The Subrogation Strategist

In Zbranek Custom Homes, Ltd. v. Joe Allbaugh, et al., No. 03-14-00131-CV, 2015 WL 9436630 (Tex.App.-Austin Dec. 23, 2015), the Court of Appeals of Texas, Austin, considered the circumstances under which a general contractor can be held liable for injuries to a non-contracting party’s property. The court held that, because the general contractor, Zbranek Custom Homes, Ltd. (Zbranek), exercised control over the construction of the fireplace at issue, Zbranek owed a duty of care to the first lessees of the home that Zbranek built.

In Zbranek, Bella Cima Developments, L.P. (Bella Cima) hired Zbranek to act as the general contractor for the construction of a home. As the general contractor, Zbranek engaged various subcontractors to perform different aspects of the construction, including the framing, stucco and masonry work for an outdoor fireplace.

After Zbranek completed the construction of the home, Bella Cima leased the home to Joe and Diane Allbaugh. The Allbaughs’ first use of the home’s outdoor fireplace resulted in a house fire that substantially damaged the home and its contents. The official fire investigator with the fire department inspected the outdoor fireplace and found a gap between the firebox and the framing. The investigator concluded that the space between the firebox and the framing allowed for the ignition of combustible materials, which ultimately caused the house fire.

The Allbaughs filed a negligence action against Zbranek and several of its subcontractors. The jury found Zbranek, alone, negligent and wholly responsible for the fire and awarded the Allbaughs $715,420 for the damage to their personal property. Zbranek appealed and moved for a new trial. On appeal, Zbranek asserted that it did not have a contract with the Allbaughs and, therefore, it did not owe the Allbaughs a duty of care.

Discussing a general contractor’s duty of care to third parties, the court noted that “‘there is a common-law duty to perform a contract with care and skill, and the failure to meet this implied standard might provide a basis for recovery in tort under appropriate circumstances.’” The court further noted that “[t]his duty applies to general contractors to ensure that their subcontractors perform their work in a safe manner if the general contractor specifically retains some control over some portion of the work performed by a subcontractor or actually exercises control over the work.”

In its contract with Bella Cima, Zbranek agreed that it would be responsible “for the performance of all duties reasonably necessary to complete the Project” and ensure that all construction complied “with all applicable laws, codes and ordinances” and substantially complied “with all plans and specifications of the architect.” During construction, Zbranek supplied all of the raw materials for the project. In addition, Zbranek supplied a different firebox than the firebox called for in the architectural and construction plans without consulting the architect and Zbranek made this change after the framing subcontractors had framed the chimney for a smaller, metal-insert fireplace. Zbranek also inspected and approved the construction of the fireplace and the materials used on the outside of the fireplace. Based on the facts of the case, the court found that the evidence was legally and factually sufficient to support the trial court’s implied conclusion that Zbranek exercised sufficient control over the construction of the fireplace so as to owe a duty of reasonable care to the Allbaughs.

Zbranek serves as a reminder that, even though a general contractor usually provides only general supervision with respect to the work of its subcontractors on a construction project, there are circumstances under which a general contractor may be held liable, in tort, for the work of a subcontractor. Thus, if the circumstances are such that a subcontractor owes a duty of care to a non-party such as a first-time home user and the general contractor exercises control over the subcontractor’s work, if the subcontractor’s work damages the first-time home user’s property, subrogating insurers should be able to pursue negligence claims against the general contractor.