By Brian C. Padove and John E. Sebastian, Watt Tieder Hoffar & Fitzgerald, LLP

The construction industry has an unfortunate notorious reputation of being resistant to adopting new technological changes while other industries (finance, healthcare, etc.) rapidly embrace digital transformations. While dealing with this reputation, the construction industry, likewise, has been dealing with a decades-long, generally industry wide, productivity decline. These competing issues make the industry ripe for disruption – and one of the most anticipated disruptors comes in the form of Artificial Intelligence (AI). AI developments will likely lead to transformations, industry wide, ranging from design and planning to project management, and potentially even robotic construction crews. While these advancements promise to lead to advancements in efficiency, productivity, and safety, from a legal perspective, they also may complicate matters due to legal uncertainties. The question arises – who holds the legal responsibility for these uncertainties?

The Rise of AI

The future of AI is not that far away – robots laying bricks, installing drywall, and pouring concrete – all with exact precision.  AI algorithms are predicting and preventing safety hazards before they materialize, or allowing for buildings with self-regulating energy consumption – this is the future AI promises in the construction industry, and it is not some pipe dream. In fact, various large construction industry companies are leading the charge with AI-powered tools including:

• Predictive Maintenance Systems: Analyzing sensor data from equipment to predict and prevent breakdowns which minimize downtime and costly repairs;

• Safety Monitoring Systems: Utilizing computer vision to detect safety hazards like, potential equipment malfunctions, unauthorized persons in restricted areas, or falling objects in real-time;

• Design Optimization: AI algorithms creating structures that are not only structurally sound, but also, minimize material waste while maximizing energy efficiency.

Again, however, these types of optimizations open up Pandora’s box of legal questions: what happens when an AI-controlled piece of equipment injures a worker? Who is liable if an AI-designed building collapses? The list goes on and on.

The Liability Framework

The construction industry, generally, has been slow to accept and implement changes – even more so, in relation to technological changes. One must look no further than the vast array of project scheduling software available and in use on projects throughout the country which range from simple excel spreadsheets to complex integrated scheduling software. From a legal perspective, the slow implementation of such technologies does have some benefits – namely, some predictability in allocating responsibility of construction work amongst owners, general contractors, subcontractors, suppliers, and manufacturers.  Where does AI fit into this structure? If AI is being used to design a building – is the AI considered a tool, product, service, or something entirely different? Moreover, who is the responsible party when design issues arise – (1) the architect who trusted the design; (2) the software developer who created the AI; (3) the subcontractor/contractor who implemented the design; or (4) someone else entirely?

Navigating the AI Era

So, what can Subcontractors do to navigate this uncertain legal landscape and build a foundation for future AI integration into the construction industry? First and foremost, it must be noted that specific steps to take are largely dependent upon the scope and extent AI will be utilized on the Project. For example, is the use of AI set forth in the contract specifications mandated by the Owner or is the Contractor, responsible for the means and methods on the Project, making the decision to utilize AI. With this in mind, below are some considerations for Subcontractors to be conscious of in an effort to help navigate the uncertain legal landscape of AI in construction.

• Know the Scope: Make sure you fully understand, to the extent possible, how and when AI will be utilized on the Project and by whom. This preliminary consideration is important for various reasons, but most importantly, it provides notice regarding the steps you, as the Subcontractor, can take to protect yourself from liability or work that would need to be performed as a result of AI being utilized. For example, are there extra inspection steps that will need to be taken for work that utilizes AI?

• Subcontract Transparency: Advocate for clear and explicit contractual clauses defining roles, responsibilities, and risk allocation regarding AI use. If you, as the subcontractor, are simply implementing AI provided/directed by an upstream party or designer, make sure you, as the subcontractor, are not responsible for defects in the AI or arising out of the use of the AI. Further, take extra care in reviewing specific language regarding warranty requirements for implementation of the AI tool. However, as referenced above, these provisions are highly-dependent upon each specific case wherein the AI is being utilized and the scope of such AI work.

• Indemnification: Likewise, indemnification obligations and rights are dependent on the specific use of AI in the Subcontractor’s work. Considerations should be taken to push for hold-harmless provision carve-outs that ensure the Subcontractor’s standard indemnification obligations do not include defects caused by or arising out of the AI (to the extent the Subcontractor bears no responsibility and/or decision-making authority for such AI implementation) – this is especially true given the nuanced nature of the use of AI. On the other hand, to the extent, you contract with lower-tier vendors utilizing AI, ensure your agreements include that lower-tier party’s obligation to indemnify upstream parties, including yourself, for defects relating to use of the AI.

• Stay Informed: As noted above, a lot of the issues in relation to AI in construction are highly dependent on what the specific use of AI on the project will be and are constantly developing. Thus, it is imperative for parties to keep abreast of evolving legal developments and any precedents surrounding AI in construction. Additionally, should questions arise regarding specific risk management measures to take in relation to a project or contract, consult with legal counsel.

In sum, digging into how AI will impact the construction industry is not an exact science. Knowing this, determining the precise steps Subcontractors can take to protect themselves involves a continuously evolving collaborative effort between Subcontractors, their suppliers and vendors, upstream parties, and legal counsel. However, what is certain is how the undeniable efficiencies further AI implementation into the industry will serve to help close the gap on the years-long industry-wide productivity stagnation. Accordingly, taking a proactive approach in determining responsibility for such implementation and corresponding liability will be imperative over the coming years and should help set Subcontractors apart.

About the Authors:

Brian Padove is an attorney in Watt Tieder’s Chicago office. He focuses his practice in the areas of construction law and suretyship including the representation of, among others, contractors, subcontractors, suppliers, and owners. Brian provides guidance on issues involving contract drafting and negotiations, contract claims, payment disputes, mechanic’s liens, surety bond claims, and delays claims. He also regularly advises clients on various challenges impacting the construction industry.

John Sebastian is the managing partner of Watt Tieder‘s Chicago office, has represented contractors, subcontractors, sureties, architects, engineers, and design/builders in payment disputes, design defect claims, delay claims, defective work claims, and contractor and owner bankruptcies. His construction law matters include defective design, delay and disruption, labor productivity analyses, contract interpretation, differing site conditions, and surety bond and mechanics lien claims.