News & Thought Leadership from Sulloway & Hollis

October 10, 2019

Utility Tariffs, Limitations of Liability, and Non-Customers

The usefulness of a public utility tariff in litigation is frequently a function of the circumstances of an accident or claim. A recent decision from the Court of Appeals of Indiana, Tyus v. Indianapolis Power & Light Co., — N.E.3d — (2019), provides an example of a case where the court ruled that the tariff did not preclude the plaintiffs’ negligence claim. The Court of Appeals analysis is noteworthy because the plaintiffs’ were non-customers, so the court had to grapple with the applicability of a public utility tariff in that context.

The underlying facts are relatively straightforward. The plaintiffs, who were not Indianapolis Power & Light Co. (“IPL”) customers, sustained severe injuries in an automobile accident at an intersection where IPL-operated traffic signals remained out of service for more than eight (8) hours due to storm damage. Two of the plaintiffs who suffered severe traumatic brain injuries were under 10 years old.

IPL moved for judgment on the pleadings, primarily based on the terms of its tariff. The exculpatory provision at issue provided:

“24 Release of Company from Liability.

24.2 [IPL] shall not be liable for damages resulting to the Customer, or to third persons, from the use of electricity, interruption of service or supply, or the presence of the [IPL]’s property on the Customer’s premises, unless due to willful default or neglect on the part of [IPL].”

The trial court granted the motion as to the plaintiff’s negligence claim but allowed their gross negligence claim to proceed to trial. This type of decision isn’t uncommon because States typically place limitations on these types of provisions as the allegations escalate to reckless, willful, or intentional conduct. The trial court relied on an earlier tariff decision, Prior v. GTE North, 681 N.E.2d 768 (Ind. Ct. App. 1997), in which the Supreme Court applied the telecommunications company’s exculpatory provision to bar a negligence claim.

The Court of Appeals affirmed in part, reversed in part, and remanded the matter to the trial court. In doing so, the court held that IPL’s grant of immunity was beyond the Indiana Utility Regulatory Commission’s (“IURC”) delegated powers and held “that part of the Release Clause is ultra vires and void.” There were a few different parts to the Court of Appeals decision in Tyus, not all of which are discussed here because the purpose of this summary is to draw attention to the importance of context when asserting a tariff defense. That said, the section on standing and primary jurisdiction is interesting and warrants some attention.

Throughout the opinion, the Court of Appeals noted that the plaintiffs were not IPL customers. This fact was critical. The court was clear that the IURC only had the power to create rules to carry out the provision, so the enabling statutes for the purpose of ensuring that the utilities could provide constant, reliable, and efficient service to their customers. The court also noted that the Legislature cannot delegate the power to make law and that grants of immunity were the exception, not the rule.

Consequently, the Court of Appeals searched for a specific grant of authority for the IURC to allow a tariff provision to limit claims by a non-customer. It did not find one, stating, “[h]ere the legislature provided no specific language from which we can find that the legislature gave, or intended to give, the IURC the authority to shield IPL from liability for injuries caused to noncustomers by IPL’s negligence.”

Interestingly, in a follow-up comment, the Court of Appeals also took aim at an argument that other courts have found persuasive in upholding and applying exculpatory tariff provisions; that the limitations were necessary to ensure reliable service, a sort of cost control for the company. The court stated, “[t]he arrangement between the State and the utility is not a guarantee that a utility will suffer no unexpected expenses.”

The Court of Appeals also noted that Prior was not controlling because “[t]he injured party in Prior was a GTE customer. That difference is significant because, by the IURC’s own administrative rules, the rate schedules, rules, and regulations cover the relationship between the customer and the public utility.” Ostensibly, the Prior remains good law and a public utility’s tariff is still a viable defense in Indiana courts. Tyus, however, demonstrates one scenario that may not be viable, depending on the laws, regulations, and facts at issue.