A tornado tore the roof of Haney’s house. Haney hired a contractor to repair the damage and filed a claim for damages with his homeowner’s insurer. Before the repairs were completed, rains further damaged the house.
The insurer, Fire Insurance Exchange (FIE), hired an environmental consultant to perform an environmental study. The findings by the consultant were that “dangerous and toxic airborne mold and fungal spores … in concentrations posing a health risk to humans” existed in the house. The consultant provided this report to the claims adjuster as well as a second report, which stated that the molds could produce mycotoxins “which could be poisonous to individuals if inhaled.”
FIE did not warn the contractors working for homeowner about the mold that had been discovered in the house or about the risks the mold could pose. Several employees of the contractor subsequently filed suit against FIE, the claims adjuster, and the environmental consulting firm, alleging that they had sustained personal injuries due to mold exposure. The trial court dismissed all the claims. That decision was affirmed on appeal.
Reason for Dismissing Claims against Insurer
The court concluded that although the complaint described a dangerous mold condition, it was not a condition that was caused by the insurer or adjuster. Neither the insurer nor the adjuster owned or controlled the property. They “had no relationship with Plaintiffs that would impose any duty to warn of or rectify the condition….” The court found that the plaintiffs’ claims were based on “premises liability” rather than general negligence. “Premises liability,” says the court, is triggered by assertions that “the cause of the injury or damage was an unsafe or defective condition of the property itself.” Such liability is limited to those who own or control the property.
The contract between the insurance company and the environmental firm was deemed by the court to be solely for the benefit of the insurer and not the homeowner. As stated by the court:
A defendant who contracts with another generally owes no duty to a plaintiff who is not a party to that agreement, nor can a non-party sue for negligent performance of the contract.
According to the court, the “factual allegations warrant no finding that [Consultant] undertook to provide services for anyone except FIE.” For these reasons, the court affirmed the trial court’s dismissal of the action against the insurer.
Reasons for Dismissing Claims against Environmental Consultant
The trial court found that the consultant was hired by the insurance company to perform testing and prepare a written report. The consultant performed the work as requested and in a timely manner. The consultant thus discharged its contractual duty to its client, the insurance company. It owed no separate duty to the homeowner since “there was no legal relationship or privity of contract between the parties and [Consultant] did not possess or control the [ ] premises.”
Once again applying the principle of privity of contract, the court explained that in the claim against the consultant, “a defendant who contracts with another generally owes no duty to contract nonparties, nor can a nonparty sue for negligent performance of the agreement.” The court, therefore, affirmed the trial court’s dismissal of the claim against the consultant, stating:
This general rule of privity is designed to protect contractual parties from exposure to unlimited liability and to prevent burdening the parties with obligations they have not voluntarily assumed.
For these reasons, the court held there was no basis for a claim to be filed by the contractors against the insurance company, its adjuster, or its environmental consultant. Haney v. Fire Ins. Exch., 277 S.W.3d 789 ( Mo. 2009).
This article was originally written by Kent Holland for the International Risk Management Institute (IRMI) and published in the IRMI expert commentary as an article dated July 2009. See http://www.irmi.com/expert/topics/insurancelaw/environmental.aspx for additional environmental insurance law articles by Mr. Holland.