Hutcherson v. Progressive Corp.

PER CURIAM:

This case arises on appeal following the district court’s entry of partial summary judgment in favor of TABS, Inc. (“TABS”) and the district court’s entry of summary judgment in favor of The Progressive Corporation, National Continental Insurance Company, and Progressive Casualty Insurance Company (collectively, “Progressive”). We affirm in part, reverse in part, and remand.

I. BACKGROUND

On December 29, 1988, TABS’ driver Carl E. Hicks was driving a TABS truck south on Interstate Highway 75. Dennis and Deborah Hutcherson were also traveling south on 1-75, when Mr. Hutcherson pulled his rig into the emergency lane to check the truck’s refrigeration system. Mrs. Hutcherson was asleep in the cab’s berth. As Mr. Hutcherson was checking the refrigeration system at the rear of the truck on the driver’s side, Hicks swerved out of the right-hand lane, striking and killing Mr. Hutcherson. A police investigation into the accident revealed that Hicks was on amphetamines when the accident occurred.

At the time of the accident, Progressive was providing TABS with commercial fleet insurance that included a number of safety services, including periodic independent reviews of TABS' drivers, intended to supplement TABS’ internal safety program. As part of its own safety program, TABS required that all new drivers meet certain minimum qualifications, including that each driver be at least twenty-five years of age and have a minimum of two years verifiable over the road tractor-trailer experience. In addition, TABS’ hiring procedures required that each applicant submit a three year motor vehicle record (“MVR”).

When TABS hired . Hicks in February 1988, Hicks did not meet TABS’ experience requirement. In addition, Hicks’ three year MVR revealed that over the last three years Hicks had received four speeding tickets, a citation for operating his truck without proper brake lights, a license suspension for refusing to take an alcohol test and an improper, backing citation related to the refusal to submit to an alcohol test, and that Hicks had been involved in a wreck. During the hiring interview, Hicks explained the incident involving his refusal to take the alcohol test. He explained that he had backed into someone resulting in a minor accident, that the police had come to his home later after he had been drinking beer at home, and that this was the reason he refused the test. Unfortunately, the three year MVR only told part of the story. Prior to 1985, Hicks had been arrested and convicted of multiple felonies, including convictions for driving under the influence (“DUI”) and assault.

In the summer of 1988 Progressive obtained MVRs on Hicks that reflected a more complete picture — including in particular a 1983 DUI conviction. Based on this, Progressive requested that TABS place Hicks on “watch status” for six months. At that time Progressive would order a new MVR and if additional violations were found, Progressive would ask TABS to place Hicks in a non-driving capacity. The accident giving rise to the instant proceeding occurred before the expiration of the six months.

On May 21, 1989, Hutcherson’s widow filed suit against Hicks, TABS, and Progressive in Georgia state court claiming negligence, wrongful death, pain and suffering, and personal injury. On June 15, 1989, the defendants successfully removed the case to federal district court based on diversity of citizenship. On August 7, 1991, the district court entered partial summary judgment in favor of TABS on the issue of punitive damages on Hutcherson’s claim for negligent hiring and retention, and on the claim for negligent entrustment. The court also entered summary judgment in favor of Progressive on Hutcherson’s claims under section 324A(b) and (c) of the Restatement (Second) of Torts. On December 2, 1991, the district court entered final judgment on the foregoing claims pursuant to Fed.R.Civ.P. 54(b).

*1155II. DISCUSSION

This court reviews a grant of summary judgment de novo, drawing all reasonable inferences in favor of the non-movant. The court may not weigh evidence to resolve factual disputes—if a genuine issue of material fact is found, summary judgment must be denied. Ryder Int’l Corp. v. First American Nat’l Bank, 943 F.2d 1521, 1523 (11th Cir.1991). Although this is a diversity action and Georgia state law therefore provides the controlling substantive law, federal law governs the sufficiency of the evidence necessary to preclude a grant of summary judgment. Welch v. Celotex Corp., 951 F.2d 1235, 1237 (11th Cir.1992); Kicklighter v. Nails by Jannee, Inc., 616 F.2d 734, 738 (5th Cir.1980).

A. Punitive Damages

Hutcherson appeals the district court’s order granting partial summary judgment to TABS on the issue of an award of punitive damages for either her negligent en-trustment claim or her negligent hiring claim. The district court found that although sufficient evidence existed to allow the negligence claims themselves to proceed to trial, no evidence existed to support a finding that TABS had been consciously indifferent.

Under Georgia law, “punitive damages may be awarded only in such tort actions in which it is proven by clear and convincing evidence that the defendant’s actions showed willful misconduct, malice, fraud, wantonness, oppression, or that entire want of care which would raise the presumption of a conscious indifference to consequences.” O.C.G.A. § 51-12-5.1 (1992). Georgia defines “conscious indifference” as “an intentional disregard of the rights of another, knowingly or wilfully disregarding such rights.” Gilman Paper Co. v. James, 235 Ga. 348, 219 S.E.2d 447, 450 (1975). Negligence alone, even gross negligence, will not support an award of punitive damages. Colonial Pipeline Co. v. Brown, 258 Ga. 115, 365 S.E.2d 827, 830, appeal dismissed, 488 U.S. 805, 109 S.Ct. 36, 102 L.Ed.2d 15 (1988).

