Subrogation & Recovery Law Blog : Insurance Subrogation Lawyer & Attorney : Cozen O'Connor Law Firm : Property Damage & Insurance Commentary

Cozen O'Connor recently handled the first trial to go to a jury on the issue of strict liability against a manufacturer of CSST (corrugated stainless steel tubing). We are pleased to announce that, following an eight day trial conducted by Mark Utke of our Philadelphia office, the jury found CSST to be a defective product and imposed strict liability against Omegaflex, one of the major manufacturers of CSST.   Mark represented Terence and Judith Tincher, as well as their property insurance carrier, for both subrogated and uninsured losses. The jury awarded 100% recovery of both the subrogated and uninsured losses, for a total judgment that will exceed $1,000,000.  Tincher v. Omegaflex involved a CSST line that was installed in 1998 and failed from the effects of indirect lightning in June of 2007, and was tried in the Common Pleas Court of Chester County, Pennsylvania.

Recipients of our Subrogation Alerts and readers of the blog know of the issues arising from the development of CSST.  Since 1988, CSST has been used in industrial, commercial and residential construction to transport pressurized propane and natural gas.  The tubing walls are flexible and only approximately 10 mils thick (the equivalent of four sheets of paper), making CSST extremely vulnerable to the energy from indirect lightning strikes.  While seeking to go to ground, the energy can result in a perforation in the tubing. When this occurs, an arc ignites the pressurized gas and causes a blow torch effect, which typically results in a significant fire. CSST failures are annually responsible for millions of dollars in property damage across the United States, and hundreds of claims are pending against the various manufacturers of CSST.

Omegaflex sells a brand of CSST known as TracPipe, which first came on the market in 1996, as a replacement for traditional black iron pipe.  To date, over 750 million feet of this product has been sold across the country.  The purported advantages of TracPipe are its flexibility, ease of installation, and ability to reduce the incidents of gas leaks.  At trial, Omegaflex argued TracPipe’s ability to survive natural disasters, such as earthquakes and tornadoes, far outweighed any disadvantage associated with  the product, including its vulnerability in confronting indirect lightning strikes.  Omegaflex also argued that a properly bonded CSST system could withstand the energy produced from an indirect lightning strike.  Omegaflex's failure to ever  test TracPipe’s ability to withstand such energy, when properly bonded, proved fatal to its defense. 

The National Electric and Fuel Gas Codes both contain bonding requirements for household gas and electric systems.  However, these codes are intended to address life safety issues arising from stray electric current, as opposed to the dissipation of the energy created by an indirect lightning strike.  Despite this, CSST manufacturers, as an industry, argue that compliance with these code requirements demonstrates their products to be safe.  However, the National Fire Protection Association is currently evaluating the effectiveness of bonding as it relates to CSST and has considered recommending a complete ban on the sale of CSST, absent a demonstration by the industry that bonding can be a safe and effective means of safely dissipating the electrical energy created by an indirect lightning strike.

The Tincher verdict, significant on its own, has the potential to impact cases against Omegaflex beyond Chester County, Pennsylvania. A viable argument exists to extend the principles of collateral estoppel to apply to other cases against the manufacturer in other jurisdictions, involving similar facts and claims of defect. The defective nature of the product would no longer be an issue for the jury to decide, given the prior determination by the Tincher jury. 

For additional information, please feel free to contact either Mark Utke or any of  the 130 subrogation attorneys at Cozen O’Connor.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On September 17, 2010 Lennox International, Inc. sent a letter to all of its constituent regional organizations as well as its licensed dealers, installers and repair technicians placing a “Product Hold” on a series of residential air conditioning units. According to the letter, Lennox air conditioning units manufactured between July 1, 2010 and September 16, 2010 starting with serial numbers 1910G, 1910J, 5810G, and 5810J represent a serious fire hazard during installation. As part of the standard installation, the suction lines on the units must be brazed. Due to the configuration of the suction lines, one of the refrigerant valves can overheat and crack from the heat generated by the brazing. As a result, refrigerant escapes and the oil in the refrigerant can ignite. There are several reported cases of the fire spreading to the home causing significant property damage. It is believed that Lennox has not issued a full recall of these units because it is trying to develop a fix for the problem so that units that have been released into the supply chain can still be utilized at a later date. 

