Archive for the ‘Product Liability’ Category

New Jersey Court Turns the Screws on the Insured, Holding That “Your Product” Exclusion Bars Coverage For Defective Product Claim

Thursday, September 11th, 2014

In Titanium Industries, Inc. v. Federal Ins. Co., No. A-1922-12T1, 2014 WL 4428324 (N.J. Super. Ct. App. Div. Sept. 10, 2014), the court held that the commercial general liability policy issued by defendant Federal Insurance Company (“Federal”) to Titanium Industries, Inc. (“TII”) did not provide coverage for TII’s claim based on the policy’s “Your Product” exclusion.

TII manufactured and supplied titanium products, and sold titanium bars to Biomet Manufacturing Corp. (“Biomet”), pursuant to the parties’ long-term supply agreement. Biomet, a manufacturer of orthopedic implants and devices, used TII’s product to manufacture screws that were incorporated into its products. Biomet’s screws were composed entirely of TII’s titanium. After Biomet alerted TII to defects in its titanium bars which undermined the strength of the products manufactured using the screws, Biomed recalled certain affected products. TII and Biomed settled Biomed’s claim, and TII sought defense and indemnification from Federal.

On motions for summary judgment, the trial court ruled in favor of Federal on its motion, and against TII on its motion. The Appellate Division affirmed that ruling, relying on prior decisions by New Jersey state courts. The court noted that an insured bears the risk of its own faulty work, which is a matter of warranty and not insurance coverage. The court determined that the policy would not provide coverage for the claimed loss, which was based solely upon the defective titanium supplied by the insured in contravention of the express warranties made in the parties’ long-term supply agreement. The insured’s titanium was fashioned into screws, as contemplated by the parties’ long-term supply agreement, and the titanium was otherwise unaltered and not appended to other property that was damaged. Thus, the court concluded that Biomet’s claims were for TII’s breach of its warranties regarding the intended use of its product, and the risk of replacement or repair of its faulty goods was the cost of doing business, and was not a risk passed on to Federal. The court further noted that even if the claim fell within the policy’s insuring agreement, coverage was precluded by the policy’s “your product” exclusion, which excluded coverage for “property damage to your product arising out of it or any part of it,” where “your product” was defined to include “goods or products . . . manufactured, sold, handled, distributed or disposed by” the insured, and included “representations or warranties made at any time with respect to the durability, fitness, performance, quality or use of” the insured’s titanium.

 

Eye on Insurance: A Look Back at 2013 and Forward to 2014

Monday, February 3rd, 2014

2013 was a year characterized by continued pressure on the financial sector, a new regulatory landscape and further challenges for the insurance industry branching into emerging risks and economies. The lawyers in our London office authored this update which reviews the key developments and trends for various classes of business during 2013, together with commentary on what we can expect from 2014.

To view and download a PDF copy, click here.

Florida High Court Narrows Application of Economic Loss Rule to Product Liability Actions

Tuesday, March 12th, 2013

In a dramatic reversal of established precedent, the Florida Supreme Court on March 7, 2013 held in a 5-2 decision that the economic loss rule only applies to product liability actions.  Tiara Condo. Ass’n v. Marsh & McLennan Cos., No. SC10-1022, 2013 WL 828003 (Fla. Mar. 7, 2013).  The case was before the Court on a question certified by the Eleventh Circuit Court of Appeals, which asked whether the economic loss rule exception for professionals applies to insurance brokers.  Rather than answer the issue framed by the Eleventh Circuit, the Court restated the certified question to broaden the issue before it as follows:  “Does The Economic Loss Rule Bar An Insured’s Suit Against An Insurance Broker Where The Parties Are In Contractual Privity With One Another And The Damages Sought Are Solely For Economic Losses?” Slip op. at 2 (all caps omitted). The Court answered the rephrased certified question in the negative, holding that the application of the economic loss rule is limited to products liability cases.

The majority of the Court reasoned that the Court “will depart from precedent as it does here when such departure is necessary to vindicate other principles of law or to remedy continued injustice.” Slip op. at 18 (internal citations omitted). Additionally, the Court noted “[s]tare decisis will also yield when an established rule has proven unacceptable or unworkable in practice.” Id. The Court believed that the repeated creation of exceptions to the rule over time, “now demonstrates that expansion of the rule beyond its origins was unwise and unworkable in practice.”  Slip op. at 18.  The Court’s decision, therefore, “return[ed] the economic loss rule to its origin in products liability.”  Id.  Interestingly, the concurring opinion noted that the majority of the Court did not view its decision as a “departure from precedent,” but instead viewed its decision as “the culmination of the Court’s measured articulation of the economic loss rule’s original intent.”  Slip op. at 19 (Pariente, J., concurring).

Chief Justice Polston and Justice Canady dissented with opinions.  Judge Polston noted that as a result of the decision “there are tort claims and remedies available to contracting parties in addition to the contractual remedies, which, because of the economic loss rule, were previously the only remedies available.”  Slip op. at 26 (Polston, C.J., dissenting).  To state it more simply, every breach of contract claim now will be accompanied by a tort claim or claims.  See Slip op. at 35 (Canady, J., dissenting).

 

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