Does It Matter How Old My Product Is? - Statutes of Repose in Product Defect Cases

A frequent question that arises with claims involving alleged defective products is what effect, if any, the age of the product has on recovery. It’s a common misconception that simply because a product is “old,” any claim for damages caused by it are barred. However, the extent to which there could be recovery for damages resulting from a defective product depends upon whether the jurisdiction enacted any type of statute of repose for product liability cases and what that statute provides.

Statutes of repose differ from statutes of limitations and these distinctions often provide a source of confusion. The main distinction between statutes of repose and statutes of limitations is the triggering event from which the applicable period of time begins to run. A statute of limitation begins to run from the injury or the act giving rise to the injury (i.e. the date of the fire or flood in the typical subrogation case). A statute of repose begins to run from an event other than the event of an injury giving rise to the cause of action. In some cases, a statute of repose may bar an action before a cause of action even arises.

Most states have enacted statutes of repose related to construction activities (such as construction of real property). Some states have also enacted statutes of repose applicable to product liability claims which generally begin to run when the specific product is first delivered or sold to a consumer. Beyond that, every state that has a statute of repose has different and unique provisions and exceptions to how the statute applies.

A very small number of states have statutes with an absolute bar to asserting a product liability claim after a specific number of years. These statutes provide no exceptions to the rule that after a certain number of years after the product is first sold (the number of years vary), any claim is barred. More commonly are statutes which provide a number of exceptions to the absolute bar on recovery. Examples of exceptions include claims for fraud or misrepresentation. Other states have “rebuttable presumptions” whereby the court will presume that a product over ten years old is not defective until the claimant presents evidence to rebut that presumption. Finally, a few states have no statutes of repose, either because the courts have declared them unconstitutional or because they were never enacted. In those states, no matter how old the product is, the claim is not barred by any statute of repose.

Each state treats claims based on product defects very differently and that treatment is constantly subject to change by the courts. One should not assume that because a claim involves a product older than 10 years, for example, there is a legal bar to that claim. Those states that do have statutes of repose applicable to product defect cases also may have a number of exceptions that may render it inapplicable or trigger beneficial presumptions. If you have a claim involving an older product it is imperative that you review the laws of the specific jurisdiction you are in, including whether an applicable statute of repose applies.

Beware of Defendants Who Attempt to Push the Boundaries of the Economic Loss Rule (Texas)

In most jurisdictions today, to recover under a strict products liability theory, the Plaintiff must prove that a defect in the subject product was a producing cause of the Plaintiff’s damages. More importantly, in order to recover under a strict products liability theory, the Plaintiff must show that the defective product caused physical harm to person(s) and/or property other than the defective product itself. In East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 866, 106 S. Ct. 2295, 90 L. Ed. 2d 865 (1985), a unanimous U.S. Supreme Court ruled that when a defective product injures only itself and causes only economic harm, tort claims (i.e., negligence, strict products liability) do not apply. Justice Harry A. Blackmun, writing for the Court, stated "a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself." Therefore, in East River, suit could only be brought under a warranty theory. Suit under a warranty theory could no longer be filed because of a time limit in the contract, so the Plaintiff was left with no remedy. That, in a nutshell, is the Economic Loss Rule.
 

Quoting from Vincent R. Johnson, The Boundary – Line Function of the Economic Loss Rule, 66 Wash. & Lee L.Rev. 523, 534–35 (2009), the Texas Supreme Court emphasized that using the term “the economic loss rule” is “something of a misnomer” because “there is not one economic loss rule that is broadly applicable throughout the field of torts, but rather several more limited rules that govern recovery of economic losses in selected areas of the law.” Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 415 (Tex. 2011). In products liability cases, when a loss arises from failure of a defective product and the damage or loss is limited to the product itself, “recovery is generally limited to remedies grounded in contract (or contract-based statutory remedies), rather than tort.” Id. at 415. However, the economic loss rule “does not preclude tort recovery if a defective product causes physical harm to the ultimate user or consumer or other property of the user or consumer in addition to causing damage to the product itself.” Equistar Chems., L.P. v. Dresser-Rand Co., 240 S.W.3d 864, 867 (Tex. 2007) (citing Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 79-80 (Tex. 1977)); Signal Oil & Gas Co. v. Universal Oil Prods., 572 S.W.2d 320, 325 (Tex. 1978); Mid Continent Aircraft Corp. v. Curry County Spraying Serv., 572 S.W.2d 308, 313 (Tex.1978)).
 

In recent years, some courts have held that when a defective product is “integrated” into another product or system, the whole integrated product is “the product itself” for purposes of the economic loss rule. For example, in Pugh v. Gen. Terrazzo Supplies, Inc., 243 S.W.3d 84 (Tex. App.—Houston [1st Dist.] 2007, pet. denied), the First District Court of Appeals of Texas concluded that strict products liability and negligence claims brought by the purchasers of a home against the supplier of EIFS were barred by the economic loss rule. Pugh, 243 S.W.3d at 93. The homeowners in Pugh alleged that the EIFS, which had been applied on their home, allowed moisture to penetrate into their home and caused damage to their home consisting of “decayed wood framing, water damage, and mold” and “warping in their hardwood flooring.” Id. at 86-87. The Pugh court noted that all of the alleged damages were property damages to the home and found that, “under the controlling case law, there was no personal injury or damage to other property that would have permitted the [homeowners] to assert a tort claim that would be excepted from the economic loss doctrine.” Id. at 94.


Pugh and cases in other jurisdictions like it raise interesting questions regarding the breadth of the economic loss rule. Should the integrated products approach apply only when a component part is integrated into another product? Should the rule apply to products installed in homes, which are not products per se, but improvements to real property? Should the rule apply to replacement products that were added to the original product, or just to the original product and its component parts? What is required to show a product is “integrated” into another product? If the rule applies to residential or commercial structures, what products are truly integrated? Prefabricated fireplaces? EIFS? Kitchen appliances? Extension cords? Light bulbs? Toilet ball cock valves? Toilet tank connectors? What if the product was added by the property owner years after the property was built?


In addition to products liability claims, some courts have applied the economic loss rule to construction claims. The doctrine has been applied to preclude tort claims brought to recover economic losses when those losses are the subject matter of a contract. See Jim Walter Homes, Inc. v. Reed, 77 S.W.2d 617, 618 (Tex. 1988). In Jim Walter Homes, the Court held that when the injury suffered is limited to economic loss to the subject of the contract itself, the action sounds in contract alone. Id. In Schambacher v. R.E.I. Elec., Inc., 2010 WL 3075703 (Tex.App. – Fort Worth 2010, no pet.), the Fort Worth Court of Appeals held the economic loss rule barred tort claims against two subcontractors who performed electrical and insulation work during the construction of a house that was damaged by fire. Jim Walter Homes and Schambacher also raise questions regarding the scope of the economic loss rule. Does the rule apply in the absence of privity of contract between the plaintiff and the defendant? If the defendant’s work was limited to the installation of the electrical systems, which cause a fire that ultimately destroys a home, does the economic loss rule bar recovery in tort for the entire home or just the subject of the subcontract?
 

The above cases relating to the economic loss rule have come from Texas, but every jurisdiction has their own interpretation as to the scope of the economic loss rule.  As a result, it is important that you review these cases with counsel as your state may allow tort causes of action under the specific facts of your case. 

Recent Notable Recalls

By now most subrogation professionals understand the importance of keeping current with the frequent Consumer Product Safety Commission recall notices.  For this blog post we note the following recent notable recalls for the subrogation professional: 

Bosch Security Systems Recalls Fire Control Panels Due to Fire Alarm Failure
A recall was issued by the United States Consumer Product Safety Commission for the Bosch GV4 Fire Alarm Control Panel. The recall relates to the hazard of the notification appliance circuit module which can cause the panels to fail to activate an audible or visual alarm in the event of a fire. More specifically, the recall involves the G-series Fire Alarm Control Panels that are professionally installed and have model numbers that end in GV4 and use D192G Notification Appliance Circuit (NAC) modules. The NAC module monitors the circuit connections and signals when alarms are not operational. The Bosch name, logo and model number D9412GV4, D7412GV4 or D7212GV4 are on the board of recalled GV4 fire alarm control panels. The control panels and modules are used in residences and commercial facilities and can be mounted inside a variety of enclosures with a minimum size of 16 inches x 16 inches x 3.5 inches, which may or may not be labeled with the Bosch name or logo.


Most of the subject models were sold nationwide from January 2012 to December 2012. Consumers who have a recalled GV4 control panel with a D192G NAC module should contact Bosch or their certified professional installer for a free repair. Bosch Security Systems Inc. may be contacted at (800) 289-0096, from 9 a.m. to 8 p.m. ET Monday through Friday or online at www.boschsecurity.us and click on Customer Care for more information. To date, there have been no reports of any injuries. Bosch has contacted their distributors and installers and sent installers a service bulletin telling them how to correct the problem.


GE Brand Dehumidifiers are Recalled Due to Serious Fire and Burn Hazards

This recall involves 30, 40, 50, 65-pint dehumidifiers with the GE brand name. The brand name, model number, pint capacity and manufacture date are printed on the nameplate sticker on the back of the dehumidifier. The chart below indicates those that are recalled. The dehumidifiers are light gray plastic and measure between 19 and 23 inches tall, 13 and 15 inches wide, and 9 and 11 inches deep.


There have been 16 reports of incidents with the recalled GE-brand dehumidifiers, including 11 reports of overheating with no property damage beyond the units, and 5 reports of fires beyond the units which were associated with about $430,000 reported in property damage. No injuries have been reported. These items were sold at Sam’s Club, Walmart and other stores nationwide and in Canada, and online at Amazon.com and Ebay.com, from April 2008 through December 2011 for between $180 and $270. The manufacturer is Gree Electric Appliances, of China and may be contacted at Gree toll-free at (866) 853-2802 from 8 a.m. to 8 p.m. ET Monday through Friday, and on Saturday from 9 a.m. to 3 p.m. ET, or online at www.greeusa.com and click on Recall for more information.


System Sensor Recalls Reflected Beam Smoke Detectors Due To Failure to Alert Consumers in a Fire
Sensor reflected beam smoke detectors were recalled due to hazard when used with certain power supplies. Apparently, when used in this manner, the reflected beam smoke detectors can fail to send a signal to the fire alarm control panel that sounds the alarm and fail to alert occupants of a fire. The recall involves about 610 units with model number BEAM1224S and date codes 2111 through 3053. The YMMW format date codes stand for (2111) 2012-November-1st week of Nov. through (3053) 2013-May-3rd week of May. The detectors are ivory and black and measure 10 inches high by 7½ inches wide. The model number and date code are printed on a label on the back of the detector’s cover and on the product’s packaging. The reflected beam smoke detectors were used primarily in commercial buildings as part of the fire alarm system. Detectors used with acceptable power supplies, as listed on the company website, do not need to be replaced.
If you own such item you may report it to System Sensor at (800) 736-7672 from 7:30 a.m. through 5 p.m. CT Monday through Friday, or online at www.systemsensor.com and click on Resources, then Product Info Library/Technical Field Bulletins, then Safety Bulletins for more information and a list of acceptable power supplies. No Incidents/Injuries have been reported. Owners with the affected smoke detectors powered by a power supply that is not on the company’s acceptable list available online, should contact System Sensor to receive free replacement smoke detectors.
It is important to note these recalls especially when handling product defect matters. In those types of matters, it is beneficial to search the products company website, as well as, the United States Consumer Product Safety Commission website to see if your product is the subject of a recall.

 

 

 

 

 

VIKING RECALL FOR BUILT-IN SIDE-BY-SIDE REFRIGERATOR FREEZERS

Last month, Viking Range, LLC recalled approximately 750 42-inch and 48-inch built-in side-by-side refrigerator freezers with in-door water and ice dispensers that were manufactured between October 2012 and May 2013. Electrical connectors in the refrigerator freezer wiring harness can overheat which poses a fire hazard. According to the Consumer Product Safety Commission recall, Viking has received 27 reports of electrical shorts and 4 reports of fires.


