Am. Auto. Ins. Co. v. Omega Flex, Inc.

• Decision Date: 11 June 2013
• Docket Number: Case No. 4:11CV00305 AGF
• Parties: AMERICAN AUTOMOBILE INSURANCE COMPANY, as assignee of FRED AND ADRIENNE KOSTECKI, Plaintiff, v. OMEGA FLEX, INC., Defendant.
• Court: U.S. District Court — Eastern District of Missouri

AMERICAN AUTOMOBILE INSURANCE COMPANY,as assignee of FRED AND ADRIENNE KOSTECKI, Plaintiff,

v.OMEGA FLEX, INC., Defendant.

Case No. 4:11CV00305 AGF

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

Dated: June 11, 2013

MEMORANDUM AND ORDER

Plaintiff American Automobile Insurance Company ("Plaintiff") brings this action against Defendant Omega Flex, Inc. ("Defendant") to recover funds Plaintiff paid its insureds, Fred and Adrienne Kostecki, following a fire at the Kostecki residence in High Ridge, Missouri. Plaintiff asserts that TracPipe, Corrugated Stainless Steel Tubing ("CSST"), manufactured and sold by Defendant, and used to transport propane into the home, was defective and caused the fire. On this basis, Plaintiff alleges liability for three claims: negligent product design; strict liability, under defective product and failure to warn theories; and breach of warranty arising from the use of the TracPipe.

Now before the Court are the parties' cross motions for summary judgment and motions to strike the opinion testimony of expert witnesses pursuant to Daubert v. Merrell Dow Pharmaceuticals., Inc., 509 U.S. 579 (1993). The parties have fully briefed the motions and the Court heard oral argument. For the reasons set forth below,Defendant's motion to exclude the opinion testimony of Dr. Thomas Eagar is granted in part and denied in part; Plaintiff's motion to exclude the testimony of Dr. Harri Kytomaa is denied; Defendant's motion for summary judgment is granted in part and denied in part; and Plaintiff's motion for summary judgment is denied.

I. Background

Upon review of the record, the exhibits and affidavits attached thereto, the Court finds the following facts, which are undisputed, except where noted.

In 2001, Fred and Adrienne Kostecki contracted with HIW, Inc. ("HIW"), to build a house at 3460 Whitby Lane, High Ridge, Missouri ("the Kostecki residence".) Unidentified contractors retained by HIW installed TracPipe CSST to transport propane to and within the residence. HIW declared bankruptcy shortly before it finished building the Kostecki residence.

The Omega Flex 2001 TracPipe Design Guide and Installation Instructions ("2001 D&I Guide"), applicable at the time of the Kostecki construction, provides "general instructions" for the "installation and design" of a TracPipe CSST system. (Doc. No. 56-4, at 3.) The 2001 D&I Guide provides that only a "qualified person who has been trained or otherwise qualified" to install the TracPipe may do so, and states that the "general instructions" for design and installation are to be "used in conjunction with state and local building codes." Id. On the same page the 2001 D&I Guide states in bold, underlined typeface that "Local codes will take precedence in the event of a conflict between this guide and the local code." Id. In the next sentence, the 2001 D&I Guideprovides that '[i]n the absence of local codes installation must be in accordance with the NATIONAL FUEL GAS CODE. . . . Id.

The first page of the 2001 D&I Guide contains a heading reading "WARNINGS" followed by the words "Limitations of Manual" and a black box labeled "WARNING!" stating that "[t]he installation instructions and applicable local codes must be strictly followed." Id. Several pages of specific installation instructions and an illustration follow, describing, among other things, the bonding of the TracPipe to the household grounding electrode during installation. Id. at 4-20. This section of the 2001 D&I Guide concludes with a warning that "bonding is a requirement of the National Electrical Code, which must be followed for all gas piping materials including CSST." Id. at 22. The 2001 D&I Guide does not include any representations regarding TracPipe's merchantability or fitness for a particular purpose. Id.

