November 03, 2011

Court: Contractors liable for what their subs do (Jackson Sun)

A ruling from the Tennessee Supreme Court last week made it easier for homeowners to hold contractors responsible for shoddy work by subcontractors. The court has found that contractors have a duty to perform services in a "careful, skillful, diligent and workmanlike manner" that can't be fully delegated to another contractor they hire.

Read more about the issues that led up to the decision in the Tennessee Bar Journal.

The Jackson Sun carried this AP story

State Supreme Court ruling finds liability for contractors using subs

A ruling from the Tennessee Supreme Court has made it easier for homeowners to hold contractors responsible for shoddy work by subcontractors.

The court has found that contractors have a duty to perform services in a “careful, skillful, diligent and workmanlike manner” that can’t be fully delegated to another contractor they hire.

The 5-0 ruling in a case from Chattanooga over a botched roof repair job that caused a fire could have broad implications for homeowners and contractors because most home construction and repair work involves bringing in subcontractors to handle parts of the job.

The opinion written by Justice Gary Wade and released last week said this was the first time the state Supreme Court had taken up the issue of whether a contractor was absolved from liability under the contract by hiring a subcontractor.

The case began when Robert and Joanie Emerson signed a contract with Winters Roofing Co. to replace a roof. Company owner Martin Winters subcontracted out the work. When the Emersons complained that the new roof leaked, Winters brought in a different subcontractor for repairs.

The subcontractor used a propane torch on the roof, and a few hours later the house caught fire. A fire investigator for the insurance company concluded the open flame roofing work started the fire, which caused more than $870,000 in damages to the home on Sept. 26, 2007.

Neither Winters nor the subcontractor had liability insurance, although Winters tried to obtain it the day after the fire and then filed a claim that said the fire happened seven days later, the ruling said.

The Emersons’ insurance company sued Winters, who argued that he wasn’t at the site while the subcontractor was working and wasn’t responsible for his mistakes.

The trial court dismissed the lawsuit, saying the couple’s insurance company couldn’t recover damages because the fire wasn’t a foreseeable part of the contract. It also said that the only way Winters could be held responsible was if it was shown that he was negligent in his hiring or supervision of the subcontractor.

Last year the Tennessee Court of Appeals overturned that decision.

“The defendant had an implied duty to perform the services required by his contract with the Emersons in a careful, skillful, diligent, and workmanlike manner,” the Supreme Court ruling says.

It concluded that while Winters had lawfully delegated his responsibility to install a proper roof to the subcontractors, he still was liable for the shoddy work.

TN Supreme Court whether a contractor can be held liable for damage caused by an independent subcontractor.


The defendant contractor entered into a contract to replace a roof. When the newly installed roof developed leaks, the defendant hired an independent contractor to make the necessary repairs. While performing the work, the independent contractor caused a fire, resulting in an $871,069.73 insurance claim by the homeowners. As subrogor to the homeowners' rights and claims arising out of the fire, the plaintiff insurance company sued the defendant in both tort and in contract. The defendant filed a motion for summary judgment, asserting that because he had subcontracted the work, he could not be liable. The trial court granted the motion on both the negligence and breach of contract claims.

The Court of Appeals reversed, holding that the defendant had a non-delegable contractual duty to perform the roofing services in a careful, skillful, and workmanlike manner. This Court granted the defendant's application for permission to appeal in order to determine the propriety of the claim under the theory of contract. Because the defendant had an implied non-delegable duty to install the roof in a careful, skillful, diligent, and workmanlike manner, the judgment of the Court of Appeals is affirmed. The case is remanded to the trial court for proceedings consistent with this opinion.

Opinion available at:

November 01, 2011

New Government Crackdown On Independent Contractors Coincides with IRS Offer to Come Clean

The IRS has launched a new program that will enable many employers to resolve past worker classification issues at a relatively low tax cost by voluntarily reclassifying their workers.

This new program offers employers an opportunity to come into compliance by making a payment covering past payroll tax obligations.

This IRS "Fresh Start" initiative coincides with another new government Department of Labor program to crack down on employers who misclassify employees as independent contractors (see right-hand box for more information).

The new IRS Voluntary Classification Settlement Program "is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government," according to the IRS.

See full article at: