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INSIGHT: Texas Supreme Court Ruling Protects Property Owners From Negligent Hiring Claims

Nov. 27, 2019, 9:00 AM

The Texas Supreme Court determined negligent hiring is covered under Chapter 95 of the Texas Civil Practice and Remedies Code and requires proof of two separate acts of negligence. The ruling provides greater protection to property owners and may impact all negligent hiring claims going forward in the state.

In Endeavor Energy Resources LP v. Cuevas, the beneficiaries of an oil field worker killed in an accident sued the contractor building an oil rig and the owner of the mineral interest that hired the contractor. The court ruled Texas Civil Practice and Remedies Code Chapter 95, which protects property owners from negligence claims by employees of contractors working on improvements, covers claims of negligent hiring.

Chapter 95 of the Texas Civil Practice and Remedies Code limits liability of a property owner who hires an independent contractor to improve their property. Typically, this might apply when an owner hires a contractor to construct or repair a building, and one of the contractor’s employees is injured in an accident. By one estimate, construction accounted for $70 billion of the Texas GDP in 2018, and every construction project creates the potential for liability to the owner and the contractor. Therefore, the applicability of Chapter 95 has far-reaching implications throughout Texas, as does any decision expanding or limiting its scope.

By 2016, the Texas Supreme Court confirmed Chapter 95 covers all negligence claims, whether for premises liability or negligent activity. In May 2019, the supreme court examined whether a claimant’s allegation the property owner negligently hired the contractor that employed the injured party fell within the scope of Chapter 95. The court determined negligent hiring falls under Chapter 95 and clarified the requirements to prove negligent hiring.

Chapter 95

Chapter 95 applies to negligence claims (1) against a property owner, contractor, or subcontractor for personal injury, death, or property damage; which (2) arises from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement.

When Chapter 95 applies, an owner is not liable unless it had both actual knowledge of the danger or condition and controlled the manner in which the work was performed. This is a high bar to meet, and means property owners are often insulated from liability when there has been injury based on a contractor’s actions.

Oil Field Accident Led to the Case

After an oil field accident, Cuevas, a contractor’s employee, asserted negligence claims against Endeavor, as the owner, and Endeavor’s contractor. I was one of the attorneys representing Endeavor at the trial court level. Cuevas amended the petition to claim negligent hiring. After a nearly full day summary judgment hearing, the trial court granted summary judgment for Endeavor on all claims, because the evidence was clear Endeavor lacked actual knowledge of the dangerous condition and control over the contractor’s work.

The Eastland Court of Appeals disagreed and ruled Cuevas’ negligent hiring claim was not covered by Chapter 95 because Endeavor’s act in hiring the contractor took place before the oil rig accident.

The supreme court overturned the appellate court and affirmed summary judgment, making several key rulings. The court clarified negligent hiring claims were akin to negligent entrustment, and required proving two separate acts of negligence—the owner’s negligence in hiring the contractor and the contractor’s negligence resulting in the claimed injury.

This second act brought a negligent hiring claim within the scope of Chapter 95. Therefore, a claimant must show actual knowledge and control by the owner, which were not present.

Impact on Chapter 95 and Negligent Hiring Claims

Even before Cuevas, any attorney dealing with injury or damages on a construction project should have been familiar with the scope of Chapter 95. According to one estimate, Texas is expecting a 12.5% increase in industrial building construction in 2019, largely driven by the increase in crude oil production, which has spurred petrochemical and refining construction. In fact, Cuevas involved building an oil rig. With a booming construction industry, owners will frequently have cause to raise Chapter 95 defenses.

Confirming Chapter 95 applies to negligent hiring claims should benefit those owners considering construction, as potential liability is a factor in any construction project. Cuevas may prevent claimants from raising negligent hiring, claiming the owner never should have hired to contractor originally, as an end run around the actual knowledge and control standard for owner liability. Before the court’s ruling, this arguably would make a plaintiff’s focus a completely different negligent act than the injury causing incident.

It is now arguably harder to support a negligent hiring claim in a Chapter 95 context than a simple negligence claim. Not only does a claimant have to prove the owner was negligent and lacked actual knowledge and control regarding the injury causing incident, he would also have to prove the owner was negligent by initially hiring the contractor, which requires evaluating the contractor’s history and owner’s knowledge of that history.

Based on this, a negligent hiring claim may not be able to survive unless the simple negligence claim also succeeds. For that reason, claimants may have no advantage to raising a negligent hiring claim, and they may disappear substantially from Chapter 95 cases.

Outside the Chapter 95 context, Cuevas may affect negligent hiring claims in general. The state supreme court made clear a plaintiff must prove two separate acts of negligence. It is possible this could have far greater impact than Cuevas’ Chapter 95 implications. Cuevas has been cited only twice in the six months since it was decided, and neither case dealt with Chapter 95.

The federal district court for the Western District of Texas affirmed a summary judgment on negligent hiring, citing the requirement to prove “two negligent acts” described in Cuevas.

It is worth watching how lower courts apply Cuevas in the future to determine if it complicates negligent hiring claims generally. Having to prove two separate acts of negligence increases the cost and scope of discovery and also the available defenses.

What is clear is that moving forward Cuevas is favorable to defendants in construction and negligent hiring cases. How favorable remains to be seen.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Perrin B. Fourmy is an attorney with Bell Nunnally in Dallas. He has represented clients in civil litigation matters across multiple practice areas, including oil and gas, premises liability, personal injury, contracts, vehicle products liability, property disputes, debtor/creditor, and consumer rights in state and federal matters throughout Texas and the United States.