1. Negligent hiring and retention

To prove negligent hiring, Georgia law requires a plaintiff to show that the employer knew, or in the exercise of ordinary care should have known, that its employee was incompetent. Sparlin Chiropractic Clinic, P.C. v. Tops Personnel Services, Inc., 193 Ga.App. 181, 387 S.E.2d 411, 412 (1989); Harvey Freeman & Sons, Inc. v. Stanley, 189 Ga.App. 256, 375 S.E.2d 261, 264; aff'd in part, rev’d in part, 259 Ga. 233, 378 S.E.2d 857 (1988). Although custom may be some evidence of ordinary care, “in the last analysis, what ought to be done is fixed according to the standard of the ordinarily prudent man, whether or not it is custom to comply with that standard.” Moody v. Southland Investment Corp., 126 Ga.App. 225, 190 S.E.2d 578, 583 (1972).

The district court held that Hutcher-son failed to demonstrate actions on the part of TABS that rose to the level of conscious indifference, finding that TABS complied with the industry custom when it checked Hicks’ driving record for the previous three years, and this compliance, together with TABS’ hiring practices, were sufficiently careful to preclude a jury from finding that TABS either wilfully or with conscious indifference hired an incompetent truck driver.

As evidence of TABS’ conscious indifference, Hutcherson points to TABS’ knowledge of the three year MVR and Hicks’ failure to meet TABS’ two year experience requirement: Hutcherson points out that the three year MVR indicated a poor driving record, and points in particular to the 1987 incident involving an improper backing citation, a refusal to take an alcohol test, and a resulting license suspension. However, it is undisputed that Hicks explained this 1987 incident during the hiring interview in a manner that lulled TABS into discounting the failure to take an alcohol test.’ We agree with the district court that there is insufficient evidence for a reasonable juror to conclude that TABS’ knowledge at the time of hiring constitutes conscious indifference.

Hutcherson also claims that TABS was consciously indifferent in retaining Hicks *1156or failing to take him off the road in the summer of 1988, after TABS learned of the 1983 DUI conviction. TABS first learned of the 1983 DUI conviction in the summer of 1988 when Progressive wrote to TABS expressing concern about Hicks, but also noting that the DUI conviction was five years ago and therefore could probably be overlooked. The concern expressed in the letter seemed to focus on the 1987 refusal to take an alcohol test; however, as noted above, that incident had been explained to TABS in the hiring interview. Under these circumstances, we agree with the district court that the evidence is insufficient for a reasonable juror to conclude that TABS was consciously indifferent in retaining Hicks.

2. Negligent Entrustment Claim

With respect to Hutcherson’s claim that TABS was consciously indifferent in entrusting the vehicle to Hicks, the evidence is the same as the evidence to support the negligent retention claim discussed above. For the same reasons, we agree with the district court that the evidence is insufficient for a reasonable juror to conclude that TABS was consciously indifferent in this regard.

B. Section 324A Claims

Section 324A of the Restatement (Second) of Torts (the “Restatement”) provides the framework for analyzing third party liability under Georgia law. See Huggins v. Aetna Casualty and Surety Co., 245 Ga. 248, 264 S.E.2d 191, 192 (1980) (adopting section 324A of the Restatement). Hutcherson contends that because Progressive provided certain safety services to TABS in conjunction with its insurance coverage, Progressive is liable to her under Section 324A of the Restatement for the wrongful death of her husband.1

1. Section 324A(b)

The district court held that to succeed on her claim under section 324A(b), Hutcherson must first show some contractual obligation or agreement on the part of Progressive to undertake the duty of monitoring TABS’ drivers, and that duty must be in lieu of, rather than a supplement to, TABS’ duty. Because Hutcherson did not put forth any evidence of a contract or agreement, and because Progressive merely supplemented TABS’ internal safety program, the district court entered summary judgment in favor of Progressive. On appeal, Hutcherson attacks the district court’s holding that liability attaches under section 324A(b) only if Progressive’s undertaking of the duty to monitor TABS’ drivers was in lieu of, rather than a supplement to, TABS’ duty of care.2 Instead, Hutcherson argues that complete delegation of a duty is not a necessary element in a section 324A(b) claim.

