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Mavrikidis v. Petullo

March 11, 1998

ALICE I. MAVRIKIDIS AND KONSTANTINOS MAVRIKIDIS, HER HUSBAND, PLAINTIFFS-APPELLANTS AND CROSS-RESPONDENTS,
v.
GERALD PETULLO, PETULLO BROS., INC., ITS AGENTS, SERVANTS AND/OR EMPLOYEES, ANGELO PETULLO, GERALDINE PETULLO, OTTAVIO PETULLO AND/OR GERALD PETULLO, TRADING AS PETULLO BROS., INC., AN ALLEGED CORPORATION AND CLAR PINE SERVICENTER, ITS AGENTS, SERVANTS AND/OR EMPLOYEES, DEFENDANTS-RESPONDENTS AND CROSS-RESPONDENTS, AND NEWARK ASPHALT CORP., ITS AGENTS, SERVANTS AND/OR EMPLOYEES, DEFENDANT-RESPONDENT AND CROSS-APPELLANT, AND "ABC" (A FICTITIOUS NAME), DEFENDANT. MOTOR CLUB OF AMERICA INSURANCE COMPANY AS SUBROGEE OF KONSTANTINOS MAVRIKIDIS AND MOTOR CLUB OF AMERICA INSURANCE COMPANY, PLAINTIFFS-APPELLANTS AND CROSS-RESPONDENTS,
v.
PETULLO BROTHERS, INC., GERALD PETULLO A/K/A JERRY PETULLO AND ANGELO PETULLO, GERALDINE PETULLO, OTTAVIO PETULLO AND/OR GERALD PETULLO T/A PETULLO BROTHERS, INC., AN ALLEGED CORPORATION AND CLAR PINE SERVICENTER, DEFENDANTS-RESPONDENTS AND CROSS-RESPONDENTS, AND NEWARK ASPHALT CORP., DEFENDANT-RESPONDENT AND CROSS-APPELLANT, AND JOHN DOES 1 THROUGH 10 AND ABC, DEF AND GHI CORPORATIONS (FICTITIOUS NAMES), DEFENDANTS.



A-21/22 September Term 1997

Argued October 7, 1997

On certification to the Superior Court, Appellate Division.

The opinion of the court was delivered by: Garibaldi, J.

In this case, we revisit the parameters of the vicarious liability doctrine as it pertains to whether a contractee may be vicariously liable for the negligence of its independent contractor under the three separate bases of liability delineated in Majestic Realty Associates, Inc. v. Toti Contracting Co., 30 N.J. 425 (1959). Furthermore, we consider the additional issue of an employer's direct liability for the negligent hiring of an independent contractor.

I.

This case arose from an automobile accident that resulted in severe injury to plaintiff Alice Mavrikidis *fn1 (Mavrikidis or plaintiff), including second- and third-degree burns over twenty-one percent of her body. On September 11, 1990, the intersection collision occurred after defendant Gerald Petullo, *fn2 operating a dump truck registered to Petullo Brothers, Inc. (Petullo Brothers), drove through a red light, struck plaintiff's car, hit a telephone pole, and then overturned, spilling the truck's contents onto Mavrikidis's car. At the time of the accident, Gerald was transporting 10.99 tons of hot asphalt, which had been loaded onto the truck by Newark Asphalt Corporation (Newark Asphalt), to his job site at Clar Pine Servicenter (Clar Pine), a retail gasoline and automotive repair shop in Montclair.

Prior to the accident, Clar Pine's owner, Karl Pascarello (Pascarello), decided to renovate the station because he was switching gasoline brands from Getty to Gulf Oil. Those renovations included the installation of new pumps and canopies. Palisades Resources, a distributor for Gulf Oil, retained an architect for Clar Pine and supplied Pascarello with blueprints, new pumps, and canopies for the station. The canopies were installed by Fashion Design, a construction company engaged by Palisades Resources. Pascarello obtained the required approval from the Montclair zoning board. He purchased and assembled a metal frame that was placed around the gasoline pumps, assisted his father in some of the plumbing work, and installed a protective device necessary to make the pump island explosion-proof. He also hired a contractor to do the electrical work.

