Champion v. Panel Era Mfg. Co.
| Decision Date | 03 February 1982 |
| Docket Number | No. 8428,8428 |
| Citation | 410 So.2d 1230 |
| Court | Court of Appeal of Louisiana — District of US |
| Parties | Bruce CHAMPION, Jr., et al., Plaintiffs & Appellees, v. PANEL ERA MANUFACTURING COMPANY, et al., Defendants & Appellants, v. KAISER ALUMINUM & CHEMICAL CORPORATION and Mosinee Paper Corporation, Third-Party Defendants & Appellees. |
Porteous, Taledano, Hainkel & Johnson, William A. Porteous, III, New Orleans, for defendants-appellants.
Trimble & Associates, Harry F. Randow, Alexandria, Mayer, Smith & Roberts, Alex F. Smith, Jr., Shreveport, for defendants-appellees.
Gahagan & Gahagan, Henry C. Gahagan, Jr., Brittain & Williams, Jack O. Brittain, Natchitoches, for plaintiffs-appellees.
John G. Williams, Natchitoches, for intervenors.
Before CULPEPPER, FORET and CUTRER, JJ.
This is a products liability case. Plaintiffs and intervenors are the owners of chicken houses. They seek damages caused by allegedly defective insulation material used on the roofs of their houses. The original petition was filed August 29, 1978 by 21 chicken house owners against Panel Era as the finished product manufacturer, Kaiser Aluminum & Chemical Corporation, manufacturer of the aluminum foil component used in the insulation, various building contractors who had built poultry houses for the plaintiffs, and the manufacturers of the corrugated metal roofing used in the houses. A petition of intervention was subsequently filed by two more chicken house owners. Mosinee Paper Corporation and Diamond Alkali Company, manufacturers of other components of the insulation, were named as additional defendants by amending and supplemental petitions. On March 4, 1980, a supplemental and amending petition was filed by the plaintiffs to add as a defendant American States Insurance Company, an Indiana corporation, the alleged products liability insurer of Panel Era. American States answered, denying coverage, and, alternatively, made a third party demand against Kaiser and Mosinee for indemnity and/or contribution. Panel Era filed a third party demand against American States on the coverage issue.
All defendants except Panel Era, American States, Kaiser and Mosinee were eventually granted summary judgments or judgments of dismissal. Kaiser and Mosinee settled with the plaintiffs and were thereafter released as principal defendants.
When plaintiffs learned that the defendant, American States Insurance Company, was merely the excess insurer of Panel Era, further pleadings were filed to add as primary insurer American States Insurance Company of Texas, which in turn filed a third party demand against Kaiser and Mosinee. The insurers, hereinafter referred to as "American States", filed an exception of no right or cause of action on the grounds that since this is an action in contract, not tort, the insurers cannot be sued by direct action. This exception was denied at a hearing held October 9, 1980. At the same time, the trial court ruled that the settlement agreements between plaintiffs and the previously released defendants, Kaiser and Mosinee, were inadmissible as evidence at trial before a jury.
At the time of trial, the parties were aligned in the following manner:
1) Principal demand: Plaintiffs and Intervenors v. Panel Era, American States of Texas, and American States.
(2) Third party demands:
(a) Panel Era v. American States of Texas and American States (coverage issue).
(b) Panel Era, American States of Texas, and American States v. Kaiser and Mosinee (indemnity and/or contribution claim).
A lengthy trial by jury was held, resulting in a verdict on the principal demand in favor of the plaintiffs and intervenors and against Panel Era, American States of Texas and American States. The verdict on the first third party demand was in favor of Panel Era and against American States of Texas and American States. On the second third party demand for indemnity or contribution, the verdict was in favor of Kaiser and Mosinee and against American States. Judgment was rendered pursuant to this verdict. The defendants, American States of Texas and American States, appealed. Plaintiffs and intervenors answered the appeal, seeking increases in the damages and in the attorneys' fees for services rendered on appeal.
The following issues have been raised for our consideration: (1) Do the plaintiffs have a right of direct action against American States under LSA-R.S. 22:655, and, if so, did their tort action prescribe before sued upon? (2) Is there coverage under the policies issued to Panel Era by American States? (3) Should coverage have been denied for the claims of the intervenors by reason of Panel Era's delay in notice? (4) Should the settlement and hold harmless agreements executed by plaintiffs and intervenors with Panel Era, Kaiser and Mosinee have been admitted as evidence before the jury? (5) Did the amount of damages awarded by the jury constitute an abuse of discretion, and was there double recovery by plaintiffs and intervenors for the purchase price of the insulation? (6) Should the defendants receive a credit for use of the insulation up until the date of trial? (7) Did the court err in absolving Kaiser and Mosinee from any and all liability to insurers for plaintiffs' damages? (8) Should the letter to the defendant by plaintiffs' attorney have been admitted into evidence as an admission by one of the parties? (9) Were the expert witness fees excessive? (10) Should the award of attorneys' fees be increased?
Panel Era's product has the tradename "Insul-Sheath". It obtains from Kaiser Aluminum rolls of thin aluminum foil, to which is glued on one side a flame-retardant kraft paper, obtained by Kaiser from Mosinee. This bonded foil and paper is used by Panel Era as the outside walls of Insul-Sheath, with the foil on the outside. The rolls are fed through a machine that adds a polyurethane core in a gaseous form between the outside walls. This gas is expanded by heat to a width of approximately one inch. It then solidifies and constitutes the insulating material between the outside walls. The Insul-Sheath is then cut into sheets of various dimensions.
When Panel Era first started making Insul-Sheath it used a paper which was not flame-retardant. Later it started using a fire-resistant paper. The flame-retardant characteristic was derived from water soluble chemicals impregnated in the paper purchased by Kaiser from Mosinee. The switch to a flame-retardant paper was made because Panel Era felt that such a characteristic would be an additional selling point for its product. The president of Panel Era, Frank Roberts, testified the company performed no product testing nor chemical analysis to determine the compatibility of the chemicals producing the flame-resistant feature with the known construction uses of the finished product in buildings with tin roofs.
In order to expand its poultry-producing capacity, Country Pride Foods, Ltd. began during 1977 to solicit contract growers in Natchitoches Parish to build large scientifically designed chicken houses. Its expansion coordinator, Wayne Babin, provided each grower with Country Pride's written recommendations for the size, location and approved building materials for the poultry houses. Panel Era's sales manager met with Babin in Natchitoches in July, 1977 to examine the chicken houses during construction to see if their product would be suitable.
The houses were "A-frame" structures measuring 32 feet in width by one of three different lengths. The studs and rafters were either wood or metal. The sheets of Insul-Sheath were nailed directly on top of the rafters, with the aluminum foil up. The galvanized metal roofing was then nailed directly over the insulation. After viewing the method of construction, Panel Era's representative gave express assurance that its product would be suitable. The Insul-Sheath was then listed by Country Pride as acceptable for use in construction by its poultry growers.
The plaintiffs began to notice corrosion of the galvanized metal in various houses in April of 1978. Mr. Babin of Country Pride was informed of the problem and subsequently confirmed that it was limited to those growers whose houses had been constructed using the Panel Era insulation.
The cause of corrosion was established through testing by experts in chemistry and metallurgy. The fire-resistant chemicals in the Mosinee paper were dissolved by moisture from various sources, including rain water leaking through nail holes, condensation of water along the under side of the metal chicken houses, and the mere presence of high humidity sucked into the core of the insulation through "capillary action" of the polyurethane. The corrosion occurred when the dissolved chemicals came in contact with the zinc exterior of the galvanized tin roofing, causing the zinc to dissolve and the tin to rust. Holes around the roofing nails rusted, the roof leaked, the foil and paper came apart and the insulation fell down inside the houses.
There was no warning by any of the three manufacturers involved as to the possible corrosive effects of these chemicals in conjunction with metal and humidity.
Panel Era was notified of the corrosion problem in April, 1978. This suit was filed in August, 1978. However, American States of Texas was not formally notified of the claim until August, 1980, when this insurer was added as a defendant by supplemental and amending petition.
Defendant-insurers contend the trial court erred in overruling its exception of no right or cause of action, since the direct action against insurance carriers provided for by LSA-R.S. 22:655 is available only in tort actions. They claim that until after the hearing on this exception, plaintiffs had only alleged a cause of action in redhibition, and first alleged a cause of action based on tort in an amending and supplemental petition filed October...
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