In Allstate Ins. Co. v. LG Elecs. USA, Inc., No. 19-3529, 2021 U.S. Dist. LEXIS 127014, the United States District Court for the Eastern District of Pennsylvania considered whether plaintiff’s expert engineer’s opinion that there were two possible causes of a fire—both related to alleged product defects within a refrigerator manufactured by the defendant—was sufficient to support the malfunction theory of products liability. The court found that because both potential causes imposed liability on the product manufacturer and the expert ruled out misuse of the product, as well as all external causes of the fire, it was not necessary for the engineer to identify a specific cause under the malfunction theory. The court also found that the expert’s investigation and opinions met the criteria set forth in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) and the Federal Rules of Evidence and, thus, were admissible.
LG Electronics arose from a fire at the home of Thomas and Lisa Ellis. The public sector fire investigator identified the area of fire origin as the top of a refrigerator manufactured by LG Electronics USA, Inc. (LG). The Ellises filed a claim with their homeowner’s insurance carrier, Allstate Insurance Company (Insurer). Insurer retained a fire investigator and an electrical engineer to investigate the origin and cause of the fire. The fire investigator agreed with the public sector investigator that the fire originated at the top of the refrigerator. The engineer conducted a forensic inspection of the scene and ruled out all potential external ignition sources. He then examined the internal components of the refrigerator. He found arcing activity on a wire at the front top of the refrigerator. He opined that there were two possible causes of the fire: either the heater circuit insulation failed over time due to mechanical damage, or the heat from the internal light fixture ignited combustible components of the refrigerator. Since the engineer ruled out improper use of the refrigerator, he opined that the damage was caused by a manufacturing defect.
Insurer filed a subrogation action against LG to recover the amount it paid the Ellises for the loss. LG filed a Daubert motion to exclude the opinion of Insurer’s engineer. LG argued that the engineer’s opinions were not relevant, were not reached to a reasonable degree of scientific certainty and did not have a proper factual scientific basis. The root of LG’s arguments was that the engineer did not identify the specific cause of the fire, but instead presented two possible causes. LG also filed a summary judgment motion, arguing that without the engineer’s testimony, there was no issue of material fact and Insurer could not meet its burden of proof.
As a necessary basis for its ruling, the court acknowledged that Pennsylvania recognizes the malfunction theory of products liability. Success under this theory requires evidence of an occurrence of a malfunction, evidence eliminating abnormal use and evidence eliminating reasonable secondary causes. The malfunction theory is offered as an alternative method of proving a product liability case and relieves the plaintiff of the need to pinpoint a specific defect. The court held that the malfunction theory was available to Insurer in this case, even though the evidence was available for inspection. The court cited to other Pennsylvania cases where courts found that even though the evidence was able to be inspected, the plaintiff was still allowed to rely on circumstantial evidence to prove a product defect.
The court acknowledged that under Rule 702 of the Federal Rules of Evidence and Daubert, the factors to consider for the admissibility of expert testimony are: 1) whether the expert is qualified; 2) whether the testimony is based on sufficient facts and data; 3) whether the opinions are the product of reliable principles and methods; and 4) were the principles and methods reliably applied to the facts of the case. Since LG did not challenge the expert’s qualifications, the court had to decide if the expert’s opinions were based on sufficient facts and data, were based on reliable principles and methods and whether the expert reliably applied his methodology to the facts. In determining reliability, the court considered whether the method employed consisted of a testable hypothesis, was subject to peer review and was based on generally accepted standards.
The court found that in the engineer’s opinion that there were two possible causes which were relevant and helpful in proving the elements of the malfunction theory. The court held that the plaintiff need not show which of the two potential causes occurred because either one would impose liability on LG. The court also found that the engineer appropriately applied the principles and methods set forth in National Fire Protection Association 921 – A Guide for Fire and Explosion Investigations (NFPA 921), which is the generally accepted standard for fire origin and cause investigations. The court found that the engineer’s process of conducting a scene inspection and destructive examinations of the evidence were sufficient methods. Contrary to LG’s assertions, the court noted that NFPA 921 did not require any specific testing or physical experimentation. Finding that the engineer utilized reliable principles and methods to reach his conclusions, the court denied LG’s Daubert and summary judgment motions.
LG Electronics highlights that, in Pennsylvania, the malfunction theory is available to a plaintiff in a products case even if a specific product defect cannot be identified, provided that the plaintiff can rule out secondary causes and abnormal misuse. The malfunction theory is a particularly helpful alternative in property subrogation cases, where the evidence is often severely damaged to the point where the specific failure mode cannot be ascertained. A subrogating plaintiff in Pennsylvania should be aware that the malfunction theory is an available option if there is sufficient circumstantial evidence to satisfy the elements of this alternative theory. LG Electronics also provides an insightful analysis of Daubert in the context of cause and origin investigations, with which subrogation professionals are typically involved.