Safeco Ins. Co. of Ill. v. LSP Prods. Grp.
| Decision Date | 04 August 2022 |
| Docket Number | 1:20-cv-00436-DCN |
| Parties | SAFECO INSURANCE COMPANY OF ILLINOIS, Plaintiff, v. LSP PRODUCTS GROUP, INC., Defendant. |
| Court | U.S. District Court — District of Idaho |
Pending before the Court is Defendant LSP Products Group's Motion for Summary Judgment (the “Motion”). Dkt. 28. The Court held a hearing on the Motion on June 9, 2022, and took it under advisement. Now, for the reasons stated below, the Court GRANTS the Motion.
In May 2012, Melissa Norris and Richard Meyers (collectively, the “Buyers”) purchased a newly built house at 125 East Lone Creek Drive, Eagle, Idaho. On or about December 29 2016, a water leak occurred in the master bathroom of the house. The leak flooded the house, causing damage to the house and to blinds, the oven, and the dishwasher in the house. The Buyers filed a claim with their insurer, Plaintiff Safeco Insurance Company of Illinois (“Safeco”). Safeco covered the Buyers' losses under its insurance policy.
Safeco then brought this subrogation action against Defendant LSP Products Group, Inc. (“LSP”), in an attempt to recover the amounts it paid to the buyers. Safeco claims LSP is the manufacturer of the toilet plumbing product, which Safeco alleges was defective and caused the leak. That plumbing product is a water supply line that connects to a toilet. On each end of the water supply line is a plastic coupling nut. Safeco alleges that the plastic coupling nut is prone to fracture during the ordinary and intended use of the water supply line. Dkt. 1, at ¶ 10. Safeco's Complaint contains eight claims: Count I - Strict Liability (Design Defect); Count II - Strict Liability (Manufacturing Defect); Count III - Strict Liability (Failure to Warn/Instruct or Inadequate Warning/Instruction); Count IV -Negligence (Negligent Design); Count V - Negligence (Negligent Manufacture); Count VI - Negligence (Failure to Warn/Instruct or Inadequate Warning/Instruction); Count VII - Breach of Warranty; and Count VIII - Malfunction/Circumstantial Evidence of Defect. Dkt. 1. Each of these claims is brought under Idaho state law.[1]
In its Motion, LSP contends that the tort claims (Counts I-VI and VIII) are all barred by Idaho's economic loss rule and that the contract claim (Count VII) fails as a matter of law because there was no privity of contract, no third-party beneficiary, and the statute of limitations for an express breach of warranty expired.
Safeco did not respond in its brief to LSP's specific arguments about the contract claim (Count VII), asserting only that this issue is moot because the parties had discussed a voluntary dismissal of the claim. At the hearing, Safeco requested to dismiss the claim, and the Court granted that request under Federal Rule of Civil Procedure 41(a)(2). Thus, Count VII of the Complaint is DISMISSED WITH PREJUDICE.
That leaves only one issue for the Court to decide: whether the economic loss rule bars the tort claims.
Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The Court's role at summary judgment is not “to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Zetwick v. Cnty. of Yolo, 850 F.3d 436, 441 (9th Cir. 2017) (citation omitted). In considering a motion for summary judgment, the Court must “view[ ] the facts in the nonmoving party's favor.” Id. To defeat a motion for summary judgment, the respondent need only present evidence upon which “a reasonable juror drawing all inferences in favor of the respondent could return a verdict in [his or her] favor.” Id. (citation omitted). Accordingly, the Court must enter summary judgment if a party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The respondent cannot simply rely on an unsworn affidavit or the pleadings to defeat a motion for summary judgment; rather the respondent must set forth the “specific facts,” supported by evidence, with “reasonable particularity” that precludes summary judgment. Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 997 (9th Cir. 2001).
LSP argues that Safeco's tort claims are all barred under Idaho's economic loss rule.
That rule prohibits recovery of economic losses in strict products liability cases and negligence cases in general.[2] Blahd v. Richard B. Smith, Inc., 108 P.3d 996, 1000 (Idaho 2005). “Economic loss includes costs of repair and replacement of defective property which is the subject of the transaction, as well as commercial loss for inadequate value and consequent loss of profits or use.” Salmon Rivers Sportsman Camps, Inc. v. Cessna Aircraft Co., 544 P.2d 306, 309 (Idaho 1975). It does not include “property damage,” which “encompasses damage to property other than that which is the subject of the transaction.” Id. At issue is whether the damage to the house and items within it is “economic loss” or “property damage.”
