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Prudent to Delegate Duty to Independent Contractor

The California Supreme Court resolved disputes between different district courts of appeal with regard to the duty raised by the California Occupational and Safety and Heath Act (CalOSHA) and whether it is delegable to an independent contractor.

Finding the duty delegable the Supreme Court caused to be dismissed a subrogation action by a workers’ compensation insurance company inSeaBright Insurance Company v. US Airways, Inc., California Supreme Court, Case: S182508, decided August 22, 2011, that reversed the decision of Court of Appeals at 183 Cal.App.4th 219 (2010).

The General Rule

Generally, when employees of independent contractors are injured in the  workplace, they cannot sue the party that hired the contractor to do the work.   (Privette v. Superior Court (1993) 5 Cal.4th 689 (Privette).)  The Supreme Court of California in Seabright decided whether the Privette rule applies when the party that hired the contractor (the  hirer) failed to comply with workplace safety requirements concerning the precise subject matter of the contract, and the injury is alleged to have occurred as a  consequence of that failure.

By hiring an independent contractor, the hirer without doubt implicitly delegates to the  contractor any tort law duty it owes to the contractor’s employees to ensure the safety of the specific workplace that is the subject of the contract. That implicit  delegation includes any tort law duty the hirer owes to the contractor’s employees to comply with applicable statutory or regulatory safety requirements.

Such  delegation does not include the tort law duty the hirer owes to its own employees to comply with the same safety requirements. Under the definition of employer that applies to California‘s workplace safety laws the employees of an independent contractor are not considered to be the hirer’s own employees.

The Decision

The Supreme Court decided that the Court of Appeal erred in reversing the trial court, which had granted summary judgment for defendant.

Factual Background

US Airways uses a conveyor to move luggage at San Francisco International Airport.  The airport is the actual owner of the conveyor, but US  Airways uses it under a permit and has responsibility for its maintenance.  US Airways hired independent contractor Lloyd W. Aubry Co. to maintain and repair  the conveyor; the airline neither directed nor had its employees participate in Aubry‘s work.

The conveyor lacked certain safety guards required by applicable regulations. Anthony Verdon Lujan, who goes by the name Verdon, was inspecting the conveyor as an employee of Aubry, and his arm got caught in its moving parts. Plaintiff SeaBright Insurance Company, Aubry‘s workers’ compensation insurer,  paid Verdon benefits based on the injury and then sued defendant US Airways, claiming the airline caused Verdon‘s injury and seeking to recover what it paid in  benefits. Verdon intervened as a plaintiff in the action, alleging causes of action  for negligence and premises liability.

Issues

Defendant US Airways sought summary judgment based on Privette, supra,  5 Cal.4th 689, and Hooker v. Department of Transportation (2002) 27 Cal.4th 198 (Hooker). In Hooker, the Supreme Court held that the hirer of an independent contractor can be liable for a workplace injury of the contractor‘s employee if the hirer retained control over the contractor’s work and exercised that control in a way that affirmatively contributed  to the employee’s workplace injury.  Defendant US Airways argued that it did not affirmatively contribute to employee Verdon’s injury.

Insurer SeaBright and employee Verdon (plaintiffs) countered with a declaration by an accident reconstruction expert, who stated that the lack of safety guards at nip points  on the conveyor violated Cal-OSHA regulations (see § 6300  et seq. [Cal. Occupational Safety & Health Act of 1973 (Cal-OSHA)]; Cal. Code  Regs., tit. 8, §§ 3999, 4002 [regulations governing conveyor safety]) and that the safety guards would have prevented Verdon’s injury.

The trial court struck plaintiffs’ declaration insofar as it discussed causation. It found no evidence that US Airways affirmatively contributed to  the accident and granted summary judgment for defendant US Airways. The Court of Appeal reversed.

The Court of Appeal held that, under Cal-OSHA, defendant US Airways had a nondelegable duty to ensure that the conveyor had safety guards, and that  the question whether the airline’s failure to perform this duty affirmatively contributed to plaintiff‘s injury remained a  triable issue of fact, precluding summary judgment.  The court noted conflicting views among the Courts of Appeal as to how Privette, supra,  5 Cal.4th 689, and Hooker, supra, 27 Cal.4th 198, apply when the hirer of the  independent contractor failed to comply with Cal-OSHA regulations, and the court  followed a line of decisions holding that such omissions can expose the hirer to  liability.

Two questions govern the assignment of tort liability:

1.    Did the defendant owe the plaintiff a duty of care?

2.    If so, what standard of care applied?

Analysis

A plaintiff can rely on statutory law to show that a defendant owed the plaintiff a duty of care.

Whether Cal-OSHA imposes on an employer like US Airways a tort law duty of care that extends to the employees of other parties such as independent contractors is a question that was unsettled. Under the law before SeaBright, a plaintiff may rely on Cal-OSHA requirements in the same manner that it can rely on other statutes and regulations to show that a defendant owed the plaintiff a duty of care. However, California law defines “employer” narrowly.

The issue considered by the Supreme Court was whether US Airways could and did delegate to independent contractor Aubry any duty it owed to Aubry’s employees to comply with the safety requirements of Cal-OSHA. In analyzing this issue the Supreme Court’s earlier decisions recognized a presumptive delegation of responsibility for workplace safety from the hirer to the independent contractor, and a concomitant delegation of duty.

