Star Furniture Co. v. Pulaski Furniture Co.

• Decision Date: 18 November 1982
• Docket Number: No. CC934,CC934
• Parties: STAR FURNITURE CO. and Fireman's Fund American Ins. Co. v. PULASKI FURNITURE CO., etc.
• Court: West Virginia Supreme Court

Page 854

297 S.E.2d 854

171 W.Va. 79

STAR FURNITURE CO. and Fireman's Fund American Ins. Co. v. PULASKI FURNITURE CO., etc.

No. CC934.

Supreme Court of Appeals of West Virginia.

Nov. 18, 1982.

Syllabus by the Court

1. Strict liability in tort may be used to recover for property damage when the defective product damages property only.

2. In this jurisdiction, plaintiffs may utilize a strict liability cause of action to recover for damage to property other than the defective product.

3. In West Virginia, property damage to defective products which results from a sudden calamitous event is recoverable under a strict liability cause of action. Damages which result merely because of a "bad bargain" are outside the scope of strict liability.

4. Commercial enterprises may utilize strict liability actions to recover damages.

5. Comparative negligence is available as an affirmative defense in a cause of action founded on strict liability so long as the complained of conduct is not a failure to discover a defect or to guard against it.

Stephen A. Weber and Jeffrey M. Wakefield, Kay, Casto & Chaney, Charleston, for plaintiffs.

John F. Wood, Jr., Wood, Grimm & Delp, Huntington, for defendants.

McGRAW, Justice:

This proceeding is before this Court as a result of the certification of three questions of law from the United States District Court for the Southern District of West Virginia. W.Va.Code § 51-1A-1 (1981 Repl.Vol.), the Uniform Certification of Question of Law Act, authorizes the Court to accept such certifications. ¹

The certified questions present issues which are natural outgrowths of our decisions in Morningstar v. Black and Decker Manufacturing Co., 162 W.Va. 857, 253 S.E.2d 666 (1979), and Bradley v. Appalachian Power Co., 163 W.Va. 332, 256 S.E.2d 879 (1979). In Morningstar, this Court adopted the doctrine of strict liability in tort in products liability litigation. Soon afterwards, the Court embraced the doctrine of comparative negligence in Bradley.

The present case involves both doctrines. We have been asked to decide whether strict liability in tort applies when recovery is sought only for property damage rather than personal injury, whether strict liability is available to a commercial entity and its insurer as plaintiffs, and whether comparative negligence may be asserted as an affirmative defense in strict liability actions. We will discuss each question in turn.

The plaintiffs in this case are Star Furniture Co. [Star] and its insurance company, Fireman's Fund of America [Fireman's Fund]. ² Pulaski Furniture Co. [Pulaski], a Virginia corporation, and another out-of-state corporation, Hemco Corp. [Hemco], ³ are defendants.

The events leading to the institution of this case are not in dispute. Plaintiff Star purchased a "Curio" clock from defendant Pulaski in December, 1974, apparently for display and retail purposes. The clock's component parts were manufactured by Hemco. A fire damaged Star's business establishment September 13, 1975. Star claims that the fire resulted from a malfunction in the clock or its wiring.

In September, 1977, Star instituted the present action to recover $160,112.57 in damages. The company based its claims on negligence, strict liability in tort and breach of express and implied warranties. In its answer, Pulaski denied that the fire resulted from a clock or wiring malfunction, and pleaded the affirmative defenses of comparative negligence and assumption of risk.

I.

The first certified question asks whether the doctrine of strict liability may be used when recovery is sought solely for property damage as opposed to cases in which some physical injury is alleged. We answer that question in the affirmative.

In Morningstar, supra, the Court traced the development of strict liability both nationally and in West Virginia. Strict liability in tort became a recognized doctrine with the California Supreme Court's decision in Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897 (1963), and in the formulation of section 402A of the Restatement, (Second), Torts (1965). The California and Restatement approaches differ because California has deleted the Restatement's requirement that the product be in a defective condition "unreasonably dangerous to the user or consumer or to his property ...." Restatement, (Second), Torts, § 402A. In Morningstar, we followed California's lead, holding that "the general test for establishing strict liability in tort is whether the involved product is defective in the sense that it is not reasonably safe for its intended use." 162 W.Va. at 875, 253 S.E.2d at 683.

