On June 19, 2018, the Pennsylvania Supreme Court decided Whitmoyer v. WCAB (Mountain Country Meats), No. 52 MAP 2017, 2018 Pa. Lexis 2995. The decision reversed longstanding Pennsylvania law and the Commonwealth Court’s decision. The net result of this decision: an insurer can no longer assert a future credit on projected medical benefit payments when settling a third-party case. However, insurers may continue to assert a future credit on indemnity payments. Continue reading
In Adams v. Hellings Builders, Inc., 2016 Pa. Super. 192, 2016 Pa. Super. LEXIS 487, Christopher Adams and his wife, Margaret Adams (Plaintiffs), filed suit against Defendant Hellings Builders, Inc. (Hellings) to recover for moisture-related damage to their home caused by Hellings’ allegedly defective installation of stucco. Hellings filed Preliminary Objections, arguing that Plaintiffs failed to state a claim because they were not in privity with Hellings and they had no direct business dealings with Hellings.
In Brown v. Greyhound Lines, Inc., 142 A.3d 1 (Pa. Super. May 24, 2016), the Superior Court of Pennsylvania addressed attorney-client privilege and work product claims associated with the ordered production of materials from a third-party administrator’s claim file. The court also discussed whether the video recording of a mock deposition of a defendant’s employee was discoverable as a recorded statement. With respect to the first issue, the court rejected the defendants’ wholesale claim of privilege related to any and all original investigation statements in the third-party administrator’s file. With respect to the ordered production of the mock deposition video, the court found that the video was discoverable pursuant to Pa. R.C.P. 4003.4. The Brown case serves as a reminder that a third-party claims administrator’s file materials may be discoverable and recorded statements by party witnesses, even if conducted by counsel in the form of an interview, may be discoverable if they are recorded by a third-party such as a court reporter or videographer.
By: Edward Jaeger and Michael Wolfer
In Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Architects and Engineers, 119 A.3d 1070 (Pa. Super. 2015), the Pennsylvania Superior Court recently held that a negligent misrepresentation claim against an architect does not require a plaintiff to make allegations of an express misrepresentation by the architect in order to survive a motion for judgment on the pleadings based on the economic loss doctrine. The court held that, pursuant to Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454 (2005), a plaintiff may sufficiently plead a negligent misrepresentation claim by asserting that the architect’s design documents contained false information.
When an insurer, as subrogee of its insured, files suit against a defendant to recover its subrogated payments, the defendant, not infrequently, files a third-party complaint against the insured. Typically, the defendant alleges that, if it is liable, then the insured, based on his or her contributory negligence, is liable to the defendant for contribution. Insureds, however, cannot be liable in tort to themselves.
In Tincher v. Omega Flex, Inc., — A.3d –, 2014 WL 6474923 (Pa. Nov. 19, 2014), the Supreme Court of Pennsylvania discussed the Commonwealth of Pennsylvania’s products liability law and, overturning prior precedent, clarified the law. In particular, the Court, overturned Azzarello v. Black Brothers Company, 480 Pa. 547, 391 A.2d 1020 (1978), clarified the role of the judge and the jury in products liability cases and settled the question of whether Pennsylvania would adopt the Restatement (Third) of Torts: Products Liability §§ 1, et. seq. (Third Restatement) as the standard for deciding Pennsylvania products liability cases. The Tincher decision makes clear that Pennsylvania will continue to apply § 402A of the Restatement (Second) of Torts (Second Restatement) in products liability cases and that jurors, not the court, will decide the question of whether a product is in a defective condition. Plaintiffs may prove that a product is defective using either the consumer expectations test or the risk-utility test.
The Tincher case arose out a fire that occurred at the home of Terrance and Judith Tincher on June 20, 2007. The Tinchers alleged that the fire started when a lightning strike near their home caused a small puncture in corrugated steel tubing (CSST) carrying natural gas to a fireplace located in their home. The defendant, Omega Flex, Inc. (Omega Flex) manufactured the CSST.
