Borrowed servant

18 April 2008

When a general employer loans an employee to another employer (the “special employer”), the employee in most jurisdictions across the U.S. marketplace, becomes the employee of the special employer. Essentially, your employee becomes the “borrowed servant” of the employer who leases your equipment.

Under the “borrowed servant doctrine,” an employer, who has “borrowed” an employee from another, can be held liable for the negligence of the employee working under the employers' direction and control. (Standard Oil Co. V. Anderson, 212 U.S. 215 (1999)). If the employee was the borrowed servant of another at the time of the employee's (alleged)negligent conduct, the employee's general employer can avoid liability.

There are many factors to take into account when the courts determine whether an employee was actually the “borrowed servant”of another. These factors include:

• Whether the special employer has the right to hire and fire the employee

• Whether the borrowed servant is a specialist

• Which employer provided the supplies and (all) of the instrumentalities for the work-causing the claim

• Length of employment

• Whether the special employer has control and direction over the employee and the manner in which the operator performs their work

Whether the special employer has control and direction over the employee and manner of work

Applicability to crane operations

In a construction setting, the applicability of the borrowed servant doctrine is particularly prevalent. However, it is important to note that when a lessor leases machinery along with an operator to another party, it is sometimes a difficult burden to shift the liability from the lessor to the party leasing the equipment and operator. Many actions can be taken to lessen this burden, including adding specific contractual language to address borrowed servant issues.

Ideally, in a crane operation setting, the borrowed servant doctrine would be applicable as follows: Crane lessor supplies a crane operator with the crane for the duration of the lease. Lessee of the crane and operator directs and controls the actions of operator and crane completely, such that the lessor of the crane is relieved of liability for the acts of the “borrowed servant” (operator).

While the applicability of a borrowed servant situation can be bolstered by contractual language, many states recognize a common law borrowed servant doctrine, outside the parameters of the contractual language.

Applicability of doctrine

It is important to note that certain states do not readily accept the borrowed servant defense. In the states that recognize the borrowed servant defense, various elements, supra, can affect the determination by a court or jury of whether there is in fact a borrowed servant situation.

Certain states, including Indiana and Louisiana, may rely more heavily on a combination of factors to determine a borrowed servant situation (e.g., look at ability to hire/fire, payroll issues, supplier of tools/equipment, work boundaries, right to control). Other states place greater weight on only one factor, that is, which is in control of the work being done, under whose direction is the work being completed and whether that direction and control is exclusive.

It is fair to say that in all the states that recognize the borrowed servant defense, the building block to development of the defense is the determination of who controls the method and means of the work being completed.

Claims investigation

When a claim occurs involving a crane and operator, the company should identify potential borrowed servant defenses. Field investigators should be instructed to gather witness statements and information with the borrowed servant issue in mind.

For example, investigators are always asked to identify how the job was being done and who was directing and flagging the operator. If it is an employee of the lessee, you obtain more detailed information from other witnesses and the crane operator to position the claim for litigation.

An example of the proper positioning of the borrowed servant defense would be on a recent loss for “XYZ” Crane, Claim # SRSA-1234. The insured leased a crane and operator to “ABC” Carpentry for work on a home construction site. The insured's operator, John Doe (operator), was the only employee of “XYZ” Crane working on the jobsite. “ABC” carpentry employees secured plywood bundles and rigging onto the crane, which John Doe lifted to the second floor of the home. “ABC's” signalman directed John Doe where to lift and position the bundles. The operator was operating in the blind once these loads were lifted to the second story. As “ABC's” signalman directed Mr. Doe where to place the bundle, an “ABC” employee located himself between the bundle and the wall. The load struck the employee, causing severe head injury. However, the claim was positioned in the proper manner for the following reasons:

1. The “XYZ's” Crane work ticket from the date of the accident indicates that the operator is working under the exclusive jurisdiction and control of the lessee

2. The facts of the accident and witness statements indicate that the operator was being signaled at the time of the loss by the lessee; this was consistent throughout the long-term project as well. Further factors that position this more favorably for borrowed servant include:

• No other “XYZ” Crane employee was on-site (no rigger, signalman, oiler)

The lifting was not highly specialized and did not require any special expertise of the crane operator to make the lift

Although the crane and operator were supplied by “XYZ”, the rigging and other supplies were provided by “ABC”Carpentry. As another defense to borrowed servant, the insured's work ticket contained valid indemnification allowing this loss to be tendered to the party who directs and controls the crane owners' activity.

As a side note, many of the more sophisticated policyholders (those with large crane operations) recognize the importance of payroll disbursement in the use of the borrowed servant doctrine.

The claimant has since become attorney-represented, and litigation is sure to follow. However, because of the positioning with borrowed servant defenses, our defense is as strong as possible.

In the evaluation of each claim involving a crane and operator, during the initial phase, the company should examine the following questions to determine whether the borrowed servant defense will be viable:

• Was our operator the only insured employee on site?

• Who was directing and controlling the operator (who told him where to set up, what to lift, how to lift)?

• Was the operator being signaled by the lessee or another subcontractor?

• Are there any contractual terms and conditions that enhance a borrowed servant position?

The borrowed servant defense is another method whereby a risk can be transferred to another contractor. However, because of the particular nuances of state law regarding the doctrine, and because the issue of borrowed servant is most often considered a question of fact for the jury, it is important to develop a strong borrowed servant defense on the onset of a claim in order to position the litigation properly.

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