Logestan v. Hartford Steam Boiler Inspection & Insurance

626 N.E.2d 829, 1993 Ind. App. LEXIS 1632, 1993 WL 536855

• Court: Indiana Court of Appeals
• Decided: December 30, 1993
• Docket: 82A04-9301-CV-8
• Status: Published

Opinions

NAJAM, Judge.

STATEMENT OF THE CASE

Joseph Logestan, Jr. appeals from a jury verdict in favor of Hartford Steam Boiler Inspection and Insurance Company (“Hartford”) in a negligence action Logestan brought against Hartford. Logestan claimed that a Hartford employee negligently inspected a boiler which exploded and injured him. On appeal, Logestan argues that the trial court erroneously submitted jury instructions which permitted the jury to find Hartford immune from liability. We agree, and we reverse and remand for a new trial.

ISSUE

We restate the issue presented as whether Hartford is immune from liability as a matter of law.

FACTS

On October 25, 1989, Logestan was employed by Mid-States Rubber Products, Inc. in Princeton, Indiana, and was severely injured when a boiler operated by Mid-States exploded. The boiler had been last inspected on July 18, 1989, by Robert Ver-Steeg, a Hartford employee who was licensed by the State of Indiana as a “special inspector” to perform annual safety or “certificate” inspections for regulated boilers, which are required by law.

VerSteeg’s authority to conduct inspections as a special inspector was derived from his employment with Hartford, which is designated an “inspection agency” by statute as an insurance company in the business of insuring and inspecting regulated boilers. A special inspector does not hold a general commission to conduct certificate inspections but is only authorized to inspect boilers insured by his employer.

Logestan filed a personal injury action against Hartford on the theory that Hartford was liable for VerSteeg’s negligent inspection of the boiler. The court submitted instructions to the jury on the issue of Hartford’s immunity, and the jury returned a verdict in favor of Hartford. Logestan appeals. We will state other material facts where appropriate.

DISCUSSION AND DECISION

Both Logestan and Hartford dispute whether Instruction No. 17,¹ which provided that Hartford may be entitled to governmental immunity, was a correct statement of the law. They also dispute whether Hartford was immune from liability under Indiana Code § 34-4-12.7-2 for performing an inspection in connection with the issuance or renewal of a casualty insurance policy.²

However, our resolution of this appeal turns on whether the issue of immunity under either statute should have been submitted to the jury. Statutory immunity is a question of law for the court’s determination. Peavler v. Monroe County Board of Commissioners (1988), Ind., 528 N.E.2d 40, 46. Extended factual development may be required to decide the legal question of immunity. Id. “[T]he essential inquiry is whether the challenged act is the type of function which the legislature intended to protect with immunity.” Id. Thus, in our review we must consider the facts and determine whether, as a matter of law, Hartford was immune from liability under either statute for VerSteeg’s inspection of the boiler which injured Logestan.³

A. Immunity under the Tort Claims Act

Logestan and Hartford first disagree whether VerSteeg and Hartford were entitled to immunity under our Tort Claims Act, Indiana Code § 34-4-16.5-3(11). In preserving its objection to Instruction No. 17, Logestan argued both that the instruction was an incorrect statement of the law and that the issue should have been decided by the court. Logestan contends that there is no evidence in the record to show that VerSteeg, who was employed by Hartford as a “special inspector,” was a State employee for whose actions Hartford could not be held liable. Logestan is correct.

There are three classes of inspectors licensed to inspect regulated boilers in the State of Indiana. Under the administrative rules adopted by the Indiana Boiler and Pressure Vessel Rules Board, a “special inspector” is an inspector, other than a “state inspector,” in the regular employ of an authorized inspection agency.⁴ See IND.ADMIN.CODE tit. 680, r. l-l-2(6) (1992). A “state inspector” is any inspector employed by the Indiana Boiler and Pressure Board. IND.ADMIN.CODE tit. 680, r. l-l-2(5) (1992). An “owner or user inspector” is a professional engineer who is regularly employed by the owner or user of a regulated boiler qualifying as an inspection agency. See Record at 1430; IND. CODE § 22-15-6-6(c)(2).

All three types of inspectors must meet the same professional qualifications to inspect regulated boilers in this state. Record at 1430. However, Anthony Meiring, Chief Inspector for the Boiler and Pressure Division of the State Building Commission, explained the difference between a special inspector and a state inspector. Meiring testified that a special inspector’s commission indicates the inspector is employed by an insurance company, not by the State of Indiana. Record at 1501-02. Meiring stated that VerSteeg does not receive any state benefits and that as Chief Inspector he had no control over VerSteeg’s activities in inspecting boilers. Record at 1502-04. Ver-Steeg’s own identification card states that he is an employee of Hartford. Record at 974 (Defendant’s Exhibit 72).

