Derosia v. Liberty Mut. Ins. Co.

• Citation: 155 Vt. 178,583 A.2d 881
• Decision Date: 21 September 1990
• Docket Number: No. 87-584,87-584
• Parties: Gertrude C. DEROSIA, Administratrix of the Estate of Lyman R. Derosia v. LIBERTY MUTUAL INSURANCE COMPANY.
• Court: United States State Supreme Court of Vermont

Page 881

583 A.2d 881

155 Vt. 178

Gertrude C. DEROSIA, Administratrix of the Estate of Lyman R. Derosia v. LIBERTY MUTUAL INSURANCE COMPANY.

No. 87-584.

Supreme Court of Vermont.

Sept. 21, 1990.

Thomas W. Costello and Ardith L. Baldwin of Thomas W. Costello, P.C., Brattleboro, for plaintiff-appellee.

Plante, Richards, Hanley & Gerety, P.C., White River Junction, for defendant-appellant.

Before ALLEN, C.J., PECK, DOOLEY and MORSE, JJ., and BARNEY, C.J. (Ret.), Specially Assigned.

ALLEN, Chief Justice.

Defendant workers' compensation insurer appeals from a judgment entered in the Windham Superior Court on a jury verdict for plaintiff, who was injured in an industrial accident. We affirm.

On December 4, 1981, plaintiff, an employee at The Book Press in Brattleboro, severely lacerated the tips of three fingers on his right hand while operating a table saw. Plaintiff sued the manufacturer of the table saw and amended his complaint to include defendant, the workers' compensation insurer for The Book Press. Defendant moved for summary judgment on grounds that 21 V.S.A. §§ 601-709 prohibited actions against an employer's workers' compensation insurance carrier. The trial court denied the motion, and certified the issue to this Court, which decided the issue in plaintiff's favor, Derosia v. Duro Metal Products Co., 147 Vt. 410, 519 A.2d 601 (1986).

Plaintiff proceeded at trial on the theory that defendant conducted safety inspections at the premises of plaintiff's employer in a negligent fashion. The undisputed evidence indicated that at the time of the accident the table saw was being used without a safety blade guard mechanism, in violation of applicable safety regulations. A safety guard had been supplied by the manufacturer of the saw, but it had been removed and stored in a closet in the shop.

The provision of the insurance contract between defendant and plaintiff's employer respecting the inspection of the employer's premises was as follows:

INSPECTION AND AUDIT The Company and any rating authority having jurisdiction by law shall each be permitted but not obligated to inspect at any reasonable time the workplaces, operations, machinery and equipment covered by this policy. Neither the right to make inspections nor the making thereof nor any report thereon shall constitute an undertaking on behalf of or for the benefit of the insured or others, to determine or warrant that such workplaces, operation, machinery or equipment are safe or healthful, or are in compliance with any law, rule or regulation.

Prior to and at the time of the accident defendant maintained a department known as the Loss Prevention Department, which had considerable expertise in the field of workplace safety. Department personnel knew that the table saw at The Book Press should be used with a safety guard. Department personnel toured The Book Press factory on several occasions in the years prior to the accident, including one time a few months before the accident, and made recommendations about specific safety problems at the plant. Shortly before the accident, a Loss Prevention Department representative requested an opportunity to meet with The Book Press officials to discuss the problem of finger injuries on machinery at the plant. Because an immediate meeting was not feasible, the representative wrote that he would return to address the problem with the plant's manager. Plaintiff's accident occurred after this correspondence but before any such meeting occurred.

Defendant moved for a directed verdict at the close of plaintiff's case based on plaintiff's failure to present evidence of a duty or undertaking by defendant to conduct safety inspections, and the motion was denied. After the verdict was entered, defendant moved for judgment notwithstanding the verdict and for a new trial. Both motions were denied, and the present appeal followed. ¹

I.

A. Undertaking by Defendant

Defendant's central argument on the merits is that plaintiff failed to introduce any evidence at trial that defendant had undertaken or promised to provide safety inspection services for The Book Press or plaintiff. The importance of this issue was signalled in Derosia v. Duro Metal Products Co., 147 Vt. at 413, 519 A.2d at 604, where we concluded "that if a workers' compensation carrier undertakes to provide, rather than pay for, benefits and services, it should be liable in tort as 'a person other than the employer.' 21 V.S.A. § 624."