In 2008, the Tinchers filed a complaint against Omega Flex that included a strict liability claim. The Tinchers based their strict liability claim on § 402A of the Second Restatement, as followed and construed in Pennsylvania. Among other things, the Tinchers alleged that the CSST was defective and unreasonably dangerous for intended users because its walls were too thin to withstand the effects of lightning.
Prior to trial, Omega Flex filed a Motion in Limine requesting that, rather than apply § 402A, the trial court apply the Third Restatement to the Tinchers’ strict liability claim. The trial court did not resolve the Motion before trial. Omega Flex, assuming that the trial court denied its request to apply the Third Restatement, defended the case using the § 402A standard.
At the end of the trial, the jury found in favor of the Tinchers. In its post-trial motion and on appeal to the Superior Court, Omega Flex renewed its argument that the trial court should have applied the principles articulated in the Third Restatement. The Superior Court affirmed the judgment, holding, among other things, that the trial court did not err in declining to adopt the Third Restatement.
Subsequently, Omega Flex filed a petition for allowance of appeal to the Supreme Court of Pennsylvania, asking the Supreme Court to decide whether the analysis of the Third Restatement should replace the strict liability analysis of § 402A of the Second Restatement. The Supreme Court granted Omega Flex’s petition for allowance of appeal.
The Old Standard
As noted in Tincher, Pennsylvania adopted § 402A of the Second Restatement in 1966 in Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (1966). Pursuant to § 402A, “[o]ne who sells any product in a defective condition unreasonably dangerous to the user or consumer or his property is subject to liability . . . if [the product] is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.” Section 402 applies even if the seller has exercised all possible care.
In Azzarello, the Court held that, because the phrase “unreasonably dangerous” is per se misleading to lay jurors, the questions of whether a product is in a “defective condition” and “unreasonable dangerous” – questions that relate to the risks and utilities of a product – were questions for the Court. Thus, following Azzarello, juries were not instructed on the standard for determining whether a product was unreasonably dangerous. The jury’s function was to determine whether the plaintiff proved the factual allegations in the Complaint. In cases alleging a design defect, the jury could find a defect where the product left the supplier’s control lacking any element necessary to make it safe for its intended use or possessing any feature that rendered it unsafe for its intended use.
Because the relevant inquiry at trial was the condition of the product rather than the reasonableness of the manufacturer’s conduct, the case law after Azzarello reflected an increasing concern with segregating strict liability and negligence concepts. In Tincher, the Court acknowledged that having courts decide whether a product was unreasonably dangerous while juries were instructed that a product must be provided with every element necessary to make it safe for its intended use “led to puzzling trial directives that the bench and bar understandably have had difficulty following in practice”. Thus, in Tincher, the Court overruled Azzarello.
The Revised Standard
Although the Tincher Court overruled the Azzarello decision, the Court did not abandon its adoption of § 402A of the Second Restatement. Similarly, it did not abandon the principles underlying Pennsylvania’s strict liability law, principles which recognize that strict liability has its roots in both negligence and warranty law and seek to hold those who sell a product responsible for damage caused to a consumer by the reasonable use of the product. Consistent with these basic principles, the Court held that “a person or entity engaged in the business of selling a product has a duty to make and/or market the product – which ‘is expected to and does reach the user or consumer without substantial change in the condition in which it is sold’ – free from ‘a defective condition unreasonably dangerous to the consumer or [the consumer’s] property.’”
To demonstrate a breach of this duty, a plaintiff must prove that the seller, whether a manufacturer or a distributor, placed the product on the market in a “defective condition.” To establish that a product was in a “defective condition” when it was placed on the market, a plaintiff can use either a consumer expectation test or a risk-utility test. According to the Court, this composite standard – allowing the use of either the consumer expectation test or the risk-utility test – allows the appropriate test to be applied based on the factual circumstances of each case. In addition, by balancing the interests inherent in either a negligence or breach of warranty standard, the composite strict liability standard effectuates a further shift of the risk of harm onto the supplier than either a negligence or breach of warranty standard can achieve.