Because Pascarello had no experience in the construction or paving business, he hired Gerald's father, Angelo Petullo, to perform the asphalt and concrete work as part of the renovation of his service station. Pascarello had known Angelo since 1972 and, prior to hiring him, Pascarello examined other paving jobs that Angelo had completed. Pascarello hired Angelo by verbal agreement to participate in the station's renovations based on Angelo's reputation as an excellent mason and, to a lesser extent, the debt owed Clar Pine under the Petullo Brothers account. Over the years, Angelo and Gerald had charged gas and small repairs to their company account. In exchange for the asphalt work, both parties orally agreed that the Petullos would receive a $6,800 credit toward a $12,000 to $20,000 debt that Petullo Brothers had accumulated.

At trial, there was conflicting testimony whether Angelo or Gerald operated Petullo Brothers, a corporation that had been dissolved in 1978 by the New Jersey Secretary of State for nonpayment of annual fees. Although Angelo and Gerald both testified that Gerald had been running the company since 1982 and that Angelo formally transferred ownership to his son in 1989, Pascarello testified that he considered Angelo to be the company head and Gerald to be an employee who worked "hand in hand" with his father. Furthermore, a police officer testified that, at the accident site Angelo identified himself as the owner of Petullo Brothers. The jury concluded that Pascarello hired Angelo and Petullo Brothers to complete the asphalt and concrete work at the Clar Pine job site.

The Petullos supplied the labor, equipment, concrete, and most of the asphalt needed for the job, until Angelo "ran out of money" in the midst of the renovations. As a result, Pascarello provided him with a blank check made out to Newark Asphalt to purchase the asphalt on the day of the accident. Pascarello testified that he supplied Angelo with a check because he " the type of person you don't give cash to." Nevertheless, it is undisputed that Pascarello was not involved in supervising the Petullos' work on a daily basis. Other than general supervision and periodic consultation, Pascarello's limited participation in the asphalt work consisted of payment for three loads of asphalt, including the one involved in this accident, as well as his direction to lay the asphalt in front of the service station's bay doors first to enable him to continue his automotive repairs while the gas station was out of service. As part of its regular course of business, Clar Pine repaired cars and small trucks. During completion of the paving job, Clar Pine remained open for business, servicing cars but not selling gasoline.

On the morning of the accident, Gerald ordered twenty tons of asphalt from Newark Asphalt's plant. The employees of Newark Asphalt loaded 10.99 tons of asphalt, at a temperature between 300 and 310 degrees Fahrenheit, onto Gerald's truck and 9 tons onto a second truck. The vice-president of the asphalt supplier, Michael Manno, testified that its workers did not physically inspect its customers' vehicles to ensure their ability to carry a given load. Rather, he explained, Newark Asphalt is "like a grocery store." Its employees "are not policemen, we don't inspect anything." If the customer is able to pay, the customer will receive what is ordered.

The employees at Newark Asphalt, however, do conduct visual inspections of a truck to determine whether it can accommodate the requested load. According to Manno's testimony, such a visual inspection of Gerald's truck would lead to the Conclusion that it could haul up to fifteen tons of asphalt in its truck bed. Yet, at the scene of the accident, Gerald admitted to the responding police officer that he was unable to stop at the red light because of the load on his truck.

The police also learned at the scene of the accident that Gerald's driver's license had been suspended. The officer issued two summonses to Gerald -- one for failure to stop at a red light and the other for driving while on the suspended list. Shortly after the collision, Angelo arrived on the scene to assist in cleaning up the asphalt before it cooled and stuck to the roadway. The officer issued three summonses to Angelo, whose license had also been suspended -- one for driving while suspended, one for having no vehicle insurance, and one for allowing an unlicensed driver (Gerald) to operate a vehicle. At trial, the officer explained that he issued the second and third tickets to Angelo because, as noted before, he identified himself as the owner of Petullo Brothers. Although Gerald and Angelo dispute their speaking with the officer at the scene of the accident, it was stipulated at trial that on February 26, 1991, both Petullos pleaded guilty in Bloomfield Municipal Court to driving while on the suspended list on September 11, 1990. At that same municipal hearing, Gerald also pleaded guilty to disregarding a traffic signal and failing to have insurance on the date of the accident. Furthermore, Petullo Brothers, through Gerald, pleaded guilty to operating an unsafe and overweight vehicle on September 11, 1990.

