Continental Ins. v. Page Engineering Co.

• Decision Date: 05 December 1989
• Docket Number: No. 87-295,I-X,87-295
• Citation: 783 P.2d 641
• Parties: Prod.Liab.Rep. (CCH) P 12,317 CONTINENTAL INSURANCE, Fireman's Fund Insurance Company; St. Paul Insurance Company; Royal Insurance Company; Centennial Insurance Company; and American Home Insurance Company, Appellants (Plaintiffs), v. PAGE ENGINEERING COMPANY, Does, inclusive, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 641

783 P.2d 641

Prod.Liab.Rep. (CCH) P 12,317

CONTINENTAL INSURANCE, Fireman's Fund Insurance Company; St. Paul Insurance Company; Royal Insurance Company; Centennial Insurance Company; and American Home Insurance Company, Appellants (Plaintiffs), v. PAGE ENGINEERING COMPANY, Does I-X, inclusive, Appellees (Defendants).

No. 87-295.

Supreme Court of Wyoming.

Dec. 5, 1989.

Vincent J. Horn, Jr., Cheyenne, and Larry D. Henson, Henson & Henson, San Francisco, Cal., for appellants.

Gary M. Greenhalgh, Greenhalgh, Bussart, West & Rosetti, Rock Springs, and John H. Anderson, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for appellees.

Before CARDINE, C.J., THOMAS, URBIGKIT, and MACY, JJ., and BROWN, J., Retired.

THOMAS, Justice.

The essential determination that the court must make in this case is whether tort theories may be invoked by a purchaser of a product in an instance in which the failure of the product causes damage only to the product that failed (economic loss in the parlance of the authorities). An additional issue is raised questioning the propriety of the entry of a summary judgment in favor of the seller when the buyer asserts that a genuine issue of material fact exists concerning the contractual duties owed by the seller to the buyer. The parties also have argued the applicability of the law relating to an insurance company acting as a volunteer in the payment of the claim for insurance proceeds filed by the buyer. The trial court ruled that the complaint of Continental Insurance, Fireman's Fund Insurance Company, St. Paul Insurance Company, Royal Insurance Company, Centennial Insurance Company, and American Home Insurance Company (Appellants collectively referred to as Continental) failed to state a claim in those counts asserting negligence, strict liability, or failure to warn against Page Engineering (Page) because the only damages asserted were the economic loss to Bridger Coal (Bridger), the buyer of the product. With respect to contractual claims that were asserted, the trial court found that the contract was not ambiguous and that Page's duties expired long before any cause of action accrued. In addition, the district court ruled that Continental was a volunteer with respect to its payment of Bridger's insurance claim. We hold that the trial court correctly ruled that Continental's claims of negligence, strict liability, and failure to warn do not state a claim upon which relief can be granted. We are in accord with the district court's ruling that Page had no existing duty under the contract that related to Bridger's loss in this case. Given those determinations, the question of whether Continental acted as a volunteer in paying Bridger's claims for insurance is moot, and we need not address it. We affirm the trial court's entry of summary judgment in favor of Page, recognizing that, in substance, the judgment constituted a dismissal with prejudice of the claims for relief under tort theories and was a true summary judgment with respect to claims based upon breach of an express or implied contract.

This case arose out of the failure of a reeving block on a very large dragline that Bridger had purchased from Page. A break in the reeving block caused the 100 yard long boom to separate from the rest of the dragline structure and, when it fell, the boom was destroyed. Continental paid Bridger for its damages, which were caused by the collapse of the dragline, and then sought to recover from Page asserting its rights as a subrogee of Bridger.

In the Appellants' Brief, Continental sets forth five primary issues to be addressed, each of which encompasses several sub-issues and arguments. Those are stated as "A. Whether a district court in treating a Wyoming Rules of Civil Procedure Rule 12(B)(6) motion to dismiss as a summary judgment motion may make factual assumptions as to the type of loss, cause of loss, and insurance coverage for the loss; deny plaintiff the right to conduct further discovery; and then grant summary judgment to defendant on the basis of the assumed type of loss, cause of loss, and insurance coverage?

"B. Whether a manufacturer who sells heavy machinery in Wyoming and later discovers that one component of said machinery has a correctable unreasonably dangerous defect may escape liability for 'negligent failure to warn' under the 'economic loss' doctrine when the dangerously defective component fails in a foreseeable manner and destroys a non-defective component of the machinery?