It is undisputed that during installation the TracPipe in the Kostecki residence was not bonded with a bonding clamp and bonding wire of 6 AWG thickness as described in the 2001 D&I Guide. Mr. Ronald Juergens and Mr. Mark Goodsong, Plaintiff's electrical engineering experts, testified at their depositions that the Kostecki installation did not have a bonding clamp that was attached to the CSST or a bonding wire of 6 AWG thicknesses for the product. Instead, a three prong plug was used for grounding in accordance with the National Electric Code ("NEC") requirements referenced in the 2001 D&I Guide.¹

Defendant's Suggested Price List provides that Defendant "warrants to the original owner at the original installation site that the [TracPipe] will be free from defects in material or workmanship for one year from the date of installation." (Doc. No. 56-16, at 4.) The Suggested Price List further states that this limited warranty "does not apply if the Product has been subjected to misuse or neglect, has been accidentally or intentionally damaged, has not been installed, maintained or operated in accordance with the TracPipe Design and Installation Guide, or has been altered or modified in any way." Id. The Suggested Price List also states in bolded, upper case lettering that the limited warranty "is in lieu of all other warranties, either express or implied, and all such other warranties, including without limitation implied warranties of merchantability or fitness for a particular purpose, are hereby disclaimed and excluded from this limited warranty." Id.

Defendant provides its Suggested Price List to direct purchasers of TracPipe. The record does not indicate whether HIW or its subcontractor purchased the TracPipe from a dealer or directly from Defendant. There is no evidence that the Kosteckis received orread the Suggested Price List accompanying the TracPipe used in their home or that they received any other documents that might give rise to a warranty.

The Kosteckis moved into the residence in 2002, after it passed a local building code inspection. Thereafter, they obtained a home owners' insurance policy from Plaintiff. The policy period extended from May 7, 2009, to May 7, 2010, and covered up to $2,169,800 in damage to the Kosteckis' property ($1,142,000 for dwelling, $228,400 for other structures, and $799,400 for personal property), and $1,020,000 in liability and medical payments to others ($1,000,000 in personal liability for each occurrence and $10,000 for each person for medical payments to others).

The Policy provides in pertinent part:

Definitions

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C. 15. Occurrence means:

a. Under Coverage For Damage To Your Property: accidental loss and damage to covered property which occurs during the policy period and is caused by one or more causes of loss we cover....

Property Losses Not Covered

* * *

B. 1. We will not pay for loss caused by or resulting from any of the following. However, any ensuing loss not excluded in this policy is covered

* * *

e. Inherent vice, hidden or latent defect or any quality in property that causes it to damage or destroy itself

* * *

For the causes of loss described above, except collapse, we do cover resulting loss or damage to covered property unless the resulting loss is itself caused by a cause of loss described in Property Losses Not Covered.

1. We do not cover loss caused by any of the following

* * *

c. faulty, inadequate or defective . . .

(2) design, specifications, workmanship, repair, construction, renovation, and remodeling, grading, compaction;

(3) materials used in repair, construction, renovation or remodeling;

* * *

Policy Conditions

* * *

I. Subrogation

* * *

2. If we require assignment, an insured will sign and deliver all related papers and cooperate with us.

3. In the event of loss which we believe may be collectible from others, we may pay in the form of a loan to be repaid out of any recoveries from others. You will cooperate in every way possible to assist in such recovery from others and we shall, at our expense, take over your rights against others to the extent of your payment.

Pursuant to a one-page document entitled "Assignment and Subrogation Receipt," Plaintiff bought an interest in the claims in this suit by paying the Kosteckis 50% of theiralleged losses. The Receipt also provides that the Kosteckis retain a pro-rata uninsured interest in any recovery Plaintiff obtains.

Defendant sells TracPipe to wholesalers or distributors, who then sell to licensed installers. At the time of purchase, installers are required to produce a card evidencing that they have been trained in TracPipe installation. Installers obtain training cards by attending a training class conducted by a company representative, regional manager, manufacturer's reps, or a person at the wholesale level that has received training.

It is undisputed that Defendant's distributors are not supposed to sell TracPipe to anyone who does not have a training card, but Defendant has no program in place to assure that this requirement is followed or to inform its certified installers of changes in its installation guidelines. It is also undisputed that installation instructions are not provided to certified installers at the point of purchase and new versions of D&I Guides are not provided to certified installers as they are updated.

On April 30, 2010, a thunderstorm moved through the High Ridge area, accompanied by rain and lightning. A fire occurred at the Kostecki home during this lightning storm. As a result of the fire the Kostecki property suffered severe heat, smoke, and water damage.

David Smith, Defendant's testifying fire investigator, has opined that the fire originated directly below the study where it was first observed and that the cause of the fire cannot be determined. Smith's scene investigator conducted a burn pattern analysis indicating that the fire originated in or around the floor truss system between a bedroom on the lower level and the first floor study. The fire spread through the flooring system inthis area, causing the floor in the study to collapse into the basement. Robert Wysong, one of Plaintiff's experts, identified the same area...