## Facts

- A homeowner’s insurer, American States Insurance Co., hired Marv Hixon (an Indiana contractor) to replace linoleum flooring after minor water damage at an Indiana residence.
- Hixon subcontracted with Sherwin-Williams, which agreed to supply and arrange installation of the linoleum.
- Sherwin-Williams engaged Louis Benkovich, a self-employed linoleum installer, as an independent contractor; Sherwin-Williams did not supervise his work and did not know job particulars.
- Because the cement subfloor was damp, plywood underlayment was required; Benkovich used an extremely flammable glue whose container carried explicit ventilation and safety warnings.
- Benkovich closed windows and left a water heater pilot light on; glue vapors ignited and exploded, causing about $27,000 in damage, which American States paid.
- American States and Hixon sued Sherwin-Williams in federal court under diversity jurisdiction; American States sought about $27,000, while Hixon sought an amount below the then-applicable $10,000 amount-in-controversy requirement.
- The district court allowed both claims to proceed, then directed a verdict for Sherwin-Williams on the merits; both plaintiffs appealed.

## Issues

1. Whether a federal court sitting in diversity may exercise jurisdiction over a co-plaintiff’s related claim that fails the statutory amount-in-controversy requirement on a pendent-party theory.
2. Whether, under Indiana law, Sherwin-Williams was liable for damages caused by Benkovich as an independent contractor, including under exceptions for inherently dangerous work or negligent selection.
3. Whether American States could recover on warranty theories despite lack of privity and where the loss resulted from misuse of a properly warned product.

## Decision

- The court held the district court lacked subject-matter jurisdiction over Hixon’s claim because it did not satisfy the amount-in-controversy requirement and could not be maintained through pendent-party jurisdiction in a diversity case.
- The court affirmed the directed verdict for Sherwin-Williams against American States on the merits.
- The court held Indiana’s general rule of nonliability for independent contractor torts applied; installing linoleum was not inherently dangerous in the relevant sense.
- The court found no evidence Sherwin-Williams negligently selected Benkovich given his long experience, prior work for Sherwin-Williams, and good reputation.
- The court rejected warranty-based recovery because American States lacked privity/beneficiary status and the harm was caused by disregard of explicit warnings rather than product defect.

## Legal Principles

- In diversity cases, each plaintiff’s claim must independently satisfy statutory jurisdictional requirements; pendent-party jurisdiction cannot be used to bring in a plaintiff whose claim fails the amount-in-controversy threshold.
- Under Indiana law, a principal is generally not liable for the torts of an independent contractor absent a recognized exception (including inherently dangerous work or negligent selection).
- “Inherently dangerous” exceptions do not apply where the activity is ordinarily safe if performed with ordinary care and the harm is caused by the contractor’s extraordinary negligence in ignoring clear safety instructions.
- A negligent-selection claim requires evidence that the principal failed to use reasonable care in choosing the contractor; a strong prior track record and reputation may defeat that theory.
- Warranty theories do not supply recovery where the plaintiff lacks privity or third-party beneficiary status and the loss stems from misuse of a properly labeled product rather than a defect.

## Conclusion

The Seventh Circuit dismissed Hixon’s below-threshold claim for lack of diversity jurisdiction and affirmed judgment for Sherwin-Williams on American States’ claim, holding that Indiana law did not impose liability on a principal for an independent contractor’s extreme negligence during routine flooring installation and that warranty theories failed on privity and causation grounds.


Hixon v. Sherwin-Williams Co., 671 F.2d 1005 (7th Cir. 1982)