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Murphy v. Sentry Ins.

Supreme Court of Vermont

March 7, 2014

Sandra J. Murphy, Personal Representative and Administrator of the Estate of Christopher Murphy
Sentry Insurance

Page 986

Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Chittenden Unit, Civil Division. Helen M. Toor, J.

Steven A. Bredice of Powell Orr & Bredice PLC, Williston, for Plaintiff-Appellant.

Robert G. Cain and Andrew A. Beerworth of Paul Frank Collins P.C., Burlington, and Christopher J. Lynch of LeClairRyan, Hartford, Connecticut, for Defendant-Appellee.

Present: Reiber, C.J., Dooley, Skoglund, Burgess and Robinson, JJ.


Page 987

Burgess, J.

[¶1] Plaintiff Sandra J. Murphy appeals from a superior court decision that vacated a jury verdict in her favor and entered judgment as a matter of law for defendant Sentry Insurance. Plaintiff contends that there was sufficient evidence to establish Sentry's liability for her husband's workplace death under the Restatement (Second) of Torts § 324A based on a negligent inspection theory. Plaintiff also argues that the court erred in awarding costs to Sentry. We affirm.

[¶2] Decedent died in 2004 after a forklift he was operating for his employer, Pete's RV Center, tipped over. Pete's is a recreational vehicle dealership in Williston, Vermont, owned by David McGinnis and Terry Shepard. At the time of the accident, the decedent was operating a forklift equipped with an unapproved towing attachment, and using the forklift to tow a fifth-wheel camper. In its capacity as Pete's general liability insurer, Sentry had performed a safety survey at Pete's in April 2002. Plaintiff sued Sentry, alleging in relevant part that Sentry was negligent in performing the April 2002 safety survey because it failed to identify and warn of the dangers of using forklifts with unapproved towing attachments.

[¶3] The following evidence was presented at trial. As indicated, as of April 2002, Sentry was employer's general liability insurer only. That month, Gary Smith, a senior safety consultant with Sentry, met with owner McGinnis at Pete's for an initial safety consultation and survey. At that time, Pete's indoor facility consisted of a large building containing a showroom, offices, a parts department, and an RV products store, as well as a service department with a welding unit, numerous tools and one Toyota forklift. The outdoor premises included a six-acre lot with between 150 and 200 RVs, trucks with tow hitches, and a propane filling station.

[¶4] Smith testified at trial that as a general matter, the purpose of Sentry's free loss-prevention services was to " assist the insured ... with their safety program. It's really a value added service that [Sentry] provide[s] for [its] customers." Smith also stated, generally, that these services promote employee safety, that Sentry tries to improve employee safety at the businesses that Sentry insures, and that Sentry's services are " strictly as advisory in nature. It's a consultation visit ... it's not mandatory." McGinnis understood that to control losses and promote safety for Pete's employees and managers Sentry would " look around the dealership, see if we had any issues that might be a potential

Page 988

safety problem or claim, future claim for the company."

[¶5] Smith explained Sentry's standard inspection procedure as follows. First, Smith would deliver and review various education materials, such as safety and health guidelines and write-ups on miscellaneous safety areas. He would then review Sentry's " Safety at Your Service" website, and inquire how Sentry could assist the insured. Next, Smith would take a " brief walkthrough" of the insured's premises. Smith noted that Sentry informed the insured that Sentry was " not their safety program," and that the walkthrough was " strictly advisory in nature" and " certainly not a floor-to-ceiling or wall-to-wall" inspection. Smith reiterated that it was " a walkthrough making general observations. If we see something out of the ordinary that could produce a loss producing situation then ... we'll stop. We'll talk about it. And we'll make the appropriate recommendation."

[¶6] At the time of his inspection of Pete's, it was standard for Smith to take hand-written notes and fill in blanks on a preprinted " loss control form" to memorialize his observations. Though Smith testified that he had no independent recollection of the April 2002 inspection at Pete's, his report stated that equipment in the service department included one forklift, which was established at trial to be a Toyota forklift. Asked if he saw any attachments for the forklift, Smith stated, " [a]ccording to my report I did not, because if I had seen any attachments there would have been a reference to that in my report."

