Rejects the "mode of operation" rule in certain negligence cases. Establishes the claimant's burden of proof in certain claims against the owner of retail premises by persons lawfully on the premises for damages for injuries sustained from a fall due to an unsafe condition existing in or on the premises.

A BILL FOR AN ACT

SECTION 1. The legislature finds that a recent decision of the Hawaii supreme court will have significant adverse legal and economic implications on retail operations, restaurants, and other commercial and governmental operations in the State, by increasing the difficulty of defending premises liability claims through the elimination of notice as a defense to those claims.

Specifically, in the case of Gump v. Wal-Mart Stores, Inc., 93 Haw. 417, 5 P.3d 407 (2000), the Hawaii supreme court affirmed a decision of the intermediate court of appeals that dramatically restricted the available defenses that property owners can assert to defend against certain types of claims.

The Gump case involved a plaintiff who sustained injuries after she slipped and fell on a french fry outside of a McDonald's restaurant but inside the premises of the Kailua-Kona Wal-Mart. The plaintiff alleged that the defendants were negligent in maintaining and inspecting the premises. The defendant, Wal-Mart contended that it had conducted an inspection of the area only ten minutes before the accident and found no french fry on the floor, and therefore had no prior notice of the condition and no reasonable opportunity to detect and remove the fry before the accident occurred between the last inspection and the accident.

The trial court found Wal-Mart to be liable and awarded damages to the plaintiff. Wal-Mart appealed to the intermediate court of appeals, which subsequently affirmed the verdict but, in doing so, adopted the "mode of operation" rule, which the court summarized as follows:

Gump v. Wal-Mart Stores, Inc., 93 Haw.App. 428, 441-442, 5 P.3d 418 (1999).

In affirming the decision of the intermediate court of appeals, the Hawaii supreme court noted its agreement with the mode of operation rule, but held that the application of that rule was "limited to circumstances such as those of this case":

Gump v. Wal-Mart Stores, Inc., 93 Haw. 417, 421, 5 P.3d 407 (2000). The supreme court further noted that fallen food was a "continuous and foreseeable risk inherent in Wal-Mart's mode of operation", and that "Wal-Mart failed to take reasonable precautions to prevent the risks inherent therein." Id.

The legislature finds that, notwithstanding the Hawaii supreme court's opinion, the adoption of the mode of operation rule in Hawaii unfairly reduces a claimant's burden of proof in slip and fall cases filed in the State, and imposes a heavy and unreasonable burden on retail and restaurant operations to essentially insure the safety of their customers, regardless of how often they inspect and maintain their premises.

The legislature further finds that the mode of operation rule has been adopted in only a small minority of jurisdictions which have decided to hold the premises owner liable in slip and fall lawsuits where the condition causing the incident resulted from the manner in which the defendant conducted business, as in self-service restaurants. Those jurisdictions have determined that whenever the risks of harm are caused by customers spilling drinks or dropping food onto the floor, the risk shall be deemed forseeable and the owner will be held liable even if he or she had no prior actual or constructive notice of the condition. This is the first time that a Hawaii court has adopted this burden for self-service retail operations, which amounts to strict liability.

Gump also represents a substantial departure from prior Hawaii case law. The Hawaii supreme court stated the material elements of a premises liability case in Corbett v. Assn. of Apt. Owners of Wailua Bayview Apts., 70 Haw. 415, 417, 772 P.2d 693 (1989):

Under Harris v. State, 1 Haw. App. 554, 557, 623 P.2d 446 (1981), the intermediate court of appeals stated that, in order to support recovery in an action where the owner or occupant is charged with negligence, the plaintiff must establish that the owner or occupant "knows or should have known of the hazard or defect which caused the injury. Liability cannot be imposed where a landlord or an owner or occupant of premises has not been put on actual or constructive notice of the unsafe condition or defect that causes plaintiff injury."

The intermediate court of appeals in Gump distinguished its prior holding in Harris. The plaintiff in Harris was injured in two falls on the premises of the Kaneohe state hospital, where she was involuntarily committed for treatment of alcoholism. The court stated that its pronouncement that an owner was not an insurer against all accidents was justifiable in a case like Harris, where the landowner or occupant did not have the responsibility to maintain the premises. Unlike Harris, however, the court in Gump found that "Wal-Mart indubitably controlled and maintained the premises in question." Gump, 93 Haw.App. at 440.