As stated in Tincher, when a plaintiff proceeds utilizing a risk-utility theory, in order to prove that the harm suffered was due to the defective condition of the product, the plaintiff has the burden of proving the risks and utilities of the product. However, how the burden of proof will operate in products liability cases remains an open question. Although the Court acknowledged that the California case upon which its alternative consumer expectations/risk-utility balancing test is based, Barker v. Lull Engineering Co., 573 P.2d 443 (Cal. 1978), shifts the burden of production and persuasion to the defendant when the plaintiff is proceeding on a risk-utility theory, the Court noted that other jurisdictions also shift the burden of proof to the defendant. Ultimately, the Court left the question of which party has the burden of proof when the plaintiff is proceeding on a risk-utility theory for another day, to be decided in an appropriate case. In addition, the court left open the question of whether the standard it announced would, outside of the Tincher case, be applied retroactively or prospectively.
In its discussion tracking the development of strict liability law in Pennsylvania, the Court acknowledged that, looking back, its case law “offered a series of missed opportunities to develop a vibrant and coherent body of common law on the issue.” As noted by the Court, although the Webb Court adopted § 402A, it did so without explaining how § 402A derived from or complimented existing common law. Similarly, the Court did not provide direction concerning how trial courts should instruct juries or apply § 402A.
Concerned that it would repeat the mistakes that the Azzarello Court made when it issued its broad holding, the Tincher Court stated that, because it is difficult for courts to determine the range of factual circumstances to which a particular rule should apply, the common law should develop “incrementally, within the confines of the cases as they come before the Court.” The Court supported its decision to apply an incremental approach by stating that, while general rules may apply to a “typical” case, courts must recognize that “circumstances like product diversity, general uncertainties inherent in the creative process, difficulties in recreating the design process, [and] difficulties in the discovery process . . . may contribute to whether cases other than the typical case will generate a dispute and resulting decisional precedent.”
Consistent with its goal of developing the law incrementally, as the facts of a particular case require, the Court acknowledged, but did not address, the argument that the risk-utility test should be used to limit liability exposure regardless of whether the claim relates to a known/foreseeable risk or an unknown risk. Rather, the Court held that it would wait to address this argument in an appropriate case. Similarly, rather than decide whether to adopt the burden of proof standard articulated in Barker when the plaintiff is proceeding on a risk-utility theory, the Court chose not to resolve the issue, finding that “[t]he ultimate answer to the question best awaits balancing in an appropriate case. . . .”
Although the Tincher decision leaves some questions unanswered, the decision makes clear that Pennsylvania will continue to apply § 402A of the Second Restatement in products liability cases and that jurors, not the court, will decide the question of whether a product is in a defective condition. Plaintiffs may prove their design defect claims using either the consumer expectations test or the risk-utility test. In other words, plaintiffs may prove a defective condition “by showing either that (1) the danger is unknowable and unacceptable to the average or ordinary consumer, or that (2) a reasonable person would conclude that the probability and seriousness of the harm caused by the product outweigh the burden or costs of taking precautions.”
To assist courts who will have to apply the law in the future, the Tincher Court provided a detailed discussion of the strict liability doctrine’s background and the rationale for its decision, a discussion that the Court failed to provide when it first adopted § 402A in Webb. Thus, although the Tincher decision leaves some unanswered questions with respect to how Pennsylvania courts should apply § 402A going forward, Pennsylvania courts should be able to use Court’s commentary to develop the common law without the confusion that followed the Azzarello decision.
For more information regarding this alert, please contact Ed Jaeger (215.864.6322 / firstname.lastname@example.org) or Bill Doerler (215.864.6383 / email@example.com).