"C. Whether the 'economic loss' limitation on product liability actions should entirely preclude a product liability action which sounds in negligence or strict liability where an unreasonably dangerous defective component of a product fails in a foreseeable manner and destroys a non-defective component?

"D. Whether the district court may make factual assumptions as to cause of loss and based thereon enter summary judgment that the loss was not covered by insurance and thus that insurers are not entitled to subrogation?

"E. Whether any continuing obligation should be implied under a contract for sale of heavy machinery where, after the sale, the manufacturer continues to conduct technical, training and assistance visits to the jobsite; and, if there is no such continuing obligation, whether discovery should be allowed to ascertain the obligations and requirements understood by the manufacturer or imposed by industry custom and practice as to the subsequent visits to the jobsite?"

Page Engineering, in its Brief of Appellee, states the issues presented in this way:

"I. Whether the trial court properly applied the economic loss doctrine, which is cited with approval by the Wyoming Supreme Court and is the controlling law in a clear majority of jurisdictions, to enter summary judgment for appellee on appellants' tort claims (Counts I, II, IV-VI) which seek to recover only for loss to the dragline boom?

"II. Whether any finding of fact was necessary to the district court's award of summary judgment for appellee as a matter of law?

"III. Whether the courts recognize an exception to the doctrine approved by the United States Supreme Court in the East River decision denying recovery for economic loss (damage to the product itself) when the failure of one component of a product damages another component?

"IV. Whether the economic loss doctrine bars strict liability claims for damage to the product itself?

"V. Whether the economic loss doctrine bars claims for negligent failure to warn?

"VI. Whether the trial court properly awarded summary judgment for appellee on appellants' claim for breach of contract for failure to maintain insurance (Count III), negligent failure to maintain insurance (Count IV) and express indemnity (Count V) where the clear and unambiguous language of the 1974 agreement, the only contract relied on by appellants in the record, provides that appellee's duties to Bridger lapsed under the 1974 agreement eight years before the collapse of the dragline?

"VII. Whether the trial court properly denied appellants' motion for continuance of discovery where appellants only sought discovery of facts to establish their theory of failure to warn and the trial court had already found this theory legally insufficient?

"VIII. Whether the trial court properly awarded summary judgment for appellee because appellants were not entitled to subrogation since appellants admitted that the loss to the dragline was due to a latent defect in the dragline and recovery for loss due to a latent defect was excluded from coverage under appellants' insurance policy."

In 1974, Bridger commenced negotiations with Page to purchase a dragline, to be used in its open pit mining operations in Wyoming, which Page would manufacture. Those negotiations culminated in a Purchase Contract which demonstrates a carefully negotiated and prepared agreement of the parties with respect to the responsibilities of both the buyer and the seller. That Purchase Contract provided for integration with a merger clause, which stated:

"This Purchase Contract, including these terms and conditions, the specifications attached hereto and any additional terms and conditions incorporated in and attached hereto constitutes the sole and entire agreement between the parties. The Seller's proposal is incorporated in and made a part of this Purchase Contract only to the extent of specifying the nature and description of the Equipment ordered, and then only to the extent that such terms are consistent with the terms of this Purchase Contract. No other items or conditions shall be binding upon Buyer unless accepted by it in writing."

In paragraph ten of the purchase agreement, Page's warranty of the dragline was set forth in this language:

"Seller warrants that the Equipment and all parts thereof shall be free from defects in design, material, workmanship and title, and shall conform in all respects to the terms of this Purchase Contract, and, if no quality is specified, shall be of the best quality consistent with the nature and type of equipment usual and customary for draglines. If within one (1) year from (a) the date that the equipment is available for commercial operation (capable of stripping overburden) or (b) thirty (30) days after the date the dragline first walks, whichever is earlier, the Equipment, or any part thereof, does not conform to these warranties, and Buyer shall have notified the Seller within a reasonable time after its discovery of such nonconformity, Seller shall thereupon promptly correct such nonconformity at its sole expense. The conditions of any subsequent tests shall be mutually agreed upon and Seller shall be notified of and may be represented at all tests that may be made. In the event that the Equipment or any component parts are replaced pursuant to this warranty, such replacement Equipment and parts shall be warranted and guaranteed as provided herein for a period of one (1) year after such...