Clearly any fire involving an HVAC unit reported between July 1 and September 16 should be scrutinized to determine if a Lennox unit was involved and, if so, whether a “held” unit was the culprit. If it is determined that a “held” unit was the culprit, Lennox should be considered as a potential defendant. Second, there is at least one known case of this type of fire occurring after the “hold” was issued. Any installer that fails to heed Lennox’s warning not to install the product could open itself to liability, depending on the laws of the state where the fire occurs.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 On July 6, 2010, the National Fire Protection Association (NFPA) issued a safety alert recommending that residential fire sprinkler systems containing antifreeze be drained and the antifreeze be replaced with water. While NFPA emphasized that residential sprinklers remain reliable and effective, a recent fire incident involving a sprinkler system containing a high concentration of antifreeze solution raised concerns surrounding the combustibility of antifreeze solutions in residential sprinkler systems. The subject incident involved a grease fire in a kitchen where a sprinkler system with a reported 71.2% concentration of antifreeze deployed. The fire resulted in a single fatality and serious injury to another individual.

Following this incident, NFPA initiated a research project in conjunction with the Fire Protection Research Foundation. The initial test results showed that antifreeze solutions consisting of 70/30% glycerin and 60/40% propylene glycol may provide an unacceptable risk of harm to occupants in certain types of fire scenarios, in particular kitchen grease fires. There were successful tests where kitchen grease fires were extinguished or contained with a 50/50% glycerin solution, but NFPA felt there should be additional testing to more fully understand if there is a risk associated with a 50/50% glycerin solution. Further testing on antifreeze is planned in the future.

Potential fire spread issues, such as the aforementioned, should always be considered when evaluating a case for subrogation potential. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The U.S. Chemical Safety Board (CSB) called for a ban on cleaning out debris from gas piping using pressurized natural gas. “Gas blow” is an industry-wide practice and is now described as an “inherently unsafe activity.”

CSB called for the ban after investigating a tragic explosion at Kleen Energy in Middleton, Connecticut, that killed six workers. After that investigation, CSB called upon the Occupational Safety & Health Administration (OSHA) to issue Federal regulations prohibiting the release of flammable gas to clean fuel pipes. Furthermore, the CSB sought changes to major voluntary standards from the National Fire Protection Association and the American Society of Mechanical Engineers to amend their codes and standards to require safer methods of cleaning fuel gas piping.

Connecticut Governor M. Jodi Rell issued an executive order banning the use of natural gas blows during power plant construction in that state. The Governor’s spokesperson indicated making that change will save lives.

CSB also issued letters to 49 states, warning of the hazards associated with gas blows and urging state officials to enact necessary changes in their state regulations and codes to prohibit gas blows at power plants and similar facilities.  Keep proper gas line maintenance procedures in mind when evaluating gas line failure subrogation matters. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Defective car cases can be challenging to pursue.   When the car is subject to a recall, recovery potential usually improves.  If the vehicle’s owner knew about the recall and had the repairs done, do not despair—many times those repairs are inadequate.

One example is the defective Ford speed control deactivation switches.   The switches have been the subject of recalls since 1999 and continuing through to 2009.   However, on February 2, 2008, Ford issued a "recall of the recall" as to 225,000 of its previously recalled cars that had supposedly been "fixed."   The problem, as portrayed by Ford, was that a certain batch of fused wiring jumper harnesses installed in vehicles had "defective fusing."   Sources would later say that the problem was also an ambiguity in the service instructions, causing technicians to make mistakes in executing the fix.

Another example is the recall campaign for the 2001-2004 Mazda Tributes, which described the problem with the ABS modules as follows:

What is the problem?
…. [T]he Anti-lock Brake System (ABS) Module connector may have missing or dislodged wire seals.  This condition could allow contamination to enter the module connector creating a potential for an electrical short.  …. This condition could occur either when the vehicle ignition switch is in the off position or while the vehicle is being operated.

This recall fails to explain the root cause of the defect and how that problem is addressed by the “fix”.  Rather, significant discretion is given to the service technician to decide whether to repair or replace the harness connector (“as appropriate”) and the connector to the ABS module, which gives much opportunity for human error.

