In products liability actions, in order to ensure that all potentially liable parties are included in a lawsuit, subrogation professionals often include strict liability claims against products sellers within the chain of distribution for a product. In West Virginia, the Legislature recently enacted legislation, W. Va. Code § 55-7-31, designed to protect “innocent” sellers from product liability lawsuits. The legislation states that, for actions involving a product sold on or after July 6, 2017, no product liability action – i.e. a strict liability action – can be maintained against a seller unless the seller meets one of the noted exceptions.
Pursuant to § 55-7-31, in order to pursue a strict liability claim against a seller (i.e. a wholesaler, distributor or retailer) under West Virginia law, a subrogating insurer will need to prove, among other things, that:
1) the seller had actual knowledge of the defect;
2) the seller exercised substantial control over the aspect of the defect that was a proximate cause of the claimed damages;
3) the seller altered, modified or installed the product and the alteration, modification or installation was not authorized or requested by the manufacturer, or not performed in compliance with the manufacturer’s specifications;
4) the seller made an express warranty about the product that was independent of the manufacturer’s express warranty;
5) the seller resold the product after its first sale for use or consumption and the product was not in substantially the same condition as it was when it left the manufacturer’s possession;
6) the seller failed to exercise reasonable and product-appropriate care in assembling, maintaining, storing, transporting or repairing the product;
7) the seller removed the manufacturer’s labels or warnings from the product;
8) the seller is a controlled subsidiary of a manufacturer or the manufacturer is a controlled subsidiary of the seller;
9) the seller repackaged the product or placed his or her own brand name or label on the product (subject to certain exceptions);
10) the manufacturer cannot be identified;
11) the manufacturer is not subject to service of process;
12) the manufacturer is insolvent; or
13) it will not be able to enforce a judgement against the manufacturer.
Although the legislation, generally, protects sellers who had no role with respect to creating a product defect from liability, the legislation allows insurers to pursue subrogation against sellers who, based on their knowledge or conduct, should be held strictly liable. In addition, the legislation allows subrogating insurers to pursue sellers in situations where the manufacturer is effectively beyond reach. Pursuant to § 55-7-31, while a truly “innocent” seller may be protected from suit, the exceptions detailed in the legislation should allow subrogating insurers to, when necessary, file suit against sellers to ensure that entities in the distribution chain – rather than a victim’s insurer – are, ultimately, responsible for product defects.