FEDERAL INSURANCE COMPANY v. MARTIN EDWARD WINTERS, Supreme Court of Tennessee, at Knoxville (2011)

FACTS: In 2007, Robert and Joanie Emerson entered into an oral agreement with Martin Winters, the owner of Winters Roofing Company, to install a new roof on their house for $17,832. When discussing the oral agreement, the two parties failed to discuss insurance. Mr. Emerson, however, researched Winters Roofing Company’s website and discovered Winters Roofing Company carried general liability and worker’s compensation insurance which he believed and relied on. When it came time to begin working on the roof, Mr. Winters subcontracted the agreement to Terry Monk, without informing the Emersons. Mr. Monk completed the work without any issues. A few months after Mr. Monk completed the work on the roof, the Emersons notified Mr. Winters of the leaking roof. Mr. Winters subcontracted the repair work again, but this time, to Bruce Jacobs who formed his own subcontract with Mr. Winters. In this agreement, Mr. Jacobs agreed to perform any and all work with the repairing of the roof, while Mr. Winters would be responsible for any and all leaks/damages caused by the work performed. On September 26, 2007, Mr. Jacob began repairing the Emerson’s roof, while they were away from their home, and caused a fire to start a few hours later, causing the Emersons $871,069.73 in home and personal damages. When the fire department came out to put out the fire, Gary Young, a fire inspector, stated the cause of the house fire was due to the open flame roofing work conducted by Mr. Jacobs. When asked about Mr. Jacob’s insurance coverage, Mr. Jacobs claimed that he was an independent contractor who was uninsured and unable to pay for the damages on the house and personal property since his subcontract agreement with Mr. Winters stated Mr. Winters as the liable contractor. For Mr. Winters’ insurance coverage, he purchased liability insurance from American Safety Insurance Company (“American Safety”) one day after the fire had occurred. Furthermore, when asked by American Safety for details about the fire to determine if liability coverage was applicable to Mr. Winters, he stated the fire occurred on October 3rd, 2007, a week after when the actual fire occurred. After receiving conflicting information regarding the fire, American Safety received accurate information detailing the actual fire to be on September 27, 2007 at which Mr. Winters invoked his right to remain silent under the United States Fifth Amendment. 

PROCEDURAL HISTORY: On January 15, 2009, Chubb National Insurance Company, soon to be Federal Insurance Company, filed a suit against Martin Winters seeking $871,069.73 in damages for the Emerson’s lost home and personal property under their insurance policy. Federal Insurance Company alleged Mr. Winters acted with negligence and breached the agreement with the Emersons on the basis that he failed to provide an implied obligation to complete the roofing work “skillfully, carefully, diligently, and in a workmanlike manner.” In addition, Federal Insurance claimed that Mr. Winters was never released from his contractual duties despite subcontracting the repair work out to another party. Mr. Winters filed a motion for summary judgment alleging that because he wasn’t the party that completed the work on September 27, 2007 nor present to supervise Mr. Jacobs, Federal Insurance sued the wrong person. The trial court ruled in favor of Mr. Winters and granted the motion for summary judgment on both the negligence and breach of contract claims. The Tennessee trial court held that Mr. Winters wasn’t liable for negligent subcontract acts since no negligence occurred in the hiring of the subcontractor or supervision of the subcontracting party performing the work. Under the theory of contracts, the trial court stated that recovery of damages for the Emersons was not possible since the damages that occurred were unforeseeable. The Court of Appeals reversed the trials court’s grant for summary judgment stating Mr. Winters had a non-delegable duty to ensure that the work subcontracted out to Mr. Jacobs was performed in a “careful, skillful, and workmanlike manner.” While they reversed the trial court’s ruling, the Tennessee Court of Appeals granted Mr. Winter’s appeal to having an implied duty under contract to perform the roofing services in a “carefully, skillfully, diligently, and in a workmanlike manner to determine if this duty was delegable to Mr. Jacobs, the subcontractor. Concurrently, Federal Insurance dropped their claim of recovery based on theory of negligence against Mr. Winters. 

ISSUE(S): 

1. Whether a person can breach its duty to a contract in an expressed or implied contract.

2. Whether a person is liable for damages for a completed contract even if a subcontractor performed the actual work. 

HOLDING: 

1. A person can breach its duty to a contract in an expressed or implied contract.

2. A person is liable for damages for a completed contract even if a subcontractor performed the actual work. 

REASONING: The Tennessee Supreme Court held that service contracts, formed in Tennessee, are accompanied by an implied obligation to perform the service skillfully, carefully, diligently, and in a workmanlike manner. Mr. Winters, being the defendant in the case carrying an implied duty to perform the Emerson’s roof in a skillfully, carefully, diligently, and in a workmanlike manner, is not relieved of liability for damages to the roof. On the claim of delegation of liability, the court held that Mr. Winters’ liability to perform the service skillfully, carefully, diligently, and in a workmanlike manner, was not delegable to any of the subcontractors. Therefore, Mr. Winters’ is liable for breach of contract. On the matter of the motion for summary judgment, the court ruled that the trial court erred in granting Mr. Winters’ motion for summary judgment. 

JUDGMENT: The Tennessee Supreme Court affirmed the judgment of the court of appeals and remanded it for trial.