As a result of an inspection of Gerald's truck, conducted two days after the accident by a member of the commercial vehicle inspection unit of the Essex County Police Department, two weight violations were uncovered: (1) the truck's weight at the time of the accident exceeded the gross vehicle weight (GVW) of 32,000 pounds, for which it was registered with the Division of Motor Vehicles, by 866 pounds *fn3 and (2) the combined weight of the cargo plus the axle exceeded the statutory limit by 5,106 pounds. *fn4 The officer who inspected the truck explained that owners can register their trucks for whatever GVW they choose. The GVW is the weight of the vehicle plus its cargo. The officer testified, however, that the truck's GVW of 32,000 pounds was "an inordinately high figure." In his deposition testimony, which was read to the jury at trial, Gerald testified that the GVW of the truck was actually 18,000 pounds. At trial, however, Gerald testified that the GVW of the truck was 27,000 pounds. In addition, the truck's right rear brake was "non-existent" and wooden side boards had been added to the truck to increase its holding capacity. Moreover, the testimony of plaintiff's expert indicated that the cause of the accident was primarily due to the truck being excessively overloaded by eighty-two percent. His calculation was based on Gerald's deposition testimony that the actual GVW for the truck was 18,000 pounds. The expert further testified that had the truck not been overloaded, Gerald would have maintained better control and required a shorter braking distance.

Pascarello testified that the Petullos' trucks appeared to be "junks" and would run for three to five days before breaking down. Specifically, Pascarello observed that the trucks had dents in the bumpers and fenders, loosened grills and tailgates, and frequent bald tires. None of those observations, however, implicated faulty brakes. Pascarello never repaired or inspected the dump trucks that the Petullos used to transport asphalt. He did not know that the trucks were uninsured. He also did not know that Angelo and Gerald had suspended licenses or that Gerald was a reckless or careless driver.

On December 6, 1990, Mavrikidis and her husband filed a complaint against Gerald, Angelo, Petullo Brothers, Geraldine Petullo (Angelo's wife), Ottavio Petullo (Angelo's brother), Newark Asphalt, and Clar Pine. One year later, an action brought by Motor Club of America Insurance Company (MCA) against defendants for recovery of property and medical benefits paid to plaintiff was consolidated with the present action. The jury trial was conducted between April 7 and April 15, 1994. At the close of testimony, the trial Judge denied Newark Asphalt's request that the jury charge and verdict sheets be modified to incorporate its contention that N.J.S.A. 39:4-77 and DeBonis v. Orange Quarry Co., 233 N.J. Super. 156 (App. Div. 1989), place the burden of properly loading a truck on the owner/operator of the truck and not on the loader.

In special interrogatories, the jury found that Gerald operated his truck negligently on September 11, 1990 and that his negligence was a proximate cause of the accident. The jurors further found that Gerald was acting as an agent, servant and/or employee of Angelo at the time of the accident. In addition, the jury found that Newark Asphalt was negligent in overloading the truck and that its negligence was also a proximate cause of plaintiff's injuries. Although the jury found Angelo and Petullo Brothers to be competent to perform the work for which they were engaged, it also found Clar Pine "negligent in engaging a careless, reckless or incompetent contractor" and that its negligence was a proximate cause of the accident and plaintiff's injuries. Furthermore, the panel found that Clar Pine retained control of the "manner and means" of performing the paving work at the station and that such work, "i.e. the transport and/or paving of hot asphalt, an inherently dangerous activity."

Specifically, the jury determined that Gerald was 48% negligent; Angelo was 24% negligent; Newark Asphalt was 11% negligent; and Clar Pine was 17% negligent. The jury awarded $750,000 in damages to plaintiff and $30,000 to her husband per quod. In the consolidated action, the jury found Gerald solely liable for its award to MCA of $14,000 in property damages and $36,000 in medical expenses. Subsequently, the trial court molded the verdict. In that verdict, the court found Angelo vicariously liable for all of Gerald's negligence. Therefore, Angelo was liable for the 24% share attributed to him by the jury as well as the 48% attributed to Gerald. Based on the finding that Clar Pine was vicariously liable for its independent contractor, Angelo, the court entered a judgment against Clar Pine for 89% of the total damages awarded, including the 17% attributed directly to Clar Pine by the jury, the 24% attributed to Angelo, and the 48% attributed to Gerald. The court also entered judgment against Newark Asphalt for eleven percent of the total damages awarded. Clar Pine and Newark Asphalt appealed.