The recall advises owners to immediately turn off and unplug the recalled refrigerator freezers and contact Viking to schedule a free, in-home repair. Click here for a list of all model numbers included in the recall. The model number can be found on the ceiling of the interior of the refrigerator.
 

Heavy Equipment Fires - What The Subrogating Carrier Should Know

Heavy equipment fires occur frequently and can lead to substantial losses. The loss of the equipment itself is often compounded by the insured’s loss of use of the equipment.  For businesses that rely extensively on heavy equipment (e.g., agricultural and construction businesses), the loss of use/business interruption claim arising from such a fire can be staggering.


Heavy equipment is often used in undeveloped areas not readily accessible to fire departments. As a result, the equipment is often badly damaged by the fire, creating challenges to identifying the point of origin. Subrogation recovery for such fire will hinge on proper investigation immediately after the loss occurs. The following are some tips to guide a subrogating carrier’s investigation in heavy equipment fires.


In analyzing a heavy equipment fire case, it is important to gather data and evaluate the maintenance history of the equipment. Lack of maintenance of hoses carrying hydraulic fluid can be problematic, as these rubber hoses become brittle and prone to cracking over time, creating the potential for the failed hose to discharge pressurized, flammable hydraulic fluid onto hot parts of the equipment’s motor or exhaust system, resulting in a fire. Thus, one of the first steps in evaluating the recovery potential of a heavy equipment fire claim is to determine whether the equipment was properly maintained. A diligent insured will keep log books recording each instance of maintenance to the equipment. The carrier should request such maintenance records from the insured at the outset of such a claim, as those records can substantially inform the subsequent investigation.


Additionally, some heavy equipment fires may occur at job sites where there is already a fire in progress. In a land clearing project, for instance, there is usually a pile of cleared wood and vegetation being burned. This creates a significant potential for the equipment operator to move the equipment too close to the burn pile, causing combustible components of the equipment to ignite. On many pieces of equipment, the cold air intake is located at the rear of the machine, behind the operator. We have investigated several fires wherein the operator, looking forward, did not realize that the rear of the machine was perilously close to a burning debris pile, and a smoldering ember is sucked into the machine’s cold air intake, causing a fire in the engine compartment. This potential fire cause makes it crucial that the subrogating carrier establish the pre-fire location and movements of the equipment as soon as possible following a loss. The carrier should make every effort to obtain this information directly from the operator of the equipment and other individuals who were actually present when the fire occurred; obtaining the information from a foreman or company representative who was not present at the time of the loss is not a substitute for first-hand statements.
 

Finally, the carrier should be aware that not all fire investigators and engineers are created equal for purposes of investigating a heavy equipment fire. If possible, the subrogating carrier should retain a fire investigator familiar with heavy equipment fires and a mechanical or electrical engineer who specializes in heavy equipment, as non-specialist fire investigators and engineers may not be able to quickly and accurately identify all potential ignition sources on the relevant equipment.

15 Million Schneider Electric Surge Protectors Recalled

Last week Schneider Electric recalled over 15 million surge protectors that pose a fire hazard to consumers and their property. Schneider issued a recall on select model American Power Conversion (APC) series 7 and 8 surge protectors that it manufactured between 1993 and 2002. The products were sold nationwide at retailers like Best Buy, Circuit City, and COMP USA. Click here for a list of all model numbers. The Schneider surge protectors can be identified by the words “Personal,” “Professional,” “Performance,” or “Network” printed on the product.
 

According to the Consumer Product Safety Commission recall, Schneider has received 700 reports of the surge protectors overheating, including 55 claims of property damage from fire and smoke. This includes one instance of $916,000 in damage to a home and another instance of $750,000 in fire damage to a medical facility. In addition, there are 13 reports of personal injuries, including smoke inhalation and contact burns from touching the overheated surge protectors. Schneider Electric is a global manufacturer of numerous electronic products ranging from weather observation hardware and solar equipment to circuit breakers. Schneider has set up a recall website for consumers to obtain a free replacement surge protector.
 

Dehumidifiers Recalled for Fire and Burn Hazard

On September 12, 2013, Gree Electric Appliances, Inc. of Zhuhai, China announced the recall of 2.2 million dehumidifiers sold in the United States under ten different brand names. The recall was instituted after the manufacturer received notice of 165 incidents involving their products, including 46 fires, and causing more than $2,000,000 in property damage. The units can overheat, smoke and catch fire, posing fire and burn hazards to owners. The manufacturer has reportedly launched investigations into each of the fires. Gree Electric Appliances reported to BusinessWire.com that their internal investigation indicates that the dehumidifiers overheat as a result of low levels of refrigerant. In some instances, Gree suspects that a compressor overload protector emits sparks inside its plastic cover, potentially causing a fire inside the unit.

Gree manufactured the dehumidifiers under brand names, Danby, De’Longhi, Fedders, Fellini, Fridgerdaire, Gree, Kenmore, Norpole, Premier, SeaBreeze, Soleus Air, and SuperClima. The units were sold at appliance and major retailers throughout the United States and online at Amazon and E-Bay, between January, 2005 and August, 2013. The units are white, beige, gray or black plastic and measure between 19 and 24 inches tall, 13 and 15 inches wide, and 9 and 11 inches deep.

Consumers typically use dehumidifiers in their basements and additional inquiry should be made in basement fire claims about your insured’s use of a dehumidifier. If you have a fire loss involving a dehumidifier, you should consult the CPSC Recall Notice for a complete list of make and model numbers to determine if your model is listed on the recall.

 

Long, Hot Summer: Two Auto Manufacturers Announce Major Recalls to Address Fire Risk

It has been a long, hot summer for Honda and General Motors. In June, Honda recalled roughly 686,000 vehicles sold worldwide. Of the 686,000 vehicles recalled, 143,000 were sold in the United States under the Fit name. The problem with the vehicles, from the 2007-08 model years, involves the master power window switch on the driver’s door. According to Honda, “exposure to water and other fluids can cause electrical resistance in the switch, which ultimately can cause the switch to overheat and melt,” resulting in a fire. Honda has advised all Fit owners to park their vehicles outside until the window switch can be inspected.  Click here for a link to the Honda recall website. 


General Motors, which owns a controlling stake in Honda, expanded an existing recall this summer as well. Last August, GM recalled 249,000 various model sport utility vehicles to address a problem with a circuit board in the driver’s side door. This summer, GM added 231,000 more SUVs to the recall. Of the 480,000 vehicles recalled, approximately 443,000 were sold in the United States. The recall indicates “road salt, rain water, and other liquids can get inside the driver’s door module,” potentially causing a short circuit in a circuit board in the door. The short circuit “may cause overheating,” which can melt parts of the door and ignite a fire. The recall applies to the Chevrolet Trailblazer EXT and GMC Envoy XL from the 2006 model year, as well as the Chevrolet Trailblazer, GMC Envoy, Buick Rainier, Saab 9-7X and Isuzu Ascender from the 2006-07 model years. To date, GM has received reports of eleven fires related to the problem with the circuit board.
 

While summer is coming to a close, subrogation professionals should keep these substantial recalls in mind as they investigate vehicle fires in the coming months.
 

California Court Affirms Strict Product Liability Despite Third-Party Criminal Act

A California court has given new meaning to the judicial maxim “on a clear day you can foresee forever!”  In Collins v Navistar 2013 DJAR 4169, the Court of Appeals, Third Appellate District, held that a manufacturer could be held strictly liable for damages allegedly caused by a defectively designed truck windshield.  In Collins, it was undisputed that the plaintiff was injured by a rock thrown by a juvenile from a freeway overpass.  The 2.5 pound piece of concrete penetrated the truck’s windshield, struck plaintiff in the head causing him severe brain injuries.  The manufacturer predictably argued that the criminal acts of the juvenile, who pled guilty to three counts of assault with a deadly weapon and received a 12 year prison sentence, constituted a superseding cause cutting off tort liability.  The appellate court found otherwise-emphasizing that the windshield failed to provide exactly the protection for which it was designed-i.e. shielding a truck driver from foreseeable road hazards.  The court’s rationale was summarized as follows-“so long as the road hazard is reasonably foreseeable, the manufacturer must take steps to address common risks caused by negligent drivers, debris thrown into roads by acts of nature, and even third-party criminal acts.”   As the Collins court explained, “a windshield is not any less defective because it is pierced by an intentionally, rather than unintentionally, thrown rock.”   The Collins court, citing from the landmark California Supreme Court case of Soule v. General Motors Corp. (1994) 8 Cal.4th 548, concluded that “strict products liability does not depend on the criminal or noncriminal nature of the source of the risk but on its foreseeability.”


The Collins case is another reminder that even in cases that initially do not appear to have subrogation potential (in this case a third party criminal act caused the loss), it is important to review them with counsel for potential avenues for recovery.

Exhaust Fan Fires: Crimp Connection Failure and the Melted Copper "Smoking Guns"

Exhaust fans commonly found in the ceilings of bathrooms and laundry rooms cause many residential fires and fires in commercial and industrial buildings. Exhaust fan fires have caused more than $50 million in property damages.[1]

Exhaust fan fires are frequently ignited by electrical arcing in the fan motor or by heating caused by the fan motor bearings “locking up.” The heat generated by the electrical activity or friction is sufficient to ignite plastic components of the fans such as the blades or grill. The burning plastic can and will fall down out of the fan to ignite combustible material in the room below. Burn patterns moving up and out from laundry baskets, plastic trash cans, and other similar items ignited by burning plastic dropping down from exhaust fans are frequently relied upon by investigators for fan and fan motor manufacturers to support an argument that the fan was damaged by a fire originating in the room below and being drawn to, and burning to, the fan operating in the ceiling of the room.

Investigators have identified one common cause of exhaust fan fires referred to as a crimp connection failure. Certain fan motors are manufactured with a crimp connection between a copper lead and an aluminum conductor. Copper and aluminum are dissimilar metals. Copper and aluminum expand and contract at different rates when heated and cooled. The differential rate of expansion and contraction will weaken the connection. The contact between the dissimilar metals also causes corrosion which results in oxidation. Aluminum oxides do not conduct electricity well and further weaken the connection. Weakening and failure of the connection results in resistance heating and electrical arcing sufficient to ignite fires. 

There are three crimp connections in many exhaust fan motors. The first crimp connection connects the copper lead from the motor plug cord to the copper lead into the fan motor TCO. A crimp connection is merely a hollow connector that is used to connect one conductor to another. The first crimp connection is actually located within the plastic bobbin of the motor. The second crimp connection runs out from the fan motor TCO and connects to the aluminum windings. The second crimp connection actually rests on the aluminum windings. The third crimp connection connects the other end of the aluminum windings to the copper lead for the neutral that returns back to the plug cord. The third crimp connection is usually also located within the plastic bobbin for the motor.

The second crimp connection is a connection of a copper lead to an aluminum conductor. Heat generated by the connection failure can cause off-gassing of the varnish on the aluminum windings upon which the second crimp connection rests. Electrical arcing can occur as the second crimp connection fails and the aluminum windings are exposed by the off-gassing of the varnish. The electrical arcing will ignite the off-gassing varnish and combustible lint, dust, and plastic in the fan. 

The melting of the copper lead at the second crimp connection is strong evidence that a failure at this connection ignited a fire. Copper melts at 1,980° Fahrenheit. ((c) NFPA 921, 2011 Edition, Table 6.2.8.2) Electrical arcing caused by the failure of the connection is typically the only possible source of heat sufficient to melt the copper. Fire attacking a fan motor from the exterior will typically not produce localized temperatures near 1,980° Fahrenheit, especially when combustible material such as plastic in the fan or wood framing near the fan with much lower ignition temperatures suffer little or no fire damage. A fire attacking an exhaust fan from the exterior will typically cause electrical arcing in another location on the fan electrical system and terminate current to the fan motor before the fire reaches the fan motor and causes arcing at the second crimp connection.

