Payment for Injured Mailman

Client has a home office in a room on the second story of his home. It’s at the front of the house and overlooks the front walkway. The home office is about 10% of the home’s total heated square footage. Client was cleaning his office windows about 6-months ago. Instead of climbing up a ladder to do the exterior cleaning, he just leaned his body out of the window and hung on tight. But he lost his grip and fell. He happened to land on the mailman. The mailman was slightly injured and incurred some medical bills. In case it matters, the mailman’s delivery that day involved business mail only. The mailman definitely saw the client cleaning the windows, but he proceeded to walk underneath him to deliver the mail. Client says that the mailman even made an effort to catch him.

To make a long story short, the client wrote a check out of his business account to reimburse the mailman for his medical bills.

We’re preparing the client’s 2020 Schedule C bookkeeping and are trying to figure out how to classify this payment.

Any help with this situation would be appreciated. I’m sure some of you have fallen into something like this before.

Fallen into, or fallen for?

Master's class? lol

Fallen into, or fallen for?

Fallen into. I was going to say “run into,” but it seemed that a pun was in order.

Surely, some of you have had similar instances with window falls, slip-and-falls, fallen trees, etc., where there is a business connection.

My initial thought is no deduction, that the mailman assumed the risk when he saw my client hanging out the window. But that’s kind of a legal concept.

The mailman definitely saw the client cleaning the windows, but he proceeded to walk underneath him to deliver the mail.

Neither snow nor rain nor heat nor falling window cleaners stays these couriers from the swift completion of their appointed rounds.

Seriously, to deduct the payment as a business expense, the expense must be “ordinary and necessary.” Falling out of a window onto a mailman certainly isn’t ordinary. Is it a casualty loss? Probably, but my guess is that since homeowner’s insurance probably covers the loss, it wouldn’t be deductible.

Falling out of a window onto a mailman certainly isn’t ordinary.

Is the “expense” really one of “falling out of a window onto a mailman?” That might be what gave rise to the business expense (or partial business expense), but it isn’t the expense itself.

Let’s say I have an obstacle course in my Schedule C home office. At the front there’s a sign that says, “Clients are prohibited from attempting the obstacle course.” At the very end is my pet cobra. A client enters the premises while I’m in the bathroom, successfully completes the obstacle course and proceeds to get bitten by my cobra. A set of extraordinary facts indeed. But when I reimburse the client for the cost of the anti-venom, shouldn’t that be a Schedule C deduction?

The mailman could have filed a workmans comp claim, too.
How much are we talking about?
No one has ever paid something out of pocket instead of filing an insurance claim?

Years ago I had a client that did some sort of specialty construction work. Occasionally paint on cars parked nearby got damaged by something the client sprayed. Client paid the car owners the cost of getting their cars repainted. It was deductible (although I cannot remember what I looked at to determine that).

I think I would let the client deduct the amount he paid for the mailman's medical expenses.

Is it a casualty loss? . Not to Jeff's client. Maybe to the mailman, if his property was damaged.

This Supreme Court case https://caselaw.findlaw.com/us-3rd-circuit/1380072.html has absolutely nothing to do with this thread (although a mailman was involved, and I've always wondered what happened to him). I just like to refer to it every so often because it was local. As a further digression and in an attempt to make the case for posting this as at least slightly relevant to tax practice, did you know that sovereign immunity applies to

any claim arising out of the loss, miscarriage, or negligent transmission of letters or postal matters

. So don't count on suing the USPS for delayed tax mail delivery.

You're welcome.

Sounds like a settlement payment to me ... your client paid the mailman’s medical expenses to avoid other claims. I assume the postman regularly delivers business mail to the home office of your client. Sounds a bit like having a delivery driver injured on business premises, any costs borne by the business seem ordinary and necessary.

OP, by the way he words his OP, seems to be leading us in the direction of OIH rules. If this is qualified as an OIH, implies OP, then is the expense directly related or only indirectly? Mailman may have only delivered business mail that day, but over the course of the year it's been a mixed bag.. (Ah, another pun).

How about a car that's 50/50 business use and causes (uninsured) property damage while on a business use run. Do we deduct all the expese or just 50/50. An imperfect analogy, but ....

OTOH, cleaning the OIH windows would be a direct OIH expense, so ....

How much are we talking about?

$8,145.

did you know that sovereign immunity applies to

Thank you, but I thought if they leave a package in a weird place near your doorstep and you trip on it, you can sue.

any costs borne by the business seem ordinary and necessary.

