Opinion ID: 1834200
Heading Depth: 1
Heading Rank: 2

Heading: inherent danger and peculiar risk

Text: Fleck asserts that the work CCT performed was inherently dangerous and involved peculiar risks, and that ANG is therefore vicariously liable for CCT's conduct under Sections 416 and 427 of the Restatement (Second) of Torts. Those sections provide exceptions to the general rule of employer non-liability for the acts of an independent contractor: § 416. Work Dangerous in Absence of Special Precautions One who employs an independent contractor to do work which the employer should recognize as likely to create during its progress a peculiar risk of physical harm to others unless special precautions are taken, is subject to liability for physical harm caused to them by the failure of the contractor to exercise reasonable care to take such precautions, even though the employer has provided for such precautions in the contract or otherwise. § 427. Negligence as to Danger Inherent in the Work One who employs an independent contractor to do work involving a special danger to others which the employer knows or has reason to know to be inherent in or normal to the work, or which he contemplates or has reason to contemplate when making the contract, is subject to liability for physical harm caused to such others by the contractor's failure to take reasonable precautions against such danger. We have previously recognized causes of action based upon Sections 416 and 427. See McLean v. Kirby Co., 490 N.W.2d 229 (N.D. 1992); Schlenk, supra ; Peterson, supra . The dispositive issue is whether the protections afforded by Sections 416 and 427, making one who employs an independent contractor vicariously liable under certain circumstances for physical harm to others, extend to the employees of the independent contractor. [2] Fleck asserts that we have already held in Schlenk and Peterson that those sections do apply to employees of independent contractors. In those cases, however, we specifically stated that we were not resolving that issue: The parties have urged this court to decide whether or not the word `others' as used in these sections includes employees of an independent contractor, so as to allow the cause of action against Bell. We deemed it unnecessary to decide the question in Peterson v. City of Golden Valley, 308 N.W.2d 550, 554 (N.D.1981). We again decline to decide the issue because, even if we were to accept Schlenk's contention that employees of an independent contractor fall within the meaning of the term in our State ... we agree with the district court that the evidence does not establish that Bell owed a duty to Schlenk under any of the theories posited, and, thus, Schlenk could not prevail as a matter of law. Schlenk, supra, 329 N.W.2d at 607-608 (footnote and citations omitted); see also Peterson, supra . Of those jurisdictions which have considered the issue, the vast majority hold that employers of independent contractors are not vicariously liable to the employees of the independent contractor under Sections 416 and 427. See, e.g., Morris v. City of Soldotna, 553 P.2d 474 (Alaska 1976); Jackson v. Petit Jean Electric Co-op., 270 Ark. 506, 606 S.W.2d 66 (1980); Privette v. Superior Court, 5 Cal.4th 689, 854 P.2d 721, 21 Cal.Rptr.2d 72 (1993); Ray v. Schneider, 16 Conn.App. 660, 548 A.2d 461 (1988); Peone v. Regulus Stud Mills, Inc., 113 Idaho 374, 744 P.2d 102 (1987); Johns v. New York Blower Co., 442 N.E.2d 382 (Ind.Ct.App.1982); Dillard v. Strecker, 255 Kan. 704, 877 P.2d 371 (1994); King v. Shelby Rural Electric Cooperative Corp., 502 S.W.2d 659 (Ky.1973), cert. denied, 417 U.S. 932, 94 S.Ct. 2644, 41 L.Ed.2d 235 (1974); Rowley v. City of Baltimore, 305 Md. 456, 505 A.2d 494 (1986); Vertentes v. Barletta Co., 392 Mass. 165, 466 N.E.2d 500 (1984); Conover v. Northern States Power Co., 313 N.W.2d 397 (Minn.1981); Zueck v. Oppenheimer Gateway Properties, Inc., 809 S.W.2d 384 (Mo.1991); Anderson v. Nashua Corp., 246 Neb. 420, 519 N.W.2d 275 (1994); Sierra Pacific Power Co. v. Rinehart, 99 Nev. 557, 665 P.2d 270 (1983); Whitaker v. Norman, 75 N.Y.2d 779, 551 N.E.2d 579, 552 N.Y.S.2d 86 (1989); Curless v. Lathrop Co., 65 Ohio App.3d 377, 583 N.E.2d 1367 (1989); Tauscher v. Puget Sound Power and Light Co., 96 Wash.2d 274, 635 P.2d 426 (1981); Wagner v. Continental Casualty Co., 143 Wis.2d 379, 421 N.W.2d 835 (1988); Jones v. Chevron U.S.A., Inc., 718 P.2d 890 (Wyo.1986). Two federal courts, construing North Dakota law, have concluded that we would follow the majority view. See Olson v. Pennzoil Co., 943 F.2d 881 (8th Cir.1991); Ackerman v. Gulf Oil Corp., 555 F.Supp. 93 (D.N.D.1982). The minority view, adopted in a handful of jurisdictions, holds that employees of the independent contractor are included within the protections of Sections 416 and 427. See, e.g., Lindler v. District of Columbia, 502 F.2d 495 (D.C.Cir.1974); Makaneole v. Gampon, 70 Haw. 501, 777 P.2d 1183 (1989); Giarratano v. Weitz Co., 259 Iowa 1292, 147 N.W.2d 824 (1967); Phillips v. Mazda Motor Manufacturing (USA) Corp., 204 Mich.App. 401, 516 N.W.2d 502 (1994); Vannoy v. City of Warren, 15 Mich.App. 158, 166 N.W.2d 486 (1968); Elliott v. Public Service Co., 128 N.H. 676, 517 A.2d 1185 (1986); Lorah v. Luppold Roofing Co., 424 Pa.Super. 