The Appellate Division reversed with respect to Clar Pine, holding there was insufficient evidence to support a finding of vicarious liability on the part of Clar Pine for the negligent acts of Gerald, Angelo, and Petullo Brothers, under any of the three relevant exceptions outlined in Majestic, supra. Therefore, the jury should not have considered those three exceptions. The court further found that there was insufficient evidence to support a finding that Clar Pine was independently negligent in hiring Petullo Brothers. Finally, the Appellate Division rejected Newark Asphalt's argument as clearly without merit. In accordance with its decision, the court remanded for a reallocation trial to determine the degree of responsibility of Gerald, Angelo, and Newark Asphalt.

We granted certification to Clar Pine and Newark Asphalt, 148 N.J. 460 (1997), and now affirm the Appellate Division decision.

II.

The first question is whether Clar Pine is vicariously liable for plaintiff's injuries. As we explained in Majestic, supra, the resolution of this issue

must be approached with an awareness of the long settled doctrine that ordinarily where a person engages a contractor, who conducts an independent business by means of his own employees, to do work not in itself a nuisance (as our cases put it), he is not liable for the negligent acts of the contractor in the performance of the contract.

[Id. at 430-31].

See also Bahrle v. Exxon Corp., 145 N.J. 144, 156 (1996) ("Ordinarily, an employer that hires an independent contractor is not liable for the negligent acts of the contractor in the performance of the contract."); Baldasarre v. Butler, 132 N.J. 278, 291 (1993) ("Generally . . . the principal is not vicariously liable for the torts of the independent contractor if the principal did not direct or participate in them.").

The initial inquiry in our analysis is to examine the status of the Petullos in relation to Clar Pine. Despite plaintiff's alternate theories to the contrary, the Petullos were independent contractors rather than servants of Clar Pine.

The important difference between an employee and an independent contractor is that one who hires an independent contractor 'has no right of control over the manner in which the work is to be done, it is to be regarded as the contractor's own enterprise, and he, rather than the employer is the proper party to be charged with the responsibility for preventing the risk, and administering and distributing it.' (quoting Prosser & Keeton, supra, § 71).

[Baldasarre, supra, 132 N.J. at 291].

In contrast, a servant is traditionally one who is "employed to perform services in the affairs of another, whose physical conduct in the performance of the service is controlled, or is subject to a right of control, by the other." W. Page Keeton, Prosser & Keeton on the Law of Torts § 70 at 501 (5th ed. 1984).

In determining whether a contractee maintains the right of control, several factors are to be considered. The Restatement (Second) of Agency sets forth these factors, including:

(a) the extent of control which, by the agreement, the master may exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or business;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer;

(i) whether or not the parties believe they are creating the relation of master and servant . . . .

[Restatement (Second) of Agency § 220(2) (1958).]

Applying those Restatement factors, it is evident that neither Angelo nor Gerald was a servant of Clar Pine. The masonry work required a skilled individual. Although Pascarello paid for three loads of asphalt, the Petullos provided their own tools and the remainder of the needed materials, other than bolts and plywood supplied by Pascarello to install the canopies. Their work did not involve the regular business of Clar Pine. In addition, the period of employment spanned only the time it took to lay the asphalt and concrete. Following the accident, the Petullos continued the job for which they were hired, which was approved by the Building Inspector of Montclair. In exchange for their services, the Petullos were not paid by the hour or month; instead, they received a discharge of the portion of their debt.

Based on that threshold determination, we now must determine whether this case falls within any exceptions to the general rule of nonliability of principals/contractees for the negligence of their independent contractors. There are three such exceptions, as delineated by the Majestic Court: "(a) where the landowner [or principal] retains control of the manner and means of the doing of the work which is the subject of the contract; (b) where he engages an incompetent contractor; or (c) where . . . the activity contracted for constitutes a nuisance per se." Majestic, supra, 30 N.J. at 431.