[¶7] The location of the forklift tow attachment at the time of Smith's visit was discussed extensively at trial. Owner Shepard did not accompany Smith on his walkthrough, but he testified that the forklift was parked in a designated spot when not in use. Shepard stated that on a typical day, " [t]here would probably be somebody on the forklift almost all the time all day" and that if the forklift was not unloading a delivery truck " then the attachment would be on it." Both McGinnis and Shepard testified that they had no recollection of discussing the forklift attachment with Smith. McGinnis had no memory that he or Smith observed a forklift in operation during the April 2002 visit, and there was no evidence to dispute Smith's testimony that, based on his report, he observed no tow attachment at Pete's.

[¶8] Whether Smith saw or should have seen the forklift attachment is connected to notice of the attachment's purpose, illegality, and the role it was claimed to ultimately play in the June 2004 fatality. Pete's employees used the Toyota forklift with the tow attachment to move RV inventory around the lot. Shepard built the attachment for the Toyota forklift and decided that it was safe to use. It is undisputed that Pete's was not authorized by the forklift manufacturer to add the after-market tow attachment, and that its unapproved use violated the law.

[¶9] After the April 2002 inspection, Smith followed up on his survey of Pete's in an April 16, 2002 letter. The letter noted that Smith's visit had been in connection with Sentry's general liability insurance coverage. It further listed four motor-vehicle claims creating losses from 1999 to 2000, and observed that an " analysis of losses reflects that a motor vehicle safety program should be developed along with a driver training program." The letter also confirmed that Smith discussed Sentry's website and provided information on how Pete's could obtain additional information regarding the website and order safety lessons.

Page 989

[¶10] The letter made the following five recommendations, which were " offered to assist [Pete's] in controlling [its] losses" : (1) protect the propane gas station against collision and fence it to prevent tampering; (2) develop and communicate a written vehicle-safety policy; (3) schedule driver meetings to demonstrate management interest in a safe driving record; (4) require employees to sign a sexual harassment policy; and (5) conduct a security evaluation and implement measures to detect and deter theft or vandalism of inventory.

[¶11] In March 2004, almost two years after Sentry's general liability inspection, Pete's acquired two Yale forklifts intended for use in a remote warehouse. As he did for the Toyota forklift, Shepard built tow attachments for the Yale forklifts to move RVs. The Yale forklifts were much smaller and less stable than the Toyota, and were more prone to tip over when used with the attachments.

[¶12] The accident that killed plaintiff's husband occurred on June 15, 2004. On that day, the decedent was using a Yale forklift to tow an RV at the warehouse. As he proceeded down a ramp, the unit jackknifed and the forklift flipped, landing on top of him. Following the accident, Sentry inspected Pete's and sent a follow-up letter with urgent new recommendations to avoid the use of after-market forklift attachments prohibited by law and emphasizing the danger of such unauthorized modifications.

[¶13] McGinnis testified that, had Sentry warned Pete's of the dangers associated with using an unapproved attachment on the forklift, " We would have listened. We would have talked about it." Asked if he would have taken the forklift out of service if cautioned that this equipment was dangerous and a threat to employee safety, he answered " [i]t's hard to say. ... [A]t the time, it was the only method we had for moving units. So it's difficult to say ... how we would have answered that. ..." Counsel further inquired: " [I]f you were told that it presented ... an employee hazard as expressed eventually in the [post-accident] letter that you received from Sentry, would you have ignored that warning or would you have heeded it and begun to find a replacement for the forklift?" McGinnis answered: " Yes. We would have taken it seriously and at least started looking at all alternatives." Shepard testified that had Sentry informed Pete's, as it did after the accident, of the danger of unapproved forklift attachments, Pete's would not have purchased the Yale forklifts or fabricated towing attachments for them.

[¶14] In her lawsuit, plaintiff alleged in relevant part that Sentry was negligent in its April 2002 inspection because it failed to discover and warn Pete's about the danger of using unapproved towing attachments. Sentry moved for judgment as a matter of law at the close of the evidence, which the court denied. The jury found in plaintiff's favor on the negligence claim.

[¶15] Sentry subsequently renewed its motion for judgment as a matter of law, and the court granted its request. The court agreed with Sentry that there was no evidence to show Sentry's liability under § 324A of the Restatement (Second) of Torts (1965). That provision states:

Liability to Third Person for Negligent Performance of Undertaking.

One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm ...

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