439, 622 A.2d 1383 (1993). California, long one of the leading minority view states, recently overruled its prior cases and adopted the majority view. See Privette v. Superior Court, supra . Courts adopting the majority view have outlined several well-reasoned and persuasive policy arguments in support of their holdings that employees of the independent contractor are not protected under Sections 416 and 427. Most of these policy reasons are based upon the availability of workers compensation benefits to the employee. Several courts have noted that the primary purpose underlying the Restatement sections creating vicarious liability is to assure compensation for injured persons. See, e.g., Sloan v. Atlantic Richfield Co., 552 P.2d 157 (Alaska 1976); Privette v. Superior Court, supra ; Peone v. Regulus Stud Mills, Inc., supra ; Wagner v. Continental Casualty Co., supra . We have indicated that the purpose of the peculiar risk rule is to ensure that innocent plaintiffs will not be left remediless while the owner is free to disclaim responsibility by entrusting the work to an independent contractor. McLean v. Kirby Co., supra . Thus, the policy concern which is the subject of Sections 416 and 427assuring a remedy for injured othersis already satisfied when the injured party receives workers compensation benefits. The California Supreme Court rationalized the policy concern in Privette v. Superior Court, supra, 21 Cal.Rptr.2d at 74, 854 P.2d at 723: When an employee of the independent contractor hired to do dangerous work suffers a work-related injury, the employee is entitled to recovery under the state's workers' compensation system. That statutory scheme, which affords compensation regardless of fault, advances the same policies that underlie the doctrine of peculiar risk. Thus, when the contractor's failure to provide safe working conditions results in injury to the contractor's employee, additional recovery from the person who hired the contractora nonnegligent partyadvances no societal interest that is not already served by the workers' compensation system. See also Zueck v. Oppenheimer Gateway Properties, Inc., supra ; Edward J. Henderson, Liability to Employees of Independent Contractors Engaged in Inherently Dangerous Work: A Workable Workers' Compensation Proposal, 48 Fordham L.Rev. 1165 (1980). The Idaho Supreme Court observes: To the extent that workmen's compensation is the preferred remedy for occupational injuries, it does appear anomalous and fortuitious [sic] to allow an employee to recover in tort from a third party owner when the accident arises out of and in the course of employment. Peone v. Regulus Stud Mills, Inc., supra, 744 P.2d at 106. Furthermore, many courts recognize that, because the cost of workers compensation premiums are necessarily included in the contract price, the employer of the independent contractor has indirectly paid those premiums and should be protected by the exclusive remedy provisions in the workers compensation laws. See, e.g., Vagle v. Pickands Mather & Co., 611 F.2d 1212 (8th Cir.1979) (applying Minnesota law), cert. denied, 444 U.S. 1033, 100 S.Ct. 704, 62 L.Ed.2d 669 (1980); Privette v. Superior Court, supra ; Dillard v. Strecker, supra ; King v. Shelby Rural Electric Cooperative Corp., supra ; Rowley v. City of Baltimore, supra ; Vertentes v. Barletta Co., supra ; Zueck v. Oppenheimer Gateway Properties, Inc., supra ; Wagner v. Continental Casualty Co., supra ; Jones v. Chevron U.S.A., Inc., supra ; see also Section 65-01-02(15)(c), N.D.C.C. (a general contractor is liable for workers compensation premiums for the employees of a subcontractor or independent contractor if the subcontractor or independent contractor fails to pay the premiums). The Washington Supreme Court explains: The employer's liability for damage resulting from the negligence of the independent contractor is limited to third parties largely because the employer has in a sense already assumed financial responsibility for the injuries to the employees in that the contract he or she pays to the independent contractor necessarily includes the costs of the insurance premiums that the independent contractor must pay for workers' compensation coverage.... The employee