Plaintiffs contend, albeit not too strongly, that Clar Pine also is guilty of the tort of negligently hiring an independent contractor. This Court recognized the tort of negligently hiring an incompetent, unfit, or dangerous employee in DiCosala v. Kay, 91 N.J. 159, 174 (1982). No New Jersey case, however, has extended that doctrine to hold that a contractee will be directly liable for his or her own negligence in selecting the contractor. See, e.g., DiCosala, supra, 91 N.J. at 174; Schultz v. Roman Catholic Archdiocese, 95 N.J. 530, 534 (1984); Lingar v. Live-In Companions, Inc., 300 N.J. Super. 22, 29-30 (App. Div. 1997); Johnson v. Usdin Louis Co., 248 N.J. Super. 525, 529-31 (App. Div.), certif. denied, 126 N.J. 386 (1991).

In DiCosala, supra, 91 N.J. at 172, as one of the principal bases for that decision, we cited section 317 of the Restatement (Second) of Torts (1963), which states: "A master is under a duty to exercise reasonable care so to control his servant while acting outside the scope of his employment as to prevent him from intentionally harming others or from so conducting himself as to create an unreasonable risk of bodily harm to them." (emphasis added). Comment a to that section expressly provides that the rule is "applicable only when the servant is acting outside the scope of his employment." Id. § 317 comment a. If the employee were acting within the scope of his employment, then the master may be vicariously liable under standard agency principles. Ibid. In this case, however, there is no dispute that Gerald was acting wholly within his contractual duties.

In addition, the doctrine of respondeat superior does not ordinarily apply in the context of an independent contractor. Indeed, the status of an independent contractor is "'characterized by the attributes of self-employment and self-determination in the economic and professional sense.'" Ibid. (quoting Rokos v. State, Dep't of Treasury, 236 N.J. Super. 174, 181 (App. Div. 1989)). By definition, then, the work done by an independent contractor is not overseen or controlled by the contractee. Accordingly, the basic premises underlying the tort of negligent hiring of an employee are lacking in the hiring of an independent contractor.

A prominent commentator, in discussing the negligence of the contractee, addressed a number of situations in which contractees are liable for their own negligence rather than that of their contractors:

Where there is a foreseeable risk of harm to others unless precautions are taken, it is his duty to exercise reasonable care to select a competent, experienced, and careful contractor with the proper equipment . . . . So far as he in fact gives directions for the work, furnishes equipment for it, or retains control over any part of it, he is required to exercise reasonable care for the protection of others; and he must likewise interfere to put a stop to any unnecessarily dangerous practices of which he becomes informed, and make a reasonable inspection of the work after it is completed, to be sure that it is safe. . . . In all of these cases, he is liable for his personal negligence, rather than that of the contractor.

[Prosser & Keeton, supra, § 71 at 510-11 (footnotes omitted).]

The above analysis comports with the imposition of liability on a principal under the three Majestic exceptions. We address more fully the question of whether this state recognizes a separate tort of negligently hiring an independent contractor in our Discussion of the second Majestic exception.

III.

We now discuss each of the Majestic exceptions in turn. Under the first Majestic exception, the reservation of control "of the manner and means" of the contracted work by the principal permits the imposition of vicarious liability. "In such a case the employer is responsible for the negligence of the independent contractor even though the particular control exercised and its manner of exercise had no causal relationship with the hazard that led to the injury, just as in the case of a simple employer-employee situation." Bergquist v. Penterman, 46 N.J. Super. 74, 85 (App. Div.), certif. denied, 25 N.J. 55 (1957). Under that test, the reservation of control over the equipment to be used, the manner or method of doing the work, or direction of the employees of the independent contractor may permit vicarious liability. Trecartin v. Mahony-Troast Constr. Co., 18 N.J. Super. 380, 387 (App. Div. 1952), aff'd, 21 N.J. 1 (1956).

However, supervisory acts performed by the contractee will not give rise to vicarious liability under that exception. As indicated by the language of the exception, application of principles of respondeat superior are not warranted where the contractee's "supervisory interest relates to the result to be accomplished, not to the means of accomplishing it." Majestic, supra, 30 N.J. at 431; see also Marion v. Public Serv. Elec. & Gas Co., 72 N.J. Super. 146, 154-55 (App. Div. 1962) (explaining that retention of broad supervisory power rather than "right to direct and control" did not subject contractee to vicarious liability for independent contractor's actions); Trecartin, supra, 18 N.J. Super. at 386 (recognizing that " general contractor . . . exercising only such general superintendence as is necessary to see that the subcontractor performs the contract, ordinarily has no duty to protect an employee of the subcontractor").

