Barrie v. VP Exterminators, Inc.
625 So. 2d 1007, 1993 WL 427305 (1993)
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Rule of Law:
A professional who supplies information in the course of their business owes a duty of reasonable care to a non-contractual third party who the professional knows will receive and rely upon that information for a specific transaction. A direct contractual relationship (privity) is not required to establish a tort duty for negligent misrepresentation.
Facts:
- Judy and Michael Barrie entered into an agreement to purchase a dwelling from Secor Bank.
- The purchase agreement was conditioned on Secor Bank providing a 'termite certificate showing free and clear.'
- Secor Bank hired V.P. Exterminators, Inc. to perform a termite inspection of the property.
- Vincent Palumbo, on behalf of V.P. Exterminators, issued a 'wood destroying insect report' to Secor Bank, stating there was no physical evidence of active or old termite infestation.
- Based on this report, the Barries proceeded with the purchase of the dwelling from Secor Bank on September 14, 1990.
- Three days after the sale, on September 16, 1990, the Barries discovered extensive termite damage in one of the walls.
- Subsequent inspections confirmed extensive old and active termite infestation, rendering the dwelling unfit for habitation.
Procedural Posture:
- Judy and Michael Barrie filed suit against Secor Bank (vendor), V.P. Exterminators, Inc., and Vincent Palumbo (inspector) in a Louisiana trial court.
- V.P. Exterminators, Palumbo, and their insurer filed peremptory exceptions of no cause of action and motions for summary judgment, arguing lack of privity.
- The trial court sustained the exceptions and granted the summary judgment motions, dismissing the suit against the inspector defendants.
- The Barries appealed to the Louisiana Court of Appeal, Fourth Circuit, where they were the appellants.
- The Court of Appeal affirmed the trial court's judgment, holding that no cause of action existed for negligent misrepresentation without a direct relationship.
- The Barries, as applicants, sought and were granted a writ of certiorari by the Supreme Court of Louisiana.
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Issue:
Does a professional termite inspector, hired by a property vendor, owe a duty of reasonable care to a prospective purchaser who the inspector knows will receive and rely on the inspection report, even if there is no direct contractual relationship or communication between the inspector and the purchaser?
Opinions:
Majority - Ortique, J.
Yes. A termite inspector owes a duty to exercise reasonable care and competence so as to protect third persons for whose benefit and guidance the information was sought and supplied, and who may detrimentally rely on its contents. The court, employing a duty/risk analysis under Louisiana's general tort articles, held that the inspector's knowledge that the report's 'end and aim' was to facilitate a sale to a prospective purchaser expanded the bounds of its duty. Citing the principles in Glanzer v. Shepard and the Restatement (2d) of Torts § 552, the court found that since the inspector knew the report was intended to guide the purchasers in their decision, a duty was imposed by law, regardless of the absence of privity. The purchasers were members of the limited group for whose benefit the report was supplied, making their pecuniary loss a foreseeable probability.
Dissenting - Marcus, J.
No. In the absence of privity or any direct or indirect communication between the inspector and the purchasers, no duty is owed. The dissent argues that the majority confuses foreseeability with the initial existence of a duty. While the inspector may have foreseen that the report would be transmitted to a purchaser, this foreseeability only defines the scope of a duty once it is established. Without any contractual relationship or communication to create that initial link, no duty should arise.
Analysis:
This decision aligns Louisiana law with the majority of jurisdictions by adopting the principles of the Restatement (2d) of Torts § 552 for negligent misrepresentation claims by third parties. It moves away from a strict privity requirement, focusing instead on the professional's knowledge of the intended use and user of their work product. The ruling significantly enhances protection for consumers in transactions like real estate sales, where reliance on expert reports provided by another party is common. It establishes a clear precedent that professionals, such as inspectors and appraisers, can be held liable for economic losses suffered by foreseeable third parties who rely on their negligently prepared reports.