The philosophical underpinning of strict liability "is to insure that the costs of injuries resulting from defective products are borne by the manufacturer that put such products on the market rather than by the injured persons who are powerless to protect themselves." Greenman, 59 Cal.2d at 63, 27 Cal.Rptr. at 701, 377 P.2d at 901. This rationale results from the belief that manufacturers may spread the cost of compensating such injuries to society by including the cost of insurance or judgments as part of the product's price tag. This theory is often referred to as the risk distribution principle. Still, the term strict liability in tort actually is misleading. As we noted in Morningstar, strict liability "does not impose absolute liability or make the manufacturer an insurer of his product." 162 W.Va. at 868, 253 S.E.2d at 677. Rather, the doctrine makes it less difficult for injured consumers to prove their cases.

The cause of action covered by the term "strict liability in tort" is designed to relieve the plaintiff from proving that the manufacturer was negligent in some particular fashion during the manufacturing process and to permit proof of the defective condition of the product as the principal basis of liability.

Id. Additionally, the need to release consumers from having to overcome affirmative defenses provided manufacturers by the Uniform Commercial Code often has been cited as spurring the development of strict liability. These technical requirements include notice of breach of warranty, disclaimers of liability, and privity. Id., citing Dippel v. Sciano, 37 Wis.2d 443, 459-60, 155 N.W.2d 55, 63 (1967).

The parties agree that the risk distribution principle underlying strict liability applies to circumstances in which the consumer suffers only property damage. Ability to utilize strict liability does not depend on the fortunate fact that the defective product did not result in personal injury. To permit such a distinction would penalize the fortunate who escape personal injury.

As the parties have pointed out, both jurisdictions which have adopted California's formulation of strict liability in Greenman and those which have followed the Restatement's approach in Section 402A have permitted plaintiffs to recover for property damage. California extended strict liability to property damage only two years after explicitly recognizing strict liability in Greenman. Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965). Restatement jurisdictions have had no difficulty in applying strict liability to such cases because the very terms of Section 402A provide for such recovery. "One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or to his property ...." [Emphasis added]. Therefore, we adopt the rule that strict liability in tort may be used to recover for property damage when the defective product damages property only.

Although the parties agree that we should adopt this rule, they disagree on the scope of the term "property damage." The petitioner, Star, argues that damages resulting from harm to the defective product itself should be recoverable in a strict liability cause of action. The respondents appear to argue, however, that utilization of strict liability should be limited to recovery for damage to property other than the defective product and should also exclude claimed consequential damages such as alleged lost profits.

The need to define "property damage" is evident from cases decided in other jurisdictions. Plaintiffs generally have attempted to place three distinct types of harm under the property damage umbrella: damage to property other than the defective product, damage to the defective product, and loss of goodwill or profits.

The first category is the type of damage most often encountered in such actions for strict liability. In this jurisdiction, plaintiffs may utilize a strict liability cause of action to recover for damage to property other than the defective product. This is the unanimous view in other jurisdictions. See, e.g., Cloud v. Kit Manufacturing Co., 563 P.2d 248 (Alaska 1977); Shields v. Morton Chemical Co., 95 Idaho 674, 518 P.2d 857 (1974). See generally W. Prosser, Law of Torts § 101 (4th ed. 1971).

Unanimity of opinion disappears, however, when application of strict liability is suggested for damage to the defective product itself or such commercial harm as loss of profits. These injuries are often characterized as "economic loss," although of different types. Damage to the defective product has been labeled "direct economic loss"--"the difference between the value of what is received and its value as received." S. Birnbaum, Disclaimers of Warranties, Limitation of Remedy, Liability of Successor Corporations and Economic Loss, [1981] Product Liability Update 156 (Practicing Law Institute). Lost profits, however, are classified as "consequential economic loss" --"indirect loss resulting from the inability to make use of the defective product." Id. In this regard, loss of profits as consequential damages is transplanted from the fields of contract and commercial sales law. See, e.g., W.Va.Code § 46-2-715(2) (1966).

The...