Stacy v. Aetna Casualty & Surety Company

• Citation: 484 F.2d 289
• Decision Date: 08 November 1973
• Docket Number: No. 72-3268.,72-3268.
• Parties: Lester STACY, Plaintiff-Appellee, v. The AETNA CASUALTY & SURETY COMPANY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

484 F.2d 289 (1973)

Lester STACY, Plaintiff-Appellee, v. The AETNA CASUALTY & SURETY COMPANY, Defendant-Appellant.

No. 72-3268.

United States Court of Appeals, Fifth Circuit.

August 27, 1973.

Rehearing and Rehearing Denied November 8, 1973.

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W. P. Mitchell, Jess B. Rogers, Tupelo, Miss., for defendant-appellant.

William S. Lawson, John L. Long, Tupelo, Miss., for plaintiff-appellee.

Before WISDOM, GEWIN and CLARK, Circuit Judges.

Rehearing and Rehearing En Banc Denied November 8, 1973.

CLARK, Circuit Judge:

Lester Stacy lost his right leg when he fell into a rotating auger in the floor of the ice storage room of the poultry processing plant where he was employed. Having received the statutory benefits provided under the Mississippi Workmen's Compensation Law,¹ Stacy brought this action against the Aetna Casualty and Surety Company, his employer's compensation insurance carrier. He alleged that Aetna's failure to use reasonable care in performing inspections and safety engineering services was a proximate cause of his injury which rendered the carrier directly liable to him for damages in excess of compensation benefits. Aetna moved for summary judgment on the ground that as workmen's compensation carrier for Stacy's employer, Purnell's Pride, Inc., it was immune from this suit for plenary damages because of the exclusive liability provisions of the Mississippi Workmen's Compensation Law, Miss.Code Ann. § 6998-05. Aetna's motion for summary judgment was denied with an opinion reported at 334 F. Supp. 1216 (N.D.Miss. 1971).

The case was tried to a jury which found by answers to special interrogatories that Aetna did not exercise reasonable care when it failed to inspect the ice storage room of Purnell's poultry processing plant and that its negligence proximately caused or contributed to Stacy's injury. On appeal, Aetna contends, inter alia,² (1) that the district court erred in holding that under Mississippi law a workmen's compensation carrier may be subject to actions at law arising from negligent performance of inspection and safety engineering services and (2) that its motion for a directed verdict should have been granted since the evidence was insufficient to warrant submission of the case to the jury on the issue of liability. We do not reach or decide the correctness of the district court's Erie³ interpretation of the exclusive liability provision of the Mississippi Compensation Law since we agree with Aetna that the evidence, when viewed in the light most favorable to Stacy, failed to establish a cause of action.

On the morning of the accident Stacy arrived at Purnell's plant prior to his fellow workers. Having turned on the ice conveyer system, he entered the ice storage room for the purpose of breaking up crushed ice which had frozen into a solid mass overnight so that it would feed into a trench in the center of the storage room from which a metal auger would convey it to the assembly line on an upper level. The floor of the ice storage room sloped toward this central trench at an angle of 7 to 10 degrees. Stacy slipped on a sheet of ice and slid into the trench where the rotating auger entrapped his right leg and slowly and painfully amputated it above the knee. At the time of Stacy's accident, there were no grates or grills covering the trench to prevent workmen from coming into contact with the auger, nor had any other accident-prevention or safety devices been installed for the protection of employees such as Stacy who would be required to work in the ice storage room.

For about two years preceding Stacy's accident, Purnell's operated its own company safety program covering all of the various installations making up its complete operation — the poultry processing plant, feed mill, vehicle maintenance shop, hatchery, commercial egg operation and warehousing facilities. During this time and prior thereto Aetna had provided workmen's compensation liability insurance to Purnell's. Under its policy, Aetna reserved the right to inspect all of the premises it insured. For at least two years before Stacy was hurt, an Aetna representative who was a trained "loss control" engineer had visited Purnell's on a monthly basis. During these regular visits this Aetna engineer had consulted with Dick Guyton, Purnell's personnel director who also served as its plant safety officer, to discuss any accidents which had occurred since his last visit. They checked with the company nurse for her inquiries and comments and "looked into" areas where accidents had occurred. Aetna's engineer also attended meetings called by Purnell's to discuss safety with its employees. On occasion, Aetna made recommendations concerning safety improvements when Purnell's safety program personnel encountered problems they could not answer. Where Purnell's regarded these recommendations as practical within the industry and its own operation and not in conflict with the U. S. Department of Agriculture regulations, they were usually followed.

