Michigan Supreme Court creates "contract immunity"

In the Fultz v. Union-Commerce Associates' and Banaszak v. Northwest Airlines decisions, the Engler majority of the Michigan Supreme Court has turned existing law on its head.  In these holdings, the four Justices have allowed a contract between two parties to extinguish the rights of non-contracting parties, in essence creating "contract immunity" for the parties to the contract.

In Fultz, the Court refused to allow a woman who fell in a commercial parking lot to sue the excavating company that allegedly did a poor job of removing snow.  The Court did not hold that the company did a good job, it held, as a matter of law, that the excavating company owed no duty to act with reasonable care in performing its contractual duties:  its only "duty" or legal obligation was the obligation in the contract owed to the landowner.  Its contractual duty eliminated its normal duty of reasonable care.

The Court majority went a step farther in Banaszak.  In the latter case, an airline passenger suffered injury when the contractor covered the end of a terminal walkway with an inadequate plywood cover.  The Court held that since the defendant owed the terminal authority a contractual duty to properly cover the walkway, this duty excluded any tort duty of "reasonable care" which would have been owed to passengers using it.  Perhaps we need to re-state that concept for emphasis.  If any other non-party to the contract had created a hazard by covering the walkway with plywood, and an injury was 'foreseeable' as a result, that non-party to the contract would be liable for a breach of reasonable care causing injury.  In this case, however, because the defendant expressly assumed a contractual duty to the terminal authority to fix the terminal walkway, it was relieved of its normal duty to act with reasonable care.

If this result seems to the reader to be absurd, illogical, unfair, bad public policy, and judicial activism at its worst, you are not alone. When this doctrine forced him to dismiss an Antrim County case against a builder who created snow-covered traps adjacent to basement egress windows,  13th Circuit Judge Tom Power expressed his frustration and dis-taste in a public hearing.  In a very thoughtful article in the private Michigan Defense Quarterly, Hal Carroll acknowledged that the rule has no foundation in law or policy, before encouraging insurance attorneys to make thorough use of it.  As Mr. Carroll pointed out, the doctrine can be utilized to eviscerate normal negligence theory.  His example:  coffee servers should be contractually required to serve coffee carefully and their management should be contractually required to train them well:  the result would be a mutually-beneficial contractual obligation that would exclude any negligence claim against either.