The Subrogation Strategist

In Allstate Veh. & Prop. Ins. Co. v. Glitz Constr. Corp., 2023 N.Y. App. Div. LEXIS 1180, 2023 NY Slip Op 01171, the Supreme Court of New York, Appellate Division, Second Department (Appellate Court), considered whether a contractor could be found liable for its subcontractor’s alleged negligence in causing injury to a homeowner’s property. The homeowner’s insurer, as subrogee of the homeowner, sought to recover damages from the contractor despite an allegation that the subcontractor – an independent contractor - caused the injury to the homeowner’s property. Finding that there was no evidence that any of the exceptions to the non-liability rule related to hiring independent contractors applied, the Appellate Court affirmed the lower court’s decision granting judgment in favor of the contractor.

In this case, the homeowner hired the contractor (defendant) to convert her garage area into a bedroom and an office. The defendant later hired a subcontractor to perform the electrical rough-in work. At trial, the homeowner’s insurer (plaintiff) presented evidence that the subcontractor, who damaged an existing wire with a drill bit, caused an electrical failure that resulted in a fire. The defendant argued that it could not be held liable for the subcontractor’s alleged negligence because the subcontractor was an independent contractor and, on appeal, the Appellate Court agreed.

Although the court recognized the general rule that a party who retains and independent contractor - as distinguished from an employee or servant - is not liable for the independent contractor’s negligence, the rule is subject to a number of exceptions.  As noted by the court, one exception applies when the employer of an independent contractor controls the methods and means of by which the work is performed.

Although the question of whether an actor is an independent contractor or an employee for the purposes of tort liability is usually a factual issue for the jury, when there is no conflict in the evidence the question may properly be determined as a matter of law. Here, the Appellate Court found that trial court correctly ruled as a matter of law that the plaintiff failed to present any evidence that the defendant controlled the means by which the subcontractor performed his work.

In reaching its decision, the Appellate Court analyzed another exception to the non-liability rule, the nondelegable duty exception, and clarified that “a duty is nondelegable when the responsibility is so important to the community that the employer should not be permitted to transfer it to another.” For the following three reasons, the court determined that the plaintiff also failed to establish that the performance of the electrical rough-in work was a nondelegable duty:

(1) there was no evidence that the defendant assured the homeowner that it would perform the rough in work itself;

(2) there was no evidence that the defendant held itself out to the public as an entity that specifically performed that type of work; and

(3) the terms of the renovation contract do not create a nondelegable duty with regards to the rough-in work.

This case serves as an important reminder as to why it is critical to seek liability against the right party. Although it may be tempting to pursue the bigger target in subrogation matters, recovery efforts can quickly come to a halt when the burden of proof cannot be met. Here, the plaintiff failed to establish that the defendant was liable because there was no evidence to contradict the fact that the subcontractor was an independent contractor, rather than an employee, or that an exception to the rule applied.