Contrary to Hutcherson’s assertions, to be liable under section 324A(b), Progressive must completely assume a duty owed by TABS to Hutcherson. Howell v. United States, 932 F.2d 915, 918 (11th Cir.1991) (applying Georgia law). See also Huggins v. Standard Fire Ins. Co., 166 Ga.App. 441, 304 S.E.2d 397, 398 (1983) (section 324A(b) liability attaches only when “the *1157alleged tortfeasor’s performance is to be substituted completely for that of the party on whose behalf the undertaking is carried out”).3 Hutcherson can point to no evidence that creates a material issue of fact as to whether Progressive completely assumed TABS’ duty to monitor the safety of its drivers. Accordingly, the district court correctly entered summary judgment for Progressive on Hutcherson’s section 324A(b) claim.

2. Section 324A(c)

Hutcherson claims that the lower court erred by entering summary judgment in favor of Progressive on her section 324A(c) claim. To establish liability based on section 324A(c), Hutcherson must demonstrate that her injuries were suffered because of TABS’ reliance on the safety inspections undertaken by Progressive. Universal Underwriters Ins. Co. v. Smith, 253 Ga. 588, 322 S.E.2d 269, 272 (1984); Smith v. Universal Underwriters Ins. Co., 752 F.2d 1535, 1537-38 (11th Cir.1985) (per curiam); Bussey v. Travelers Ins. Co., 643 F.2d 1075, 1077 (5th Cir. Unit B April 1981) (per curiam). Georgia law requires that reliance be shown by a change in position. Phillips v. Liberty Mutual Insurance Co., 813 F.2d 1173, 1175 (11th Cir.1987) (citations omitted). Thus, Hutcherson must show that TABS changed its position by neglecting or reducing its own safety program because of Progressive’s efforts. See Bussey, supra, 643 F.2d at 1077-78.

Progressive offered direct evidence below that TABS did not reduce or eliminate any of its duties relating to the monitoring of its drivers. Relying on this evidence, the district court entered summary judgment in favor of Progressive. In reaching its determination, however, the district court discounted evidence put forth by Hutcherson that TABS had reduced its own safety program in reliance on Progressive’s safety services. This was error. As we noted in Phillips, supra, 813 F.2d at 1175, reliance may be proven by circumstantial evidence.

Our careful review of this summary judgment record persuades us that a jury might reasonably infer that TABS did reduce its safety activities in reliance upon Progressive. The jury could reasonably infer that TABS itself would have more closely monitored its drivers absent the substantial monitoring which was provided by Progressive. The director of safety for TABS testified that TABS did depend upon Progressive with respect to monitoring drivers. When Progressive’s investigation in the summer of 1988 uncovered driving offenses by Hicks of which TABS was not previously aware, and reported to TABS that Hicks was questionable and on “watch status,” the record is subject to a reasonable inference that TABS did not itself investigate and evaluate the matter as common sense would indicate, but rather relied upon Progressive’s apparent determination that “watch status” was sufficient. Finally, a former Progressive manager stated that it was in Progressive’s economic interest to provide services to TABS to the extent that TABS would be induced to rely upon the services in lieu of conducting its own activities. Considering the totality of the evidence, we conclude that a reasonable jury could find that TABS did permit the safety services provided by Progressive to supplant safety activities that TABS would otherwise have conducted. See Phillips, supra, 813 F.2d at 1175. Because a material issue of fact exists, the district court’s entry of summary judgment in favor • of Progressive under § 324A(c) is reversed.

III. CONCLUSION

For all of the foregoing reasons, we AFFIRM the district court’s entry of partial summary judgment in favor of TABS regarding punitive damages for negligent hiring and entrustment, as well as the dis*1158trict court’s entry of summary judgment in favor of Progressive on Hutcherson’s section 324A(b) claims. We REVERSE the district court’s entry of summary judgment in favor of Progressive on Hutcherson’s section 324A(c) claims.

AFFIRMED in part, REVERSED in part, and REMANDED.

. Section 324A provides:

One who undertakes gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking if:
(a) his failure to exercise reasonable care increases the risk of such harm; or
(b) he has undertaken to perform a duty owed by the other to the third person; or
(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.

Restatement (Second) of Torts § 324A (1965).

. Hutcherson also contends that the district court erred in requiring that she put forth evidence of a contract or agreement, citing Sims v. American Casualty Co., 131 Ga.App. 461, 206 S.E.2d 121, 130 aff’d, 232 Ga. 787, 209 S.E.2d 61 (1974), for the proposition that a legal duty may arise from a course of conduct which is independent of a contract or express agreement. Because we find that Hutcherson has failed to show that Progressive completely assumed *1157TABS’ duty to monitor its drivers, we do not need to reach this issue.

. Hutcherson argues that complete delegation of all duties is not required, so long as TABS completely delegated some duty to Progressive that TABS owed Hutcherson and Progressive breached that duty. See Canipe v. National Loss Control Service Corp., 736 F.2d 1055, 1063 (5th Cir.1984), cert. denied, 469 U.S. 1191, 105 S.Ct. 965, 83 L.Ed.2d 969 (1985). Even if Hutcherson is correct, Hutcherson has not offered any evidence that Progressive completely assumed a duty owed her by TABS.