An exhaust fan must be on or energized for a crimp connection failure to occur and ignite a fire. Electrical arcing cannot occur unless electrical current is flowing to the crimp connection. However, a crimp connection can fail and cause a fan to stop operating or to operate intermittently when the fan switch is on and the fan is energized. Therefore, a fan may be on and energized even though it is not operating and the homeowner does not believe the fan is on. This situation often occurs when exhaust fans rendered non-operational by a crimp connection failure are controlled by two separate on/off switches in a laundry room or bathroom. 

The connection of dissimilar metals in an electrical circuit is a recognized fire danger. Section 110.14 of the 2008 National Electric Code prohibits intermixing or splicing where physical contact occurs between dissimilar conductors (specifically identifying copper and aluminum as dissimilar conductors) unless a device is used that is approved for connecting the dissimilar metals. However, this code provision applies to building wiring and not to wiring within a product such as an exhaust fan.



[1] Presentation entitled “Exhaust Fan Fires” by Case Forensics, copyrighted by Case Forensics 2011 (4/29/11) – citing Home Fires Involving Air Conditioning, Fans, or Related Equipment. John R. Hall, Jr. NFPA, July 2010.

 

 

 

 

7.4 Million Toyota Vehicles Recalled for Power Window Control Fire Hazard

On October 10, 2012, Toyota Motor Corp. announced a worldwide safety recall of over 7.4 million vehicles, including approximately 2.5 million vehicles sold in the U.S., for a fire hazard associated with the power window controls. The recall is the result of an investigation launched in June 2012 by the United States National Highway Traffic Safety Administration (“NHTSA”).  Furthermore, this action by Toyota, which follows shortly after its 2009-2010 recall of several million vehicles concerning unintended acceleration issues, represents one of the largest recalls in the company’s history.

Approximately a dozen of Toyota’s models are impacted by the recall, affecting model years ranging from 2007 to 2009. According to Toyota, the driver’s side power window controls in the recalled vehicles may experience a “notchy” or sticky feel during operation. Furthermore, Toyota advises that this condition “may be caused by an uneven application of the grease” used to lubricate the window controls during the supplier’s switch assembly process. Attempts by individuals to alleviate the issue by applying commercially available lubricants can cause smoke and/or fire due to the overheating and/or melting of the switch assembly.

Toyota models affected by the recall include noted brands such as the RAV4, Camry, Camry Hybrid, Highlander, Highlander Hybrid and the Corolla. Additionally, between 2006 and 2009, Toyota produced a number of Pontiac Vibes for General Motors (“GM”) under a production agreement. Given the fact that the Pontiac Vibe shares the same body and component parts manufactured for the Toyota Matrix, it is expected that additional action will be taken by GM with respect to this vehicle.  Yesterday, it was reported that GM will be sending notifications to the owners of over 47,000 Pontiac Vibes affected by this issue. If you have a vehicle fire case involving a Toyota or Pontiac Vibe, you should consult Toyota’s recall notice or contact Pontiac Customer Care at: 1-800-762-2737.

 

BMW Recalls Mini and Mini Cooper Cars

On January 10, 2012, BMW of North America, LLC, announced a voluntary recall of 88,911 Mini and Mini Cooper cars manufactured between 2006-2011 and equipped with 4-cylinder turbocharged engines. The recall arises from overheating of a circuit board which electronically controls an auxiliary water pump that cools the turbocharger in the vehicles. In extreme cases, the overheating of the circuit board can lead to smoldering of the water pump and could result in a vehicle fire. There have been 12 fires reported to the National Highway Transportation Safety Administration, though none have resulted in accidents or injuries. Per BMW, each of the reported fires occurred while the vehicles were standing still. The recalled models include: 2007-11 Mini Cooper S; 2008-11 Mini Cooper Clubman; 2009-11 Mini Cooper S Convertible; 2009-11 Mini JCW; 2009-11 Mini JCW Clubman; 2009-11 Mini JCW Convertible; 2011 Mini Cooper S Countryman.

EDRs--You Never Know Who's Watching

EDRs or "black boxes" now are contained in a wide range of consumer products including copiers, household appliances, alarm systems and cars. "EDRs" can provide a final data picture of how a product was last operating before a failure happened. Technological advances include building EDRs with a read write tamper proof cabability. For example, an unexpected rise in temperature or surge in power can trigger an EDR that may support an eye witness observation that a product was on fire, smoking or operating erratically. Critics condemn EDRs suggesting they are surveillance monitors akin to those used by "Big Brother" in George Orwell's novel "1984." The reality is far different. EDRs objectively record data within state prescribed privacy legislative requirements.

Smart Technology

Smart Technology refers to systems that monitor and diagnose appliances while in use to include home energy and security systems. Those systems can control heating and air conditioning systems to increase safety while saving energy. These systems can take measurements at pre-determined intervals by use of meters and controls.

Major companies such as Panasonic, General Electric and LG offer Smart Technology systems. LG offers appliances with THINQ Technology that meters and controls "smart" refrigerators, dishwashers, stoves, ovens, etc. LG offers a smart diagnosis program that claims to notice when a home appliance does not operate properly and issues alerts. That system will soon become WI-FI capable. Panasonic has a product line called ECONAVI, that covers 30 household appliances and will monitor usage and a user's living environment. GE offers a similar program called Nucleus Energy Manager that collects real time information on a product's usage.

Conclusion

Subrogation professionals should encourage their consultants to actively seek out and recover EDR information when available. That data may provide a wealth of information about the operating parameters of a product believed to have been involved in a failure. That data can then be evaluated and assessed as part of the overall subrogation investigation.
 

Fifth Circuit Clears a Path for Pursuing Design Defect Claims without the Defective Product

A recent 5th Circuit Court of Appeals case held that spoliation of evidence may not necessarily be fatal to a product liability claim. The case, A.K.W. v. Easton-Bell Sports, Incorporated, et. al, 11-60293 (October 18, 2011) stemmed from a head injury to a minor, “A.K.W.”, that occurred during football practice while A.K.W. was wearing a helmet manufactured by Defendant Ridell. On the final play of practice, A.K.W. stepped up to tackle the opposing quarterback and was joined in that tackle by two additional defenders. All of the players involved in the tackle landed on top of A.K.W.; his head was the first to hit the ground. Shortly after practice, A.K.W.’s right eye blurred and he collapsed on the field.  His coaches removed the helmet, which was later lost. A.K.W. was subsequently diagnosed with a carotid artery tear that rendered him partially paralyzed.

A.K.W., through his mother, filed suit against various manufacturers of football helmets in Mississippi State Court claiming that his helmet was defectively designed due to the padding. The matter was removed to Federal Court which applied Mississippi substantive law including the Mississippi Products Liability Act (MPLA). The MPLA sets out three elements for a defective design claim: (1) the product was defectively designed; (2) the design defect made the product “unreasonably dangerous”; and (3) the design defect caused the injury. Mississippi common law further requires that plaintiffs prove that at the time of the injury, the product was in substantially the same condition as when it left the defendant’s control.

A.K.W. was unable to produce the helmet he was wearing at the time of the injury.  He testified that he was wearing a Riddell helmet at the time; however, there were four (4) different types of Riddell helmets in use by the team. Ridell filed a motion for summary judgment contending that A.K.W. was unable to prove that the helmet he was wearing was in substantially the same condition as when it left the defendant’s control. A.K.W.’s expert assumed that the football helmet was in perfect condition as if it just left the defendant’s control. The expert opined that all four types of Riddell helmets were defective per se upon leaving the manufacturer. Plaintiff argued that since the comparison product for the feasible design alternative is not the exact, individual product involved in the injury, proof as to substantial similarity is unnecessary. The appellate court reversed the trial court’s grant of summary judgment, holding that because the opinion of A.K.W.’s expert was not based on the actual helmet, there was no need for A.K.W. to have produced the actual helmet. Where an expert opinion about defect is based upon a perfect condition product that is straight from the manufacturer, and that opinion applies to all potential products that could have caused the injury, there is no requirement to produce the actual product that caused the injury.
 

LG Dehumidifiers Recalled after Reports of Thirteen Fires

Thirteen fires and more than one million dollars in property damage have been caused by LG Dehumidifiers, prompting a recall. The Goldstar GHD30Y7, Goldstar DH305Y7 and Comfort-Aire BHD-301-C dehumidifiers are all included in the recall. The recalled units are distributed through The Home Depot, Walmart, Ace Hardware, Do It Best, Orgill and other nationwide retailers from January 2007 through June 2008.

The failure mode is identified by the CPSC as a short in the power connector for the dehumidifier's compressor. Consumers are warned to immediately stop using the dehumidifiers and unplug them. Goldstar and Comfort-Aire deny any responsibility.

If you learn of dehumidifiers in the area of origin, it's recommended to hire an electrical engineer to perform a site inspection so as to rule the unit in or out, along with any other electrical sources, including the structural electrical system. The dehumidifier should be preserved if there is any possibility it may have been involved in the fire, along with the receptacle to which it is connected, and any associated cords, including extension cords.
 

I preserved the dryer, so why is my dryer fire case being dismissed?

The Consumer Product Safety Commission claims that in 1996 alone, clothes dryers caused 15,500 house fires, resulting in 20 deaths, 320 injuries and $84.4 million in property damages. In light of this information, it is not surprising that dryer manufacturers vigorously defend products liability claims. Just recently, Electrolux obtained a defense verdict in Wisconsin federal court in a dryer fire case filed by a subrogating carrier.

Successfully pursuing a dryer fire claim in this environment requires attorneys and experts who have the technical experience, education and acumen to successfully navigate the many defenses that dryer manufacturers raise. The attorney and expert must realize that there is no such thing as a “typical” dryer fire case. Each case presents its own set of facts and circumstances which prevent you from adopting a one size fits all type of litigation strategy when prosecuting these cases.

In recent years, Cozen O’Connor has developed an expertise and sophistication in prosecuting dryer fire cases.  As a result, numerous insurers have asked us to “take a second look” at dryer fire claims that were previously closed by other law firms. In several of these cases, we have identified viable subrogation opportunities and instituted suit against the potentially responsible parties. Unfortunately, in most of the cases we reviewed, we had to advise the client that although the case had a potentially viable theory of liability, we could not pursue the claim because the investigator had failed to collect and preserve the necessary evidence.

In dryer fire cases, it is not simply enough for the investigator to preserve the dryer. There is other critical evidence that must be documented and/or preserved if you are to successfully overcome the legion of defenses that dryer manufacturers will undoubtedly raise in your case. Some of their favorites are:

1. Spoliation – Ideally, you should place the dryer manufacturer on notice of the claim and give them an opportunity to inspect the fire scene. If the dryer manufacturer is not given this opportunity, they will certainly raise a spoliation defense. However, this defense can be overcome if your expert properly documented the fire scene completely and extensively with photos. It still amazes me to see fire investigators who take a dozen or less photos of the room of origin and believe that they have adequately documented the fire scene, especially in this age of digital cameras. Make sure your investigator takes tons of pictures of the fire scene, both close ups and overall view shots. I love it when I get a CD from my expert and it has 400 or more fire scene photos. I can’t tell you how many times one of those photos has saved a case two or three years down the road in litigation when a defendant has raised an unexpected issue and we are able to rebut the allegation with a photo.
 

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Pourable Gel Fuel Recalled

On September 1, 2011 the Consumer Product Safety Commission announced a voluntary recall of all pourable gel fuels made by nine separate companies. The recall covers an estimated two million units of this fuel, which has been sold since 2008. Customers are being asked to contact the individual companies to obtain a refund for return of the product.

The recall is reportedly based on 65 reported incidents of flash fires. The fuel is designed to be used in outdoor fireplaces or firepits.  Specifically, the pourable gel fuel can ignite unexpectedly and splatter onto people and objects when it is poured into a firepot that is still burning.

If you have a claim involving a flash fire occurring when an individual was using pourable gel fuel, your first instinct may be to chalk it up to user error. However, based on this recall, thought should be given to pursuing a products liability theory.
 

