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

Article I, Section 19 of The California Constitution provides that just compensation be paid when private property is taken or damaged for public use.  *STOP*  Take a deep breath.  It is not as tough as it sounds.  In fact, after reading this blog you'll likely find yourself asking "Why haven't I used inverse condemnation as a cause of action in fire cases before?".

Insurance carriers have incurred more than a billion dollars in damages arising from the California wildfires over the past few years.  The causes of these fires include arson, discarded cigarettes and failed utility equipment owned or operated by government entities or privately owned public utility companies.  When the latter are to blame, rest assured that inverse condemnation is the preferred cause of action to champion your fire subrogation case.  It's both a shield and a sword against government entities and public utilities.

The Shield:      In California, government entities require an injured party to file a claim within six (6) months of an incident to preserve a cause of action for Dangerous Condition of Public Property.  Inverse condemnation does not require the filing of any claim form and has a three (3) years statute of limitations.  Even assuming you win the race to file a timely notice, you will still need to prove the public entity or utility had notice of the dangerous condition in order to prevail under a Dangerous Condition of Public Property cause of action.  Inverse Condemnation has no requirement to prove notice of the dangerous condition.

The Sword:  A plaintiff need only prove the necessary elements of the cause of action to prevail  - (1) a public entity or privately owned utility company (2) took/damaged (3) private property for (4) public use (5) without just compensation.  [Note: Flood/levee cases have some different requirements.].  A plaintiff does not need to prove (1) negligent conduct; (2) fault on the part of the government entity or public utility; (3) that the loss was foreseeable; or (4) how or why the loss even occurred.   Moreover, liability and causation are issues to be determined by a judge, not a jury, which eliminates potential bias against insurance companies.  As if this is not enough incentive, a plaintiff that prevails under an inverse condemnation cause of action is also entitled to recover attorneys'  fees and costs.

Inverse condemnation is a recognized cause of action in many jurisdictions, though its application varies from state to state.  Still, the next time you receive a fire loss in which a government entity or privately owned public utility company is a potential defendant, look to see if the elements of inverse condemnation are met.  If so, don't be afraid to wield the sword and reap the benefits.

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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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