Hill v. United States Fidelity and Guaranty Company

• Decision Date: 20 July 1970
• Docket Number: No. 25767.,25767.
• Citation: 428 F.2d 112
• Parties: Marie L. HILL, Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

428 F.2d 112 (1970)

Marie L. HILL, Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee.

No. 25767.

United States Court of Appeals, Fifth Circuit.

June 2, 1970.

Rehearing Denied and Rehearing Denied July 20, 1970.

Jack F. Wayman, Mark Hulsey, Jr., Nathan Bedell, Jacksonville, Fla., for appellant.

Noah H. Jenerette, Jr., Jacksonville, Fla., for appellee.

Before WISDOM, GODBOLD and SIMPSON, Circuit Judges.

Rehearing Denied and Rehearing En Banc Denied July 20, 1970.

GODBOLD, Circuit Judge:

This is one of approximately 50 cases growing out of a fire at the Roosevelt Hotel in Jacksonville, Florida in 1963 and filed in the District Court for the Middle District of Florida. The District Court has stayed proceedings in the companion cases pending the outcome of this appeal.

Appellant and her husband were guests in the hotel. Her claim against USF&G is for damages for personal injury to herself and for the wrongful death of her husband, both suffered in the fire. USF&G was the hotel's public liability, fire and workmen's compensation insurer. The basis of appellant's claim is alleged negligent performance by USF&G of an undertaking by it to carry out what are termed safety engineering inspections of the hotel. The principal issue is whether USF&G owed a legal duty to the hotel's guests.

The District Court granted USF&G's motion to dismiss appellant's claim as stated in the Uniform Amended Complaint for failure to state a claim upon which relief could be granted, and granted leave to amend.¹ Appellant filed a Second Uniform Amended Complaint, and it was dismissed for the same reasons assigned for the first dismissal.² The appellant elected not to plead further, and the court entered a judgment of dismissal with prejudice.

We conclude that the District Court erred in dismissing the Uniform Amended Complaint, and the Second Uniform Amended Complaint, and we reverse.³

1. History of the proceedings.

This action and others were filed originally in Florida state court, charging negligence against individual owners of the hotel, the hotel company (the operating lessee) and USF&G. The state court denied USF&G's motion to dismiss the Uniform Amended Complaint, holding that it stated a cause of action for negligent violation of duties as defined in the decision of the Supreme Court of Illinois in Nelson v. Union Wire Rope Corp., 31 Ill.2d 69, 199 N.E.2d 769 (Ill.1964) and the Florida case of Modlin v. Washington Avenue Food Center, 178 So.2d 596 (Fla. Ct.App.1965).⁴ Nelson, though decided by the courts of Illinois, applied Florida law. Prior to trial, claims against the individual owners and the operating lessee were settled, and those parties were dismissed from the case. USF&G then removed to federal court on diversity grounds.

After removal USF&G moved the federal District Court for rehearing of its motion to dismiss, which had been denied in state court. The District Court granted rehearing and granted the motion, stating that it was following the opinion of the Appellate Court of Illinois in Nelson v. Union Wire Rope Corp., 39 Ill. App.2d 73, 187 N.E.2d 425 (1963), which it thought the Supreme Court of Florida would follow, rather than the reversing opinion of the Supreme Court of Illinois, which the Florida trial court had followed.

2. The power of the District Court to rehear the motion to dismiss.

In the beginning we dispose of the contention of appellant that the federal court could not rehear the motion to dismiss the Uniform Amended Complaint and, if it did so, could not reach a result opposite to that of the state court. Appellant's argument is a sort of catch-all amalgam of what the federal court is Erie-bound to do, what as a matter of policy it should do, law of the case, and the evils of forum shopping.

