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.