Patton v. Simone
626 A.2d 844, 1992 Del. Super. LEXIS 545 (1992)
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Rule of Law:
Under the Restatement (Second) of Torts § 324A, one who undertakes to render services to another is not liable to a third person for harm unless the undertaking was intended to benefit the third person and the service provider's failure to exercise reasonable care (a) increased the risk of harm, (b) involved assuming a duty owed by the other to the third person, or (c) caused harm due to reliance by the other or the third person.
Facts:
- Richard Ventresca and Anthony Simone owned a five-story building where their business, Diamond Chemical and Supply Company, operated.
- The building contained an elevator with an unenclosed shaft, a known hazard that had caused injuries to employees James Turner in 1985 and Roland Hewett in 1987, and a death to Joseph Lilly in 1974.
- From 1975 onward, the City of Wilmington and its Fire Department repeatedly cited the owners for the dangerous elevator and ordered them to bring it up to code, but the owners failed to make the required repairs.
- Equifax Services, Inc., on behalf of Diamond Chemical's insurers, conducted three underwriting surveys of the property in August 1985, October 1986, and October 1988, for the purpose of risk assessment and premium determination.
- During these inspections, Equifax personnel did not note or make any recommendations regarding the unprotected elevator shaft.
- On October 19, 1989, a Diamond Chemical employee, Edward R. Patton, was working on the fifth floor.
- A co-worker, Hewett, called the elevator down from another floor, leaving the fifth-floor shaft opening unprotected by its safety chain, and shouted a warning to Patton about the open shaft.
- Shortly after acknowledging the warning, Patton fell down the open elevator shaft and died from his injuries.
Procedural Posture:
- Richard M. Patton, the executor of Edward R. Patton's estate, filed a negligence lawsuit against Equifax Services, Inc. and White and White Inspection and Audit Service, Inc. in the Superior Court of Delaware, a trial court.
- The defendants, Equifax and White and White, filed a motion for summary judgment, arguing that as a matter of law they owed no duty to the decedent and should not be held liable.
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Issue:
Does an inspection company hired by an insurer to conduct underwriting surveys owe a duty of care to an employee of the insured who is injured by a hazardous condition that the company failed to report?
Opinions:
Majority - Herlihy, J.
No. An inspection company hired by an insurer to conduct underwriting surveys does not owe a duty of care to an employee of the insured under these circumstances. To establish liability for negligently performing a service for another that harms a third party, the plaintiff must satisfy the requirements of the Restatement (Second) of Torts § 324A, which this court formally adopts. The court found that Equifax did not undertake to render services for the benefit of Diamond Chemical or its employees, but only for the insurers. Even if an undertaking existed, none of the three conditions for liability under § 324A were met: (a) Equifax's inspections did not increase the risk of harm, as they were merely visual and made no physical changes to the hazardous condition; (b) Equifax did not assume Diamond Chemical's duty to provide a safe workplace, as its inspections were limited to insurability and did not supplant the employer's own safety responsibilities; and (c) neither Diamond Chemical nor Patton relied on Equifax's inspections, as the company was already well aware of the elevator's dangerous condition from numerous city citations.
Analysis:
This decision formally adopts the Restatement (Second) of Torts § 324A into Delaware law, establishing a clear framework for analyzing third-party liability for negligent performance of an undertaking. It significantly narrows the potential liability of insurance inspectors and other third-party service providers by clarifying that inspections conducted for the provider's own benefit (e.g., underwriting) do not create a duty to employees of the client company. The case sets a high bar for plaintiffs, requiring them to show not just a negligent inspection, but that the inspector's actions either made the situation worse, supplanted the employer's own safety duties, or induced detrimental reliance.