Honeywell Thermostats Recalled

 On July 28, 2011, the Consumer Product Safety Commission (CPSC) and Honeywell International Inc. collectively issued a voluntary recall of 77,000 Honeywell baseboard and fan heater thermostats sold between January 2000 and December 2007. There have been 16 reported incidents of the thermostats melting and smoking as a result of overheating. While there have been no reported injuries thus far, the product is considered to be a fire and burn hazard to consumers. This is not the first recall of its kind, nor the first recall for Honeywell. Just last October, CPSC recalled control panel fire alarms manufactured by a Honeywell subsidiary, Fire-Lite Alarms. Honeywell, however, is not the only company haunted by such issues with these devices. The Consumer Product Safety Commission announced a recall of Comverge, Inc. brand thermostats back in June 2010 when 13 reported incidents of overheating prompted CPSC to deem the product a safety and fire hazard to consumers. Due to such dangerous potential results of usage, CPSC is taking the necessary precautions to ensure the safety of consumers.

The recently recalled thermostats vary in size, but all feature “Honeywell” or “Cadet” written on the outside of the white, rectangular base. Inside the base, each thermostat has an identifiable model number and 4-digit date code, with the recalled thermostats containing the model numbers listed below as well as date codes beginning with 00, 01, 02, 03, 04, 05 and 06. Consumers with a recalled thermostat should immediately set the thermostat to 45 degrees or switch to “off”, a feature only available on thermostats with a letter “B” featured in the model number. 

Hamilton Beach Recalls Toaster

On June 30, 2011, the U.S. Consumer Product Safety Commission (CPSC), in partnership with Hamilton Beach Brands Inc., issued a recall of about 300,000 model 22600 Hamilton Beach classic chrome 2-slice toasters. Due to a defect within the heating element of the toaster, the appliance is reported to be hazardous should it come into contact with flammable materials. Fifteen incidents of malfunction have been brought to the company’s attention, with three reports of property damage. The Hamilton Beach toasters were available for sale between February 2008 and June 2011, and may still be on shelves. The defective toasters have a distinct series code on the bottom of the toaster, beginning with the letters C or D, and specific four digit numbers that follow, ranging from 0190 to 5290. The letters “BI” follow this number code, so that the format appears as CXXXXBI or DXXXXBI, with the Xs representing the unique four digit number code.

Out of Limbo? Antifreeze Fire Sprinkler Systems Are Back, But They Come With Strings Attached

A fire sprinkler system is supposed to suppress fires. But, in August 2009, a fire sprinkler system in an apartment complex in Truckee, California did just the opposite. The fire began as a grease cooking fire. Then, a fire sprinkler system with a reported 71.2% concentration of glycerin antifreeze deployed during the fire. The resulting effect was an extended fire and explosion in which a serious injury and a fatality occurred.

Following the Truckee incident, the National Fire Protection Association (NFPA) initiated a research project in conjunction with the Fire Protection Research Foundation. The NFPA's investigation showed that there was a possibility of flash fires associated with various concentrations of antifreeze solution used in antifreeze fire sprinkler systems. Basically, if the antifreeze solution had too much of the antifreeze chemical, then the antifreeze solution could spread a fire, not suppress it. So, in July 2010 the NFPA issued a safety alert providing that residential anti-freeze systems should be drained and replaced with water. Then, in August 2010, NFPA Standards Council issued three Temporary Interim Amendments (TIAs) that, in effect, would ban of the use of anti-freeze systems in residential new construction. The Truckee incident, and the resulting research and NFPA responses, put the future viability of anti-freeze fire sprinkler systems in serious question.

Then, as part of its meeting on February 28-March 1, 2011, the NFPA Standards Council reviewed and issued (over an appeal by the Massachusetts Department of Fire Services) three new TIAs that would impact NFPA 13, Standard for the Installation of Sprinkler Systems, NFPA 13D, Standard for the Installation of Sprinkler System in One- and Two- Family Dwellings and Manufactured Homes, and NFPA 13R, Standard for the Installation of Sprinkler Systems in Residential Occupancies up to and Including Four Stories in Height. Under the new TIAs, antifreeze systems can be installed as long as the antifreeze solution is factory produced and meets certain maximum concentrations of antifreeze chemical. The new antifreeze sprinkler systems would also require special testing and verification that such requirements are met. In addition, to deal with existing antifreeze systems, a TIA was issued for NFPA 25, Standard for the Inspection, Testing and Maintenance of Water-Based Fire Protection Systems, that would require annual testing and certification that the proper type and concentration of antifreeze solution was in an existing system.

Based on the 2011 TIAs, NFPA issued an updated NFPA Alert regarding antifreeze in new and existing fire sprinkler systems. In the updated Alert, NFPA summarizes the new TIAs and the impact on new and existing fire sprinkler systems. The NFPA also recommended in the April 2011 Alert several other options for the design of fire sprinklers to avoid the effects of freezing conditions, including the placement of sprinklers in heated areas and using dry or preaction systems instead of antifreeze systems. NFPA will be having online presentations about the new TIAs on June 28, July 7 and July 19, 2011.

How the Truckee incident, the new TIAs, and the additional testing will impact the fate of antifreeze fire sprinkler systems still remains to be seen. However, for the subrogation professional going forward, the existence of an antifreeze sprinkler system should now prompt additional questions about the special testing and certification required for these type of fire sprinkler systems and the potential liabilities created by such testing, or lack thereof.
 

Washington Court Rules Branding Seller May be Sole Party Liable for Manufacturing Defect

The Washington Court of Appeals recently ruled that a seller may be the sole party held strictly liable for a manufacturing defect if the product is sold under the seller’s brand or trade name. In 2007, Monika Johnson was riding in downtown Seattle when the carbon fiber fork of her bicycle (which attaches the frame to the wheel) sheared, causing the fork and wheel to become disconnected from the bicycle (and an accident that seriously injured Ms. Johnson). The bicycle was purchased at REI and sold under REI’s brand name, Novara. However, the actual carbon fiber fork that failed was manufactured by another entity, Aprebic Industry Company (the fork did have the Novara brand name on it as well). Ms. Johnson filed a lawsuit that named only REI as a defendant.

REI attempted to shift blame to Aprebic by arguing in a summary judgment motion that jurors should be able to apportion fault between the two companies. The trial court disagreed, and ruled that while REI could still pursue Aprebic (through a third-party complaint) in a severed trial, the jury would not be allowed to attribute fault to anyone other than REI. In Johnson v. Recreational Equipment, Inc. (REI), the Washington Court of Appeals upheld the trial court’s ruling. If jurors were allowed to allocate fault, the Court reasoned, the manufacturer would “necessarily be 100 percent responsible for the defectively manufactured product” and “the product seller would avoid all such liability.” Since Washington’s Product Liability Act (WPLA) explicitly allows for a product seller to be held liable as a manufacturer for defects in the seller’s branded products, the Court concluded it would undermine the WPLA to allow apportionment of fault.

The Johnson case reaffirms that subrogating carriers may have multiple options when pursuing a product defect claim in Washington. In the case of a defect involving a seller’s branded product, the carrier may consider pursuing the manufacturer, the seller, or both.

 

Recall Notices and Your Subrogation Case

Property insurers are all too familiar with losses caused by defective products. Some product defects are isolated instances, affecting only one unit, but in today’s era of mass production and of use of component parts supplied by third-party vendors, defects that affect every unit of a particular product are commonplace.

When a systemic defect is discovered, such as the defect affecting Ford cruise control systems or Norcold RV refrigerators, a prudent manufacturer will proactively issue a notice of product recall to consumers. Some such notices are published through the manufacturer’s website or through government channels, and are not directly sent to consumers. Others, such as the recalls issued by Ford and Norcold, are sent by mail directly to affected consumers. In many cases, the consumer ignores the recall notice, which can present problems for a subrogated property carrier attempting to recover against the manufacturer of the defective product.

In litigation, the problem arises when the product manufacturer can prove that it sent one or more recall notices to the insured. Manufacturers rely on the notices as evidence of the insured’s contributory negligence. However, the confirmed receipt of a recall notice by the insured does not automatically devalue your subrogation case. Further analysis should be done as there are several factors which can work in favor of a subrogated insurer. First, the insured may deny receiving the recall notice. Recall notices are almost always sent by standard US Mail, with no means of confirming the consumer’s receipt of the notice. In those instances, the assertion by the insured that he or she never received any notice of recall is often sufficient to drive up the value of the case. Because many recall documents are sent in plain envelopes which give no clue that they contain vital safety information, it is reasonable to assume it could be discarded as “junk mail”.

Even if there is no real dispute that a recall notice was received, the manufacturer must show that the recall was effective in curing the defect which it seeks to address. For example, some Ford owners have suffered fire losses relating to the cruise control systems of their vehicles after they had the recall work performed. Likewise, Norcold has issued repeated recalls of some of its RV refrigerators, and maintains a website advising certain consumers that “[e]ven if your refrigerator was repaired as part of a previous recall, it is necessary to have it repaired again to minimize the risk of injury or death due to fire.” If the recall work is not actually effective in correcting the product defect, it is arguable that the recall notices have no real effect. That is, if the product defect still exists after the recall work is performed, a consumer who ignores the notice has not failed to decrease his or her risk of a loss.
 

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Aquarium Heaters Recalled for Fire Hazard

On April 21, 2011, the U.S. Consumer Product Safety Commission (“CPSC”) announced a recall of about 1.2 million Marineland “Stealth” and “Stealth Pro” aquarium heaters. The subject aquarium heaters are Marineland “Stealth” brand heaters of various model numbers and wattages, sold through their parent company, United Pet Group. The heaters were sold at pet stores and on websites from January 2004 through February 2011.

The “hazard” identified in the recall notice is a wiring problem that can cause the heaters to overheat during normal use, which in turn can lead to a fire hazard. The overheating can also cause the heater to shatter or the glass of the aquarium to break, resulting in a laceration hazard. The recall states that United Pet Group has received reports of 38 fires resulting in property damage and 45 reports of broken aquarium glass.

If you have a case where a Marineland Stealth or Stealth Pro aquarium heater is associated with a fire, you should consult the CPSC’s recall notice to determine if your model is one listed on the recall. The heaters associated with this recall are black plastic tubes and have a temperature adjustment knob at the top. They have also been sold as part of aquarium starter kits.
 

New Report on CSST

A newly released study addresses the CSST failure scenario and suggests significant testing in an effort to “mitigate” it. The report, which is 267 pages is entitled, Validation of Installation Methods for CSST Gas Piping to Mitigate Lightning Related Damage. The report was issued by the Fire Protection Research Foundation, a group that consists of members of NFPA, the National Electrical Contractors Association, the U.S. Army, the New Mexico Institute of Technology, and three private engineering firms, among others. Significantly, the Sponsors of the study included numerous CSST manufacturers. Yet the report may not have been welcome news to the manufacturers, as it charges them with the need to conduct numerous tests in an effort to reduce the hazards of the product.

The report mentions by name the Cozen O’Connor CSST Task Force and highlights a number of cases handled by our attorneys. Several months ago, Angela Hahn, co-chair of the CSST Task Force, had a chance to share information with one of the Panel members of the Foundation, engineer Mitchell Guthrie, at the Lightning Protection System's Annual conference . She was joined by Mark Utke, who later met again with Mr. Guthrie to discuss at length the case of Tincher v. Omega Flex, Inc., a CSST failure case that Mark tried to verdict this past January.

As background, CSST stands for corrugated stainless steel tubing. It consists of a continuous, flexible stainless steel pipe corrugated in helical fashion to make it flexible. The exterior of CSST is typically coated with PVC or polyethylene (PE) that is yellow in color. The tubing walls of CSST are flexible and only approximately 10 mils thick (the equivalent of four sheets of paper), making CSST extremely vulnerable to damage in the event that energy from lightning should strike at or near a structure. The energy from a direct or indirect lightning strike will seek conductive materials to travel along and move toward ground. While seeking to go to ground and traveling the course of the CSST material, the energy can and does on occasion transfer or “jump” from the tubing. The transfer can occur when there is another metallic circuit, such as a chimney line, near the CSST, resulting in electrical arcing. The effect of an electrical arc is to create a hot plasma discharge and leave a hole. The combination of the high heat from the arcing event and the flow of gas through the resulting hole – both occurring at the same location -- will ignite the pressurized gas and causes a blow-torch effect, which can result in a significant fire.

