Indiana premises liability jurisprudence may be changing. If it does, being a business owner in Indiana will be increasingly risky. Not a risk premised on how good the business person may be, but premised on whether a crime will occur at the business and harm a customer, visitor or guest.
In March 2012, the Indiana Court of Appeals decided Santelli v. Rahmatulla, 966 N.E.2d 661 (Ind. Ct. App. 2012). There, it was held that a premises owner could be jointly liable for the intentional criminal acts of a third party. If a jury determined the premises owner did not provide reasonable security in a given situation, that business owner would be held responsible for the full verdict, despite the fact that a co-defendant committed the crime. Part of the court’s rationale supporting the decision was the insurability of the premises owner compared to the inability of a victim to collect from the perpetrator. Transfer has been granted in this case, and oral argument is scheduled for Feb. 14.
In July 2012, the Court of Appeals issued Alea London, Ltd v. Nagy, 970, N.E.2d 272 (Ind. Ct. App. 2012), in a memorandum decision. There, the court validated a provision in a bar owner’s commercial general liability policy excluding injuries sustained by assault and/or battery from coverage. While this decision is unpublished and sets no precedence, it undoubtedly implicates the prior Santelli decision. While the holding in Santelli was premised on insurability, the court in Alea London Ltd. gives the insurer the ability to exclude criminal acts of third parties from coverage. The likely consequence is that insurance companies will begin excluding coverage for the criminal acts of others from their commercial general liability policies.
The evolving trend in these cases is a weakening standard in judging whether the landowner owes a duty to protect the invitee from a criminal act by a third party. Indiana has long followed the Restatement (Second) of Torts (1965) § 344, which provides that a possessor of land who holds it open to the public owes a duty to discover that criminal acts are occurring, or are likely to occur, and to give a warning that is adequate to enable the visitors to protect against it. The existence of this duty is normally a question of law. Comment f to Section 344 states that the possessor of the land is not an insurer of the visitor’s safety and owes no duty to a visitor until he knows or has reason to know that the criminal acts are occurring or about to occur. Whether the landowner has such reason to know of the criminal act is determined by the “totality of the circumstances” test first enunciated in Delta Tau Delta v. Johnson, 712 N.E. 2d 968 (Ind. 1999).
The problem with this test is that it is a nebulous, fact-sensitive determination and leads to inconsistent results. For instance, in Santelli, a hotel maintenance worker walked off his job and stole a master key card. He returned thereafter and murdered a guest. The guest’s estate sued both the hotel owner and the former maintenance man who committed the murder. The jury found the owner was negligent in hiring the former maintenance man because he failed to conduct a background check, failed to retrieve a master key card from him when he quit, and generally failed to provide adequate security. Based on the decision, it appears that liability in Santelli was premised on the hotel owner’s failure to investigate his worker’s criminal history. Based on this rationale, and with the pervasiveness of crime today, it seems that every business owner should have reason to believe a crime could be committed on his property.
Business owners in Indiana will face the prospect of having to conduct criminal background checks on all prospective employees in order to prevent liability for the employee’s criminal acts on his premises. Every potential employee, visitor or patron will be suspect. Hiring convicted criminals will no longer be an option. Providing temporary housing for those on parole or probation will prescribe potential liability on the landowner in the event of on-premises recidivism. Ultimately, business owners and landowners will have no choice but to deny jobs, housing and services to anyone who has a criminal history, because to continue offering it would be to assume liability in the event that person commits another crime. While the owner’s liability for another’s crime is premised on insurability, there will ultimately be no such coverage due to valid exclusions.
Yes, it is risky to own a business in Indiana … now, more than ever.•
Mr. Freyberger is a partner in the Evansville office of Kahn Dees Donovan & Kahn and is a director of the Defense Trial Counsel of Indiana. The opinions expressed in this article are those of the author.