In adopting the mode of operation rule, the intermediate court of appeals in Gump justified adoption of that rule on the grounds that the rule would not involve "any real advantage or disadvantage to either party, other than the elimination of a conceptually awkward and unrealistic element of proof which … impinges upon both plaintiff and defendant." Gump, 93 Haw.App. at 444-445.

The legislature finds that, far from being "a conceptually awkward and unrealistic element of proof", existing law gives parties an even playing field in which plaintiffs prevailed and were compensated if they could prove that the premises owner failed to conduct reasonably frequent inspections and maintained the premises in a reasonably safe condition. The law required a finding of fault on the part of the premises owner before liability was imposed, not where reasonable measures had been taken to maintain a safe environment, but due to lack of notice it was unable to remedy or warn of a defect.

The public policy underlying the requirement of a finding of negligence on the part of the premises owner before the attachment of liability is self-apparent. If the owner, despite the exercise of reasonable care, did not know or should have known of the hazard and did nothing to create the condition, the owner should not be held responsible for the invitee's injuries. This acknowledges the fact that accidents do happen without the fault of the people who are injured or the people who control the premises. Gump changed this basic principle and imposes virtually a strict liability standard on self-service operations which have evolved to dominate the retail and food and beverage industries.

Finally, the legislature finds that not only does Gump increase the difficulty of defending premises liability claims in the State by eliminating notice as a defense to certain claims, that case will increase the likelihood of a finding of liability against restaurants, particularly self-service ones. Risk of loss will increase and likely result in an increase in the general cost of general liability insurance if claims increase because of the unfair and undue imposition of liability even where no fault exists.

Retailers, restaurants, and self-service businesses will now be required to take extraordinary and costly measures in loss prevention that were not previously required by the State's long-established premises liability law. For example, businesses will be required to assign and pay for employees to constantly inspect and clean their floors, not simply on a regular basis, thereby increasing Hawaii's anti-business reputation. Public sectors facilities may also be at risk of similar liability, in the operations of such businesses as school cafeterias, airport food concessions and terminals, blind vendors, and other public buildings where food and drink are allowed to be brought in from private operations.

Accordingly, the purpose of this Act is to specifically reject the "mode of operation" rule in Hawaii, and to establish the claimant's burden of proof in negligence claims brought against the owner of a retail premises by a person lawfully on the premises for damages as a result of an injury, death, or loss sustained because of a fall due to an unsafe condition or defect existing in or on the premises.

SECTION 2. Chapter 520, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§520- Premises liability; burden of proof; abrogation of "mode of operation" rule. (a) In any negligence claim brought against the owner or occupier of any retail premises by a person lawfully on the premises for damages as a result of an injury, death, or loss caused by an allegedly unsafe condition or defect existing in or on the premises, the claimant shall have the burden of proving, in addition to all other elements of the claimant's cause of action, all of the following:

(b) No liability shall be imposed against the owner of any retail premises for injury, death, or loss sustained on the premises by any person pursuant to the "mode of operation" rule, or any similar doctrine, in which a claimant is able to demonstrate that the business proprietor adopted a marketing method or mode of operation in which an unsafe condition or defect is reasonably foreseeable and the owner or occupier failed to take reasonable action to discover and remove the unreasonable risk of harm, and which allows the injured party to recover damages without showing actual notice or constructive knowledge of the specific instrumentality of the accident."

SECTION 3. Section 520-2, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

""Constructive notice" means that the claimant has proven that an unsafe condition or defect existed for such a period of time that it would have been discovered if the owner of any retail premises had exercised reasonable care. The presence of an employee of the owner in the vicinity in which the unsafe condition or defect exists does not, alone, constitute constructive notice, unless it is shown that the employee knew, or in the exercise of reasonable care should have known, of the unsafe condition or defect.

"Retail premises" includes any restaurant or other retail establishment that sells food, goods, or other merchandise at a fixed place of business."

SECTION 4. This Act shall apply only to causes of action based upon acts or omissions occurring on or after its effective date.

SECTION 5. Other than section 1 of this Act, new statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.