UK Post - Putting the "Gross" in Gross Negligence

Historically, and unlike other jurisdictions, English Courts have seen no difference between negligence and gross negligence as a legal concept. In 1843 it was “the same thing, with the addition of a vituperative epithet” (Wilson v. Brett) and in 1997 it was said that “the difference between negligence and gross negligence [is] merely one of degree.” (Armitage v. Nurse). However this does not necessarily mean that that the term “gross negligence” cannot have an effect in English law.   

More and more recently the English courts have needed to interpret “gross negligence” because it frequently appears in commercial contracts.  There is often an underlying commercial justification for limiting (or excluding) negligence: essentially making it knock-for-knock, but not gross negligence.  And in the commercial setting it is also arguable that if parties have chosen to use such words then they must be given some meaning. Thus, in The Hellespont Ardent (1997) the High Court held that the distinction between negligence and gross negligence was potentially material – the contractual term being clearly intended to represent something more than a failure to exercise the standard of care that would ordinarily constitute “mere” negligence.

More recently, in Camarata Property v Credit Suisse Securities (2011) the Court held that the concept of gross negligence had to be considered in view of the parties’ agreement as a whole as opposed to being a defined concept under English law. Thus a distinction might exist where gross negligence means more than simple negligence (although the difference, for English Courts, may not be easy to define or even describe).

In Camarata there was the presence of both “negligence” and “gross negligence” in the agreement: a factor that indicated some distinction must be intended. Ultimately, however, the difference was found to be one of degree and not kind.  In any event the point became moot as it was decided the bank could not have predicted Lehman’s collapse: so it was neither negligent nor grossly negligent.

Thus, for businesses or claims handlers in the UK (or where there is an English jurisdictional clause) the distinction may be that being grossly negligent suggests a greater lack of care than mere negligence (and a greater hurdle to be overcome in the event of a claim). Similarly it is a distinction worth looking out for if businesses want to ensure they have a remedy for mere (trivial) negligence on the part of those providing services and where they want to ensure they receive the highest standards of care.

The Filed Rate Doctrine

Imagine that your insured’s house has caught on fire, but when a firefighter attempts to connect the water hose to the hydrant nearest the home, he cannot open the valve because he turned the valve in the wrong direction, breaking the stem of the hydrant.  The firefighter moves on to the next hydrant, but that one is frozen, forcing the firefighting crew to connect to a third hydrant much further from the home, causing a delay of 30 minutes, making it too late to save any portion of your insured’s home.

The investigation into the fire reveals that an employee for the water public utility had painted over the top of the first hydrant, thereby covering the arrow that shows which way to open the valve.  Further inquiry reveals the water utility’s inspection records show that the second hydrant had earlier been described as “very hard to open” and “hard to open”, but no remedial actions were taken.  Certainly, after paying out the claim, you think you have viable subrogation claims against the water utility for negligent maintenance.  But before proceeding further, you will want to check out the water utility’s tariff, which is filed with the respective state administrative agency that regulates public utilities. 

A tariff is a public document setting forth the services of a public utility, rates and charges with respect to services and governing rules, regulations and practices relating to those services.  In our scenario, the water utility has a tariff which provides, “It is agreed by the parties receiving service that the Company shall be free and exempt from any and all claims for injury to persons or property by reason of fire, water, failure to supply water pressure or capacity.”  This may significantly impact your claim, due to the legal doctrine known as the “filed rate doctrine.”

The filed rate doctrine “forbids a regulated entity from charging rates other than those filed with the regulatory agency.”  Also known as the filed tariff doctrine, it serves two purposes: recognizing the agency’s autonomy in setting fair rates and preventing service or rate discrimination among customers.  In a sense, the doctrine treats tariffs as a matter of contract: on one side is the utility, and on the other is the state representing all its citizens.  In accordance with this treatment, courts will consider the provisions of the tariff as part of the contract between the customer and the utility.  See, e.g., Krasner v. New York State Elec. & Gas Corp., 90 A.D.2d 921, 921-22 (N.Y. App. Div. 1982).  In other states, however, the tariff will have the force and effect of a statute.  See, e.g., Dyke Water Co. v. Public Utilities Com., 56 Cal.2d 105, 123 (1961).

Implementing the filed rate doctrine, courts have limited the liability of a public utility for simple negligence whose tariffs contain limitation of liability clauses, like the one quoted above.  However, what is still uncertain in the United States is whether such provisions will be enforced where the utility acted grossly negligent or in a willful and wanton manner.  Very few courts have made actual holdings with precedential value that limitation clauses will be enforced in such cases.

One of the most recent courts to weigh in on the matter is the Delaware Supreme Court in Brown v. United Water Delaware, Inc., 3 A.3d 253 (Del. 2010).  There, the court adopted the filed rate doctrine and held that it could bar claims of simple negligence, but refused to rule on whether the doctrine could bar claims for gross negligence and/or wanton and willful misconduct.  On remand to the Delaware Superior Court, the Court looked to other state courts that have examined the issue.  The Superior Court wrote that the filed rate doctrine may bar claims for gross negligence because there was no “overwhelming” caselaw from other jurisdictions saying that filed tariffs cannot preclude claims for gross negligence and that there is no Delaware statutory authority or public policy to the contrary.  This discussion, however, was non-precedential dictum, which the Delaware Supreme Court acknowledges.  Therefore, the issue is still unresolved in Delaware, as well as elsewhere, where very few courts have made actual holdings with precedential value on the matter.