A final decision of a state trial court is not binding on the federal courts as a final expression of the state law, King v. Order of United Commercial Travelers of America, 333 U.S. 153, 68 S.Ct. 488, 92 L.Ed. 608 (1948). In this instance the decision of the state court does not have the imprimatur of finality, but in lieu it has the persuasive force of having been entered in the very case and on precisely the same issues, and it has the additional persuasiveness of the fact that the state judge, in seeking to divine what was the law of Florida, relied upon the opinion of the highest court of Illinois, while the federal judge, engaged in the same search, chose to follow the reversed opinion of the intermediate appellate court of Illinois. The state judge had power to reexamine his own order on motion to dismiss until such time as final judgment was entered, and the federal judge would have had power to do the same with an order of his own. The power to reexamine is not lost by the transfer from state to federal system.

3. The Uniform Amended Complaint

The Uniform Amended Complaint contains these allegations as the basis for the claim that USF&G had a duty to hotel guests which it breached:

9. From the time the owners acquired ownership of the hotel until the time of the fire, the defendant United States Fidelity & Guaranty Company (hereinafter referred to as the "insurance company") issued and carried various public liability, fire, and workmen\'s compensation insurance policies covering said premises and the operation of said hotel and made periodic safety engineering inspections of the hotel premises to detect conditions hazardous to persons occupying and using the hotel premises. The insurance company made reports of such inspections to the hotel company together with recommendations for the elimination of any such hazardous conditions, and the owners and hotel company complied with such recommendations and relied upon the insurance company to inspect the hotel premises and to detect and report conditions hazardous to persons occupying and using the hotel premises. It became and was the duty of the insurance company to exercise reasonable care in making such inspections and although the insurance company, in the performance of its safety engineering inspections knew or should have known of the conditions alleged in paragraphs 4 and 5, above, and knew or should have known that such conditions constituted an unreasonable risk of injury from fire and smoke to persons in the hotel and rendered the premises unsafe for the housing of guests as alleged in paragraph 6, above, and should have reported the existence of such hazardous conditions to the hotel company, yet the insurance company carelessly and negligently performed such inspections in failing to detect such conditions and in failing to report to the hotel company that such conditions rendered the hotel unsafe for housing guests.

We conclude that this stated, under Florida law, a claim on which relief could be granted. A point of entry for discussion is § 324A of the Restatement of Torts, Second (1965):

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 perform⁵ 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.

Comment e. to that subsection provides:

e. Reliance. The actor is also subject to liability to a third person where the harm is suffered because of the reliance of the other for whom he undertakes to render the services, or of the third person himself, upon his undertaking. This is true whether or not the negligence of the actor has created any new risk or increased an existing one. Where the reliance of the other, or of the third person, has induced him to forgo other remedies or precautions against such a risk, the harm results from the negligence as fully as if the actor had created the risk.

Section 324A subjects one to liability whether his undertaking be gratuitous or for compensation. The District Court characterized the Uniform Amended Complaint as alleging a purely gratuitous undertaking by USF&G and the parties take the same approach. We have some question whether the language of paragraph 9, quoted above, confines the role of USF&G to that of a mere volunteer. But, as a practical matter, we accept that characterization. The Second Uniform Amended Complaint positively alleges that USF&G's undertaking is for compensation.

The most full analysis of the Florida law is in the two Nelson opinions of the Illinois courts. In Nelson actions were brought in Illinois for seven deaths and injuries to eleven other persons occurring in the fall of an elevator-type hoist in the contruction of Duval County courthouse at Jacksonville, Florida. Suits were brought in Illinois against American Mutual, which was the insurer carrying public liability and workmen's compensation insurance for the general contractor, on the basis of its undertaking to supply safety engineering service (and against other defendants on other theories). Judgments were entered against American Mutual.

On appeal the Appellate Court of Illinois held that the policies issued by American Mutual gave it the right to inspect the premises and equipment of the general contractor (Auchter) but did not impose upon it any duty to do so, and that the theory of plaintiffs' case was negligent performance by American Mutual of a gratuitous undertaking to perform safety engineering services. The Appellate Court reversed on the basis of its conclusion that American Mutual had not undertaken inspection of the hoist and cable as part of its gratuitous safety engineering services, but, alternatively, even if it had entered into such an undertaking, no one, neither Auchter nor the plaintiffs,...