualify for the defense. The ruling from In re Katrina Canal Breaches Litigation , 2010 WL 3554302 (Fifth Cir. Sept. 14, 2010), diverged from previous immunity cases and may result in increased exposure to third-party liability claims.

The U.S. Army Corps of Engineers contracted with Washington Group International, Inc. (WGI) for engineering and construction services on a large project in New Orleans. The plaintiffs sued WGI, claiming its negligent and improper actions in fulfilling the contract were a cause of flood damage resulting from Hurricane Katrina. The district court initially granted summary judgment for WGI based on government contractor immunity.

Government contractor immunity, first articulated by the U.S. Supreme Court in Boyle v. United Technologies Corp. , 487 U.S. 500 (1987), evaluates government contractor immunity from negligence claims by third parties with a three-prong test. Namely, liability for defects cannot be imposed when (1) the United States approved reasonably precise standards; (2) fulfillment of the contract conformed to those specification; and (3) the supplier warned the United States about known dangers.

In applying Boyle, the appeals court held the services performed by the contractor were not done so pursuant to reasonably precise government specifications, and as such, failed the first prong of the legal test. Therefore, the defendant was not entitled to protection under the government contractor defense.

In previous immunity cases, the court has focused primarily on the extent of the government’s involvement in reviewing the contractor’s specifications. However, In re Katrina seems to impose a heightened standard on what constitutes reasonably precise standards. The court chose not to focus on the government’s development of the standards but rather on the contactor’s review and execution of those standards.

In light of In re Katrina, government contractors would benefit from engaging in a detailed discussion of specification requirements and should be aware of the liability risk associated with the use of design-build contracts.

For more information, please contact Clair E. Wischusen at 215.918.3559 or [email protected]