LSP's contends that Idaho's economic loss rule depends on the subject of the transaction and that the whole house, and not only the plumbing product, was the subject of the transaction. As such, damage to the house is economic loss. LSP argues that when an item is purchased as part of a larger transaction, the item is integrated into the whole subject of the transaction. For this principle, LSP cites Aardema v. U.S. Dairy Sys., Inc., 215 P.3d 505, 511 n.2 (Idaho 2009); Tusch Enters. v. Coffin, 740 P.2d 1022, 1025-26 (Idaho 1987); and Blahd, 108 P.3d at 1000.
On the other hand, Safeco argues that even if the house were the subject of the transaction, the economic loss rule applies only to the defective property itself, which in this case was only the plumbing product. Safeco distinguishes this case from the facts in Tusch Enterprises and Blahd. In both Tusch Enterprises and Blahd, the distinct defect was the foundation of buildings. Tusch Enters., 740 P.2d at 1024-25; Blahd, 108 P.3d at 999. Whereas a structure's foundation is necessarily integrated into the whole structure, Safeco contends that a small, replaceable plumbing product is not integrated into the whole house. In support, Safeco points to Oppenheimer Industries, Inc. v. Johnson Cattle Co., Inc., 732 P.2d 661 (Idaho 1986); and Brian and Christie, Inc. v. Leishman Electric, Inc., 244 P.3d 166 (Idaho 2010). In Oppenheimer Industries, Inc., the court held that the economic loss rule did not bar a tort claim alleging that the brand inspector's negligence caused the loss of the plaintiff's cattle. 732 P.2d at 664. In Leishman Electric, Inc., the court held that the economic loss rule did not apply to a claim about a subcontractor's negligence in connecting neon signs to the electrical power. 244 P.3d at 170.
Alternatively, Safeco argues that the house is not the subject of the transaction. In Safeco's view, the underlying contract that gave rise to this lawsuit was the installer's purchase of the plumbing product rather than the Buyers' purchase of the house. Additionally, Safeco suggests that some of the damaged property-i.e., the blinds, oven, and dishwasher-may not have been purchased as part of the house. Safeco also claims that the damages for additional living expenses are recoverable because they are “parasitic to an injury” to property. See Duffin v. Idaho Crop Improvement Ass'n, 895 P.2d 1195, 1200 (Idaho 1995) (“[E]conomic loss is recoverable in tort as a loss parasitic to an injury to person or property.”).
The parties disagree about the applicable economic loss rule. Does it turn on the subject of the transaction or on the discrete defective part?
While the application of Idaho's economic loss rule often “rel[ies] on factual comparisons from previous decisions,” the rule is clear-“[e]conomic loss has been defined as, but not limited to, costs of repair and replacement of defective property which is the subject of the transaction, as well as commercial loss for inadequate value and consequent loss of profits or use.” Aardema, 215 P.3d at 510-11 (emphasis added) (cleaned up). Idaho's economic loss rule is not limited to the defective product itself. See Blahd, 108 P.3d at 1001 ( ). Other jurisdictions have different economic loss rules, and some of those rules focus on the defective product itself rather than the subject of the transaction. See, e.g., Ajose v. Interline Brands, Inc., 187 F.Supp.3d 899, 907 (M.D. Tenn. 2016) (applying Pennsylvania's economic loss rule and holding that “recovery under strict liability is permissible when the damage goes beyond the defective product itself”). But Idaho's rule defines economic loss as the “subject of the transaction.”
Thus Safeco's argument that the applicable rule is not the “subject of the transaction” but rather the discrete “defective product at issue” fails. See Dkt. 34-1, at 1, 11-15.[3] What's more, the caselaw Safeco relies on here is inapplicable. Oppenheimer Industries, Inc. and Leishman Electric, Inc. both involved claims of negligent services in which there was no defect in any product. Oppenheimer Indus., Inc., 732 P.2d at 664 ( the economic loss rule did not apply where a brand inspector's negligent inspection caused the loss of...
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