Shifting the blame

Five months ago, seven black-robed men and women in Raleigh made a couple of decisions that could uncork a flood of lawsuits against local governments across the state.

On April 7, the N.C. Supreme Court trashed a legal defense cities and counties have used for decades to get certain kinds of negligence cases thrown out of court almost immediately.

“It could be pretty significant,” says David Lawrence, an assistant director at the Institute of Government at UNC-Chapel Hill.

In the two rulings, the Supreme Court decided that a husband and wife could sue Lee County over allegedly faulty building inspections, and that another family could sue the city of Shelby over a delay in sending the city Fire Department to a burning home where a young girl died.

“I do think it’s a substantial change from prior case law in North Carolina,” allows Buncombe County Attorney Joe Connolly.

The rulings — which largely gutted what’s known as the public-duty doctrine — reversed decisions of the N.C. Court of Appeals and surprised some court watchers.

In fact, the justices made it clear that they believe that only law-enforcement officers should continue to be protected by the doctrine.

The court’s decisions pave the way for more lawsuits like one filed in July against Buncombe County and its building inspectors. In that suit, the owners of an Asheville hotel maintain that they had to spend more than $4.9 million fixing building-code violations that should have been caught by county building inspectors — forcing the owners to virtually tear down the structure in the process (see sidebar).

Depending on who’s talking, the change could have other repercussions, too. The risk of additional lawsuits could unnecessarily slow building construction — or it could lead to safer construction. It could encourage government employees be much more careful — or make it harder to find employees willing to assume the risk of working for local government.

One thing appears clear: The easier it is to sue, the greater the chances are that more money will be paid out. And it’s ultimately the taxpayers who will foot the bill.

Protecting the public

The gist of the public-duty doctrine is that government has a duty to protect the public in general, not a specific individual. For example, a police officer can’t be sued for failing to protect the safety of a particular person, since his legal duty is to protect the public at large, explains Andrew L. Romanet Jr., general counsel for the N.C. League of Municipalities.

The doctrine hasn’t applied, however, to cases in which a government employee owes a “special duty” of protection to someone, such as a crossing guard’s duty to a child, or a jailer’s to a prisoner, notes James B. Blackburn, general counsel for the N.C. Association of County Commissioners.

North Carolina first recognized the public-duty doctrine in the 1950s, according to Charles Cromer, legislative counsel for the N.C. Academy of Trial Lawyers.

And as recently as this spring, there was good reason to think that the doctrine would stand, observes Rich Ducker, associate professor of public law and government at the Institute of Government, who wrote a paper on the subject for a building inspectors’ conference in June. In a series of cases in the late ’90s, the N.C. Court of Appeals had cited the doctrine in determining that lawsuits against both local governments and building inspectors should be dismissed before going to trial, Ducker notes.

And just 2-1/2 years ago, the N.C. Supreme Court upheld the public-duty doctrine in the cases that arose from the horrific 1991 fire at the Imperial Foods Products chicken-processing plant in Hamlet. The court ruled that neither the people injured nor the heirs of those killed could sue the state Department of Labor for failing to inspect the plant during the 11 years it had operated before the accident, says Ducker. (The workers couldn’t escape because the exits were unmarked, blocked and inaccessible, according to the court ruling.)

In the Hamlet decision, the state Supreme Court quoted one of its earlier rulings, which said the public-duty doctrine is necessary to prevent an “overwhelming burden of liability” on governmental agencies with limited resources.

“It would have been quite a tab for the state to pay,” notes Cromer.

As of now, state government is still protected by the public-duty doctrine. But trial lawyers like Cromer are itching to change that.

After the Hamlet-fire case, curtailing the scope of the public-duty doctrine became a top priority of the N.C. Academy of Trial Lawyers, says Cromer. One of the group’s tactics was to file a “friend of the court” brief in the Supreme Court case involving the Lee County building-inspection suit, a move that allowed the association to air its viewpoint even though it wasn’t directly involved in the case.

Counting the costs

Local-government advocates and homebuilders — who are allies on this issue — predict that this spring’s ruling will lead to more lawsuits, slower inspections, increased liability and more expense for taxpayers. On the other hand, trial lawyers (who would sue the government on their clients’ behalf) maintain that the resulting increase in safety will outweigh any drawbacks.

Blackburn foresees more lawsuits down the road. “I bet there’s going to be a whole bunch of these,” he says.

Cromer agrees that more lawsuits will be filed — but no more than were filed before the Hamlet-fire case. And he has little sympathy for the plight of governmental bodies.

“Their job is to protect the public, and if they’re afraid of being sued because they don’t protect the public, then the answer is: Protect the public. Do your job,” proclaims Cromer, adding, “There are a lot of people injured by the action or inaction of the state.

Cromer argues that the only time a trial lawyer will make money is when a city or county doesn’t do what it’s supposed to do (and the people suing can prove negligence).

“Certainly, it may make building inspectors much more — if they haven’t been careful — much more careful,” concedes Lawrence.

But he also maintains that a homeowner with a gripe against his contractor may instead decide to go after the municipality, which has deeper pockets (and, unlike a contractor, can’t go out of business).

“It’s going to embolden people who have a crack in their foundation to tag the city’s inspection department for it,” predicts John Miall, Asheville’s risk management director. “I’m not sure cities and counties should be in a position of guaranteeing what a contractor or architect does.”

With the possibility of more lawsuits comes the potential for more payouts.

