Michigan Expands Contractors’ Tort Liability


 A beautiful Michigan home burned down in 2007 due to an improperly ­installed fireplace. The home was re-built in 2007, but a year later, the home burned again. The insurer paid both losses, and asked subrogation counsel to investigate the matter for subrogation potential. The experts concluded that the second house fire was due to the fireplace having been improperly installed during the reconstruction of the home. Suit was brought accordingly. However, the Michigan trial court, contrary to its own views, felt obligated to grant summary judgment to the defendant fireplace installer due to the law in Michigan at the time.  Subrogation counsel filed an appeal.

As we have previously reported, in its June 6, 2011 decision in Loweke v. Ann Arbor Ceiling & Partition Co., LLC,______Mich.           NW2d _____(Docket No. 141168), under Michigan’s Fultz doctrine, a contractor had no tort liability for injuries or damages to property for work performed in furtherance of its contract unless, by applying a "separate and distinct mode of analysis," a new condition was created as a result of that work, leading to the injury complained of. In practice, proving the creation of such a "separate and distinct" new condition proved to be quite difficult in the context of several court decisions following Fultz. This problem was made worse for potential claimants if the faulty work was performed by someone with whom they were not in privity of contract, such as, in many cases, a subcontractor.the Michigan Supreme Court significantly modified its prior holding in Fultz v. Union-Commerce Assoc., 470 Mich. 460, 683 NW2d 587 (Mich. Sup. Ct., 2004). 

In Loweke, the Michigan Supreme Court stated its intention to "clarify" the holding in Fultz by, in essence, reverting to more traditional tort law. The Court stated that even when one is performing contractual work, that "does not alter the fact that there [exists] a preexisting obligation or duty to avoid harm when one acts….[W]hile the mere existence of a contractual promise does not ordinarily provide the basis of a duty of care to a third party in tort, the existence of a contract [also] does not extinguish duties of care otherwise existing …" The Loweke Court stated: "Fultz did not extinguish the simple idea that is imbedded deep within the American common law of torts … if one having assumed to act, does so negligently," then liability exists as to a third party for "failure of the defendant to exercise care and skill in the performance itself."

In an unpublished opinion issued on December 22, 2011, relying upon Loweke, the Michigan Court of Appeals reversed the trial court’s decision. The Court observed that it would ordinarily remand to the trial court to reconsider its summary judgment decision in light of the new Supreme Court authority, but since the trial court had made clear that it felt it was required to reach its conclusion in light of Fultz, the Court of Appeals instead reversed the trial court’s grant of summary judgment outright and remanded the case to the trial court for further proceedings.  This reversal now provides an opportunity, as well as a legal basis, to seek recovery of damages from the fireplace installer.

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