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

All 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.

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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.

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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. 

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In 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.

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The 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

It 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.

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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. 

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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.

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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.

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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.

In 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.

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On 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).

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Effective 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.

Keep 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."

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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.

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One 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.

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The 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.

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From 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.

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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.

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