Court Opinion

ID: 9525584
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:05:12.799897+00
Date Added: 2024-06-11T13:15:41.883300
License: Public Domain

ROBERTSON, Judge,
dissenting.
I agree with the majority that Hartford is not entitled to immunity under the Indiana Tort Claims Act but I reach that conclusion by a slightly different route. I must respectfully dissent, however, because I am convinced that by the enactment of Ind.Code 34-4-12.7-2, the legislature has immunized Hartford from liability for mere negligence in the making of an inspection conducted, at least in part, for purposes of casualty insurance renewal.
The Indiana Tort Claims Act provides immunity from liability for a loss resulting from an inadequate or negligent inspection which has been made to determine whether property complies with or violates any law or contains a hazard to health or safety. I.C. 34-4-16.5-3(11). The ITCA extends immunity to either a governmental entity or an employee acting within the scope of the employee’s employment. Id. Hartford is neither a “governmental entity” nor an “employee” as defined by the ITCA.
A “governmental entity” is defined as the State of Indiana or one of ten qualifying political subdivisions of the State. I.C. 34-4-16.5-2(c), (f). A private insurance company/inspection service is not one of the governing units, public institutions, or state agencies particularly named. See I.C. 34-4-16.5-2(g), (h).
Governmental entities implicitly entitled to immunity under the ITCA typically are either created directly by the State, so as to constitute a department or administrative arm of the government, or are administered by individuals who are controlled by public officials and responsible to such officials or the general public. World Production v. Capital Improvement Board of Managers of Marion County (1988), Ind.App., 514 N.E.2d 634, 637, trans. denied. Thus, accountability is one factor which distinguishes a governmental entity. See id.; Buckley v. Standard Investment Co. (1991), Ind., 581 N.E.2d 920, correction rehearing, 586 N.E.2d 843.
The nature of the function performed by the entity has also been a factor which serves to identify a governmental entity. Instrumentalities within the scope of the ITCA perform functions which are unique*835ly governmental in nature and which have traditionally been exclusively provided by the government. They are not merely private enterprises independently contracted to fulfill a governmental duty. See e.g. Ayres v. Indian Heights Volunteer Fire Dept., Inc. (1986), Ind., 493 N.E.2d 1229; Clement v. Stone (1988), Ind.App., 524 N.E.2d 36, trans. denied (pursuit and arrest of suspected felon).
Hartford does not meet any of these criteria. It has not been created by the legislature as an arm of State government or to provide a uniquely governmental service and it is ultimately accountable only to its shareholders. And, while the permitting process established by I.C. 22-15-6 attempts to ensure that certain minimum safety standards have been met by all operating boilers, the system is essentially one of self-regulation. The State defers to the judgment of licensed professionals employed either by the insurer or the owner/operator and exercises virtually no oversight. If an insurer/inspection agency refuses to insure the risk associated with a particular boiler, the State will not authorize its operation unless the owner/operator obtains a certificate inspection from another insurer or qualifies as an inspection agency itself and posts a bond. Like a public utility, an inspection agency has some of the trappings of a governmental entity, but none of the essential features.
Hartford maintains that, inasmuch as its employee was a special inspector as that term is defined by the applicable regulation, 680 IAC 1 — 1—2(6), and was acting on behalf of the State at the time of the inspection, its inspector was an employee entitled to immunity under the ITCA, and that immunity extends to Hartford by reason of the doctrine of respondeat superior. The express language of the ITCA precludes such an interpretation of the legislation.