Distilling the most favorable facts proven which would support the jury verdict, we find that Aetna had a contractual right to make inspections at any point in Purnell's operations; in a two year period prior to Stacy's accident Aetna did make regular monthly inspections of those parts of Purnell's complete operation to which Aetna was directed by Purnell's or at which Purnell's accident reports indicated workmen had been hurt; Aetna was never requested to inspect the ice storage room because no accident had ever been reported there before Stacy's injury; and Aetna never undertook to inspect this room prior to that day.

Stacy contends that, having reserved the right to inspect and having undertaken to participate in Purnell's safety program, Aetna's failure to inspect the ice storage room and to discover the dangerous conditions therein rendered the carrier directly liable to him. This contention is founded on the legal principles expressed by § 324A of the Restatement of Torts, Second (1965):

One who undertakes, gratuitiously 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 perform 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.

While we find no Mississippi case precisely in point, we assume from the favorable citation of a related section, § 325 of the First Restatement of Torts, in Long v. Patterson, 198 Miss. 554, 22 So.2d 490, 492 (1945), that the Mississippi courts would now adopt the rule of 324A. Accord Hill v. United States Fidelity & Guaranty Co., 428 F.2d 112, 115-116 (5th Cir. 1970), cert. denied, 400 U.S. 1008, 91 S.Ct. 564, 27 L.Ed.2d 621 (1971); Roberson v. United States, 382 F.2d 714, 718 (9th Cir. 1967). However, even giving Stacy the benefit of the progressive principles of § 324A, we find that the evidence failed to establish that Aetna was under a legal duty to inspect the ice storage room and therefore the case should not have been submitted to the jury to determine whether its failure to do so amounted to negligence.

Because no representative of Aetna, at any time prior to Stacy's accident, conducted an actual inspection of Purnell's ice storage room or of the ice conveyer system Stacy's case is immediately distinguishable from the situation where an inspecting workmen's compensation carrier undertakes, but negligently performs, an inspection of the injury-producing instrumentality. See, e. g., Beasley v. MacDonald Engineering Co., 287 Ala. 189, 249 So.2d 844, 846 (1971); Nelson v. Union Wire Rope Co., 31 Ill.2d 69, 199 N.E.2d 769, 779 (1964); Fabricius v. Montgomery Elevator Co., 254 Iowa 1319, 121 N.W.2d 361, 362, 93 A. L.R.2d 591 (1963); Smith v. American Employers' Ins. Co., 102 N.H. 530, 163 A.2d 564, 566 (1960).

On the facts of the present case, Aetna's liability must find support in proof that it undertook an inspection program which obligated it to seek out and report safety defects anywhere in Purnell's processing facility and that this undertaking amounted to an assumption of a duty of inspection owed by Purnell's to its employees or that Stacy's injury resulted from reasonable reliance on Aetna's undertaking.⁴ Stacy's only claim of proof that Aetna had undertaken such a comprehensive safety inspection is based upon that portion of Aetna's amended answer which states:

Defendant admits that it made periodic inspections of said plant and the complete operation of said employer pursuant to permission granted by Paragraph 3 of the conditions of said policy of workmen\'s compensation insurance which provided in part as follows:

"The company and any rating authority having jurisdiction by law shall each be permitted but not obligated to inspect at any reasonable time the work places, 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 work places, operations, machinery or equipment are safe."

Defendant avers that such inspections were on a consultant basis and denies all other allegations of Paragraph III of the complaint.

According to the uncontradicted evidence developed at trial "periodic inspections of said plant and the complete operation of said employer" amounted to a limited undertaking to conduct safety engineering services in those areas of all of Purnell's various facilities where either the director of the company's own safety program or records of previous accidents...