The 1993 decision in Privette, supra, 5 Cal.4th 689, explained: “At common law, a person who hired an independent contractor generally was not liable to third  parties for injuries caused by the contractor‘s negligence in performing the work. … Central to this rule of nonliability was the recognition that a person  who hired an independent contractor had no right of control as to the mode of doing the work contracted for.” That was the common law rule,  but over time, the courts created so many exceptions to this general rule of nonliability that the rule [came to be] primarily important as a preamble to the catalog of its exceptions.

Workers‘ compensation serves the same policies as the peculiar  risk doctrine:  It ensures the availability of compensation to injured employees, spreads the risk created by a contractor‘s work to those who benefit from the  work, and encourages workplace safety.

The Privette line of decisions establishes that an independent contractor’s hirer presumptively delegates to that contractor its tort law duty to provide a safe workplace for the contractor’s employees.  At issue here  is whether the hirer can be liable to the contractor‘s employees for workplace injuries allegedly resulting from the hirer’s failure to comply with safety requirements of Cal-OSHA and its regulations.  That raises the question whether the tort law duty, if any, to comply with Cal-OSHA and its regulations for the  benefit of an independent contractor’s employees is nondelegable.

The nondelegable duties doctrine prevents a party that owes a duty to others from evading responsibility by claiming to have delegated that duty to an  independent contractor hired to do the necessary work.  The doctrine applies when  the duty preexists and does not arise from the contract with the independent  contractor.

Before hiring independent contractor Aubry, defendant US Airways owed its own employees a duty to provide a safe workplace.  The Supreme Court did not suggest that defendant could delegate that preexisting duty to Aubry such that defendant could  avoid liability if the conveyor had injured defendant’s own employee.  But under  the definition of “employer” that applies to California’s workplace safety laws, the employees of an independent contractor like Aubry are not  considered to be the hirer’s own employees, and the issue whether  defendant US Airways implicitly delegated to contractor Aubry the tort law duty, if  any, that it had to ensure workplace safety for Aubry’s employees.

The latter duty did not predate defendant’s contract with Aubry; rather, it arose out of the contract. Any tort law duty US Airways owed to Aubry’s employees only existed because of  the work (maintenance and repair of the conveyor) that Aubry was performing for  the airline, and therefore it did not fall within the nondelegable duties doctrine.

The Supreme Court concluded, therefore, that plaintiffs cannot recover in tort from defendant US Airways on a theory that employee Verdon’s workplace injury resulted from defendant’s breach of what plaintiffs describe as a nondelegable duty under Cal OSHA regulations to provide safety guards on the conveyor. The Court of  Appeal erred in reversing the trial court‘s grant of summary judgment for defendant.

Lesson

People or companies that use independent contractors can delegate the duty to provide a safe workplace to the independent contractor. In SeaBright the delegation was found to be implicit in the agreement between US Airways and Aubry. The prudent business using an independent contractor should consider making the delegation of the duty to be explicit and contained in the contract to avoid unnecessary litigation from workers’ compensation insurers and the employees of the independent contractor.

Of course, US Airways, and anyone using an independent contractor, cannot delegate the duty for injuries to its own employees. That type of risk shifting can be accomplished with a well written indemnity agreement and/or a requirement that the independent contractor makes the person hiring it to become an insured of the independent contractor’s policy of liability insurance which includes insurance to fulfill the indemnity agreements.

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Biography

Barry Zalma is the principal of the law office Barry Zalma, Inc. and a consultant with Zalma Insurance Consultants. 

Barry Zalma is an internationally recognized attorney licensed to practice only in California. As a lawyer, consultant, author, mediator or arbitrator he aids all parties who need his services on any insurance matter.

He is available for consultation on any and all insurance issues faced by you or your clients.

INSURANCE COVERAGE COUNSEL
Mr. Zalma is knowledgeable and qualifies as an expert in cases involving insurance bad faith, insurance claims, insurance claims handling, and insurance fraud. Mr. Zalma aids insurers, insurance agents and brokers, and attorneys representing both plaintiffs and defendants with their
insurance cases.

If there is a dispute about the interpretation of a particular insurance coverage, Mr. Zalma has the expertise needed to assist the insurer or the policyholder to resolve the dispute. 

Insurance policies are contracts, and to understand insurance policies each party must recognize how all contracts, and specifically insurance contracts, are interpreted. Barry Zalma, as an insurance coverage attorney with more than 42-years experience, is uniquely qualified to provide
advice and counsel on how to interpret an insurance policy as it applies to a specific fact situation.

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If the insured and the insurer cannot agree on the extent of a claim, competent insurance counsel is imperative. If the insured retains counsel to present his or her claim, or if fraud is suspected, the prudent insurer will retain counsel to protect its interests.

Claims counsel will usually deal with the insured’s attorney or public insurance adjuster. Claims counsel will direct investigation and provide advice and counsel to the insurer before a decision is made with regard to a disputed claim.

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Even lawyers who have coverage experience often find themselves prevented from addressing coverage issues. This is particularly common in the tri-partite relationship that applies to much civil defense work when the insurer retains defense counsel and pays defense costs on behalf of
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Defense counsel retained by an insurer to defend an insured represent both and should never
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Barry Zalma, Esq.
Barry Zalma, Inc.
4441 Sepulveda Boulevard
Culver City, CA 90230-4847
Phone: 3103904455 
Web site: http://www.zalma.com    
Email: zalma@zalma.com

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