First, while it is true that, for purposes of the ITCA, an “employee” is one who “presently or formerly act[s] on behalf of a governmental entity whether temporarily or permanently,” “with or without compensation,” I.C. 34-4-16.5-2(b), an “employee” expressly does not include an independent contractor or an agent or employee of an independent contractor. Id. In Indiana, the right or ability to control has long been the decisive precondition to vicarious liability in tort, White v. Galvin (1988), Ind.App., 524 N.E.2d 802, 804, and has served to distinguish an independent contractor from an employee. See Nash v. Meguschar (1949), 228 Ind. 216, 91 N.E.2d 361; Prest-O-Lite Co. v. Skeel (1914), 182 Ind. 593, 106 N.E. 365; Dallas Moser Transporters, Inc. v. Ensign (1992), Ind.App., 594 N.E.2d 454, 456. Under Indiana common law,
where one lets a contract to another to do a particular work, reserving to himself no control over such work except the right to require it to conform to a particular standard when completed, he is not liable for the negligence of the party to whom the contract is let. An independent contractor is one exercising an independent employment under a contract to do certain work by his own methods, without subjection to the control of his employer except as to the product or result of the work. When the person employing may prescribe what shall be done, but not how it is to be done, or who is to do it, the person so employed is a contractor and not a servant. The fact that the work is to be done under the direction and to the satisfaction of certain persons representing the employer, does not render the person contracted with to do the work a servant.
Prest-O-Lite Co. v. Skeel, 182 Ind. at 597, 106 N.E. 365.
That the State is interested solely in the result of the inspection, i.e. the operation of safe boilers, is readily apparent from the legislative design of the inspection and permitting process. The State has adopted certain minimum standards “for the construction, installation, inspection and repair of boilers and unfired pressure vessels” to be independently applied by the industry itself and its insurers, with only an annual report or the fact of insurance sufficing as proof of compliance. See 680 IAC 1-1-1 (Standards intended to cover only “certain fundamental features of construction,” *836“leaving] number of details to judgment of designers and inspectors”)- The office of the building commissioner has only the power to see that the standards are met by those who have control over the operation of boilers; the State has reserved no control over the means and methods of attaining those standards.
To the extent, then, that the State can be said to be an employer because it has allowed Hartford to perform the work of ascertaining whether boilers in the State of Indiana meet minimum safety standards, the legislature has made Hartford an independent contractor as that term has traditionally been defined by Indiana common law. The legislature has expressly stated that, as an independent contractor, neither Hartford nor its employee is immune from civil liability for the negligent performance of an inspection. Where, as here, the relevant facts are undisputed, Hartford’s status as an independent contractor can and should have been determined as a matter of law by the court. Detrick v. Midwest Pipe & Steel, Inc. (1992), Ind.App., 598 N.E.2d 1074, 1075.
Moreover, Instruction No. 17 was designed to state the law of sovereign immunity as codified by the ITCA, not the common law doctrine of the borrowed servant. The second paragraph of the instruct repeats the language of I.C. 34-4-16.5-3(11). In addition, the instruction was supplemented with an instruction which selectively paraphrases the definition of employee contained in the ITCA. The instruction does not inform the jury that a servant can serve two masters at the same time or instruct the jury to determine whether the employee has abandoned its service to one of its masters. The borrowed servant doctrine would relieve Hartford of civil liability only if its employee’s service- to the State necessarily involved the abandonment of its service to Hartford. See Johnson v. Motors Dispatch, Inc. (1977), 172 Ind.App. 285, 360 N.E.2d 224, 228; New York Central Railroad Co. v. Northern Indiana Public Service Co. (1966), 140 Ind.App. 79, 85, 221 N.E.2d 442.
Despite the error in the giving of Instruction No. 17,1 believe the jury’s verdict in favor of Hartford should not be reversed or the matter retried because Hartford is immune from liability under a different section of the Indiana Code.
Indiana Code 34-4-12.7-2 provides Hartford immunity when an inspection is conducted for the purpose of renewal of a policy of casualty insurance, even when the inspection serves the additional purpose of certifying the boiler for operation in the state.
Indiana Code 34-4-12.7-2, which was enacted in 1983, provides:
(a) No act or omission in the making of an inspection in connection with the issuance or renewal of a policy of casualty or fire and marine insurance subjects an insurer or its:
(1) Agents;
(2) Employees; or
(3) Service contractors;
to civil liability for any injury, death, or loss.
(b) The exemption from civil liability in subsection (a) does not apply to:
(1) Any injury, loss, or death that:
(A) Occurs during an inspection; and
(B) Is proximately caused by the negligence of the insurer or its agent, employee, or service contractor;
(2) An inspection that is required under a written service contract; or
(3) Any injury, loss, or death proximately caused by an act or omission that constitutes:
(A) A criminal offense;
(B) Gross negligence; or
(C) Willful or wanton misconduct.
