The Georgia Court of Appeals Looks at Duties Arising from Insurance Company Inspections

The January term of the Georgia Court of Appeals ended on March 30, 2014. As is often the case, the Court issued some of its more interesting decisions at the end of the term. In Bing v. The Zurich Servs. Corp., Case No. A14A1911 (decided March 25, 2015), the Court addressed the tort duties that arise when an insurance company undertakes inspections of its insured’s property.

The case arose out of the explosion that occurred in 2008 at the Imperial Sugar Company sugar refinery in Port Wentworth, Georgia. Zurich American Insurance Company, who had issued a property insurance policy for the plant, had contracted with one of its affiliates to conduct inspections of the plant. An inspection had occurred several months prior to the explosion. After the explosion, several injured workers and the survivors of a deceased worker sued the Zurich affiliate that had conducted the inspection, claiming that it had negligently failed to identify the hazard that caused the explosion.

In arguing that the insurance affiliate was liable, the plaintiffs relied upon Section 324A of the Restatement (Second) of Torts. That section provides that when one undertakes to render services to another “which he should recognize as necessary for the protection of a third person or his things” the party undertaking those activities is subject to liability to that third person for physical harm resulting from his failure to exercise reasonable care. In rejecting that section of the Restatement as a basis for liability, the Court of Appeals noted that the inspection was undertaken for the benefit of the Zurich insurance company, to provide the information needed to properly underwrite the risks of the property. The inspection was not undertaken to benefit the insured or its employees.

This decision will be an important one in defining the risks that insurance companies face when they undertake inspections or examinations of their insured’s businesses or property. Insurance companies wanting the benefit of this decision should make it clear that they are undertaking those inspections for their own purposes and not for the benefit of the insured.

The opinion is available at

For more information on Bing v. Zurich, contact Ed Wasmuth.

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