Hartford relies upon Ayres v. Indian Heights Volunteer Fire Department (1986), Ind., 493 N.E.2d 1229, for the proposition that when VerSteeg conducted certificate inspections as a State commissioned special inspector, VerSteeg was an “instrumentality” or an employee of the State. We cannot agree. Ayres established the rule of law that “[w]hen private individuals or groups are endowed by the state with powers or functions governmental in nature, they become agencies or instrumen-talities of the state and are subject to the laws and statutes affecting governmental agencies and corporations.” Id. at 1235. In holding that a township’s volunteer fire department is an instrumentality of the state and not an independent contractor, our supreme court concluded that firefighting is a service that is uniquely governmental. Id. The court observed that it was not aware of any private enterprise in the business of fighting fires, a fact, in its opinion, which distinguishes a volunteer fire department from private enterprises that pave roads or build schools and that the government sometimes calls upon to fulfill its governmental duties to the public. Id.

We decline to extend the definition of an “employee” under the Tort Claims Act to include special inspectors employed by insurance companies which conduct state authorized inspections. Unlike firefighting, the activity of inspecting regulated boilers is not a “uniquely governmental” function. Our statutes authorize not only “state inspectors” but privately employed “special inspectors” and also “owner or user inspectors” to conduct boiler inspections for certificates of operation. The owner or operator of a regulated boiler may choose either a state inspector, a special inspector or, if it qualifies, its own inspector to conduct the required annual certificate inspection. Any one of these inspectors may certify a regulated boiler for an operating permit. Thus, certificate inspections are not a uniquely governmental function.

Further, as our supreme court has cautioned, the Indiana Tort Claims Act is a statute in derogation of the common law which must be strictly construed against limitations on the claimant’s right to bring suit. Hinshaw v. Board of Commissioners of Jay County (1993), Ind., 611 N.E.2d 637, 639. “We will assume that the legislature is aware of the common law and intends to make no change therein beyond its declaration either by express terms or unmistakable implication.” Id.

Here, there is no express statutory declaration of immunity for special inspectors, and we cannot discern from an examination of the Tort Claims Act any implication that such immunity was intended. Nor can we conclude that the statutory provisions and administrative rules enacted to regulate boiler inspections demonstrate “clearly the intention of the Legislature” to recognize special inspectors as instrumentalities or employees of the State. See Ayres, 493 N.E.2d at 1237.

VerSteeg was not employed by the state, and other than the issuance of his license, his work as a special inspector was not directed, supervised or otherwise controlled by the state. We acknowledge that the inspection of boilers is a regulated activity in this state. However, control, or the right to control, is a precondition necessary to establish vicarious liability in tort. White v. Galvin (1988), Ind.App., 524 N.E.2d 802, 804. The state’s regulation of special inspectors employed by private insurance companies to perform certificate inspections is too tenuous a statutory relationship to warrant immunity under the Tort Claims Act. See Buckley v. Standard Investment Co. (1992), Ind., 586 N.E.2d 843, 844 (board of trustees of utility, whose members were initially appointed by city, held not a governmental entity because city had no control over current makeup of board). Likewise, the mere fact that, following initiative taken by the boiler operator to renew its annual certificate, the state will accept an inspection made by a privately employed “special inspector” does not constitute the degree of control required to establish that the special inspector is acting on behalf of a governmental entity.

In sum, we hold that special inspectors are not state employees and that Hartford is not a governmental entity or instrumentality of the state entitled to immunity from liability. The legislature did not intend to extend governmental immunity under the Tort Claims Act to insurance companies merely because they are engaged in insuring and inspecting boilers.

B. Immunity under Indiana Code § 34-4-12.7-2

Hartford also asserts that, without regard to governmental immunity, it was immune from liability for VerSteeg’s inspection as a matter of law under Indiana Code § 34-4-12.7-2, which provides:

(a) No act or omission in the making of an inspection in connection with the issuance or renewal of a policy of casualty or fire and marine insurance subjects an insurer or its:

(1) Agents;

(2) Employees; or

(3) Service contractors;

to civil liability for any injury, death, or loss.

(b) The exemption from civil liability in subsection (a) does not apply to:

(1) Any injury, loss, or death that:

(A) Occurs during an inspection; and

(B) Is proximately caused by the negligence of the insurer or its agent, employee, or service contractor;

(2) An inspection that is required under a written service contract; or

(3) Any injury, loss, or death ■ proximately caused by an act or omission that constitutes:

(A) A criminal offense;

(B) Gross negligence; or

(C) Willful or wanton misconduct.

Hartford had issued a casualty insurance policy which covered the boiler, and Hartford argues that VerSteeg inspected the boiler both in connection with the issuance or renewal of its policy and the issuance of a new certificate as required by law. Hartford reasons that the dual purpose of Ver-Steeg’s inspection does not defeat Hartford’s immunity under Indiana Code § 34-4-12.7-2. Hartford maintains, in effect, that Indiana Code § 34-4-12.7-2 provides blanket immunity for an insurance company acting as an inspection agency because all certificate inspections are also inspections made in connection with the issuance or renewal of an insurance policy.

