Arizona Real Estate Brokerage Not Liable for Agent Car Accident
By Adam Martinez Chair of Rose Law Group Real Estate Litigation Department
Today, the Arizona Court of Appeals handed down a decision upholding a trial court’s dismissal of a wrongful death lawsuit against an Arizona brokerage (Santorii v. RE/Max Professionals, 1 CA-CV 15-0211). The lawsuit was filed against the brokerage after one of its agents was returning from a real estate sales appointment and crossed the center line, colliding with a tractor-trailer. Tragically, both the agent and the driver of the tractor-trailer died in the collision. The spouse of the tractor-trailer driver filed a wrongful death lawsuit against the brokerage alleging that the broker was responsible for the death because Arizona law makes a broker responsible for its agent’s actions. The trial court disagreed, stating that the broker was not liable because the agent was an independent contractor and not an employee, and employers are generally not liable for the negligent acts of independent contractors. The spouse appealed and the Arizona Court of Appeals agreed with the trial court.
The distinction between an employee and an independent contractor is not always clear in the real estate industry. In Arizona, real estate agents are employees of a broker for purposes of the Unemployment Compensation Act and Workers’ Compensation Act. However, in all other contexts, agents are generally recognized as independent contractors. Still, brokers must be careful because simply calling an employee an independent contractor does not shield the broker from potential liability for the negligent acts of its agent. Whether courts will honor the designation of independent contractor depends on the control the employer exercises over the agent. If the broker exercises complete control over the agent; the agent may be considered an employee.
In this case, the Court agreed with the spouse that Arizona law requires brokers to exercise reasonable supervision over the activities of its agents and that a broker is responsible for the acts of its agents “within the scope of their employment.” However, the Court held that these legal obligations did not create sufficient control over all activities of the agent, but only those related to the broker’s responsibility to supervise “real estate transactions,” such as the use of forms and contracts and managing documents. The Court held that even though the broker had “a degree” of control over its agent regarding transactions, the broker did not control its agent’s other activities, such as driving, where the agent went, which routes he took, or when he worked.
Therefore, the Court held that while a broker in Arizona is generally responsible for the mistakes that its agents make in connection with real estate transactions, the broker will not be responsible for negligent acts unrelated to a transaction.
A copy of the decision can be found here. http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2016/1%20CA-CV%2015-0211.pdf. This decision may be appealed to the Arizona Supreme Court.
