Vulcan Materials Co., Inc. v. Driltech, Inc.

• Decision Date: 07 September 1983
• Docket Number: No. 39953,39953
• Citation: Vulcan Materials Co., Inc. v. Driltech, Inc., 306 S.E.2d 253, 251 Ga. 383 (Ga. 1983)
• Parties: VULCAN MATERIALS COMPANY, INC. v. DRILTECH, INC.
• Court: Georgia Supreme Court

Page 253

306 S.E.2d 253

251 Ga. 383

VULCAN MATERIALS COMPANY, INC. v. DRILTECH, INC.

No. 39953.

Supreme Court of Georgia.

Sept. 7, 1983.

Robert L. Todd, R. Dennis Withers, G. Terrell Davis, Hurt, Richardson, Garner, Todd & Cadenhead, Atlanta, for Vulcan Materials Company, Inc.

Charles T. Lester, Thomas A. Cox, Thomas A. Varlan, Sutherland, Asbill & Brennan, Atlanta, for Driltech, Inc.

MARSHALL, Presiding Justice.

This case comes to us on certified questions from the Eleventh Circuit Court of Appeals. These are the facts:

In 1976, Vulcan Materials Company, Inc., purchased a rotary blast hole drilling machine for use in its rock quarry near Kennesaw, Georgia. The machine was manufactured by Driltech, Inc. In 1978, a cast iron bushing in the machine's compressor system fractured, releasing a spray of hydraulic fluid. This spray was ignited by the heat of the engine, and the machine burst into flames. The drill operator was in the cabin of the machine when the fire started and was almost immediately surrounded by flames, but he managed to escape without injury. The drill was damaged beyond repair, but the fire caused no personal injury or damage to property other than the drill.

In 1981, Vulcan brought this suit against Driltech in federal district court, seeking damages for the loss of the use of the drill. Recovery was sought under theories of negligence and breach of warranty. The district court ruled that the warranty claims are barred by the statute of limitations and that the negligence claim is barred by the fact that there was neither personal injury nor damage to property other than the drill.

On appeal to the federal appellate court, the following two questions have been certified to us: (1) Under Georgia law, is there an "accident" exception to the general rule that an action in negligence does not lie absent personal injury or damage to property other than to the allegedly defective product itself? Cf. Long Mfg., etc., Inc. v. Grady Tractor Co., 140 Ga.App. 320, 231 S.E.2d 105 (1976), with Long v. Jim Letts Olds., Inc., 135 Ga.App. 293, 217 S.E.2d 602 (1975). (2) If an "accident" exception is recognized under Georgia law, how should this exception be defined? Held:

1. As recognized in Flintkote Co. v. Dravo Corp., 678 F.2d 942 (5th Cir.1982), the Jim Letts decision is the first Georgia case applying the general rule that, in the absence of an accident, there can be no action in negligence to recover the loss of the economic value of a defective product, unless there is some personal injury or damage to other property. This is referred to as the economic-loss rule.

Jim Letts involved the purchase of an automobile which overheated as a result of defects in the engine. The overheating resulted in gradual deterioration of the engine, causing the purchaser to sell the automobile for less than the "book value." The purchaser then sued the seller and manufacturer in tort, for diminution in value of the car and cost of repairs, among other things. Citing from Prosser, Law of Torts (4th Ed.1971), p. 665, the Court of Appeals held, " '(W)here there is no accident, and no physical damage, and the only loss is a pecuniary one, through loss of the value or use of the thing sold, or the cost of repairing it, the courts have adhered to the rule ... that purely economic interests are not entitled to protection against mere negligence, and so have denied the recovery.' " Jim Letts, 135 Ga.App. 293, supra, at p. 295, 217 S.E.2d 602.

2. As further recognized in Flintkote, although the decision of the Georgia Court of Appeals in Long Mfg. might appear to be inconsistent with the economic-loss rule espoused in Jim Letts and its progeny, it actually falls within the accident exception to the economic-loss rule.

In Long Mfg., the purchaser of a portable tobacco barn was suing the manufacturer in negligence for the difference in value of the barn before and after it had collapsed while being transferred from one site to another. There were no allegations of personal injury or damage to property other than the barn. Although the judgment for the plaintiff was reversed because of an erroneous charge to the jury, it was recognized that under the facts the plaintiff did possess a cause of action against the defendant. Long Mfg., 140 Ga.App. 320, supra, at p. 321, 231 S.E.2d 105.

3. As stated in Flintkote, "This decision [in Long Mfg.] can be reconciled with prior and subsequent decisions of the Georgia Court of Appeals only by interpreting it as finding that the plaintiff's losses resulted from an accident because of the sudden collapse of the barn ... We therefore conclude that Long Mfg. falls within the accident exception to the economic loss rule. See Gainous v. Cessna Aircraft Co., 491 F.Supp. 1345 (N.D.Ga.1980). Unfortunately, neither Long Mfg. nor any other Georgia decision discusses the nature and scope of the accident exception." (Footnote omitted.) 678 F.2d 942, supra, at pp. 947, 948.

Nevertheless, the nature and scope of the economic-loss rule and its accident exception are discussed in the Flintkote decision itself, as well as in the decisions of other courts.

We find the most comprehensive analysis to be contained in Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co., 652 F.2d 1165, 1169-1173 (3d Cir.1981). "[S]ome courts have concluded that injuries that can be classified as economic loss should not be recoverable in tort. 'Economic loss' has been defined as 'the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold.' Comment, Manufacturers' Liability to Remote Purchasers for 'Economic Loss' Damages--Tort or Contract? 114 U.Pa.L.Rev. 539, 541 (1966). This definition of economic loss accords with the policy of warranty law to protect expectations of suitability and quality. The items most frequently sought as damages for unsuitable products are the reduction in value caused by the defect, costs of repair or replacement, and loss of profits.

"This does not mean, however, that every prayer for relief that seeks the cost of repairing a damaged product entails the type of economic loss traditionally encompassed within warranty law. Commentators in several courts have carefully distinguished economic loss from physical harm or property damage. The line that is drawn usually depends on the nature of the defect and the manner in which the damage occurred. Defects of quality, evidenced by internal deterioration or breakdown, are assigned to the economic loss category, while the loss stemming from defects that cause accidents 'of violence or collision with external objects' is treated as physical injury. Tort law traditionally has redressed injuries properly classified as physical harm.

"The seminal case that recognized and applied this distinction is Seely v. White Motor Co., 63 Cal.2d 9, 403...