In sum, the fact that recall work was done does not necessarily destroy your subrogation case.  In fact, it may open up more questions about the effectiveness of the recall and provide an additional theory of liability in certain circumstances.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Subrogating the discarded cigarette case can burn out quickly or really catch fire.  If your insured caused it, subrogation may be a problem.  But when a defendant causes it, potential subrogation, right?  Perhaps.  Take, for example, the case of a store clerk who throws a discarded cigarette on the pine needles that serve as a landscaping bed outside the building while on a smoking break.  The clerk works for a business that runs a store.  You insure the neighboring building.  Clear winner against the clerk’s employer?

Not so fast.  You still need to prove the employee’s smoking was done “in the course and scope of employment” for an employer to be held vicariously liable for the acts of the employee.  

The “Furtherance of Employer’s Interests” Test

Is smoking a cigarette in furtherance of an employer’s interests?  That is the standard applied by most courts when determining if the act was in the course and scope of employment.  See, e.g., Lange v. National Biscuit Co., 297 Minn. 399, 211 N.W. 2d 783 (1973); Minamayor Corp. v. Paper Mill Suppliers, Inc., 297 F. Supp. 524, 526 (E. D. Pa. 1969); Edgewater Motels, Inc. v. A. J. Gatzke, 277 N.W.2d 11; 1979 Minn. LEXIS 1381 (Minn. 1979).

Case By Case Basis: Factors to Consider

Courts have found smoking to be considered in furtherance of the employer’s interests depending on the circumstances.  Factors relevant to the analysis include:

- Whether the smoking occurs substantially within authorized time and space restrictions.

- Whether the smoking is a minor deviation from the employee's work-related activities .

- Whether the employer's assent was given or may be fairly assumed.

- Whether the smoking was known to occur or reasonably expected.

Application

Knowing to address these issues early will help you analyze more thoroughly the potential vicarious liability of the defendant.  It may also help develop potential spread theories, even if it turns out the smoking was outside the course and scope or was done by a customer or passerby or even your own insured.  For example, if the store owner knows customers or passersby regularly discard cigarettes in the area, the store owner might be liable for failure to provide cigarette towers or failure to select landscaping less combustible than the pine needles used in our fact pattern.  Questions to pose of the store clerk and employer might include:

- Did you smoke in a designated area at the designated time?

- Who created the area and time designations?

- Did you have available a designated trash container for the cigarettes?

- Did you use such containers and, if not, why not?

- Are customers or passersby known to smoke outside the store?

- Was your employer aware of such customer smoking?

- Where does such customer or passerby smoking occur?

- What steps were taken to mitigate potential hazards from such smoking?

- Who selected the pine needles as landscaping and why?

When investigating the claim, these questions should be asked early, when witnesses are still available and their memories still fresh.  It may mean the difference between your case smoking out or burning bright.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In a case of first impression, the Pennsylvania Superior Court adopted the "bright line" rule, followed by a majority of jurisdictions, that all information considered by a testifying expert, including information typically protected under the attorney work-product privilege, is discoverable.In Barrick v Holy Spirit Hospital, No. 1856 MDA 2009 (Pa. Super. Sept.16, 2010), the court embraced the notion that once information is considered by an expert, it is fair grounds for full discovery and cannot be shielded.

In Barrick, a plaintiff sought discovery of letters and emails between the defendant's testifying expert and counsel that included trial strategies and tactics. Plaintiff Barrick was injured when a chair collapsed in the defendant's cafeteria. The plaintiff was treated by Dr. Green who was designated to testify as the defendant's expert. The plaintiff subpoenaed Dr. Green's records, but were furnished the treatment records only. The defendant refused to produce emails and letters exchanged between counsel and Dr. Green that included counsel's views concerning the expert's onions. The trial court ordered the production of all records, including communications between counsel and Dr. Green.