The public-duty doctrine has been the first line of defense for local governments. With that mostly removed, local government will have to fall back on the defense of governmental immunity (which means that government can’t be sued for carrying out a governmental function).

But governmental immunity goes only so far. In fact, when a city or county buys insurance, Romanet notes, it waives its governmental immunity for damages covered by the insurance. So weakening the public-duty doctrine may make it easier for people to collect on a city’s or county’s insurance policy.

It’s worth noting that not everything a government does is considered a “governmental function.” Building inspections are, because cities and/or counties are required by law to conduct them, Miall notes. But staging the Bele Chere festival, on the other hand, would not be considered a governmental function — and so would not protected by governmental immunity.

The city of Asheville is “self-insured” — meaning it has money put aside to pay insurance claims. The special fund would cover the first $500,000 of a single claim and the first $1 million if there were more than one claim in a year, Miall explains. Once those limits were reached (which hasn’t happened yet), Miall adds that the city is covered by outside insurance for up to $15 million.

Buncombe County is self-insured for the first $100,000 of a single claim; the most it would pay in county funds in a single year is $650,000, says Lois Galloway, the county’s risk manager. After that, the county’s two insurance policies would kick in, up to a total of $2 million, she says.

If weakening the public-duty doctrine results in the city paying out more claims, that could drive up insurance premiums, notes Miall.

Adds Connolly: “There’s a real likelihood that, based on the recent court decisions … liability rates will be affected, if [only] to compensate for anticipated lawsuits — even if these lawsuits turn out to be groundless.”

Improving safety – or adding red tape?

Blackburn also predicts a greater burden on taxpayers, not only to help pay for damage awards in court cases, but to hire and train additional building inspectors.

“Building inspectors are going to be held to a much higher standard of inspection reliability,” suggests Blackburn. “Building inspectors will have to be a whole lot more careful.”

Buncombe County’s legal advisers partly agree.

“I think, clearly, after those two recent decisions, there will be more double- and triple-checking to confirm your inspections,” says Connolly.

Associate County Attorney Stan Clontz offers: “I suppose you could say it’s kind of a warning to us to do them very carefully. But at the same time, it’s our position we have been doing them carefully.”

As a result of that extra caution, Blackburn expects more — and more detailed — inspections. Since building inspectors won’t be able to rely as much on contractors, they will probably fail more inspections.

“We’ve already seen that starting to happen,” says Blackburn. “Nobody wants to be on the side of flawed or negligent performance of governmental duty … but there’s a point at which it’s going to be slowed down so much, I’m not sure what’s been accomplished.”

Asheville’s director of building safety, Terry Summey, acknowledges that depending on the situation, inspectors might look more closely at construction, wiring or other items — which could take more time.

“We just try to do a better job than we are doing,” Summey says. “We’re all the time working on that.”

Although local homebuilders are concerned about inspections taking longer, they don’t expect any major slowdowns, according to Stan Caton, a general contractor who is president of the Homebuilders Association of Greater Asheville.

“Throughout the city and county, inspection people are doing a great job,” he says. “The inspectors, the builders — we all have to work together to make this work.”

Summey sees other potential impacts as well. Building-inspection departments tempted to hire people right out of school, or those with only a basic knowledge of construction, may decide to hire more experienced people instead, something Summey says he already does. But he worries that the increased threat of liability may make some potential employees less inclined to work for the city.

“There’s almost an expectation that we see everything and know what’s going on, so it opens us up to a potentially bad situation,” Summey reflects.

Smaller cities and counties whose inspectors juggle more than one job description may be harder hit than larger cities like Asheville, which has specialized employees for the various inspections required, Summey notes.

“I feel like we’re doing a fairly decent job right now,” he says modestly, adding, “I feel like we’re in good shape.”

Paul Wilms, a lobbyist for the N.C. Homebuilders Association, predicts higher costs.

“Anytime you have a crew standing around waiting for an inspection, it costs money,” Wilms says.

And that extra cost may affect those who are less able to afford it, Wilms observes. A cost increase won’t mean as much for someone building an upper-end home. But for people building or buying their first home, those extra costs could determine whether they qualify for a loan, he warns.

Cromer, however, thinks homebuilders would appreciate building inspectors doing their job.

“If safety means a day or two delay, I think it’s worth it,” he asserts.

But Wilms maintains that builders are already taking proper safety measures. He thinks the result will simply be extra red tape.

As for emergency dispatching (the other governmental function directly addressed by the state Supreme Court), both Clontz and Jerry VeHaun, director of Buncombe County’s emergency services, say they don’t anticipate much change in the way 911 dispatchers do their jobs.

“We take the position that we try to do a good job in everything we do — not because of some fear of financial liability but because it’s the right thing to do — and we’re trying to provide a good service to the citizens,” says Clontz.

A duty to whom?

In the end, the question may come down to one of individual rights vs. public resources.

“The idea is, how many resources are the taxpayers willing to pay for?” Romanet says. “When you sue the government, you sue the taxpayers.”

Miall agrees, noting, “There’s no such thing as free money.”

And Blackburn, the lawyer for the Association of County Commissioners, asserts that a broad public-duty doctrine makes sense.

“If we’re taking responsibility for everything that can go wrong … we may be taking on a level of governmental responsibility that we’re not prepared to undertake,” Blackburn says.

The gutting of the public-duty doctrine means government is being treated more like private enterprise, even though its role is different, adds Miall.