There seems to be no real dispute that the policy issued by Hartford to Mid-States on the risks associated with the boiler was a policy of casualty insurance. Casualty insurance typically covers accidental injury both to person and to property. 1 G. Couch, R. Anderson, & M. Rhodes, Couch on Insurance 2d § 1:30 (1982). Boiler insurance is a type of casualty insurance *837covering damages to property of the insured or others for which the insured may be liable. Id. § 1:25, § 42:385. See also I.C. 27-l-13-14(a) (Casualty and liability insurance means insurance included in Class II and Class III of I.C. 27-1-5-1) and I.C. 27-1-5-1, Class 2(e) and Class 3(d).
The evidence offered at trial shows the inspection at issue to have been made by Hartford, at least in part, for the purpose of renewal of insurance. Hartford’s inspector, Mr. VerSteeg, inspected Mid-States’ boiler on July 18, 1989. The policy of insurance issued Mid-States by Hartford provided coverage to Mid-States for the period of October 10, 1988, to October 10, 1991. Pursuant to the terms of the policy, Hartford was required to notify its insured at least 45 days before the anniversary date of the policy, here by August 26,1989, if it decided not to renew the policy. Mr. VerSteeg testified that the inspection was conducted “because they [Mid-States] wanted their boiler inspected and rein-sured.” R. 876. VerSteeg stated specifically that the inspection was intended to serve two purposes: insurability and issuance of a certificate of operation. R. 1007.
Indiana Code 22-15-6-2(b) provides that if a permit is issued by an insurance company acting under I.C. 22-15-6-4, and the applicant ceases to insure the boiler covered by the permit, the permit terminates. Thus, as Mr. VerSteeg testified, a certificate inspection and an inspection conducted in connection with the renewal of insurance are one and the same.
The majority disagrees with me over the effect of these facts, characterizing the evidence favorable to its result as more “abundant and compelling.” Op. at 833. Certainly, the evidence I have recited is substantial evidence of probative value which would support a determination by a preponderance of the evidence that the inspection was conducted, at least in part, for purposes of renewal. Accordingly, the central issue posed by this case is whether the legislature intended to immunize acts or omissions in the making of an inspection when the inspection has, as a distinct but corollary purpose, the certification of an object for operation.
With certain explicit exceptions which I will address momentarily, I.C. 34-4-12.7-2 expressly relieves an insurer from liability for acts or omissions “in the making of an inspection in connection with” the issuance or renewal of casualty, fire or marine insurance. The statute does not state that the inspection must be made solely in connection with the issuance or renewal of insurance. Yet, the parties appear to agree that inspections made by an insurer solely for the purpose of determining insur-ability fall within the zone of immunity provided by the statute. Such inspections are typically undertaken wholly for the benefit of the insurer and are limited in scope to the objective to be served by the inspection, namely, the advisability of indemnifying the insured for a particular risk.
It makes sense to limit an insurer’s liability for an inspection which is circumscribed in scope and intended solely for the insurer’s benefit. The common law does so. Apart from the duty which all actors owe to each other when they undertake an affirmative line of conduct, that is, to take precautions which are reasonably necessary to protect others from injury from that conduct and to refrain from doing anything unreasonably dangerous, F. Harper, F. James & O. Gray, The Law of Torts § 18.6 (1986), the common law imposes no obligation on an actor to come to the aid of another who is in peril, even if the actor, in the exercise of ordinary care, should realize that action on his part is necessary for another’s aid or protection. Perry v. Northern Indiana Public Service Co. (1982), Ind.App., 433 N.E.2d 44, 49. This rule applies unless the actor, by contract or conduct, assumes a duty of care where one otherwise would not exist. Id. A duty may arise where one 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, and the actor’s failure to exercise reasonable care increases the risk of harm, the harm is suffered because *838of the reliance of the other or third person upon the undertaking, or the actor has undertaken to perform a duty owed by the other to the third person. Id. at 50.