So how does the foregoing impact recovery potential against a utility?    First, as already discussed, you will want to examine the tariff your target public utility has filed, in particular to see if it contains any limitation of liability provisions.  Second, it will be important to conduct an extensive fact and legal investigation to determine how far from the standard of care the utility’s actions were.  This investigation will help determine if the utility’s conduct was simple negligence, gross negligence, or willful and wanton misconduct.  Use of an expert knowledgeable about the respective standard of care will help in this investigation.  Third, you will want to determine your state’s view on the filed rate doctrine and whether it has taken any stance on whether it will prevent claims for ordinary negligence, gross negligence, or wanton and willful misconduct.  Further, as ancillary research, because some states consider tariffs as contracts between the utility and the costumer, you will want to examine your respective state law on the enforcement of contractual limitation of liability clauses where the defendant committed gross negligence and/or willful and wanton misconduct.  This can be especially helpful in cases where the courts have yet to address the field rate doctrine’s impact on limitation of liability clauses where the utility was grossly negligent or worse.

Pennsylvania Supreme Court: One Cannot Exculpate For Recklessness

The Supreme Court of Pennsylvania recently held that exculpatory clauses that relieve a party of liability for “recklessness” are invalid as against public policy. Tayar v. Camelback Ski Corp. Inc., 2012 WL 2913750,* 10 ___ A.3d ___ (July 18, 2012). After a detailed analysis and discussion of the law applicable to exculpatory clauses, the Supreme Court concluded that it was against public policy to allow a party to exculpate itself in advance for reckless behavior. The Supreme Court reasoned that to find otherwise “would remove any incentive for parties to act with even a minimal standard of care.” Tayar, 2012 WL 2913750 at * 7 & 10. In so finding, the Supreme Court not only noted that the overwhelming majority of states find that exculpatory clauses releasing reckless conduct are against public policy, but also noted that the federal courts in Pennsylvania had previously barred the enforcement of releases for reckless conduct. Id. at * 9 & n.13.

The Court’s decision in Tayar left “for another day the question of whether a release for gross negligence can withstand a public policy challenge.” 2012 WL 2913750, at * n. 7. The Court cited federal court decisions from United States District Courts for the Eastern District of Pennsylvania and the District of New Jersey in its analysis of recklessness, and noted those courts found that exculpatory clauses in Pennsylvania cannot limit liability for gross negligence. Id. at * n.13. In doing so, the Court commented on the decision in Valeo v. Pocono Int’l Raceway, Inc., 500 A.2d 492 (Pa. Super. 1985) by saying that it “did not address the public policy of permitting such a release.” Id. at * n.7. . Valeo is sometimes cited as authority for the argument that one cannot circumvent the language in an exculpatory clause based on gross negligence. While the Court’s decision in Tayar now stands for the proposition that one cannot avoid liability for recklessness by relying on an exculpatory clause, the decision also opens up the possibility that, under the same logic, defendants can no longer escape liability for acts of gross negligence. 

California Court of Appeal Puts the Brakes on Contractually Exculpating Liability for Gross Negligence

Riding motocross has been part of my life for nearly twenty years. Every weekend as a kid, I would wake my parents up early, load my motorcycle in the back of a truck, and we would drive to the local motocross track. The line of trucks waiting to enter couldn’t move fast enough. I remember thinking – “Just sign in and let’s go!” Virtually all motocross tracks in the country have riders and spectators print and sign their name to a “sign-in sheet” at the entry gate. That sheet invariably contains language attempting to release the owner of the premises from liability. Today, I still anxiously wait in my truck to sign in and ride at motocross tracks throughout Southern California. But releases like these may not slow down your subrogation case.

In Rosecrans v. Dover Images, Ltd., plaintiff and motocross rider, Jerid Rosecrans, loaded his bike in the back of his truck and drove to Starwest Motocross Track in Perris, California. Before entering, an attendant at the entrance booth gave Jerid a clipboard with a document titled, “Release and Waiver of Liability Assumption of Risk and Indemnity Agreement.” Several paragraphs set forth the waiver and release of liability language. He signed the document and then started riding on the track after putting on his gear (helmet, goggles, chest protector, etc.).

Unfortunately, Jerid crashed on the downside of a blind jump. Luckily, he was not hurt as a result of the initial crash. But his luck ran out as he stood up to get back on his bike. Another rider who was going over the blind jump collided into and injured him. The track did not have a caution flagger stationed at the jump to alert the other rider. Jerid filed a lawsuit against the track alleging that Starwest “negligently owned, operated, maintained and/or controlled” the track because there was not a caution flagger stationed at the take off of the jump to signal that Jerid had crashed.

Starwest moved for summary judgment asserting the waiver as a complete defense to the asserted claims. The trial court agreed with Starwest and concluded that the Release completely barred Jerid’s claims. The California Court of Appeal upheld the Release to the extent that it barred claims for simple negligence. But the Court disagreed with the trial court and held that the Release did not bar claims for gross negligence. The plaintiff’s safety expert opined that not having a caution flagger stationed at a blind jump was “inexcusable, a blatant disregard for riders’ safety, and criminal.” Accordingly, the Court concluded that a reasonable jury could find the track’s conduct to constitute an extreme departure from the standard of care. Ultimately, the Court refused to allow defendants to use a release of liability to shield them from extreme negligent conduct.