Happy Halloween! Today’s post is not about ghosts, ghouls and goblins, though. It’s much scarier … it’s about contractors, subcontractors and insurance companies! (….shriek….)
In a noteworthy decision issued last week, the Tennessee Supreme Court held that all construction contracts have an implied duty on part of the contractor to perform in a "careful, skillful, diligent, and workmanlike manner." In Federal Insurance Co. v. Winters (pdf), the court adopted the "majority rule" that has been applied in most states. According to the court’s decision, a contractor may not escape liability for performing in a workmanlike manner by "delegating" or subcontracting the work to a subcontractor.
In Winters, the defendant contractor entered into a contract to replace a roof. When the newly installed roof developed leaks, the defendant hired an independent contractor to make the necessary repairs. While performing the work, the independent contractor caused a fire, resulting in an $871,069.73 insurance claim by the homeowners.
The plaintiff insurance company sued the defendant contractor in both tort and in contract based upon theories of subrogation (i.e., stepping in the shoes of the homeowner to assert their rights for claims arising out of the fire). The defendant contractor filed a motion for summary judgment, asserting that because he had subcontracted the work to another contractors, he could not be liable. The trial court granted the motion on both the negligence and breach of contract claims.
The Court of Appeals reversed, holding that the defendant had a non-delegable contractual duty to perform the roofing services in a careful, skillful, and workmanlike manner. The Supreme Court granted the defendant’s application for permission to appeal. Because the defendant had an implied non-delegable duty to install the roof in a careful, skillful, diligent, and workmanlike manner, the Supreme Court affirmed the decision.
I told you it was scarier than ghosts, ghouls and goblins! Is there a lesson to be learned? Yes. Even the Supreme Court acknowledged that this rule was not a prohibition against delegation of construction contracts. Rather, the lesson learned is that the delegation must be accompanied by a release from the other party.
Image: Pedro Ferreira