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Contractor’s Liability to Third Parties

Contractor’s Liability to Third Parties

Under Maryland law, a contractor’s (or subcontractor’s) liability to a third party is often determined by a foreseeability test.  This general principle was recently clarified by the Maryland Court of Special Appeals in Cash & Carry Am., Inc. v. Roof Solutions, Inc., 2015 Md. App. LEXIS 79 (2015).  In that case, a roofing contractor’s negligent operation of a torch resulted in a fire at the homeowner’s townhome.  Unique to this case, however, was the fact that the owner’s corporation (i.e. a third party) was storing computer equipment in the townhome which was damaged by fire.  At the trial level, the contractor and subcontractor successfully obtained summary judgment, in part, based on the argument that they owed no duty to the third party corporation.

Reversing the trial court’s decision, the Maryland Court of Special Appeals found that liability did exist based on a foreseeability test.  After reviewing general tort law, the Court reasserted what was held in another construction case, Counsel of Co-Owners Atlantis Condo. Inc. v. Whiting-Turner Contracting Co., 308 Md. 18, 33, 517 A.2d 336 (1986).  Specifically, it noted:

[T]he determination of whether a [tort] duty will be imposed in this type of case should depend upon the risk generated by the negligent conduct, rather than upon the fortuitous circumstances of the nature of the resultant damage. Where the risk is of death or personal injury, the action will lie for recovery of the reasonable cost of correcting the dangerous condition.  Citation omitted.

The Court found further justification for liability when it observed “[i]t is now the almost universal rule that the contractor is liable to all those who may foreseeably be injured by the structure, not only when he fails to disclose dangerous conditions known to him but also when the work is negligently done. This applies not only to contractors doing original work, but also to those who make repairs . . .”  Citations omitted.

After concluding that “foreseeability” is “the principal determinant” of whether a duty of care in tort should be recognized, the Court went on to define the test for foreseeability as whether “a reasonable person in a similar position would have foreseen that harm to someone’s interests was an unreasonably likely outcome of [the actor’s] conduct.”  Citations omitted.  The Court explained that “[o]ther factors pertinent to whether a duty of care should be recognized when the risk of harm is not solely economic are the degree of certainty that the plaintiff suffered the injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty of exercising care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved.”  Citations omitted.  With this legal framework in place, the Court then went on to find that the roofer and its subcontractor owed a duty to anyone in the townhome and their personal property because it was foreseeable that the owner of the townhome could have visitors and their visitors could bring with them personal property.

Interestingly, however, the Court drew a distinction between personal property and “non-tangible” property like software.  To the extent that Plaintiff Cash & Carry claimed damages not only for its computer equipment (i.e. tangible personal property), but also for the proprietary software and lost future business profits (i.e. non-tangible property), the Court concluded the Plaintiff could not recover for the latter.  Again, relying upon the foreseeability test, the Court of Special Appeals concluded that a contractor could not reasonably foresee that damage to a private townhome would result in damage to proprietary software and future corporate profits unless the contractor was expressly told in advance that such a risk was involved in the job.

While not a seismic shift in Maryland law, Cash & Carry Am., Inc. v. Roof Solutions, Inc., 2015 Md. App. LEXIS 79 (2015) helps clarify a contractor’s liability to third parties in the construction context.  Because each case is fact specific, for more information on whether a contractor’s conduct could give rise to third-party liability, contact the attorneys at Walker, Murphy & Nelson, LLP today.

Disclaimer: This article is for general informational purposes only. Nothing contained herein constitutes legal advice, nor does it create an attorney-client relationship. All persons reviewing this should consult counsel for advice regarding any specific legal questions and any unauthorized use of this information is expressly prohibited.