The April 2011 CSST Report provides numerous examples of CSST failure scenarios and attempts to offer solutions, which it also calls “mitigations,” to address future CSST failure scenario. The Report cautions that merely bonding the CSST at its starting and/or ending point may not be sufficient and that “a global equipotential solution is necessary to achieve a complete solution.” The “mitigations” would include the following possibilities if supported by testing: multiple bonding, bonding with a short length of conductor, requiring minimum bends, requiring a separation distance from another metallic circuit (such as a chimney flue or cable), and a design change that would enhance the ability to withstand a lightning surge. The report notes that some manufacturers already include some of these requirements in their latest “installation rules.” But the report cautions: “However, based on some studied CSST cases, holes do not always occur where the distance between the CSST and a metallic part is the smallest, and thus separation distance may be difficult to address.” It also cautions that none of these potential solutions may actually work: testing is still needed to show that they will, in fact, work.

The recommended testing is summarized in the Conclusion section, as follows:

The scenario analysis, when compared to tests published so far (or simulations, should it be difficult to carry out some tests due to laboratory limitations when long lengths of CSST are required) have shown that some tests are missing. For the sake of clarity, we repeat below the main statements given in the scenario clause:
• Simulations are needed to show if separation distance is needed based on bonding conductor length and possible lightning currents given from the standard database. Bonding conductors located at the entrance may not be enough if the bonding conductors are too long. In that case, multiple bonding or separation distance may solve the problem (please note that a few cases have shown that incidents occurred in spite of apparent sufficient separation distance).
• Tests should be made to check the ability of CSST to withstand small fault current for a long time, as well as higher fault current for a shorter time.
It should be confirmed that multiple bonding is unlikely to create a major problem when surge current is flowing along CSST.
• Tests should be performed to identify the impedance (mainly inductance) of CSST per unit measure.
• Tests to determine CSST impedance should incorporate the maximum bending radius as given in technical brochures. The effect of bends should be investigated.
• Tests should be performed with 8/20 impulses (representing induced surges) to see if this can damage CSST if multiple bonding is not provided.
Based on tests results, it will be possible to determine if multiple bonding is necessary of not. The needed tests and simulations are described below. With four types of test, all scenarios can be covered.

Whether CSST manufacturers will follow the report’s recommendations and conduct the testing remains to be seen.  For additional information regarding CSST failures, please contact the author of this blog post.

Flash, KABOOM! Water Heater Failures Involving GAC's

 Lightning strikes and a water heater fails resulting in a fire. Is the subrogation investigation over? Not if the water heater failure involves a Gas Appliance Connector (GAC). GAC’s have properties similar to Corrugated Stainless Steel Tubing (CSST).

Recently, in a case tried by Cozen O’Connor, a jury imposed fault on a CSST manufacturer, finding that the CSST had failed during a lightning strike, causing a fire. CSST is used in gas distribution systems in residential and commercial construction. Lightning struck a home causing a leaking hole in the CSST igniting fuel, causing extensive damage. The jury determined that CSST was a defective product for which the manufacturer was strictly liable.

Similar to CSST, Gas Appliances Connectors (“GACs”) are pre-fabricated, similar in appearance and construction to CSST, with shorter runs. GACs service gas appliances such as furnaces, stoves, and water heaters. Like CSST, GACs can be subject to failure when impacted by errant electricity. The electrical current may result from a lightning strike, a failed air conditioning compressor, or other electrical anomalies such as energized or floating neutrals. The typical failure mechanism is an electrical arc and ‘blow out’ of the flared end of the GAC. 

The issue is whether a GAC is unreasonably dangerous given alternative, feasible designs. Although black iron pipe is an excellent alternative to CSST for gas distribution systems, it is not a good substitute for GACs given the difficulty in precisely lining up an appliance with the stub of a black pipe. Moreover, the GAC also functions to protect the gas system from leaks that might be caused by structural shifts in or vibrations to a black iron pipe system.


 

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The Georgia Statute of Repose for Products: When Does Time Begin to Run?

Georgia has a statute of repose for claims involving defective products. O.C.G.A. §51-11-11(b)(2) states that “no action shall be commenced pursuant to this subsection with respect to an injury after ten years from the date of the first sale for use or consumption of the personal property causing or otherwise bringing about the injury.” [Emphasis Added]  Prior to 2006, based upon this statute, products claims were brought against product manufacturers within ten (10) years after the product was purchased by the first consumer or user. However, in 2006 the ruling in Johnson v. Ford Motor Company changed the game. In Johnson, the Georgia Court of Appeals held that a claim involving damage caused by a product’s component part must be filed within 10 years after the part was incorporated into the final design of the product by the manufacturer.

In Johnson, the plaintiff suffered property damage when her Lincoln Town Car erupted into flames inside of her neighbor’s garage. The fire spread from the neighbor’s home to the plaintiff’s home. The plaintiff alleged that the vehicle’s speed control deactivation switch failed and caused the fire. The plaintiff sued the vehicle and the switch manufacturers to recover the damage to her property. The Court upheld the lower court’s grant of summary judgment in favor of the manufacturers and held that the 10 year statute of repose began to run “when Ford installed the switch in the car and the car became operable.” The Court reasoned that “when the car was driven off the assembly line, the starter had been actively placed in use, was in fact being used, and did not require purchase from the end user or consumer to be used for its “intended purpose.”

On February 7, 2011, the Georgia Supreme Court issued a ruling resolving the controversial issue raised in the Johnson case. See Campbell v. Altec Industries Inc., 288 Ga. 535 (2011). In Campbell, the Eleventh Circuit certified the following question to the Georgia Supreme Court: “In a strict liability or negligence action, does the statute of repose in O.C.G.A § 51-1-11 begin running when (1) a component part causing an injury is assembled or tested, (2) a finished product, which includes an injuring component part, is assembled, or (3) a finished product, which includes an injuring component part, is delivered to its initial purchaser?”

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Careless Smoking Claims Soon to be Extinguished by Fire Safe Cigarettes

Has your cause and origin investigator concluded that a carelessly discarded cigarette started a fire? If so, you should determine the location from which and manner in which the cigarettes were bought. If the cigarette at issue was not “fire safe”, there may be a small time-frame left within which to pursue a subrogation claim against internet retailers for selling an illegal cigarette within your insured's state.

New York was the first state to adopt a fire safe cigarette requirement. The state of New York passed legislation on August 16, 2000 that called for all cigarettes sold in the state of New York to have reduced ignition propensity by July 2003.

The tobacco industry, which had for decades actively opposed passage of state and federal requirements for cigarette fire safety standards, argued that it was not technically feasible to manufacture such a cigarette. In direct response to the proposed rule-making, Brown & Williamson Tobacco Corp., R J Reynolds Tobacco Co., Specialty Tobacco Council directed a comment in opposition to the legislation and the proposed standard. The tobacco companies’ objected that “[i]t has not been demonstrated that the performance standard specified in section 4 of the proposed rule will impact real world fire scenarios.” Assessment of Public Comment – Fire Safety Standards for Cigarettes. 2003.

The State administrative agency rejected the tobacco companies’ position, responding:

Large changes in ignition strength test results can be expected to reflect significant changes in fire risk. There is reason to expect that compliance with the performance standard specified in section 429.4 of the proposed rule will result in a significant reduction in cigarette-initiated fires. Reducing the heat output and the burning time of a cigarette will reduce the likelihood that it will ignite a fire.

New York set a minimum performance requirement for cigarettes which are to be tested in accordance with the American Society of Testing and Materials standard E2187-02b. The standard requires a lit cigarette to be placed on ten layers of standard filter paper in a draft-free environment and then observed to determine whether or not the tobacco column burns through its full length. A brand is in compliance if no more than 25 percent of the 40 cigarettes tested in a trial exhibit full length burns. 

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JURY RULES THAT CSST IS A DEFECTIVE PRODUCT IN LANDMARK CASE

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.

Car Fire Cases: Recalling the Recall

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.

Chinese Drywall - Recent Settlements and Verdicts

Defectively manufactured drywall has been in the news for the past two years. Recently, there have been a string of favorable rulings, verdicts, and settlement for those damaged by the defective drywall. 

On May 10, 2010, in the case of Germano et al. v. Taishan Gypsum, Judge Fallon, who is presiding over the Multi District Litigation, entered a default judgment in favor of the plaintiff homeowners and awarded in excess of $2.6 million in damages against Taishan Gypsum Company. Presently, Taishan Gypsum is appealing the entry of the default judgment. 

On May 10, 2010, in the case of Hernandez v. Knauf Gips KG, et al, Judge Fallon entered a judgment in favor of the plaintiff homeowners and awarded $164,049.64 against Knauf Plasterboard Tianjin Company, Limited, plus reasonable attorneys’ fees, costs of the action, and interest from the date the judicial demand until paid. 

Two other federal lawsuits filed against Chinese drywall manufacturer Knauf have been settled. The suits were brought by Paul Clement and Celeste Schexnaydre, who own a home near New Orleans, Louisiana, and John Campbell, who owns 21 contaminated apartments in Slidell, Louisiana. The agreements were reached following a June 18th conference with Judge Fallon. Knauf agreed to pay to remediate the homes, pay at least $25,000 to store furniture, pay for apartment rental while homes were rebuilt, pay at least $15,000 to replace damaged appliances and personal property, and pay attorneys’ fees.  Additionally, Knauf agreed to pay Campbell for lost rental income, and to replace and test the drywall in one apartment while negotiating about the remediation of additional apartments.

On June 22, 2010, in the nation’s first Chinese drywall jury trial, a Florida jury found in favor of a homeowner and awarded $2.47 million against Banner Supply, which was found liable on the grounds of negligence, public nuisance and violation of Florida’s Deceptive and Unfair Trade Practices Act. Banner was found 55 percent responsible. Under Florida law, non-defendants in the case were also apportioned responsibility: Chinese drywall manufacturer Knauf Plasterboard Co. was found 35 percent at fault, and a Chinese exporter and a Miami importer, were each held 5 percent responsible. The jury unanimously awarded the homeowners $494,443 for remediation costs; $9,984 for replacement costs for personal property; $169,268 for temporary housing costs and moving expenses; $20,775 for cleaning costs; $3,320 for additional utilities costs; $920 for storage costs; $6,651 for additional interest on credit cards; $1.7 million for loss of enjoyment; and $60,000 for diminution of the value of their house.

Finally, Lowe’s Companies, Inc, the nation’s second largest home improvement store chain has agreed in principal to a national settlement of claims involving defective drywall. Lowe’s has agreed to pay $6.5 million (primarily in gift cards) to those affected by the defective drywall Lowe’s sold. The amounts paid to each affected customer will depend upon the total amount of documentation, which should include proof of purchase, defects, and damages. 

The Consumer Product Safety Commission has received a total of 3,296 complaints from homeowners in 37 states plus the District of Columbia, American Samoa, and Puerto Rico who claim to have been damaged by defective drywall made by a variety of companies. The cause of the problem is still highly debated and unknown by the various entities testing and inspecting the products. However, despite the unknown and debated cause of the defect, plaintiffs are prevailing against the manufacturers, distributors, installers, and sellers of the defective drywall.

For more information, please feel free to contact one of our offices.

