Palka v. Servicemaster Management Services Corp.
611 N.Y.S.2d 817, 634 N.E.2d 189, 83 N.Y.2d 579 (1994)
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Rule of Law:
A party who enters into a comprehensive and exclusive contract to inspect, repair, and maintain a property owes a duty of care to non-contracting third parties reasonably within the zone of the intended safety services, especially when the contractor's failure to perform its duties creates a more dangerous condition.
Facts:
- Palka was a registered nurse employed by Ellis Hospital.
- In 1985, Ellis Hospital contracted with Servicemaster Management Services Corporation to provide comprehensive maintenance services.
- The contract gave Servicemaster the duty to manage and direct the hospital's maintenance department and implement a program of preventative maintenance and safety inspections.
- Prior to Servicemaster's contract, the hospital's own staff conducted safety inspections of wall-mounted fans in patient rooms.
- After Servicemaster assumed maintenance responsibilities in 1985, the inspections of the room fans ceased.
- In 1987, while Palka was attending to a patient, a wall-mounted fan fell from its wooden mount and injured her.
- Servicemaster's Director of Plant Operations testified that part of Servicemaster's duties was to create a safe environment and engage in 'preventative maintenance,' defined as 'inspection and checking to see if something needs repairing before it falls.'
Procedural Posture:
- Palka sued Servicemaster in the New York Supreme Court (the trial court of first instance).
- A jury rendered a verdict in favor of Palka on the issue of liability.
- Servicemaster, as appellant, appealed to the Appellate Division of the Supreme Court (an intermediate appellate court).
- The Appellate Division, in a 3-2 decision, reversed the trial court's judgment and dismissed Palka's complaint.
- Palka, as appellant, appealed as of right to the Court of Appeals of New York (the state's highest court), with Servicemaster as the appellee.
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Issue:
Does a maintenance contractor, who has an exclusive and comprehensive agreement to inspect and maintain a property, owe a duty of care to a third party lawfully on the premises who is injured due to the contractor's negligent failure to perform its contractual duties?
Opinions:
Majority - Bellacosa, J.
Yes. A maintenance contractor with an exclusive and comprehensive agreement owes a duty of care to a third party injured by its negligence. The court reasoned that Servicemaster's comprehensive and exclusive contract entirely displaced the hospital's prior in-house maintenance and safety program. This is not a case where a contractual obligation stands alone; rather, Servicemaster's failure to perform its duties did not merely withhold a benefit but 'positively or actively' created an unreasonable risk of harm. The 'end and aim' of the service contract was to provide a safe environment for a known and identifiable group—hospital employees, patients, and visitors—like Palka. Therefore, Servicemaster's assumed duty extends beyond its contract with the hospital to non-contracting individuals who were foreseeably at risk from its negligent performance.
Analysis:
This decision clarifies a significant exception to the general rule limiting tort liability to parties in privity of contract. The court established that a service contractor can owe a duty to a third party when its contractual undertaking is so comprehensive and exclusive that it effectively displaces the property owner's own duty of care. This holding expands potential liability for contractors in outsourcing and privatization scenarios, making them directly accountable to individuals they were foreseeably meant to protect. Future cases will likely focus on how 'comprehensive and exclusive' a contract must be to trigger this extended duty, distinguishing between limited service agreements and full assumption of a safety function.
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