We cannot accept Hartford’s characterization of VerSteeg’s inspection as an inspection made “in connection with the issuance or renewal” of a casualty insurance policy. Hartford relies solely upon Ver-Steeg’s statement that if he inspects a boiler and determines that a boiler is unsafe, then he recommends that the policy be cancelled or not be reissued until the unsafe condition is corrected. See Record at 932-33; Appellee’s Brief at 42-43.

However, there is other abundant and compelling evidence in VerSteeg’s testimony which refutes Hartford’s characterization of the inspection as an insurance inspection. VerSteeg’s inspection occurred on July 18, 1989, but Hartford’s three-year policy which covered the boiler did not expire until October 10, 1991, more than two years later. See Record at 1607. Ver-Steeg also admitted that he did not send the results of his inspection to underwriting at Hartford. Record at 1026. Ver-Steeg’s inspection report did not state that the inspection was made to renew the Hartford policy. Rather, his report stated that it was a certificate inspection for an operating permit, and VerSteeg testified that Hartford sent the report to the State. Record at 969, 970 (Defendant’s Exhibit 2) and 1027.

Hartford’s policy itself distinguishes between inspections conducted for insurance purposes and certificate inspections. The policy provides in Paragraph D “Inspections and Surveys” under the “Common Policy Conditions” that Hartford reserves the right, but is not obligated, to make inspections. Record at 1594 (Paragraph D). The policy then states “[w]e do not make safety inspections” and expressly disclaims any warranty that a boiler’s condition complies with applicable laws, regulations, codes or standards. Record at 1594. Certificate inspections conducted pursuant to rules adopted by the Indiana Boiler and Pressure Vessel Board are safety inspections. See IND.ADMIN.CODE tit. 680, r. 1-1-1 (1992) (“regulations contained herein shall be understood to set forth rules for safeguarding life, limb and property”). Thus, Hartford’s own policy, which expressly disclaims that any inspections Hartford performs as an insurer are safety inspections, confirms that a certificate inspection and an insurance inspection are not made for the same purpose. Indiana Code § 34-4-12.7-2 does not provide blanket immunity to insurance companies performing boiler inspections.⁵

The brief portion of VerSteeg’s testimony relied upon by Hartford is insufficient to overcome the other facts established through his testimony and the express disclaimer in Hartford’s policy. Considering all the evidence, which we must when the question of immunity is presented, it is apparent that VerSteeg did not inspect the Mid-States boiler in connection with the issuance or renewal of insurance, and that, as a matter of law, Hartford was not entitled to immunity for the inspection under Indiana Code § 34-4-12.7-2.

CONCLUSION

Hartford is not immune from liability for VerSteeg’s purported negligence in inspecting the boiler which injured Logestan. VerSteeg was not an employee of the State of Indiana. Neither was his inspection made in connection with the issuance or renewal of an insurance policy. The question of immunity in Instruction Nos. 3, 4 and 17 should not have been submitted to the jury. In the absence of immunity, this case should proceed to trial on the elements of negligence. See Peavler, 528 N.E.2d at 46-47. We reverse and remand for a new trial.

Reversed and remanded.

CHEZEM, J., concurs. ROBERTSON, J., dissents with opinion.

1 . That instruction stated:

The annual inspection of a regulated boiler by a special inspector licensed by the State is an activity for which Indiana provides immunity from legal liability.

If you find Mr. VerSteeg was acting as an employee of the State in performing the annual state certificate inspection of the subject boiler on July 18, 1989, then Mr. VerSteeg and therefore Hartford Steam Boiler Inspection and Insurance Company would not be liable for any loss resulting from failure to make an inspection, or making an inadequate or negligent inspection, of any property to determine whether the property complied with or violated any law or contained a hazard to health or safety.

Record at 1746.

2 . Instruction Nos. 3 and 4 instructed the jury regarding immunity under this statute. See Record at 1725-27.

3 . Hartford also makes the alternative argument that Instruction No. 17 was properly submitted to the jury and was not erroneous because under the borrowed servant doctrine, the question of which employer is liable for an employee's negligence is a question for the trier of fact. See Progressive Construction and Engineering Co. v. Indiana and Michigan Electric Co. (1989), Ind.App., 533 N.E.2d 1279, 1284. As shown in our analysis below, VerSteeg is an employee of Hartford, and is neither an employee of the State nor an employee of both the State and Hartford. Thus, whether immunity exists under the Tort Claims Act is a question of law for us to decide.

4 .An “inspection agency” is "an insurance company engaged in insuring and inspecting regulated boilers and pressure vessels in Indiana.” IND.CODE § 22-15-6-4(a)(l).

5 . Similarly, Hartford’s claim of blanket immunity under the Tort Claims Act fails because, as we have already concluded, neither VerSteeg nor Hartford are state employees or governmental entities.