The Court of Appeals Will Review the Second Department’s Expansion of Liability of Commercial Owners and Managing Agents for the Negligence of their Independent Contractors

In Pesante v Vertical Indus. Dev. Corp., 2016 NY Slip Op 05854 (2d Dep’t August 24, 2016), the Second Department greatly expanded liability of commercial property owners and managing agents for the negligence of their independent contractors.  It was not clear from the one page decision whether the Court was aware of the far reaching consequences of what it had done.

Recently, the Second Department granted a motion for leave to appeal.  The matter is now on its way to the Court of Appeals.

In Pesante, the plaintiff claimed he was walking with a friend in a parking lot owned by the Vertical Industrial Development Corp. (“Vertical”) and managed by Rentar Development Corp. (“Rentar”), when she was struck by a remote-controlled toy car. The parking lot was patrolled by the employees of the owner’s independent security contractor. There was testimony that immediately prior to the accident, the security guard was in the same vicinity as the operator of the remote-controlled car. Vertical and Rentar moved for summary judgment on the grounds they were not responsible for the negligence of the security guard and presumably on the grounds it had no notice of the remote control car in the parking lot.  The lower court granted the motion, but on appeal the Second Department reversed.

The Second Department initially noted the general rule that a party who retains an independent contractor, as distinguished from a mere employee or servant, is not liable for the independent contractor’s negligent acts'” (citing Brothers v New York State Elec. & Gas Corp., 11 NY3d 251, 257).  The Pesante Court however, relied on an exception to this rule where “the party is under a duty to keep premises safe'” (citing Horowitz v 763 E. Assoc., LLC, 125 AD3d 808, 810, quoting Backiel v Citibank, 299 AD2d 504, 505. While the Court correctly cited the language above, the exception is referred to as the “non-delegable duty exception”.  More is required than a duty to keep the premises safe, that duty must be non-delegable.

While there are statutes that make this duty non-delegable, such as the New York City Multiple Dwelling Law which applies to residential apartment buildings, there was no such statutory basis at work in Pesante which dealt with commercial parking lot.  Typically, a commercial owner delegates the duty to keep premises safe to their tenants and only retains such duty with regard to structural issues with respect to the demised space.  The duty to maintain the structure is non-delegable, but the duty to maintain the floor inside the tenant’s space can be delegated. See Chery v. Exotic Realty, Inc., 34 A.D.3d 412, 413, 824 N.Y.S.2d 364, 365 (2d Dep’t 2006).

While, the Pesante Court was not faced with leased premises, the question whether Vertical and Rentar’s duty to the plaintiff to protect her from remote control vehicles in its parking lot was “non-delegable” so that it could be vicariously liable for the negligence of its subcontractors, was something that should have required considerable analysis and discussion, which the Court did not provide.

The Pesante Court’s citation to the Court of Appeals case, Brothers v New York State Elec. & Gas Corp., 11 NY3d 251, 257 is instructive.  In Brothers, the Court of Appeals emphasized the general rule is justified because “one who employs an independent contractor has no right to control the manner in which the work is to be done and, thus, the risk of loss is more sensibly placed on the contractor” (id. at 274). The Court noted however, that this general rule was subject to various exceptions including where the work was ‘inherently’ dangerous” or where the duty was non-delegable.

With respect to the non-delegable duty exception, the Court of Appeals explained there was “no clearly defined criteria” and that courts must perform “a sui generis inquiry” because “the conclusion ultimately rests on policy considerations”. The Court explained that “a duty is non-delegable when ‘the responsibility is so important to the community that the employer should not be permitted to transfer it to another.’ (Prosser and Keeton, Torts § 71, at 512 [5th ed].)” (72 NY2d at 118-119.)

In Brothers, despite the plaintiff’s assertion the public utility should be liable for its contractor’s negligence since it had a duty to comply with federal and state worker safety regulations, the Court disagreed finding several policy considerations that militated against imposing vicarious liability including that doing so would expose the defendant to a large class of plaintiffs given that utilities do a lot of highway maintenance using independent contractors.  Notably, this is exactly what the Pesante decision will do to commercial landlords.

