“Ruh v. Metal Recycling Services” Decision

In a recent decision, the South Carolina Supreme Court held that while a principal cannot be held liable for the negligence of an independent contractor, a principal can be held liable for the negligent selection or hiring of an independent contractor.   See Ruh v. Metal Recycling Services, LLC, No. 28163 (S.C. June 21, 2023).  As a result, we expect to see an increase in claims against parties simply for hiring independent contractors that are alleged to have caused injury through some negligent act or omission.  Indeed, we have already seen claims against a manufacturer for shipping goods via a motor carrier that is later involved in an accident.

The question then becomes – how can a company best minimize its risk in getting caught up in this kind of litigation?

Naturally, it is important to investigate and vet potential independent contractors.  Our Supreme Court specifically stated in the Ruh decision that the extent to which an independent contractor should be investigated and vetted “will vary depending on the degree to which the work involves a risk of physical harm unless done ‘skillfully and carefully’.”  While a surface level assessment of competence may be enough for projects involving a low risk of physical harm, projects involving an increased risk of physical harm would require more.  As always, document all efforts and preserve these documents.

Unfortunately, even when exercising proper care to hire a competent and careful contractor, that alone may not prevent your company from getting dragged into litigation.  Once an injured party alleges that a company did not exercise reasonable care in selecting a contractor, that may be enough to bind that company in litigation until it can be proven that the company exercised reasonable care.

Therefore, the inclusion of a properly drafted indemnification clause in all your contracts with independent contractors may present a last line of defense to protect your company’s interests.  An indemnification clause is a contractual provision in which one party agrees to answer for any specified or unspecified liability or harm that the other party might incur.  Black’s Law Dictionary (11th ed. 2019).  In other words, when hiring an independent contractor, you can require that the independent contractor defend any lawsuit or pay any damages that arise out of the project.

Typically, indemnification clauses cover only that party’s own negligence.  However, courts in South Carolina will permit indemnification clauses whereby a party will have to answer for the negligence of another.  See Federal Pacific Electric v. Carolina Production Enterprises, 298 S.C. 23, 26, 378 S.E.2d 56, 57 (Ct. App. 1989).  It is important to note that our courts will strictly construe any indemnification clause that purports to relieve an indemnitee from the consequences of its own negligence.  Laurens Emergency Medical Specialists, PA v. M.S. Bailey & Sons Bankers, 355 S.C. 104, 111, 584 S.E.2d 375, 378-79 (2003).  As a result, it is imperative that a competent attorney draft your company’s indemnification clauses to ensure that the clause will withstand scrutiny from any court and ensure the independent contractor will indemnify your company for its alleged “negligence” in investigating, selecting, and hiring the contractor.

Consult with Collins & Lacy to develop are carefully drafted indemnification clause to protect your company from any additional liability the Ruh decision may present and ensure your company’s operations are secure and protected from exposure.