Foreign Manufacturers Legal Accountability Act - Opening the Floodgates Against Overseas Defendants

Have you ever experienced this scenario: Your expert has identified the cause of a loss in the United States, but the manufacturer of the failed product is overseas? If so, then you have to start thinking about issues such as how you will serve process on the overseas defendant and will the foreign defendant be subject to personal jurisdiction in the United States? Congress is currently reviewing a bill designed to circumvent much of the frustration with serving process and obtaining jurisdiction over foreign manufacturers. Currently, in order to obtain jurisdiction in the United States over an overseas product manufacturer, you have to prove that the overseas defendant has sufficient contacts with the state in which you are filing suit. To prove sufficient contacts exist you have to gather as much information as you can on the defendant's contacts with your forum state, including:

•           Does the defendant have office/property/bank accounts in your forum state?
•           Does the defendant regularly ship products to the forum state?
•           Does the defendant advertise to ship products to the forum state?  

Often the foreign defendant may have little or no contacts with the forum state, preventing you from filing suit in the U.S. However, Congress is looking to make it easier for plaintiffs to both serve foreign defendants and obtain jurisdiction over them in a U.S. Court. The bill titled "Foreign Manufacturers Legal Accountability Act" is currently under review by Congress and is expected to pass in the near future. It requires foreign manufacturers of products/goods shipped to the United States to establish an agent in at least one U.S. State to accept service of process on behalf of the manufacturer. In addition, the bill requires that the foreign manufacturer consent to personal jurisdiction in the State or Federal courts of the State in which the registered agent is located. Congress' attempt to create personal jurisdiction over foreign manufacturers by statute is arguably inconsistent with the Due Process Clause of the Constitution from which our current personal jurisdiction standard was born. However, Congress did wisely include a provision that the State in which the registered agent is located be a state "with a substantial connection to the importation, distribution, or sale of the products of such foreign manufacturer or producer." This allows for the argument that the foreign manufacturer is conceding to sufficient minimum contacts with state in which the registered agent is located because the foreign manufacturer is picking the state it has sufficient contacts with to be the location for the agent. It is likely that the Supreme Court will eventually get involved in the issue. But if the current bill is passed and upheld by the Supreme Court we can expect the floodgates to open against foreign manufacturers since personal jurisdiction would be automatically established in the State in which the foreign manufacturer's registered agent for service of process is located. 

NFPA Reviewing Safety of CSST

As its name suggests, the National Fire Protection Association’s goal is to protect against fires. It is therefore not surprising that the number of fires involving corrugated stainless steel gas tubing over the last few years has caught the NFPA’s attention. In the fall of 2009, the NFPA formed a CSST Task Group. The Task Group was entrusted with the job of taking a closer look CSST’s potential for failure when confronted with energy from direct and indirect lightning strikes. The CSST Task Group has now met, submitted a report and has been discharged.

Only time will tell, but the CSST Task Group report may have a far ranging impact in both the construction and CSST industries. First, one of the main issues that the Task Group reviewed was whether bonding of CSST, as set forth in the present edition of the National Fuel Gas Code (NFPA 54), was enough to prevent lightning-induced CSST fires. The Task Group reports that it sought research supporting the continued use of the current CSST bonding requirements of NFPA 54. To this end, the Task Group specifically asked manufacturers of CSST to provide research performed by them on their behalf in this regard. The information the Task Group received in response was of “limited value” and “did not provide enough information to ascertain that the proposed bonding remedy will provide adequate protection from lightning induced surges.” The minutes of the Task Group meeting further reveal that at least one of the members observed failed CSST gas lines even in instances where the CSST was bonded per NFPA 54 and the manufacturer’s recommendation.

As a result of the Task Group’s work, the NFPA has decided that further review of CSST is warranted before the next version of NFPA 54 is published in 2014. Among other things, the NFPA is now looking to validate whether bonding of CSST is an adequate solution to the lightning exposure problem or if there are other alternative methods of installation that will make the product safe. 

Could this be the end of CSST as means of delivering gas products? Or, could this be the start of a movement to make CSST a genuinely safe product? The NFPA appears serious about making sure this product is safe. An Action Report dated June 23, 2010 concluded with these words of warning: 

Over the next full revision [of NFPA 54] currently scheduled to be in the Annual 2014 revision cycle, the industry and others advocating the continued use of CSST in gas piping systems shall validate the safe use of the product through independent third-party validated research and testing that can be reviewed and evaluated by the standards developers in a timely way… [I]t is incumbent upon the manufacturers or others promoting the use of CSST in gas piping systems to provide independently validated and reliable technical substantiation demonstrating the CSST can safely be used. If such substantiation is not provided, the Technical Committee on the National Fuel Gas Code must consider prohibited the use of CSST in NFPA 54. In addition, should the issues not be reasonably addressed by the end of the next full revision cycle, Annual 2014, the Council may take action as it deems appropriate up to and including prohibition of the use of CSST in NFPA 54.

For many who have already lost their homes due to lightning-induced CSST fires, these developments have already come too late. But for now, NFPA appears poised to act. Hopefully, we all will be safer for it.

Expert Selection In Product Liability Cases

SelectionAll of us in the subrogation and recovery business are well acquainted with product manufacturers attempting to have claims thrown out of court on technical legal grounds. Almost every product liability case now involves such challenges.  Recently, a federal district court judge soundly rejected General Electric Company’s (G.E.) attempts to do just that in Louisiana. The opinion was both interesting and important because the Court did not accept G.E.’s attempts to disqualify a competent expert or narrowly construe the Louisiana Products Liability Act (“LPLA”).

On February 27, 2008, a fire damaged the Denham Springs, Louisiana home of Thomas and Janice Campbell. The Campbells were insured by Louisiana Citizens Property Insurance Group (“Citizens”). The local fire marshal concluded that the fire started in a G.E. range. Citizens retained Ted Kaplon, an electrical engineer. Mr. Kaplon also determined the fire started in the range but could not identify a specific defect. The parties also disputed whether the Campbell range was subject to a recall for “faulty wiring.”

After the lawsuit was filed, G.E. filed motions to exclude the expert opinion of Mr. Kaplon and for summary judgment. G.E. contended that Mr. Kaplon was not qualified to render an opinion concerning the defective condition of the range and how that defect caused the fire because he did not conduct any testing or rely on literature to support his opinions. The Court determined that he qualified as an expert by his education, training, and experience, which included: bachelor’s and master’s degrees in electrical engineering; registration as a professional engineer in Louisiana and six other states; testimony as an expert in several courts including the Middle District of Louisiana; investigation of between 3,000 and 4,000 fire scenes over thirty years to determine the origin and cause of fires, including hundreds of kitchen fires involving ranges; and his investigation conformed with NFPA 21, a guideline for investigating fires promulgated by the National Fire Protection Association (“NFPA”). His testimony was based on sufficient facts because he visited the fire scene, examined the evidence, and issued a detailed report. He also based his testimony on widely accepted and apparently reliable methods, specifically the standards promulgated by the NFPA. Mr. Kaplon was not offered as an expert in the LPLA, electric ranges or their alleged defects, but was offered as an expert in fire investigation and causes.

G.E. also moved for summary judgment under the LPLA because Citizens did not present any evidence of the specifications or performance standards for the range and because Citizens could not show how the range or its wiring deviated in any material way from those specifications or standards. The Court determined that Louisiana law interpreting the LPLA clearly allows Citizens to prove the range is defective through circumstantial evidence. There was no reason why Citizens could not use circumstantial evidence in order to make the inference that a product was unreasonably dangerous when that product left G.E.’s control. This inference shifts the burden of proof to the manufacturer such that the manufacturer must prove that the product was not defective when it left the manufacturer’s control. Citizen did not need to conclusively exclude all other possible explanations for the fire, it only had to show the unlikelihood of other reasonable explanations. Since Citizen did not offer any evidence as to a design defect or inadequate warnings, the Court granted the summary judgment motion as to those claims but denied the rest.

This case is an example that selection and retention of qualified experts who perform thorough investigations is critical in fighting off technical motions from manufacturers in product defect cases.

CPVC - A MATERIAL SUSCEPTIBLE TO FAILURE IN SPRINKLER SYSTEMS

Chlorinated polyvinyl chloride ("CPVC") has been used in potable water distribution systems since the 1960s. More recently, CPVC has been used in high rise fire suppression piping systems.  Within the last decade, failures in these systems have been identified raising questions as to (1) the appropriateness of CPVC and (2) the suitability of CPVC when mated with steel piping. 

When mated with steel piping, CPVC piping is placed under a static and pressurized environment.  These conditions make CPVC susceptible to failure due to stress and chemical attack. Often, a definitive cause of such a failure cannot be specifically identified, however, the following should be considered in deciding whether to pursue a CPVC fire suppression system claim:

 

1. Manufacturing Process Errors: Extrusion or molten processes used in CPVC manufacturing can cause stress in the product.  The molding process may also expose the part to chemical attack from other environmental contaminants. This can cause stress cracking, referred to as environmental stress cracking or ESC. 

 

2. Installation Errors: The installation method can adversely impact the performance of CPVC piping. For example if the part is manipulated to provide an offset between floors, or clamped in place, stress can be introduced.  The installation method can also allow for the introduction of contaminants into the piping.  The most common contaminates are (1) glue used to assemble the CPVC; cutting oils used to thread/cut steel pipe; antimicrobial coatings used to prevent corrosion; and pipe thread sealants containing chlorine and hydrocarbons.  These contaminants has been shown to cause degradation or chemical attack of the CPVC, which can cause ESC. 

 

Efforts are underway to develop testing protocols through entities such as the NFPA Committee of Sprinkler Installation Criteria, as well as the NFSA, Underwriter Laboratories ("UL"), and Factory Mutual ("FM") advisory committees.  In December 2008, FM issued an alert regarding incidents of failure regarding potential incompatibility of CPVC with certain coated steel piping.  FM testing discussed in a March 30, 2010 release noted that in certain instances CPVC failures were seen within a thirty day period.  As a result, FM Approval Standards 1630 and 1635 are being considered for revision so as to test the tensile strength of CPVC when in contact with antimicrobial films or coatings.  This concern has also caused certain manufacturers to advise against the use of coated steel piping with CPVC, or others, to being offering non coated steel piping.   

 

Given these complicated loss scenarios, in addition to traditional fire and mechanical engineers, experts in the fields of polymers, chemistry and codes should be considered for CPVC losses.  Through early identification and coordination, your next CPVC sprinkler loss may result in a recovery.

The Malfunction Theory

Have you ever experienced the following all-too-common frustrating subrogation scenario:  Your cause and origin expert determines that a fire started from a particular product but, after destructive examination of the product, your engineer is unable to identify the defect which caused the product to fail.  Even though you cannot identify the specific defect, you are not necessarily out of luck. 

Courts in a number of states have long recognized that fires destroy direct physical evidence of a defect and therefore allow the product defect case to be presented with circumstantial evidence via a Malfunction Theory.  Under the Malfunction Theory, if one can prove the following elements then a  product liability claim still may exist:

1) The product is only a few years old;

2) The fire started inside the product;

3) Alternative ignition sources have been eliminated as a potential cause of the fire;

4) Your expert can explain how the product "could" have caused the fire even though the exact cause is unknown; and

5) The product was not misused. Often you can prove that the product was not misused if the fire started in an area where the insured did not have access to misuse it, i.e., the motor area of a microwave, the compressor area of a refrigerator, etc.  However, even if the insured had access to the area of the product where the fire occurred, you can still circumvent the misuse element by showing that the insured actually did not access this area or the insured's access of the area of origin was unrelated to the fire. 

The next time a product causes a fire, but the specific defect cannot be identified, do not rush to close the file.  Instead, check to see if your jurisdiction recognizes the Malfunction Theory.  If so, it could turn your dead-end products claim into a functional theory of liability. 

Chinese Drywall - $2.6 Million Dollar Plaintiff Verdict in MDL

Exposed drywall in new constructionIn the multi-district litigation arising out of Chinese manufactured drywall, Judge Fallon of the United States District Court for the Eastern District of Louisiana issued an Opinion on April 8, 2010 finding in favor of plaintiff homeowners and awarding in excess of $2.6 million in damages against Taishan Gypsum Company. 