In Horowitz v 763 E. Assoc., LLC, 125 A.D.3d 808, 5 N.Y.S.3d 118 (2d Dep’t 2015) also relied on by the Court in Pesante, the decision was based on the non-delegable duty to utilize safety glass pursuant to city and state building codes.  Likewise, in Backiel v Citibank, 299 A.D.2d 504, 751 N.Y.S.2d 492, (2d Dep’t 2002) the decision was based on cases that found an owner has a non-delegable duty to provide the public with a safe means of ingress and egress into a building.

None of these cases however, support the Pesante Court’s determination that Vertical and Rentar’s duty to keep their parking lot free of remote control vehicles was non-delegable.  The accident did not occur in the entrance to the building nor was there a statutory provision prohibiting remote control cars on the premises nor is the operation of a remote control car an inherently dangerous activity.

If Pesante becomes the standard in the Second Department, commercial owners and their building managers will be automatically liable, even in the absence of notice, anytime someone is injured on their property due to the negligence of a contractor.  The Second Department appears to have taken a situation where the owner should almost never be liable and made liability almost automatic against it.

Whether a case is defensible against an owner and managing agent will now greatly depend on whether the case is venued in the First or Second Department.  A good example of the difference in approach between the First and Second Departments is Laecca v New York Univ., 7 A.D.3d 415, 777 N.Y.S.2d 433, (1st Dept’ 2004) where the First Department stated:

An owner is obligated to maintain its property in a reasonably safe condition (see Tagle v Jakob, 97 NY2d 165, 168 [2001]). However, a party who employs an independent contractor for a particular task on the premises is generally not liable for the negligent acts of that contractor (Rosenberg v Equitable Life Assur. Socy. of U.S., 79 NY2d 663, 668 [1992]), absent a showing of a specifically imposed duty or knowledge by the principal of an inherent danger (Chainani v Board of Educ. of City of N.Y., 87 NY2d 370, 381 [1995]). Such knowledge can be imputed where the owner or principal created the hazardous condition or otherwise had actual or constructive notice of it (Juarez v Wavecrest Mgt. Team, 88 NY2d 628, 646 [1996]), or where he exercised supervisory control over the contractor’s operation (see Lombardi v Stout, 80 NY2d 290, 295 [1992]). The retention of general supervisory authority over the acts of an independent contractor is generally insufficient for the imposition of such vicarious liability (see Saini v Tonju Assoc., 299 AD2d 244, 245 [2002]). **2

The Laecca Court raises the further issue of notice, which was not addressed by the Pesante Court.  Even if there was a basis to impose a non-delegable duty on Vertical and Rentar, was it fair to suggest they could be liable in the absence either had notice of the remote control car?  To provide for vicarious liability is to dispense with the requirement of notice.  It is to impute notice as a matter of law under the circumstances.  Such imputation should only be found in exceptional cases such as where the activity is inherently dangerous, is an issue of safety required by statute or where safety is such a fundamental concern such as the egress and ingress of a building.

In contrast to the Second Department, the First Department, is so reticent to find an owner liable for the negligence of its independent contractors, it appears to require a finding of both a non-delegable duty and notice.  In Great N. Ins. Co. v Milo Real Estate Corp., 123 A.D.3d 482, 999 N.Y.S.2d 13 (1st Dep’t 2014), the First Department denied a motion for summary judgment finding triable issues of fact as to whether sanding and refinishing of wooden floors in a residential buildings was an inherently dangerous activity, and whether defendant had notice that sawdust, if improperly stored or disposed could spontaneously combust (citations omitted). The Court acknowledged that the defendant had a non-delegable duty to keep the residence in a safe condition, but still held that plaintiff needed to establish that it had notice its independent contractor was not properly disposing the sawdust.

Update: 1/12/17  By decision dated December 23, 2016, the Second Department granted Vertical’s motion for leave to appeal to the Court of Appeals.  Vertical is currently moving for order to show cause to stay the trial in order to allow the Court of Appeals the opportunity to hear the appeal.   We continue to hope the Pesante decision does not stand.

 

 

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