already has a remedy; one which the owner has paid for. Tauscher v. Puget Sound Power and Light Co., supra, 635 P.2d at 430 (citations omitted). Courts have also noted the incongruous result if an employer of an independent contractor were subjected to greater liability for injuries to the independent contractor's employees than if the employer had used its own employees to perform the dangerous work: [T]he principal employer should be subject to the same liability when the work is performed by employees of an independent contractor as when the work is performed by the principal employer's own employees. If the principal employer uses his own employees, he is subject to worker's compensation payments, not tort liability. If the principal employer incurs tort liability when he hires an independent contractor, the principal employer would, for reasons of cost, prefer to use his own employees, who may be inexperienced, rather than employ an independent contractor skilled in the task. Thus, several courts conclude that to impose tort liability on the principal employer would have unfavorable consequences to the principal employer, the independent contractor, the employees and the public. Wagner v. Continental Casualty Co., supra, 421 N.W.2d at 842. See also Privette v. Superior Court, supra ; King v. Shelby Rural Electric Cooperative Corp., supra ; Tauscher v. Puget Sound Power and Light Co., supra ; Jones v. Chevron U.S.A., Inc., supra . The California Supreme Court has also noted a corresponding incongruity: When an independent contractor causes injury to the contractor's own employee, the Act's `exclusive remedy' provision shields the contractor from further liability for the injury. Yet, under the expansive view of the peculiar risk doctrine that has been adopted in California and a minority of other jurisdictions, the person who hired the independent contractor can, for the same injury-causing conduct of the contractor, be held liable in a tort action for the injuries to the contractor's employee. Because this expansive view produces the anomalous result that a nonnegligent person's liability for an injury is greater than that of the person whose negligence actually caused the injury, it has been widely criticized. Privette v. Superior Court, supra, 21 Cal. Rptr.2d at 78-79, 854 P.2d at 727-728. The result is that the minority view penalizes employers who hire experienced independent contractors with trained employees to perform dangerous work, instead encouraging the employer to use its own unskilled, untrained employees. See Privette v. Superior Court, supra ; King v. Shelby Rural Electric Cooperative Corp., supra ; Tauscher v. Puget Sound Power and Light Co., supra ; Jones v. Chevron U.S.A., Inc., supra . The majority rule, which encourages the hiring of trained professionals with special expertise to perform work that is inherently dangerous or encompasses a peculiar risk, better promotes the dual policy concerns of safety to the general public and safety to those performing the work: Independent contractors are frequently, if not usually, hired because the landowner is aware of his own lack of expertise and seeks to have the work performed as safely and efficiently as possible by hiring those possessing the expertise he lacks. If the landowner chooses to avoid the additional liability imposed by the inherently dangerous exception, he may choose to direct his own employees to do the work despite his and their lack of expertise. That simple choice limits the landowner's exposure to that provided under worker's compensation. But that choice also increases the risk of injury to the employees and to innocent third parties. The anomaly is apparent now. By permitting employees of independent contractors to invoke the inherently dangerous doctrine, the law takes the distorted position of (1) rewarding landowners who, despite their own lack of expertise, choose to perform work negligently resulting in injury to workers, (2) increasing risks to innocent third parties and (3) punishing landowners who seek expert assistance in an effort to avoid liability for injury! Zueck v. Oppenheimer Gateway Properties, Inc., supra, 809 S.W.2d at 387-388 (footnote omitted). Courts have also recognized valid reasons for distinguishing between members of the general public injured by worksite negligence and injured employees of an independent contractor: Members of the public, whose proximity to danger would be merely coincidental, would probably be unaware of any danger until it struck; hence, there is no way they could adequately protect or insure themselves against harm. Employees at the work site, on the other hand, would possess some knowledge with respect to the nature of the project and thus could choose