In construing a statutory provision, this court must consider the statute as an entirety, with each part being viewed not as an isolated fragment but with reference to all the other companion provisions. To effect the legislature’s intent, we must construe an ambiguous statute in a manner consistent with other sections of the enactment. Hinshaw v. Board of Commissioners of Jay County (1993), Ind., 611 N.E.2d 637, 639. When I examine the immunity conferred by subsection (a) and the three express exceptions in conjunction with the common law, I can only conclude that the legislature intended to provide an insurer immunity for inspections made in connection with the issuance or renewal of casualty insurance even when the inspection takes on the gratuitous purpose of benefiting the plaintiff or other persons.
Exception (b)(1) speaks to the general rule at common law that one who undertakes an affirmative line of conduct must use ordinary care in so acting. Subsections (b)(3)(A) and (C) are merely aspects of that general common law rule, that one who engages in unreasonably dangerous conduct and who thereby greatly magnifies the risk of harm to others will not escape responsibility for that behavior. The second express exception, I.C. 34-4-12.7-2(b)(2), addresses in part the common law duty of assumption of risk, i.e, where an actor by contract, consents to and assumes the duty of another to the plaintiff.
This brings me to the last exception, I.C. 34-4-12.7-2(b)(3)(B): an injury, loss or death proximately caused by an act or omission constituting gross negligence. Were the grant of immunity given by I.C. 34-4-12.7-2(a) intended merely to codify the common law rule of nonliability for the failure to come to the aid or protection of others, the exception for gross negligence would be otiose. If at common law an insurer has no liability for failing to exercise reasonable care beyond that required of all actors, he may be negligent and even grossly negligent in the performance of the undertaking without legal consequence.
Consequently, I am convinced that the exception to immunity established in subsection (b)(3)(B) was intended to address the situation where an insurer gratuitously undertakes an inspection in connection with the issuance or renewal of insurance which is necessary for the protection of the plaintiff, and harm is suffered because others have relied upon the exercise of ordinary care in the performance of the inspection and have foregone other remedies or precautions which would reduce the risk of harm. Under such circumstances, common law liability would be imposed because reliance on the inspection injects the prospect of new danger into the situation, as in the present case, where the insurer is actively in the business of gratuitously providing “certificate” inspections and has provided the inspection as part of the benefit exchanged with the contract of insurance. Such an inspection has the trappings of a reliable safety inspection; it is required for operation and must be performed by licensed professionals who have been qualified by the State to conduct the inspections.
The legislature’s objective in providing immunity under these circumstances emerges from the statute as a whole: operational safety of objects which are the subject of casualty, fire and marine insurance can best be achieved by discouraging owner/operator reliance upon the acts of its insurer. The reason in such a policy is evident here where the explosion of a boiler is an event which, though perhaps infrequent, is often avoidable and highly expect-able, so much so that it is not a risk against which the Indiana General Assembly has authorized a company to insure. See I.C. 27-1-5-1, Class 3(d)(1). But the immunity granted for “safety” inspections which are gratuitously undertaken in connection with the issuance or renewal of insurance is not without limitation. By permitting recovery for gross negligence in the making of such an inspection, the legislature has revived a duty to act for the protection of others when the failure to so act would be a gross injustice. The statute therefore does not entitled Hartford to the so-called “blanket immunity” referred to by the majority, but immunity for mere negligence.
*839In reaching the conclusion that the immunity extended by I.C. 34-4-12.7-2 applies whenever an inspection is conducted in connection with the issuance or renewal of casualty insurance, I am not unmindful of the rule of statutory construction that an enactment in derogation of the common law will be strictly construed against limitations on a claimant’s right to bring suit. Hinshaw, 611 N.E.2d at 639. Nonetheless, in construing a statute, this court must presume that the legislature is aware of the common law. Id. The legislature has, by unmistakable implication, codified the common law, but modified the rule of liability for the gratuitous assumption of duty. It is our responsibility to give effect to the statute as we perceive the. legislature to have intended it, even if the equities of a particular case cry out for a different result.
It is my belief that Hartford offered sufficient evidence of probative value to demonstrate that the inspection made of the boiler in question was done at least in part for purposes of renewal. Accordingly, I must agree with Hartford that error in the giving of Instruction No. 17, which I too believe to be erroneous, was harmless as Hartford is entitled to immunity as a matter of law and the case should never have been submitted to the jury.