Additionally, Judge Fallon found that based upon the Findings of Fact and Conclusions of Law, that “scientific, economic, and practicality concerns dictate that the proper remediation for the Plaintiff-intervenors is to remove all drywall in their homes, all items which have suffered corrosion as a result of the Chinese drywall, and all items which will be materially damaged in the process of removal.”

In the written Opinion, Judge Fallon cites to the Cozen O'Connor's Chinese Drywall Litigation: Subrogation White Paper (2009) as an authoritative text in numerous places in his findings of fact.

For more information on the multi-district litigation arising out of the Chinese manufactured drywall, or to get a copy of the Cozen O’Connor Chinese Drywall Litigation Subrogation White Paper, please feel free to contact one of our offices.

Using Freedom of Information Act Requests to your Advantage in Prosecuting Subrogation Claims

Freedom Key on KeyboardThe Freedom of Information Act (“FOIA”) can be a useful tool that subrogation professionals can employ to effectively gather information to build a successful products liability claim. In cases where a loss is caused by a defective product, a simple FOIA request to the Consumer Products Safety Commission (“CPSC”) can produce a veritable treasure trove of documents of reported incidents involving a particular product. 

The CPSC tracks all complaints it receives about safety issues involving products sold in the United States. The complaints can come from a variety of sources, including local, state, or federal government agencies, as well as from consumers who contact the CPSC’s hotline. Depending on the number of incidents and the magnitude of the risk to consumers, the CPSC may launch an in-depth investigation (“IDI”) of a particular product.

Subrogation professionals investigating a potential products liability claim can utilize the CPSC’s website and FOIA requests to assist in determining whether there have been issues with a particular product. A FOIA request can produce incident reports and IDI reports relating to the product in question. To find out whether a product has been recalled, you can conduct a search at the CPSC website at http://www.cpsc.gov/cpscpub/prerel/prerel.html

There are several ways to submit a FOIA request to the CPSC. The CPSC accepts submissions via mail, facsimile, and even by email. Here is the CPSC’s contact information for FOIA requests:

FOIA Requester Service Center
US Consumer Product Safety Commission
4330 East West Highway, Room 502
Bethesda, MD 20814
Tel. (301) 504-7923
Fax. (301) 504-0127
cpsc-foia@cpsc.gov

FilesIt is important to note that the individual making the request is responsible for the cost of reproducing the documents, although there are times when the CPSC will waive the fee. In any event, the cost pales in comparison to the cost of filing suit and obtaining the documents through discovery.  Additionally, the manufacturer of the product is afforded an opportunity to correct or challenge any of the requested information, and the manufacturer can block disclosure of incident reports where they can prove inaccuracies with supporting documentation.  There are also other rare instances where manufacturers can prevent disclose if the requested information contains trade secrets and confidential commercial or financial information. To read more about FOIA requests and about what information is available, go to the CPSC’s Guide to Public Information at http://www.cpsc.gov/about/guide.html#Introduction

Finally, be on the lookout for a searchable database, which the CPSC is in the process of developing. The database was mandated by Consumer Product Safety Improvement Act  of 2008. It is anticipated that the database will be online at www.saferproducts.gov in March 2011.

No If's, And's Or Butts: Self-Extinguishing Cigarettes

The flammability of approved cigarettes is of great importance to insurers as significant property damage occurs each year from carelessly discarded smoking materials.  According to NFPA's 2008 article U.S Smoking-Material Fire Problem, in 2006 over $606 million dollars of property damage occurred due to smoking materials.   In order to try and reduce the number of fires related to cigarettes, most states require that cigarettes meet the testing procedures outlined in the American Society for Testing and Materials (ASTM) International's E2187, Standard Test Method for Measuring the Ignition Strength of Cigarettes.  Cigarettes that comply with this testing standard are supposedly safer --- less likely to cause a fire than cigarettes that do not comply with this standard.  The hope was that ASTM E2187 compliant cigarettes would self-extinguish thereby reducing the number of smoking material related fires.

Unfortunately, recent ignition tests by Fire Findings shows little to no difference between ASTM E2187 approved cigarettes and traditional, non-ASTM E2187 cigarettes.  See, Fire Findings, Vol.18, No.1 (Winter 2010).  Fire Findings tested the propensity for ASTM E2187 cigarettes to ignite trash, dry potting soil and peat moss, and gasoline.  The results of these tests were similar to the results of their previous tests of traditional cigarettes.  Fire Findings concluded that both types of cigarettes, ASTM E2187 approved and non-approved, can ignite similar materials in real world situations.   The next time your get a fire loss involving a cigarette, don't be so quick to discard it simply because the cigarette met the ASTM E2187 standard. 

MOVING UNINTENDED ACCELERATION CLAIMS FORWARD: SUBROGATION POTENTIAL FOR TOYOTA'S 8.1 MILLION RECALLED VEHICLES

Toyota’s unprecedented recall of some 8.1 million vehicles will impact consumers, businesses, and their insurance carriers all over the country.  Since 1999, an estimated 2,000 complaints of sudden unintended acceleration in Toyota and Lexus vehicles have been reported to the National Highway Traffic Safety Administration ["NHTSA"].  On February 9, 2010, Toyota issued a global recall of its 2010 Prius hybrid after over 100 complaints of “delayed brake performance” were filed with the NHTSA.   [See, timeline of recalls.]

Damages to persons and property as a result of these apparent defects will result in numerous insurance claims scattered throughout the fifty states.  The breadth of this recall presents significant subrogation and recovery potential.  But the potential complexity and fragmentation of claims raises obstacles to efficiently and effectively prosecuting many separate cases. 

Mutual cooperation agreements allow carriers to maximize recovery while minimizing and sharing expenses.  Cooperation allows for the appointment of review masters and experts to determine liability and damages related to prior, existing, and future claims.  These claims may include payments to insureds for property damage, personal injury, worker’s compensation benefits, business interruption, and loss of goodwill.

It is anticipated that the insurance industry will act quickly and expediently to review past and existing claims related to matters that involve Toyota vehicles.  Given the expanse of the recall effort by the automaker and the efforts directed by Toyota to rectify manufacturing and design defects, it is possible that the automaker will also seek a forum for cost effective and expedient resolution of claims related to the defective vehicles. 

The availability of multi-district litigation modules and mutual cooperation agreements combined with the efforts of the automaker will effectively endow both the insurance industry and the automaker with a viable alternative to multiple forum litigation.

Texas Chain...Of Distribution

With a global economy more and more products are being shipped to the United States from foreign countries daily.  When these products fail, it is expensive and time consuming to seek recovery from the foreign manufacturer.  But before throwing out your products claim, look at your state's laws on pursuing those entities in the chain of distribution of the product.  For example, distributors usually coordinate the sale of the product from the manufacturer to the seller and many times never even touch the product.  Despite their limited role of organizing the transfer of the goods, their liability can be unlimited in some circumstances.

In Texas, if you establish that the manufacturer of the product is insolvent or not subject to the jurisdiction of the court then the distributor can be held fully liable for the damages caused by the product as though they were, in fact, the manufacturer.  See Civil Practice & Remedies Code § 82.003.  Many distributors try to insulate themselves from liability in Texas by pleading the manufacturer is a "responsible third party" under Section 33.004 of the Civil Practice & Remedies Code.  This type of plea allows the distributor to put the manufacturer's name on the jury charge when the manufacturer is not a party to the litigation so the jury can then decide the percentage of responsibility between the manufacturer and the distributor.  Logically, jurors are going to put the majority of responsibility on the manufacturer who made the product as opposed to the distributor who may never have even touched the product.  Don't be fooled by this bit of legal maneuvering by a distributor.  The "responsible third party" statute only applies when both parties are negligent.  Under Section 82.003, the distributor can be held liable for the damages associated with the defective product without any negligence on the part of the distributor.  Since the distributor's responsibility for the product arises from the statutorily imposed guidelines of Section 82.003 of the Civil Practice & Remedies Code and not from any negligent act it did or failed to do, the distributor cannot escape liability by trying to push a percentage of fault onto the manufacturer under Section 33.004. 

Each state has its own laws regarding the liability of distributors and those should be reviewed before closing a claim for a defective product manufactured overseas.

Economic Loss Doctrine Broadened in Tennessee

The Economic Loss Doctrine may bar tort claims when a defective product causes injury only to the product itself and not to other property or persons. In many jurisdictions there are exceptions to the doctrine, including when the damage is caused by a “sudden calamitous event.”Recently, the Supreme Court of Tennessee considered the application of this exception.

Vintage BusIn Lincoln General Ins. Co. v. Detroit Diesel Corp., a bus caught fire due to an allegedly defective engine. The fire did not cause personal injuries or property damage to anything other than the bus. The subrogating insurer argued that the economic loss doctrine should not bar a products liability claim because the harm was caused by a “sudden calamitous event.” The court rejected the exception, instead following a “bright line rule” completely barring tort claims when a product causes damage only to itself.  The court reasoned that certain products “expose a product owner to an unreasonable risk of injury during an abrupt and disastrous occurrence" while others "merely disappoint a product owner’s expectations.”  The court explained that it would be difficult for parties and courts to apply a rule that focuses on the degree of risk and the manner in which the product was damaged, as opposed to a rule that hinges on the harm a plaintiff actually sustains.

Despite Tennessee's reluctance to carve out an exception, many states have successfully modified the application of the Economic Loss Rule by:

  1. Creating component part exceptions. (California)
  2. Confining the doctrine to products liability or very similar situations. (Florida);
  3. Statutorily providing for new home warranty laws against construction defects.(Connecticut, Indiana, Louisiana, Maryland, Minnesota, Mississippi, New Jersey, New York, and Virginia);
  4. Statutorily providing for notice and right to repair and associated actions (California, Nevada);
  5. Finding that builders have a duty in tort to act without negligence in the construction of residences (Colorado, South Carolina), or
  6. Recognizing exceptions, such as an independent duties (Utah, Colorado), special relationships or foreseeability of plaintiff (Alaska, Delaware, West Virginia).

The Economic Loss Doctrine varies in its application from state to state.  If you have a large loss involving a product, it is prudent to review your jurisdiction’s interpretation of the doctrine, and exceptions to the same, prior to embarking on recovery efforts.

Chinese Drywall Litigation: Preservation of Evidence

Exposed drywall in new constructionOn June 15, 2009, a special panel on multidistrict litigation ordered 10 federal cases involving liability for allegedly defective Chinese manufactured drywall consolidated in the U.S. District Court of the Eastern District of Louisiana with Judge Eldon E. Fallon. It was also ordered that another 67 liability actions involving allegedly defective Chinese manufactured drywall pending in other federal districts, and any other related state or federal action, be treated as potential tag-along actions and consolidated in the same court.

This procedure, referred to as multidistrict litigation, is utilized in the federal court system to consolidate pending federal and state civil cases filed throughout the United States with common questions of fact. The consolidation allows one federal judge to manage, among other things, pretrial procedures, discovery, and dispositive motions. However, after all discovery and pretrial rulings, if issues remain to be tried, the case will be remanded back to the court where it was originally filed for trial.

Judge Fallon has entered a number of orders in the Chinese drywall multi-district litigation. One of interest was entered on October 9, 2009, as Pretrial Order No. 1(B). In that order, Judge Fallon sets forth the duties and obligations for the preservation of physical evidence that must be followed by all individuals in all jurisdictions.

In summary, all individuals and entities who have or intend to pursue claims relating to allegedly defective Chinese manufactured drywall must preserve certain portions of the defective drywall and the damaged property at their own expense. Parties are required to preserve multiple samples of the drywall, drywall end tape, HVAC coil material samples, plumbing component samples, electrical component samples, and other damaged property. All evidence must be photographed or videotaped. Photographs of the evidence should be taken before and after it is removed from the property and documented on a floor plan. Thereafter, all preserved evidence must be individually stored in double-bagged polyethylene zip-lock bags. The samples must be clearly labeled on the outside of one plastic bag and then placed inside the second plastic bag. The label should include the name and address of the property, the date the samples were taken, the type of evidence, and the location where the item was taken from within the property. Finally, the evidence must be stored in a reasonably climate controlled location and free of water or moisture. 

