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

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

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

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

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

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

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

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In Canada, the right of subrogation is a product of the common law, although it may be modified by statute or contract. Unlike in the United States, Canadian common law provides that an insurer may sue only in the name of the insured in relation to a subrogated claim .That rationale has its roots in the need to provide a process by which the insurer would be able to exercise its subrogated rights. Historically, insureds were required to take all steps within their power to reduce a loss for which they had received indemnity, including exercising legal remedies against third parties. Since those remedies were personal to the insured, however, they could only be exercised in the name of the insured as a matter of procedural law. The common law did not provide a method whereby a person could be compelled to commence an action against another; therefore insurers had to apply to the Chancery Court to compel an insured to allow his or her name to be used for legal proceedings against third persons in order to reduce the loss.

The tenet still holds true today, and is illustrated by an exception to the rule discussed in the Ontario Court of Appeal case of Freudmann-Cohen v. Tran, 2004 CanLII 34765 (Ont. C.A.) . In Freudmann-Cohen, the plaintiff was injured in a motor vehicle accident when her car was struck by another vehicle. Since the driver of the offending vehicle was underinsured, the plaintiff asserted a claim under her own automobile insurer for underinsured motorist coverage. Her insurer, Zurich, subsequently learned that the defendant had been delivering pizza for Pizza Nova franchise at the time of the accident and that the franchisee had insurance coverage. It then issued a third party claim in its own name against the defendant pursuant to Rule 29.01 of Ontario's Rules of Civil Procedure, which states that: "A defendant may commence a third party claim against any person who is not a party to the action and who...should be bound by the determination of an issue arising between the plaintiff and the defendant." Zurich argued that Rule 29.01 constitutes a procedural scheme, with the force of regulation, which overrides the normal subrogation principle requiring an insurer claiming a subrogated right to sue in the name of the insured in circumstances such as these.

The Ontario Court of Appeal agreed, and held that the subrogation principle obliging the insurer to sue in the name of the insured is a procedural requirement itself, as opposed to a substantive obligation. While subrogation is a matter of substance rather than form, this aspect of subrogation is a matter of the procedure to be followed in the exercise of the substantive right of subrogation. The court noted however that:

"[t]he fact that Zurich has resorted to the third party procedure to put its subrogated claim on behalf of the plaintiffs in play in the action does not mean that Zurich is asserting the plaintiffs’ claim against Pizza Nova in Zurich’s own name. As I have earlier pointed out, rule 29.01 merely provides a mechanism whereby the defendant Zurich may ensure that an issue regarding which the third party should be bound is determined in the action; it is not necessary that that issue arise out of a claim whereby the defendant says the third party is or may be liable to the defendant. In my view, Zurich is entitled to resort to the third party rule in its own name in these circumstances."

As this case demonstrates, the right of an insurer to bring a subrogated action is derivative; that is, it merely a right to make such claim for damages as the insured himself could have made. For this reason, the general rule still holds in Canada that a subrogated action must be brought in the insured's name, rather than that of the insurer.

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