Pascarello's actions did not exceed the scope of general supervisory powers so as to subject Clar Pine to vicarious liability for Gerald's negligence. Providing blueprints, paying for some of the asphalt, and directing that a portion of the concrete be completed first are clearly within the scope of a contractee's broad supervisory powers. In addition, Pascarello's actions with regard to assembling and placing the metal frame around the gasoline pumps and installing an explosion- proof system around the island did not amount to retention of control over the Petullos' work. Pascarello's actions related to the overall renovations of the station and not to the specific work for which the Petullos were engaged. The Petullos were hired to do the paving for the station and were not involved in the renovation other than the paving. The Appellate Division, therefore, correctly determined that there was insufficient evidence to present this issue to the jury. When the evidence is viewed in the light most favorable to plaintiffs, Pascarello's actions arose from a general supervisory power over the result to be accomplished rather than the means of that accomplishment.

IV.

Under the second Majestic exception, a principal may be held liable for the injury caused by its independent contractor where the principal hires an incompetent contractor. As the Appellate Division explained in this case, "he gravamen of th exception is selection of a contractor who is incompetent. The selection of a competent contractor who negligently causes injury, does not render a liable." No presumption as to the negligence of an employer in hiring an independent contractor arises from the fact that, after being hired, the contractor is negligent in the performance of his duties and injures the person or property of another. See Reuben I. Friedman, Annotation, When is Employer Chargeable with Negligence in Hiring Careless, Reckless, or Incompetent Independent Contractor, 78 A.L.R. 3d 910, 919 (1977).

In creating the second exception, the Majestic Court relied on an earlier Appellate Division decision in Barnard v. Trenton-New Brunswick Theatres Co., 32 N.J. Super. 551 (1954). In Barnard, the court explained that:

'Where the work to be done is not per se a nuisance and injury results from the negligence of an independent contractor or his servants in the execution of it, the contractor alone is liable unless the owner is in default in employing an unskillful or improper person as the contractor.'

[Id. at 558 (quoting Terranella v. Union Bldg. & Constr. Co., 3 N.J. 443, 446-47 (1950)).]

The Barnard court concluded that there was no basis for holding the principal liable in that case, noting there was no evidence making "known to the [principal that the contractor was] unskillful or incompetent at the time of the employment." Ibid.; see also Terranella, supra, 3 N.J. at 447 (rejecting imposition of liability on principal where there was no suggestion that "the contractor lacked the requisite skill or qualifications for the work undertaken"). Here, too, there is no evidence that the Petullo Brothers were not skillful in executing the work for which they were hired: paving the service station. Rather, the proximate cause of the injuries to plaintiff was the negligence of Gerald in driving an overloaded truck with defective brakes through a red traffic light.

Because the second Majestic prong may include causes of action for both direct and vicarious liability, there is no reason to set out a separate tort for negligently hiring an independent contractor. To hold an employer liable under the second Majestic exception to the general rule of non-liability of principals for the negligence of their independent contractors, it is necessary to show both (1) that the contractor was incompetent or unskilled to perform the job for which he was hired, and (2) that the principal knew or had reason to know of the contractor's incompetence. The Petullos were skilled and experienced paving contractors. There is no evidence that the Petullos were unqualified to perform the masonry work for which they were hired. In fact, Pascarello visited other job sites that Angelo paved in order to check the quality of his work. Viewing the evidence most favorably to plaintiffs, we find that the evidence does not support a finding that the Petullos were incompetent to perform the paving work for which they were engaged; hence, there is no basis for holding Clar Pine liable, either vicariously or directly, for plaintiff's injuries.