The preservation of evidence is key to any claim involving damage to property. As such, anyone pursuing or intending to pursue a claim for damage caused by allegedly defective drywall should read and strictly comply with Pretrial Order No. 1(B).

North Carolina Extends Statute of Repose for Defective Products to 12 Years

BooksEffective October 1, 2009, North Carolina's statute of repose for claims for defective products will be increased from six to twelve years for actions that accrue on or after October 1, 2009.  N .C .G .S. 1-46.1(a)(1) .  For actions that accrued prior to October 1, 2009, the former statue of six years after the date of initial purchase or consumption will apply. 

This will substantially and positively impact subrogation potential for defective product claims in North Carolina. Interestingly, the statute of repose for improvements to real property will remain six years from the later of the specific last act/omission giving rise to the cause of action or the date of substantial completion .   N.C.G.S.  1-50(a)(5)

It is key that in any claim you have that you are calculating both the statute of limitation and statute of repose periods.  Remember a statute of limitation begins to run from the date of the event or loss.  This is the length of time within which a legal cause of action or suit must be brought.  Whereas, as statute of repose may have begun to run months or even years before the event/loss.  A classic example would be a defective car which catches fire within the garage of a home.  In North Carolina, the statute of limitation for property damages based in tort is generally three years from the event.  However, the statute of repose for the product, in this case the car, will be calculated from the date of sale to the first purchaser.

Suit must be brought before the running of both the limitation and repose periods.

 It is entirely possible that the repose period may have run before the loss or will run shortly after the date of loss.  This was frequently the problem with product claims in North Carolina because of the short repose period of six years.  Now, for events that take place after October 1, 2009, a twelve year repose period will apply and more product claims can be brought as now products between 7-12 years in age will not automatically be excluded which would bar suit against the manufacturer.   In the example above, a claim that occurred prior to October 1, 2009, for a defective 11-year old vehicle is barred because the six year statute of repose still applies to claims before October 1, 2009.  If the fire had occurred today, October 1, 2009, the claim would not be barred because of the longer repose period of twelve years applies.  Note, you would still have to bring suit within one year of the loss (before the end of the 12th year), well before the running of the three year statute of limitation.  While the increase to 12 years for the product repose period is good news for those in the recovery business.

State Flag of North CarolinaKeep in mind that North Carolina still has a fairly short six year statute of repose for improvements to real property.  So, if your house fire was due to defective original wiring in the garage and not the defective vehicle, you would have only a six year repose period that applies to your claim.  Like the example with the car, you might need to bring suit before the running of the limitation period if the six year repose period for the structure will run before the three year limitation period to bring suit expires."

Avoiding Service On Foreign Manufacturers

Subrogation cases often involve the pursuit of manufacturers in foreign countries.  Generally, service of process on those foreign manufacturers must be made pursuant to the requirements of the Hague Convention.  These requirements are time-consuming and costly, however, according to a recent California Appellate Court decision they may not always be necessary.

In Yamaha Motor Co., Ltd. v. Sup. Ct., the California Court of Appeal recently held that under certain circumstances a party may serve a foreign corporation by serving the corporation's American subsidiary.  The court considered factors including whether (1) there is ample regular contact between the local representative and the foreign defendant, (2) the likelihood that the local representative will notify the foreign defendant of the service, and (3) the overall relationship between the two companies.

The court concluded service on Yamaha-Japan was effectuated via service on Yamaha-American as this domestic entity was the “general manager in this state” and was the American face of the Japanese company.  Yamaha-America had (1) an exclusive arrangement to sell the foreign manufacturer's products, (2) provided warranty service and English owner manuals, (3) performed testing and marketing, and (4) received complaints about the manufacturer's products.  As a result, the court concluded that service of Yamaha-American was effective service for Yamaha-Japan under California law.  

Cases involving service of process on foreign manufacturers should be evaluated on a case-by-case basis to determine whether service on its American subsidiary will suffice.  If so, it will save time and money in the pursuit of your subrogation recovery.

Product Recalls: Bolstering Your Subrogation Case

Junk appliancesOne of the first things to do upon receipt of a new subrogation loss involving a product is to check to see if there are any recalls of that product.  Ultimately, if your cause and origin investigator determines the product is the cause of the loss, the recall can greatly strengthen your subrogation case.  It provides effective cross-examination of the manufacturer’s employees and experts, as well as substantial leverage in settlement discussions. 

The United States Consumer Product Safety Commission (“CPSC”) regularly advises the public of product recalls and is an excellent resource.  Recently, the CPSC issued the following product recalls which may be relevant to future subrogation claims:

On July 30, 2008, Frigidaire announced a voluntary recall of clothes washers due to a fire hazard.  An internal defect in the washers’ drain pump case overheats and presents a fire hazard.  This recall involves several models within the six brands manufactured by Frigidaire which were sold nationwide between February 2009 and May 2009.  The Frigidaire brands subject to this recall include Crosley, Frigidaire, Kelvinator, Kenmore, Wascomat and White-Westinghouse

On July 21, 2009, Fiesta Gas Grills announced a voluntary recall of its Blue Ember grills, which are fueled by propane.  These gas grills are manufactured by Unisplendor Corporation and Keesung Corporation, both in China. Fiesta is the national importer.  The hose of the gas tank can get too close to the firebox, exposing it to heat and creating a fire hazard. The grills were sold nationwide between November 2006 and June 2007 and in Canada between November 2006 and May 2009. 

On August 11, 2009, Griffin International issued a voluntary recall on Wii battery recharge stations.  Psyclone Essentials and React Wii 4-dock battery recharge stations are recalled due to a fire hazard. The battery pack can overheat, creating a fire hazard. The battery packs subject to this recall were sold at Target, Toys R Us and on amazon.com from January 2008 to July 2009.

The Rules of the Road Have Changed

Automobile Production LineThe Rules of the Road have changed, literally, with the bankruptcy filings of Chrysler and GM. Their restructurings have moved through the bankruptcy court at a dizzying pace.  The sale of substantially all of Chrysler’s assets to Fiat was approved in June, and in mid-July, a judge approved the sale of GM's most-valuable assets to a new company, majority owned by the federal government.  These reorganizations are structured as asset sales to new entities "free and clear" of tort claims arising from vehicles manufactured and sold pre-bankruptcy.

Through this process, the automakers are eliminating thousands of dealers and leaving tort claimants to recover just pennies on the dollar through the bankruptcy court because Chrysler and GM for all intents and purposes were self-insured for products defect claims.

Chrysler already has obtained bankruptcy court approval of its "free and clear" sale that purports to prohibit the assertion of all current and future claims involving a vehicle it sold pre-bankruptcy against "new" Chrysler.  GM’s treatment of tort claims is somewhat different. Bowing to political pressure, "new" GM has agreed that it would accept liability for all claims involving GM cars that were sold prebankruptcy, so long as the accident occurred after the June 1, 2009 filing of GM’s bankruptcy petition. As with Chrysler, however, claims arising from pre-bankruptcy accidents would still get paid in nearly-worthless "bankruptcy dollars." 

The terms of the sale leave a large group of tort claimants and insurer subrogees largely out of luck in pursuing claims against Chrysler and GM.  While claims which involve cars sold pre-bankruptcy can still be brought against "new" GM if the accident occurred after the June 1 filing of the bankruptcy petition, insurers will find that most other subrogation claims, like those of the tort claimants, will be relegated to the bankruptcy court to be processed as nearly-worthless, unsecured bankruptcy claims.

While "new" GM has accepted some liability for these types of claims, "new" Chrysler has not.  Thus, it is likely that despite the terms of the bankruptcy court order which prohibits the assertion of current and future claims against Chrysler, future claimants will attempt to assert successor liability claims against "new" Chrysler.  In addition to challenging this portion of the bankruptcy court's order in Chrysler, many of these claimants will seek other sources of recovery, such as dealers and suppliers; potentially exposing their insurers to risks they did not foresee underwriting.

Chinese Drywall Litigation

Exposed drywall in new constructionFrom 2004 through 2006, the housing boom and rebuilding efforts necessitated by various hurricanes led to a shortage of construction materials.  As a result, U.S. builders and suppliers imported significant amounts of Chinese drywall, estimated to be enough to construct approximately 100,000 homes.  A number of putative class action complaints and approximately 100 other state and federal complaints including counts for negligence, strict liability, breach of warranty, and violations of consumer protection acts have been filed alleging that the Chinese drywall emits gaseous emissions or “off-gassing” that creates a noxious “rotten egg-like” odor and causes damage and corrosion to home structural and mechanical systems such as air conditioner and refrigerator coils, copper tubing, faucets, metal surfaces, and electrical wiring. Additionally, the “off-gassing” is alleged to cause health problems, including allergic reactions, coughing, respiratory problems, sinus problems, throat infection, eye irritation, and nosebleeds.

Various federal, state, and independent agencies have done testing to determine the cause of the “off-gassing” but none have reached a final conclusion.  On May 7, 2009, the U.S. Environmental Protection Agency’s Environmental Response Team published a drywall analysis comparing a limited number of Chinese drywall samples from Florida homes to U.S. made drywall samples purchased from a Home Depot in New Jersey.

The EPA found significant differences between the Chinese drywall and the U.S. made drywall:

  • Sulfur was detected in the Chinese drywall but not in the U.S. drywall.
  • Strontium in the Chinese drywall was anywhere from twice to ten times the amount found in the U.S. made drywall.
  • Iron concentrations in the Chinese drywall were also significantly higher.
  • Notably, there was no evidence of fly ash found in the Chinese drywall samples or the U.S. samples.

However, the EPA has not issued a final report on the cause of the “off-gassing” and whether it causes property damage and personal injury.

On June 15, 2009, a special panel on multi-district litigation ordered cases involving Chinese drywall consolidated in the U.S. District Court of the Eastern District of Louisiana with Judge Eldon E. Fallon.  The matters are also being closely followed by Florida Congressman Robert Wexler, an advocate for families adversely impacted by homes built with Chinese drywall.

Summer Storms And Lightning CSST Fires

Summer is upon us. Summertime means barbeques and thunderstorms, but it’s best to keep them separate. Most of us have gas-fed barbeque grills, but we know to keep them outside. With thunderstorms, come lightning. For an unfortunate few whose homes contain corrugated stainless steel gas tubing (CSST), lightning will strike at or near their homes and energize the gas piping. As this happens, the energy from the lightning strike will burn a hole through this thin steel material, allowing pressurized flammable gas to escape. At the same time, the heat from the lightning strike will ignite the escaping gas. No one wants a barbeque grill inside their home. 

Unlike last year, this summer has not yet to featured many powerful thunder storms. However, in the few storms that have occurred across the country, we are seeing CSST losses and these losses have recovery potential. Review of several contractor message boards across the country reveals that contractors using CSST are concerned. Many have reverted to using black iron pipe. For those who continue to use the product, they certainly risk liability for continuing to use a product that they now know has a track record for failing under expected conditions.  Simply relying on the manufacturers’ claim that the product is safe may not be enough to avoid this liability.

Through the years, the manufacturer’s installation instructions have changed and the concepts of grounding and bonding have become more significant. Similarly, the newest codes have entire sections devoted how to bond CSST.   The reason these newest sections are devoted to only CSST is that other types of gas piping simply do not have same problems handling lightning. Yet, in homes with bonding and grounding, these losses are occurring. These losses raise the issue of whether bonding and grounding is enough. Or, perhaps, the gas lines, while bonded, were not bonded effectively. What constitutes an effective bond continues to change as much as anything. It would not be much of a surprise if bonding requirements change again in the next round of code updates. In short, all this means is that there are a lot of new homes out there that have gas lines in them that may not be safe and neither the contractors or the CSST industry are alerting the owners of these homes to the problems they have created. 

Nobody wants an indoor barbeque. It’s just not safe.