Thank you. But can we deduct the entire thing? This gets into Nilodop’s points:

Mailman may have only delivered business mail that day, but over the course of the year it's been a mixed bag.. (Ah, another pun).

OTOH, cleaning the OIH windows would be a direct OIH expense, so ....

P.S. You are all welcome to swing by and test out the obstacle course. BYOA.

Not on the tax point:
Postal workers are not covered by state worker's compensation but by a separate federal system, FECA.
Unless the FECA was included in any settlement, the client is probably exposed to additional liability.
The claim should have been tendered to the homeowner's carrier.
There is a business use exclusion in the homeowner's policy but that would not apply to these facts in most states.

Jeff - Is this going to be in one of those Farmers Insurance commercials?

There is a business use exclusion in the homeowner's policy but that would not apply to these facts in most states.

Why wouldn't it apply? And what if homeowner/business person had additional insurance to cover business use of his home?

Generally the business pursuits exclusion does not apply to injuries arising from pursuits which are incidental to normal household activities. Having mail delivered or cleaning windows are normal household activities.
In most states, under most policies, there should be coverage.
At the very least, the claim should be tendered.

Thank you, but I thought if they leave a package in a weird place near your doorstep and you trip on it, you can sue.. Yes, you can, and maybe win. That's not subject to sovereign immunity because it is not

any claim arising out of the loss, miscarriage, or negligent transmission of letters or postal matters

.

Thank you, but I thought if they leave a package in a weird place near your doorstep and you trip on it, you can sue.. Yes, you can, and maybe win. That's not subject to sovereign immunity because it is not

any claim arising out of the loss, miscarriage, or negligent transmission of letters or postal matters

.

What would the claim be if not negligence? And it would seem to arise out of the transmission of a package. I guess, is a package a "letter" or "postal matter"?

As for the OP, I don't think it's deductible. Payments to eliminate or reduce business losses are deductible. But in this case, the claim would be against the homeowner, not the business. Thus the payment to extinguish the claim is not a payment to reduce business losses. Unless you would argue that the homeowner, as defendant, would attempt to collect from the business. Which seems unlikely given the insurance complications.

What would the claim be if not negligence? And it would seem to arise out of the transmission of a package. I guess, is a package a "letter" or "postal matter"?
. Read the Barbara Dolan Supreme Court case. About 15 years ago.

What would the claim be if not negligence? And it would seem to arise out of the transmission of a package. I guess, is a package a "letter" or "postal matter"?
. Read the Barbara Dolan Supreme Court case. About 15 years ago.

Interesting. A truly strange reading I must say. Focusing on the word "transmission". But I'm all for shrinking government immunity.

Starting with context, the words “negligent transmission” in § 2680(b) follow two other terms, “loss” and “miscarriage.” Those terms, we think, limit the reach of “transmission.” “[A] word is known by the company it keeps”—a rule that “is often wisely applied where a word is capable of many meanings in order to avoid the giving of unintended breadth to the Acts of Congress.” *487 Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307, 81 S.Ct. 1579, 6 L.Ed.2d 859 (1961); see also Dole v. Steelworkers, 494 U.S. 26, 36, 110 S.Ct. 929, 108 L.Ed.2d 23 (1990) (“[W]ords grouped in a list should be given related meaning” (internal quotation marks omitted)). Here, as both parties acknowledge, mail is “lost” if it is destroyed or misplaced and “miscarried” if it goes to the wrong address. Since both those terms refer to failings in the postal obligation to deliver mail in a timely manner to the right address, it would be odd if “negligent transmission” swept far more broadly to include injuries like those alleged here—injuries that happen to be caused by postal employees but involve neither failure to transmit mail nor damage to its contents.

We think it more likely that Congress intended to retain immunity, as a general rule, only for injuries arising, directly or consequentially, because mail either fails to arrive at all or arrives late, in damaged condition, or at the wrong address.

And Thomas, dissenting, states that the interpretation defies common sense

Since he was cleaning the office windows, it seems that he was engaged in his trade or business at the time he came under the influence of gravitational forces and the restitution paid were appropriate and helpful to the
Taxpayer’s business, and were reasonable under the circumstances.

See PLR-138683-14 (Number: 201528026) for reasoning in a different situation.

But in this case, the claim would be against the homeowner, not the business.

But the homeowner is also a sole-proprietor, who was cleaning up his business property (albeit in a wreckless kind of way) when the “accident” occurred.