Tcl - Theories of Homebuilder Liability for Subcontractor Negligence - Part Ii - July 2005 - Construction Law Forum
| Jurisdiction | Colorado,United States |
| Citation | Vol. 34 No. 7 Pg. 55 |
| Pages | 55 |
| Publication year | 2005 |
2005, July, Pg. 55. TCL - Theories of Homebuilder Liability for Subcontractor Negligence - Part II - July 2005 - Construction Law Forum
July 2005
Vol. 34, No. 7 [Page 55]
Construction Law Forum
Theories of Homebuilder Liability for Subcontractor Negligence - Part II
This column is sponsored by the CBA Construction Law Forum Committee.
Column Editor:
James W. Bain of Benjamin, Bain & Howard, L.L.C., Greenwood Village - (303) 290-6600, jamesbain@bbhlegal.com.
About The Authors:
This month's article was written by Ronald M. Sandgrund, Scott F. Sullan, and Joseph F. Smith, Greenwood Village. They are, respectively, principals and an associate with Vanatta, Sullan, Sandgrund & Sullan, P.C. - (303) 779-0077. The firm represents property owners in construction, development, and building materials defect litigation and the authors frequently testify on behalf of homeowners before Colorado's legislature. The firm represents homeowners in Hoang v. Monterra Homes (Powderhorn), LLC, filed an amicus brief on behalf of homeowners in Yacht Club II Homeowners Ass'n, Inc. v. A.C. Excavating, and was involved in many district court cases discussed in this article. The authors thank column editor Jim Bain for his usual expert editing.
Residential homebuilders' liability for their subcontractors' negligence may exist under various legal theories, discussed in Part I of this article. Part II examines the policies underlying these liability theories, particularly the vicarious liability doctrine. It addresses possible distinctions among subcontractors, especially design professionals, relevant to imposing liability for their conduct. Part II also discusses related practical matters, including insurance coverage considerations and sample jury instructions.
Part I, which appeared in this column in June 2005, discussed various legal theories that may support imposing liability on homebuilders for their subcontractors' negligence.3 This Part II focuses on the policies underlying the vicarious liability doctrine and their potential application to the activities of homebuilding subcontractors. Part II discusses possible distinctions between imposing such liability on homebuilders for the acts of subcontractors who are design professionals versus those who are not. Part II also discusses how the imposition of liability on homebuilders for their subcontractors' negligence may affect liability insurance coverage.
Finally, the Appendices to this article provide sample jury instructions and a verdict form. These samples may be useful when instructing a jury charged with deciding whether the facts necessary to impose homebuilder liability for subcontractors' negligence are present if the issues relating to such liability are not decided as a matter of law by the court.
Vicarious Liability Analysis
"Vicarious liability" is the liability that a supervisory party (such as an employer) bears for the actionable conduct of a subordinate or associate (such as an employee) based on the relationship between the two parties.4 None of the theories of homebuilder liability for subcontractor negligence discussed in Part I of this article squarely fits within the vicarious liability doctrine, because none arises simply from and due to the relationship between the homebuilder and its subcontractors.5 Instead, such liability arises from:
1) public policies or statutes giving rise to independent or non-delegable duties;
2) contracts giving rise to assumed tort duties or express and implied warranties; or
3) special types of tortious conduct, such as acting in concert with other tortfeasors or engaging in inherently dangerous activities.
The legal relationship between a homebuilder and its subcontractors bears on the analysis of whether the imposition of vicarious liability on the homebuilder for its subcontractors' negligence is proper. Principal-agent, master-servant, and employer-independent contractor concepts each refer to distinct legal relationships that may or may not overlap and are relevant to analyzing vicarious liability.6
There are arguments against imposing vicarious liability that is based on an employer-employee or master-servant relationship between a homebuilder and its subcontractors. This is because subcontractors often are characterized as independent contractors and the employer-independent contractor relationship typically is considered the antithesis of the employer-employee or master-servant relationship that historically has given rise to vicarious liability.
However, Colorado appellate courts have not yet addressed whether it is proper to impose vicarious liability on a homebuilder for its subcontractors' negligence. The issue requires examination of the policies underlying the vicarious liability doctrine. That doctrine reaches back to some of Colorado's earliest reported cases. Deciding if such vicarious liability should arise suggests consideration of the question of whether the policies supporting imposition of analogous "enterprise liability" in the context of defective products apply to homebuilding activities.
Respondeat Superior Analysis
One form of vicarious liability is respondeat superior. The respondeat superior doctrine holds an employer or principal liable for an employee's or agent's wrongful acts committed within the scope of the employment or agency.7 Respondeat superior holds a master liable "for the unauthorized torts of his servant committed while the servant is acting within the scope of his employment."8
The primary public policy goals underlying imposition of liability based on respondeat superior liability are to
prevent the recurrence of tortious conduct, to give greater assurance of compensation for the victim, and to ensure that the victim's losses will be equitably borne by those who benefit from the enterprise that gave rise to the injury.9
Generally, respondeat superior requires the existence of an employer-employee or principal-agent relationship.10
In an 1893 case, the Colorado Court of Appeals described the underpinnings of respondeat superior.11 The court held that a principal contracting for the work is not liable for the negligence of the contractor in the performance of work if: (1) the principal uses due care in selecting a person to perform the task; (2) the principal enters into a contract with that person to undertake to accomplish a given result; (3) the person is at liberty to select and employ his or her own means and methods; and (4) "the principal retains no right or power to control or direct the manner in which the work shall be done."12 (Emphasis added.) Instead, the employment is regarded as independent because the person rendering the service in the course of his or her occupation represents "the will of his employer only as to the result of his work, and not as to the means by which it is accomplished."13 (Emphasis added.)
It follows that the independent contractor rule should have less force where the principal retains the right or power to control or direct the manner in which the work is done, perhaps even if such right or power is not exercised. In Grease Monkey Int'l Inc. v. Montoya,14 a principal was held liable for its agent's fraud in securing loans under the guise of using the funds for investment rather than personal benefit. The Colorado Supreme Court noted that vicarious liability on the basis of respondeat superior does not mean that "the master must stand by constantly and observe and supervise the work"; it merely means that the relationship of servant "presupposed a right" on the part of the master to have the work performed in such a manner as he or she directs.15
In the context of the typical homebuilder-subcontractor relationship, the homebuilder often retains or exercises significant control over the work. This usually includes providing detailed plans and specifications for the work, scheduling the work, integrating the work of the various trades, supervising and inspecting the work pursuant to a quality control program, and approving the work and payment for the services rendered. The homebuilder-supplied plans and specifications often are accompanied by precise details and sketches as to the manner in which the work is to be done, usually incorporating by reference industry standards, building code provisions, manufacturer instructions and advice, and design engineer requirements and recommendations.
A few courts, including one Colorado district court, have relied on the homebuilder's right to "supervise" a subcontractor's work in concluding that the homebuilder is vicariously liable for the negligence of its subcontractors, despite the general rule of employer non-liability for the torts of independent contractors.16 Other courts have justified imposition of such vicarious liability based on the policy goal of holding the homebuilder liable for the end result of the construction project. In imposing liability, for example, a Georgia court noted:
It would be too easy for a builder-seller of a house to avoid liability by hiring inexperienced crews, providing little or no supervision, and then claiming the culprit of any...
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