On appeal, the defendant argued that discovery permitted under the Pennsylvania rules does not include disclosure of mental impressions of a party's attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories. Judge Olson, writing for the Superior Court majority, noted that the work product privilege protects certain disclosures, but that the privilege is not sacrosanct and may yield if the information sought becomes relevant to an issue in a lawsuit [page 12]. Judge Olson also noted that the permissible scope of expert discovery is broad and may conflict with other discovery rules. In reconciling the conflict, the court ruled "that if an expert witness is being called to advance a party's case-in-chief, the expert's opinion and testimony may be impacted by correspondence and communications with the party's counsel; therefore, the attorney's work-product doctrine must yield to discovery of those communications". [page 10] Judge Olson reasoned that a party is entitled to discover the extent of a lawyer's influence over an expert's opinions, to test the weight and veracity of the expert's conclusions, and to determine "whether counsel directed [the expert] to reach certain conclusions or to disregard certain facts or take other facts into consideration" [page 13]

While this ruling is consistent with extant federal case law [See e.g., Galvin v. Pepe, No. 09-cv-104, 2010 WL 3092640 (D.N.H. Aug. 5, 2010)], proposed amendments to FRCP Rule 26 would require production only of “facts or data” considered by a testifying expert. But the amendments would continue to allow discovery of communications between a lawyer and a testifying expert about: (1) the compensation for the expert’s study or testimony, (2) the facts or data provided by the lawyer that the expert considered in forming opinions, and (3) the assumptions provided by the lawyer that the expert relied upon to form an opinion. These amendments are scheduled to go into effect December 1, 2010.

This decision underscores the importance of managing information sent to any testifying expert. Many courts will continue to apply the "bright line" test, even if privileged documents are inadvertently disclosed to the expert [see e.g., MVB Mortgage Corp. v. Federal Deposit Insurance Corp., No. 08-771, 2010 WL 582641 (S.D. Ohio Feb. 11, 2010), where the court concluded that “once an expert sees information, even if it is the product of an inadvertent disclosure of something otherwise privileged, that information becomes part of the expert’s mental database, and the opposing party is entitled to test how, if at all, knowing that information may have influenced the expert’s opinion."] Subrogation practitioners should also consider that many states do not have rules that follow the amended federal rules, so the "bright line" test will likely remain in force and apply to all information sent to the expert.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On September 17, 2010 Lowe’s Home Centers, Inc. settled a class action lawsuit brought in the United States District Court for the Western District of North Carolina by consumers who contracted with Lowe’s for the installation of clothes dryers in their homes and businesses. The lawsuit alleged that the “skilled, trained, experienced [and] equipped” installation technicians employed by Lowe’s used metal foil ducts to vent the dryers, in clear contravention of the dryer manufacturers’ instructions. The operative complaint cited a warning specifically instructing consumers and installers “[d]o not use a metal foil vent” and further cautioning “[f]ailure to follow these instructions can result in death or fire.” This warning was included with the clothes dryers installed by Lowe’s—either on the dryer itself or in the product instruction manual—and was uniformly ignored by the Lowe’s installers. 

The warnings accompanying the dryers are not the only indication of the danger associated with the use of a metal foil duct. The United States Consumer Product Safety Commission, in a June, 2003 publication entitled Overheated Clothes Dryers can Cause Fires, warned that “foil type duct can more easily trap lint and is more susceptible to kinks or crushing, which can greatly reduce the airflow.” Lint build-up in, and reduced airflow through, dryer ducts are among the leading causes of dryer-related fires. Thus, even in the absence of manufacturer instructions warning against the use of a metal foil duct, the Lowe’s installation practice constituted a clear deviation from the standard of care applicable to professional appliance installers.

It is currently unknown how many fires have been caused by the use of metal foil ducting, and the class action suit did not seek damages for such fires. Rather, the injury alleged in the lawsuit was the improper installation itself, and its creation of a dangerous condition which could lead to fire, injury or death. Thus, the settlement of the class action will not adversely impact a subrogating insurer’s ability to recover against Lowe’s where the defective mode of installation causes a fire.

The practice of using metal foil duct to vent clothes dryers is likely not limited to dryer installations performed by Lowe’s.  As such, a subrogating insurer investigating a fire originating in the area of a clothes dryer should be alert to this installation issue, even where the dryer was installed by a party other than Lowe’s. Additionally, where the cause of action relating to a foil duct installation is time-barred by statute, product liability causes of action against the foil duct manufacturer or seller may provide additional, unbarred avenues for subrogation recovery. 

Cozen O'Connor’s subrogation attorneys are committed to working with experts and adjusters to identify and recover on losses caused by metal foil dryer ducts. If an insurer believes that a fire loss involved metal foil ducting, it should contact Cozen O’Connor immediately for our assistance in taking advantage of the favorable recovery picture highlighted by the Lowe’s class action. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link