whether they wished to be exposed to a dangerous activity. If they did participate in such an endeavor, their rate of pay would usually reflect the risk involved. In addition, they could take steps to avoid injury by acting carefully and would be protected statutorily by employer liability and the workmen's compensation act. Morris v. City of Soldotna, supra, 553 P.2d at 481-482. This reasoning was further explained in Jackson v. Petit Jean Electric Co-op., supra, 606 S.W.2d at 69: The exception is grounded in a recognition that the possibility of harm to others is so great when the work activity is inherently dangerous that the law tolerates it only on terms of insuring the public against injury. We impose vicarious liability under these circumstances to insure that the public has legal access to a financially responsible party. The exception was obviously intended to protect those who have no direct involvement with the hazardous activity, are only incidentally exposed to its risks and have no direct means of insuring themselves against loss. Since employees of an independent contractor are directly involved in the hazardous activity, have knowledge of the risks and are insured against injury by worker's compensation, we perceive no sound justification for expanding the exception to include persons it surely was not designed to protect. See also Ackerman v. Gulf Oil Corp., supra ; Ray v. Schneider, supra ; Dillard v. Strecker, supra ; Wagner v. Continental Casualty Co., supra . It has also been recognized that permitting recovery by the employees of independent contractors would create an unwarranted windfall, and would exempt a single class of employees, those who work for independent contractors, from the statutorily mandated limits of workers' compensation. Privette v. Superior Court, supra, 21 Cal.Rptr.2d at 80, 854 P.2d at 729. The Missouri Supreme Court observes: The application of the inherently dangerous exception also distorts workers' compensation laws. The exception, if extended to employees of an independent contractor, permits a limited class of injured workersthose who can convince a judge that their work for an independent contractor was inherently dangerousto avoid the limitations of workers' compensation. This is contrary to the fact that the economic system permits workers who presume to undertake dangerous work to bargain for an enhanced reward for assuming the danger and despite the intended exclusivity of workers' compensation as an injured worker's remedy. Zueck v. Oppenheimer Gateway Properties, Inc., supra, 809 S.W.2d at 390 (footnote omitted). One final reason also supports our adoption of the majority view. The workers compensation act in effect represents a legislatively created settlement of claims between injured workers and their employers. Both sides have forfeited certain common-law rights to implement the social purposes of the act. See Barry v. Baker Electric Cooperative Inc., 354 N.W.2d 666 (N.D.1984); Breitwieser v. State, 62 N.W.2d 900 (N.D.1954); 1 Larson, Law of Workmen's Compensation § 1.10 (1993). The employee gives up the right to sue the employer for negligently inflicted injuries, in exchange for sure and certain benefits for all workplace injuries, regardless of fault. See Sections 65-01-01 and 65-01-08, N.D.C.C.; Privette v. Superior Court, supra, 21 Cal.Rptr.2d at 78, 854 P.2d at 727 (labeling this the compensation bargain); Zueck v. Oppenheimer Gateway Properties, Inc., supra . We have previously held that release of a servant for the underlying negligent conduct also releases a master's vicarious liability based upon the same conduct. Horejsi v. Anderson, 353 N.W.2d 316, 318 (N.D.1984). The same rationale applies here: the underlying negligent conduct of the independent contractor has been statutorily released, and accordingly there can be no vicarious liability based upon that conduct. To hold otherwise would effectively permit a double recovery for the independent contractor's conduct, in violation of the exclusive remedy provisions of the workers compensation act. The Supreme Court of Nebraska recently relied upon this reasoning in adopting the majority view: [I]n the context of vicarious liability, a principal cannot be liable where the agent is immune. Since Bunch, by virtue of the exclusivity provision of the workers' compensation laws, is immune from suit, Nashua, its employer-principal, necessarily cannot be held vicariously liable. Anderson v. Nashua Corp., supra, 519 N.W.2d at 285. Relying upon the foregoing reasons, we adopt the majority view and hold that an employer of an independent contractor is not vicariously liable to the independent contractor's employees under Sections 416 and 427 of the Restatement (Second) of Torts. [3]