SCOVT: Torts. Inspection by liability insurer was not an undertaking to assure workplace safety.

Thursday, June 12, 2014

Torts. Inspection by liability insurer was not an undertaking to assure workplace safety.

Murphy v. Sentry Insurance, 2014 VT 25 (07-Mar-2014)

Plaintiff appeals from a superior court decision that vacated a jury verdict in her favor and entered judgment as a matter of law for defendant Sentry Insurance. Plaintiff contends that there was sufficient evidence to establish Sentry’s liability for her husband’s workplace death under the Restatement (Second) of Torts § 324A based on a negligent inspection theory. We affirm.

Decedent died after a forklift he was operating for his employer, Pete’s RV Center, tipped over. Plaintiff alleged that Sentry was negligent in its inspection because it failed to discover and warn Pete’s about the danger of using unapproved towing attachments. Under § 324A one who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if

(a) his failure to exercise reasonable care increases the risk of such harm, or
(b) he has undertaken to perform a duty owed by the other to the third person, or
(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.

See Derosia v. Liberty Mutual Insurance Co., 155 Vt. 178, 182-83, 583 A.2d 881, 883 (1990). We agree with the trial court that plaintiff did not provide sufficient evidence here to support a finding in her favor under any of the subsections of § 324A.

To fall within § 324A(a) a party must engage in negligent conduct that “directly increases risk of harm.” Mere negligence in failing to discover a danger does not subject the defendant to liability. Assuming that the risk of physical harm associated with the use of unapproved forklift attachments was present at the time of Sentry’s inspection, nothing Sentry did increased the risk of physical harm to decedent from such attachments. We agree with the trial court that Sentry’s liability cannot be premised on § 324A(a).

In assessing a party’s liability under § 324A(b), one must examine the nature and extent of a party’s undertaking. Sentry was acting as a general liability insurer, not a workers’ compensation insurer. Sentry’s role in this case was nothing like that of the workers’ compensation insurer in Derosia. The Sentry inspector walked through the premises with one of the owners of Pete’s, and took note of several obvious hazards. There was no evidence to show that the inspector undertook to inspect the forklift or the forklift attachment, nor evidence to show that the inspector undertook to inspect the entire physical premises to discover any safety hazards that might exist. Given the nature of his safety survey, no jury could reasonably have concluded that in conducting its inspection as Pete’s general liability insurer, Sentry thereby assumed any portion of Pete’s obligation to provide a safe workplace for the decedent.

Any “reliance” under § 324A(c) must be reasonable. No reasonable employer could believe under the circumstances here that the Sentry inspector had identified all existing hazards on the premises or that he had implicitly approved the use of unauthorized towing attachments. Any reliance on the safety survey as approving the practice of using forklifts with unapproved attachments would be unreasonable as a matter of law.

Note. The Third Restatement now provides:

§ 43 Duty to Third Parties Based on Undertaking to Another

An actor who undertakes to render services to another and who knows or should know that the services will reduce the risk of physical harm to which a third person is exposed has a duty of reasonable care to the third person in conducting the undertaking if: