Cigna Insurance Co. v. Oy Saunatec Ltd

Decision Date31 July 2000
Docket NumberNo. 99-1964,No. 99-1912,99-1912,99-1964
Citation241 F.3d 1
Parties(1st Cir. 2001) CIGNA INSURANCE COMPANY, AS SUBROGEE OF WALTHAM RACQUET CLUB, INC. Plaintiff, Appellee/Cross-Appellant, v. OY SAUNATEC, LTD., a/k/a HELO FACTORIES LTD., a/k/a SAUNATEC PLC. Defendant, Appellant/Cross-Appellee. & Heard
CourtU.S. Court of Appeals — First Circuit

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Elliott R. Feldman with whom William N. Clark, Jr., Cozen and O'Connor, Roy P. Giarrusso and Giarusso, Norton, Cooley & McGlone were on brief for Plaintiff, Appellee.

Robert D. Rachlin with whom Eric A. Poehlmann and Downs Rachlin & Martin PLLC were on brief for Defendant, Appellant.

Before Boudin and Lipez, Circuit Judges, and Casellas,* District Judge.

LIPEZ, Circuit Judge.

On March 18, 1997, the Waltham Racquet Club suffered severe damage from a fire that began on the sauna heater located in its men's sauna room. Its insurer, Cigna Insurance Company, later instituted this subrogation action against OY Saunatec, Ltd., the manufacturer of the sauna heater, alleging that Saunatec had negligently designed the heater, negligently failed to warn, and breached its implied warranty of merchantability. Saunatec appeals and Cigna cross-appeals from a judgment entered on a jury verdict finding in favor of Cigna on its negligence claims and in favor of Saunatec on the breach of warranty claim. The jury found that the club had suffered $853,756.37 in compensatory damages. The jury also found that the club was 35% comparatively negligent, 12% of which was attributable to the club's breach of duty of ordinary care and 23% of which was attributable to the club's failure to install sprinklers in and around the sauna room. The court reduced the damages awarded to Cigna accordingly. We affirm.

I. Background

We summarize the relevant facts, taken in the light most favorable to the verdict. The Waltham Racquet Club, originally constructed in 1974, included a men's sauna room installed by an outside contractor. The sauna room was constructed entirely of wood, with two benches of differing height running around the walls. The contractor also installed the heater at issue in this case, a metal box placed in a corner of the room with heating elements that were designed to be covered by a mound of rocks. The heater did not, however, contain a metal grill that would prevent direct contact with the rocks. There were two wooden railings around the heater to prevent patrons of the club from accidentally coming into contact with the heater itself.

The 480 volt Saunatec heater installed in the club in 1974 was not listed by Underwriter's Laboratories (UL), contrary to Saunatec's policy. The heater was equipped with a thermostat, a control box, and a timer. At the time of its sale to the club, a high limit switch was also installed. This switch was designed to turn the heater off if it should become too hot, but it was removed at some point before the 1997 fire. The high limit switch was not the only part of the heater that had been changed by 1997. The elements, timer, control box, and thermostat had all been replaced in the time between installation and the 1997 fire. These changes had no effect upon the operation of the heater because the replacements were all compatible with the original design.

The heater was designed to be controlled directly by the thermostat and timer. The timer set the hours during which the heater would be in operation, roughly from 5:30 a.m. to 10:45 p.m. During those hours, the thermostat would turn the heating elements on or off depending upon the temperature of the room and the setting on the thermostat. Though there was some dispute over whether the thermostat's sensor was properly located in the sauna room, the jury could reasonably have found that its precise location would not have affected the running of the heater.

Though the 1997 fire is the subject of this case, it was not the first fire that the club experienced as a result of this heater. Sometime between 1978 and 1988,1 someone left a towel on top of the heater's rocks, starting a small fire. The damage from this fire did not extend beyond the sauna room, though there was rather extensive damage to the room itself. Much of the interior woodwork and benches were scarred and burnt; the rest of the sauna suffered smoke damage. After the fire, the club had the damaged wood replaced. The heater was also examined by a licensed electrician who determined that the fire had not caused any damage to the heater.

Despite this first fire, the club continued to use the heater, placing signs in the sauna warning about the danger of fire if items were left on top of the heater. Members were also warned of this danger through notices in the club's newsletter and by members of the club's safety committee. In addition, the club instituted changes in the schedules of the maintenance crew, informing them that they were to check the sauna at least twice every day to ensure that no items had been left near the heater and to remove any items they found there. As a result, the maintenance crew might enter the men's sauna to check for discarded items as often as four times a day in addition to the daily cleanup required as part of the general routine in the club. The club also had a window installed in the door to the sauna and instructed the maintenance crew to look into the sauna for discarded items every time they passed. Finally, the club had smoke detectors located throughout the building, including one that was in the men's room immediately outside of the sauna. These detectors were directly linked to the Waltham Fire Department. The club did not install a sprinkler system, in part because of a mistaken belief that none were available that could operate in the high temperatures of the sauna.

These warnings and other measures did not completely prevent members from leaving towels and other items in the vicinity of the heater, a problem encountered by other clubs that had saunas. On March 18, 1997 at 7 a.m., the club had another fire from combustible materials left on top of the heater. By that time in the morning, the heater had been on for approximately an hour and a half, and the club had been open for an hour. The heater had been checked for discarded items late the night before and none had been found. There were no checks in the morning because the maintenance crew did not arrive until after seven. During the hour that the club was open, a member of the club either accidentally or deliberately left a towel or other combustible item on top of the heater, where it caught fire.

The fire was discovered in its early stages by members in the men's locker room who tried unsuccessfully to extinguish it. Although the fire department arrived shortly thereafter, the fire caused extensive damage to the men's and women's locker areas, the lower lobby area, the wood joists providing structural support to the second floor, and the restaurant located directly above the sauna and men's locker room. In addition, the entire club suffered smoke and heat damage. Later investigation indicated that the fire had spread quickly because the normal operation of the heater had dried out the wood in the sauna room and made it more combustible.

Cigna insured the club. After settling the club's claim, it instituted this subrogation action against Saunatec, alleging negligent design, negligent failure to warn, negligent failure to warn of post-sale safety improvements, and breach of the implied warranty of merchantability. Jurisdiction was based upon diversity of citizenship, with Massachusetts law providing the rule of decision. After an eight day jury trial, the jury returned a special verdict, finding that Saunatec had negligently designed the heater, had negligently failed to warn the club post-sale that the addition of a metal grill would have eliminated the danger posed by the defect, and had breached its warranty to the club. The jury also found, however, that Saunatec had met its burden of proving its affirmative defense that the club had been unreasonable in its use of the heater, thus preventing Cigna's recovery on the breach of warranty claim. As to Cigna's negligence claims, the jury found the club was 35% comparatively negligent, of which 23% was related to the failure of the club to equip its sauna room with a sprinkler system. The jury assessed damages at $853,756.37. The court reduced that award by the club's 35% comparative negligence before entering judgment in the amount of $554,941.64.2

Following the entry of judgment, the parties filed motions for judgment as a matter of law pursuant to Fed. R. Civ. P. 50.3 The court denied both motions and the parties appealed. On appeal, Saunatec argues that the club's products liability cause of action accrued as of the first fire and is therefore barred by the statute of limitations, that the court erred in placing the issue of the post-sale duty to warn before the jury, and that the court erroneously denied Saunatec's request that the jury be instructed on the affirmative defense of misuse. Cigna, in turn, cross-appeals, challenging the district court's jury instruction on Saunatec's unreasonable use defense and the instruction that the club could have been contributorily negligent by failing to install a sprinkler system in and around the sauna room. Although we normally examine issues raised by the appeal before turning to the cross-appeal, the misuse and unreasonable use issues are so closely related that we will discuss them as a single issue. Otherwise, we deal with the issues raised by the parties in turn.

II. The Standard of Review

The parties appeal and cross-appeal primarily from the denial of their respective motions for...

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