In Conway v. Cutler Group, Inc., — A.3d –, 2014 WL 4064261 (Pa.), the Supreme Court of Pennsylvania addressed the question of whether a subsequent home buyer can recover from a home builder pursuant to the builder’s implied warranty of habitability, a warranty that protects those who purchase a newly constructed home from latent defects. Concluding that a builder’s warranty of habitability is grounded in contract, the Court held that a subsequent purchaser of a previously inhabited home cannot recover damages from a builder-vendor based on the builder-vendor’s breach of the implied warranty of habitability. The Court’s decision leaves unanswered the question of whether a purchaser who is also the first user-purchaser of a new home can pursue a breach of warranty action against a builder with whom the purchaser is not in privity of contract.
In Conway, the Cutler Group, Inc. (Cutler) sold a new home to Davey and Holly Fields. The Fields subsequently sold the home to Michael and Deborah Conway. After the Conways discovered water infiltration problems in their home, they filed a one-count complaint against Cutler, alleging that Cutler breached its implied warranty of habitability. In response to the Conways’ complaint, Cutler filed preliminary objections, arguing that the warranty of habitability extends from the builder only to the first purchaser of a newly constructed home. The trial court sustained Cutler’s preliminary objections based on the lack of contractual privity between the parties and the Conways appealed the trial court’s decision. On appeal, the Superior Court reversed, stating that the implied warranty of habitability is based on public policy considerations and exists independently of any representations by the builder, and even in the absence of an express contract between the builder and the purchaser. Cutler appealed the Superior Court’s decision to the Supreme Court.
To address the question of whether the implied warranty of habitability extends to a subsequent purchaser of a used residence, the Court discussed the history of the implied warranty of habitability in Pennsylvania. As stated by the Court, the Court adopted the implied warranty of habitability in the context of new home sales to reject the traditional doctrine of caveat emptor (buyer beware) because the purchaser of a new home justifiably relies on the skill of the developer. Thus, as between the builder-vendor and the buyer, the builder should bear the risk that the home he builds is habitable and functional. In adopting the doctrine, the Court noted that the doctrine is rooted in the existence of a contract – an agreement of sale – between the builder-vendor and the buyer.
Although the Superior Court extended the doctrine to subsequent purchasers of a used residence on public policy grounds, the Supreme Court concluded that the question of whether the implied warranty of habitability should be extended to the subsequent purchaser of a used residence is a matter of public policy for the General Assembly, not the Court, to decide. Although the Court recognized that courts have the power to formulate public policy in the clearest cases, the Court found that the issue before it did not present such a case. Thus, the Supreme Court declined to extend the implied warranty of habitability beyond its current formulation, a formulation that requires privity of contract between the parties.
In reaching its decision, the Supreme Court distinguished the facts of the Conway case from the facts in Spivack v. Berks Ridge Corp., 586 A.2d 402 (Pa. Super. 1990), the case on which the Superior Court based its decision. In Spivack, the plaintiffs purchased a “yet-to-be-constructed” condominium from a developer, who was a separate and distinct entity from the builder/general contractor of the condominium. After finding deficiencies in the condominium, the plaintiffs sued the builder/general contractor based on a breach of the builder’s warranty of habitability. The Superior Court held that, where a builder knows or should know that a home’s first purchaser will not be its first user, the builder’s implied warranty must, necessarily, extend to the first user-purchaser. Thus, as stated by the Conway Court, the warranty of habitability adopted in Spivack applies only in circumstances where the first purchaser never used or occupied the home. This was not the situation that the Court addressed in Conway.
In holding that the implied warranty of habitability does not extend to a subsequent purchaser of a used residence, the Court declined to rule on the propriety of the Superior Court’s analysis in Spivack. Thus, despite the fact that the Supreme Court declined to extend the implied warranty of habitability to used home buyers who are not in privity with the builder-vendor, an injured party who falls within the Spivack fact pattern – as the first user-purchaser of a new home – should continue to assert implied warranty of habitability claims against his or her builder/general contractor. Ultimately, however, whether a first user-purchaser who is not in privity with the defendant builder will succeed on his or her implied warranty of habitability claim is, based on the analysis in Conway, an undecided question.
For more information regarding this alert, please contact Ed Jaeger (215.864.6322 / firstname.lastname@example.org) or Bill Doerler (215.864.6383 / email@example.com).