Moreover, the only knowledge attributed to Pascarello, emphasized by the Dissent, falls into two categories: (i) Pascarello hired the Petullos to recoup the monies they owed him, post at ___ (slip op. at 11-13), and (ii) Pascarello repaired some of Petullos' trucks and deemed them to be "junks" based on several exterior flaws, post at ___ (slip op. at 14-16). As to the first point, we reject the notion that financial irresponsibility is either equivalent to or a category of incompetence. Cassano, supra, 226 N.J. Super. at 116; see also Restatement (Second) of Torts § 411 comment g (1965) ("The rule stated in this Section makes the employer responsible only for his failure to exercise reasonable care to employ a contractor who is competent and careful. It has no application where the contractor, although competent . . . is financially irresponsible."). The Dissent, however, asserts that there is sufficient evidence for a jury to conclude that Pascarello was negligent in hiring the Petullos because he knew they were incompetent contractors. In essence, the Dissent asserts that a contractee who fails to consider a contractor's lack of financial stability may be guilty of hiring an incompetent contractor. *fn5 In doing so, however, the Dissent erroneously equates the Petullos' financial status with incompetence.

In 1978, the Third Circuit in Becker v. Interstate Properties, 569 F.2d 1203, 1209 (1977), cert. denied, 436 U.S. 906, 98 S. Ct. 2237, 56 L. Ed. 2d 404 (1978), predicted that this Court would "hold that the failure to engage a properly solvent or adequately insured subcontractor is a violation of the duty to obtain a competent independent contractor." In Robinson v. Jiffy Executive Limousine Co., 4 F.3d 237, 240 (3d Cir. 1993), however, the Third Circuit expressly overruled its earlier holding in Becker that financial irresponsibility could be considered as evidence of incompetence. In Robinson, the court expressed strong policy reasons why the Becker position should be overturned. It relied on the strong Dissent in Becker that stated:

To my knowledge, New Jersey courts have never defined the scope of a tort duty on the basis of an individual's financial capabilities. The majority's decision will, I think, cause uncertainty and doubt for every financial strata and every court, as well as hinder the employment opportunities of an independent contractor trying to enter the marketplace but lacking much in the way of start-up capital.

Behind this "duty" that the majority imposes lie significant policy questions relating to economic and social costs and benefits.

[Becker, supra, 569 F.2d at 1216-17 (Hunter, J., dissenting).]

In Robinson, supra, the Third Circuit reiterated the reasoning of the Becker Dissent that such a rule would hurt fledgling independent contractors trying to enter the marketplace and would also impose prohibitive obligations on employers of independent contractors, 4 F.3d at 242, such as average homeowners who retain an independent contractor through the yellow pages. Homeowners and business people, in order to protect themselves before hiring a plumber, painter, or other independent contractor, would need to investigate that contractor's financial background. Equating lack of insurance and financial responsibility with incompetence might also wreck havoc in particular industries, such as transportation, because persons or entities contracting for transportation services would be required to make continuing inquiry into the financial qualifications of the contractor. See Robinson, supra, 4 F.3d at 242.

Two Appellate Division panels also have rejected the Becker holding and have declined to rule that a contractor's lack of insurance or financial stability can be considered in determining whether the contractor is incompetent. See Cassano v. Aschoff, 226 N.J. Super. 110 (App. Div.), certif. denied, 113 N.J. 371 (1988); Miltz v. Borroughs- Shelving, 203 N.J. Super. 451 (1985).

In Cassano, supra, an employee of an independent contractor's tree removal business sought to impose liability on the landowners for his injuries, which were sustained while working on the landowners' property at the landowners' direction. Although the independent contractor represented to the landowners that he was fully insured, he in fact was covered by neither liability nor workers' compensation insurance. Cassano, supra, 226 N.J. Super. at 113. The plaintiff contended that the landowners should be vicariously liable for hiring an incompetent contractor "and in particular, a financially unstable one." Id. at 114. Rejecting that argument, the court explained that "he fact that a contractor is negligent or incompetent in the manner in which he performs a particular job does not mean that he is incompetent generally. More to the point, [the independent contractor's] poor performance was only known . . . in retrospect." Ibid. Further, the court stated:

Although no court in this state, either before Majestic, or in the intervening nineteen years had chosen to apply [the concept of a tort duty based on financial capacity], the majority in Becker nevertheless predicted that future New Jersey courts would do so. No court has since chosen to follow that lead. In these circumstances, nor do we.

[Id. at 116].

