One of our favorite topics is hindsight bias. It’s the human tendency to believe that a particular outcome was foreseeable (or even inevitable) – but only when the game is already over and the final score is known. In the litigation context its presence means that whenever the plaintiff’s burden is to prove foreseeability he has on his side one of the most common and most intractable of the cognitive illusions. That’s why recognizing the potential for hindsight bias and finding ways to control, or at least ameliorate, its easily exploited effect on decision-making comes up so often. With Oiltanking v. Delgado an appellate court in Texas has just demonstrated (a) how to eliminate hindsight bias; and, (b) how difficult it is for even the most sympathetic plaintiff to win without it in a premises liability case.

With tort reform twenty years ago the Texas Legislature replaced foreseeability with “actual knowledge of the danger” as the test upon which culpability hinges in premises liability cases involving independent contractors. It’s a testament to the agility and creativity of the Plaintiffs’ bar that it took this long to realize the impact of the change. First they recast premises liability claims as something else; usually as “negligent activity” claims instead. Last year the Texas supreme court put that artful pleading dodge to rest with Abutahoun v. Dow Chemical Co.. Second there was the matter of what constitutes actual knowledge. With Oiltanking the answer is clear: should have known doesn’t cut it. Actual knowledge means actual knowledge.

With a foreseeability standard Delgado might have kept her $21 million judgment. But that’s not the rule. With a step-by-step actual knowledge rule, whereby constructive knowledge of the danger is imputed based upon actual knowledge of each step leading to the danger, she still might have kept it. But that’s not the rule either. It’s no longer enough just to show that the defendant knew hydrocarbons are explosive, that the pipe upon which Delgado’s decedent was welding was used to carry hydrocarbons, that the company’s lock out-tag out (LOTO) and hot-work permitting procedures could be more stringent, and that a failure of those procedures could lead to a devastating explosion. Having actual knowledge of the danger requires knowing that hydrocarbons had leaked past the blind and gathered where decedent was about to weld.

In other words, the actual knowledge rule demands knowledge of the materialized danger – not just of a potential danger and not just of the danger’s component parts. And that’s exactly how the statute reads.

I can’t think of any way a contractor’s employee could ever satisfy such an “actual knowledge” rule in a serial exposure / latent disease toxic tort case. Can you?