Section 324A of the Restatement (Second) of Torts delineates when an undertaking to render services to another may result in liability to a third person. ² This Court has never formally adopted the language used in § 324A, but it has expressed views consistent with the basic theory of liability as set forth in § 324A. See Smyth v. Twin State Improvement Corp., 116 Vt. 569, 570-71, 80 A.2d 664, 665 (1951) ("[T]he law imposes an obligation upon everyone who attempts to do anything for another, even gratuitously, to exercise some degree of care and skill in the performance of what he has undertaken, for nonperformance of which duty an action lies."). The Restatement position is not a break from our earlier case law. Rather, it is a more detailed and inclusive statement of a position long taken. Embracing § 324A formally as a focus of analysis has the great benefit of opening for our consideration a considerable body of cases interpreting a single and comprehensive legal formulation. ³

Under § 324A it is not an actor's undertaking alone which subjects him to liability, but rather it is the actor's "failure to exercise reasonable care to protect his undertaking," resulting in either (a) an increased risk of physical harm to the third person (b) the assumption by the actor of a duty owed by the second person to the third person, or (c) harm to the third person resulting from reliance on the undertaking by the second or third person.

Plaintiff responds that he presented sufficient evidence to allow the jury to conclude that defendant undertook to perform inspection services for The Book Press--a duty that The Book Press owed to plaintiff; that defendant failed to exercise "reasonable care to protect [its] undertaking"; and that harm resulted from defendant's failure. We agree.

It is well established in reviewing the denial of a motion for a new trial that this Court will view the evidence in the light most favorable to the verdict and will accord the trial court all possible presumptive support. Lent v. Huntoon, 143 Vt. 539, 553, 470 A.2d 1162, 1171 (1983). The record before us reveals that defendant's loss-prevention activities were substantial. It maintained a department expressly devoted to loss-prevention initiatives, and Karl Jacobson, defendant's loss-prevention manager, regularly visited The Book Press, inspecting the facilities and making written recommendations from time to time for safety improvements. Jacobson testified that a narrative report prepared for defendant in 1977 after a site visit indicated that The Book Press management was interested in receiving defendant's loss-prevention services, and his observations in working with the company corroborated the statement in the report. The witness agreed that "the customer [The Book Press] had no particular expertise in safety or loss prevention" and that "[t]hat expertise was provided by Liberty in particular, the Loss Control Department."

Admitted into evidence was a seven-page "Progress Report" prepared by defendant detailing The Book Press's accident record for the period January 6, 1978, to January 6, 1979. Also admitted was a document entitled "Risk Management Meeting--Loss Prevention Report," in which Jacobson recounted his meeting with Steve Medved, personnel director of The Book Press on August 26, 1980, and which included a list of loss sources within the plant, the "plan of action" or current status on the loss sources, and the status of past recommendations. Following the August, 1980 meeting, Jacobson wrote Medved, attaching an accident analysis for the year January 6, 1979 to January 6, 1980. Jacobson testified that after concluding in September, 1980 that machines were a major source of injury at The Book Press, no recommendations were made to reduce or eliminate those injuries or risks. Jacobson further testified that his duties at The Book Press were assumed by Ted Braun in 1980, but he recalled nothing specific about whether the report's conclusions about the machinery hazards at The Book Press were transmitted to Braun.

Braun visited The Book Press on January 20, 1981, and wrote Medved on January 28, 1981, identifying manual material handling as the predominant source of loss and machine accidents as a "secondary source of loss." Braun submitted the next "Risk Management Meeting--Loss Prevention Report" dated May 1, 1981, noting under "loss sources" the entry "Machine Accident-Hand injuries in press room and bindery generally from feeding work into machines and presses--No commitment." Again, in the same report, Braun stated, "No plan of action developed on machine injuries." Later in May, 1981 Braun again wrote Medved, acknowledging Medved's indication that he would prefer to have periodic loss statements on a quarterly basis and cause-coded.

Braun testified that during the first ten months of his responsibility for The Book Press account he made no safety recommendations at all. He testified as follows:

Q: As of that time, as of May 1, [1981] no plan of action had been developed by you or by anyone else at Liberty to address the machine injury problem?

A: That is correct.

Q: And at that time--at least at that time, this particular problem had been identified and accepted by Liberty Mutual and by Book Press as a major source of loss or injury?

A: That is correct.

Q: Now, you, at that meeting, discussed the conclusions that that was a major source of loss?

A: At the risk management meeting, you are speaking of?

Q: Yes.

A: Yes.

Q:...