Opinion ID: 2050890
Heading Depth: 1
Heading Rank: 4

Heading: Principal-Agent Relationship and the Duty to Warn

Text: As noted above, plaintiffs' initial argument is that the negligence count should not have been dismissed because this case fits within an exception to the noaffirmative-duty rule. Specifically, plaintiffs rely on section 471 of the Restatement (Second) of Agency (Restatement (Second) of Agency § 471 (1958)), to assert that defendants owed a duty to warn Iseberg of Slavin's threats. This court has never before addressed the application of section 471 of the Restatement (Second) of Agency, although our appellate court has. See MacDonald v. Hinton, 361 Ill.App.3d 378, 297 Ill.Dec. 162, 836 N.E.2d 893 (2005); Petersen v. U.S. Reduction Co., 267 Ill.App.3d 775, 204 Ill.Dec. 415, 641 N.E.2d 845 (1994). Section 471 provides as follows: A principal is subject to liability in an action of tort for failing to use care to warn an agent of an unreasonable risk involved in the employment, if the principal should realize that it exists and that the agent is likely not to become aware of it, thereby suffering harm. Restatement (Second) of Agency § 471, at 405 (1958). Comment a, following this section, explains the rationale for the rule: One who is requested or directed by another to act on his account has reason to believe that the other will give him information of the risks to be encountered of which the other knows and which he should realize are unknown to the one so requested to act. Further, if the one making the request is in a better position to know of the risks to be encountered, the one of whom the request is made may reasonably believe that he will be informed of facts which the other, because of his position, should know. From this it follows that a principal requesting or directing an agent to act is under a duty to disclose to the agent the risks which he knows or should know are likely to be encountered by the agent [in performing the requested acts.] [5] Restatement (Second) of Agency § 471, Comment a, at 405 (1958). Applying this rationale, courts that have found a duty to warn in reliance on section 471 of the Restatement (Second) of Agency have treated the duty as an extension of an employer's general obligation to provide a safe workplace for his employees. See, e.g., Blake v. Consolidated R. Corp., 176 Mich.App. 506, 516, 439 N.W.2d 914, 919 (1989) (railroad was held liable to the estates of three railroad employees who were murdered by an individual known to be carrying out a vendetta against the railroad based on court's finding that railroad had a duty to warn and protect its employees from criminal assault against them during the course of employment; duty could be inferred from employer's duty to provide a safe workplace for its employees); Dahlgren v. Coe, 311 Mass. 18, 40 N.E.2d 5 (1942) (employer liable for injuries to laundress scalded by hot water when employer knew water was excessively heated but did not warn laundress). In the case at bar, plaintiffs contend that the facts alleged in their third amended complaint support a finding that a principal-agent relationship existed between Iseberg and defendants at the time of Iseberg's injury and that, as a result of that relationship, defendants had a duty to warn, as set forth in section 471 of the Restatement (Second) of Agency. We disagree. The complaint alleges that Iseberg was defendants' former partner and joint adventurer, as well as the current agent, attorney, and coadventurer of the defendants and the Leikam Farm Joint Venture with respect to the sale and/or development of the Leikam Farm property. The complaint further alleges that Iseberg provided legal, brokerage, development, and marketing services to defendants and the Venture with respect to the Leikam Farm property from September 1997 through January 2000. Plaintiffs now contend that these allegations in their complaint sufficiently establish the existence of a principal-agent relationship between defendants and Iseberg at the time of Iseberg's injury. As defendants point out, however, the allegations in plaintiffs' complaint which support a finding that an agency relationship existed are directly contradicted by the documents attached to the complaint. For example, plaintiffs' assertions that Iseberg acted as an attorney and/or brokerage agent for the Leikam Farm Joint Venture are belied by the terms of the settlement, which specifically provide that Iseberg was not to have any involvement in the Leikam Farm property unless requested by the Venture in writing. Plaintiffs do not allege that Iseberg was ever authorized, in writing, to represent the interests of the Venture. Defendants also argue that, even if we accept as true plaintiffs' allegations that Iseberg provided professional legal and brokerage advice to defendants and the Venture during the relevant time period, we should find that Iseberg was acting as an independent contractor and, for this reason, the allegations in the complaint fail to demonstrate that a principal-agent relationship existed between Iseberg and the defendants. While it may be true that Iseberg was an independent contractor rather than defendants' agent (see Petersen v. U.S. Reduction Co., 267 Ill.App.3d at 782-85, 204 Ill.Dec. 415, 641 N.E.2d 845), we need not decide whether plaintiffs' complaint sufficiently alleged the existence of an agency relationship. Even if the allegations in plaintiffs' complaint supported a finding that Iseberg had been, in some capacity, defendants' agent during the relevant time period, it would not alter our determination with regard to the duty to warn. The duty to warn, identified in section 471 of the Restatement (Second) of Agency, does not arise unless the unreasonable risk of harm is involved in the employment. See MacDonald v. Hinton, 361 Ill.App.3d at 385, 297 Ill.Dec. 162, 836 N.E.2d 893 (to state a claim for negligent failure to warn of a risk involved in the employment, the risk must arise from the particular nature of the employment). To understand what it means to be involved in the employment, we turn to comment b of section 471 of the Restatement (Second) of Agency. There, the Restatement sets forth an example of a situation where a principal might be held liable for physical harm to his agent based on the principal's breach of his duty of disclosure. Comment b provides that a landlord may be held liable if he directs his agent to collect rent from a tenant without warning the agent that the tenant has a propensity to assault rent collectors and the agent, while collecting rent, is physically assaulted by the tenant. Also, an illustration following comment b provides that P may be subject to liability to A where P claims title to land occupied by T, P directs A to work the land without warning A that T has threatened to resist by force attempts by anyone to work the land, and T shoots A while A is working the land. In the case at bar, plaintiffs do not suggest that Iseberg encountered a risk of harm because of any task Iseberg was directed to perform by defendants. Nor was Iseberg injured while he was performing any tasks for defendants. Slavin attacked Iseberg at Iseberg's home. As noted above, the complaint alleged that the reason for the attack was that Slavin blamed Iseberg for the financial losses Slavin experienced. Those financial losses were the result of the inability to sell the Leikam Farm property. Plaintiffs do not allege that the inability to sell the property was due to anything Iseberg did in his capacity as the purported agent of Gross and Frank. Based on the facts alleged in plaintiffs' complaint, the risk of harm to Iseberg which Slavin posed did not arise from the particular nature of Iseberg's alleged agency relationship with Gross and Frank. See MacDonald v. Hinton, 361 Ill.App.3d at 385, 297 Ill.Dec. 162, 836 N.E.2d 893. We conclude, then, that the risk of harm was not involved in Iseberg's employment within the meaning of section 471 of the Restatement (Second) of Agency. The duty to warn, which may be owed by a principal to his agent, as provided in section 471 of the Restatement (Second) of Agency, was not implicated under the facts of this case.