Imposing Liability Where There Is Insurability

The title is from a sentence in today’s Court of Appeals’ decision in Santelli v. Rahmatullah. (pdf) In that case, Santelli was a guest of a hotel. Pryor had been an employee of the hotel. Pryor retained a key card after he walked off the job. Pryor gained access to Santelli’s room and murdered him. The hotel (owned by Rahmatullah) hadn’t performed a background check on Pryor and, at the time he was hired, there was a warrant for Pryor’s arrest for some type of probation violation. Santelli’s estate sued the hotel for negligence in performing its duty to provide security to its patrons. The hotel named Pryor as a “non-party.” (In Indiana’s comparative negligence scheme, the default is that a jury is supposed to allocate a percentage of negligence as between the Plaintiff and Defendant that combines for 100%. A Defendant can add a “non-party” to whom the jury is permitted to distribute some of the percentage of fault. The amount the Defendant owes the Plaintiff is the Defendant’s percentage of fault multiplied by the Plaintiff’s total damages.)

The Plaintiff protested Pryor’s inclusion as a non-party and asked for an instruction that informed the jury that it could not allocate fault to Pryor if Pryor’s actions were the “very duty” imposed on the hotel to protect against. In other words, the hotel has a duty to responsibly provide security so as to protect patrons against guys like Pryor. The trial court did not give the instruction requested by the Plaintiff. The jury came back with total damages of $2 million for the Plaintiff but allocated the fault at 1% for Santelli, 2% for the hotel, and 97% to Pryor the murderer. Under that ruling, the hotel was liable to the estate of the decedent in the amount of about $40,000.

Plaintiff appealed. As part of its rationale for finding for the Plaintiff and ordering a new trial, the Court of Appeals found:

If the allocation of fault to a criminal defendant reduces the liability of the negligent defendant whose action or inaction allowed the harm to occur, as it did here, the injured party will not be adequately compensated. In addition, the criminal defendant who has been identified and convicted for his intentional act likely will be both judgment proof and without insurance coverage from which the injured person could be compensated. Further, the negligent business owner can insure against liability arising from inadequate security. Combining the allocation of fault of the criminal defendant with the negligent defendant imposes liability where there is insurability. Holding the negligent proprietor liable as provided under § 14 also serves as a deterrent to breaching one’s very duty.

I can’t say that the Court of Appeals was in any way wrong in following precedent and, in fact, I was under the impression that this was already settled in the fashion the Court was applying it. I am a little dubious about the overall policy, however. If effect, the policy of Indiana’s civil tort law is not necessarily to impose liability based on one’s actual culpability in the scheme of things; rather, the consequences of that culpability are to be increased because one is insurable and if necessary to make sure the Plaintiff isn’t forced to sustain damages beyond the Plaintiff’s own culpability.

Under the present facts of the case, the jury found that the total damages were about $2 million, that the Plaintiff himself was responsible for about $20k of the loss, that the Defendant was responsible for about $40k of the loss, and that Pryor was responsible for the remaining $1,940,000. Which is tough luck for the Plaintiff because Pryor is never going to pay — under this scenario Plaintiff caused $20k of the loss but is made to bear $1,960,000 of the cost. The Court of Appeals has ordered a new trial. Assuming (and this is not at all a good assumption) the jury allocates fault ignoring Pryor and finding the same measure of damages – (drawing off the 1% versus 2% the jury found), Plaintiff’s fault increases to 1/3 and the hotel’s fault increases to 2/3; increasing the hotel’s liability from $40k to $1,332,000. Not because the hotel’s actions were any more wrong but because a) the Plaintiff shouldn’t be left holding the bag; and b) the hotel as deeper, more insurable pockets than the murderer.