The Cassano court also recognized that because the injured employee was covered by workers' compensation, the plaintiff already had a remedy for his accidental loss. Imposing liability on the landowners would adversely impact the workers' compensation system and subvert the parties' reasonable expectations. Id. at 117; see also Jones v. Chevron U.S.A., Inc., 718 P.2d 890, 899 (Wyo. 1986) ("The owner should not have to pay for injuries caused by the contractor when the worker[s'] compensation system already covers those injuries."). Although the public policy underlying the workers' compensation system is inapplicable to the facts in this case, a similar argument may be made with regard to uninsured motorist coverage. The Legislature has provided for protection of an innocent driver injured in an accident by an uninsured motorist by requiring auto insurers to provide uninsured motorist coverage in all automobile liability policies. See Gorton v. Reliance Ins. Co., 137 N.J. Super. 558, 563-64 (App. Div. 1975), rev'd on other grounds, 77 N.J. 563 (1978).

The Appellate Division also rejected the theory that liability should be imposed against a general contractor because the subcontractor was "judgment-proof" in a case involving an injured third party rather than an employee of the contractor. Miltz, supra, 203 N.J. Super. at 466. In Miltz, supra, the plaintiff was injured on negligently installed steps in a department store and based her action against the general contractor on the financial insolvency of the subcontractor hired by that general contractor. In rejecting the plaintiff's lack of financial responsibility theory, the Appellate Division emphasized that "plaintiff cites no authority for the proposition that barring a plaintiff from recovery against a contractor or sub-contractor where the sub-subcontractor who has been found liable for plaintiff's injuries is insolvent is contrary to New Jersey public policy." Ibid. The financial status of a contractor cannot be the basis for imputing liability to the principal who retained the contractor. A lack of insurance or lack of financial responsibility is not the equivalent or a category of incompetence. Accordingly, the court's charge to the jury in this regard was erroneous.

With regard to the second point, Pascarello's observation of the trucks in no way indicated that the right rear brake was defective. Although Pascarello admitted that the trucks used by Petullo Brothers were "junks," his observations of the vehicles were based on their exterior appearance and in no way indicated that the brakes on the truck were faulty. Indeed, Pascarello testified that all of Petullos' vehicles looked like "typical mason contracting trucks." The Petullos had several vehicles, including cars, small trucks, and large dump trucks. The testimony cited by the Dissent refers primarily to the Petullos' small trucks. The evidence is undisputed that Pascarello never worked on the dump truck involved in this accident. Post at ___ (slip op. at 18). Moreover, the investigating officer of the commercial vehicle unit testified that the problems with the truck could not have been discovered without placing the truck on a lift, removing the wheels, and looking underneath the vehicle. The record demonstrates that Pascarello's automotive repair shop did not have the lift necessary to inspect the dump truck involved in the accident and Pascarello had no knowledge that the right rear brake was inoperative. In addition, it is undisputed that Pascarello did not know that Angelo and Gerald had suspended licenses, were reckless or careless drivers, or that the trucks were uninsured. There was also no evidence in the record that Gerald ever had a prior automobile accident.

Imposing a duty on a contractee to check the driving record and credentials of the contractor's employees or to inspect the contractor's equipment would impose a very onerous burden on the contractee. Most, if not all, independent contractors transport their equipment and supplies to the contractee's premises. In the event that the contractor is involved in an automobile accident on the way to the job site, there is no precedent holding the contractee liable simply because the contractor was en route to the job location. A hypothetical applying a contrary result illustrates the fairness of that Conclusion. For instance, if a construction contractor were hired to build an addition to a residence and he collided with another car on his way to the house, the property owner would not be liable for injuries to the passenger in the other car. Moreover, if the construction contractor's truck were carrying heavy planks and equipment necessary to perform its task, which fell off the truck during the accident and injured the third party, there would still be no basis for imposing liability on the property owner. The only distinction between the hypothetical and this case is the content of the truck driven by Gerald Petullo. Although plaintiff's injuries were particularly grim because the hot asphalt carried in Gerald's truck spilled onto her car, that fact bears no relevance as to the competence or incompetence of the Petullo Brothers. Logically, then, the contents of the truck should not change the liability of the employer. The contractee does not and should not be deemed negligent if he or she does not inquire and inspect the independent contractor's mode of transportation, unless the equipment or transportation consists of an inherently dangerous condition. As discussed below, the transport of asphalt does not constitute such a condition.

V.

Next, we consider the application of the third Majestic exception - - whether the work engaged in by Petullo Brothers was inherently dangerous. In formulating ...


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