Opinion ID: 2308616
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Heading: Strict Liability Count

Text: With regard to Decoster's strict liability count, we have not heretofore applied the doctrine of strict liability to a case involving injury to property alone. However, we have applied the doctrine in a case involving personal injury caused by a defective product. In Phipps v. General Motors Corp., 278 Md. 337, 363 A.2d 955 (1976), a man was injured when a car he was driving accelerated suddenly and crashed into a tree, allegedly as a result of a defective accelerator mechanism. In Phipps, in an opinion for the Court by Judge Eldridge, we adopted the theory of strict liability set forth in the Restatement (Second) of Torts § 402A (1965): Special Liability of Seller of Product for Physical Harm to User or Consumer (1) 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 consumer or his property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold. (2) The rule stated in Subsection (1) applies although (a) the seller has exercised all possible care in the preparation and sale of his product, and (b) the user or consumer has not bought the product from or entered into any contractual relation with the seller. See Phipps, supra, at 353, 363 A.2d 955. Decoster argues that the trial court erred in dismissing its strict liability claim, asserting that this Court, in Phipps, adopted § 402A in its entirety and therefore property damages such as Decoster's are recoverable in Maryland under a strict liability theory. Westinghouse avers that in a commercial situation such as the instant case, Decoster's remedies must be limited to breach of warranty claims. It argues that the legislature, through its enactment of the Uniform Commercial Code with its breach of warranty remedies, created a comprehensive scheme for the recovery of economic losses in commercial situations. Because we have determined that the losses in the present case are property damage rather than economic losses, we need not further discuss the issue of when economic losses may be recoverable. However, in response to Westinghouse's contention that the legislature has provided the sole remedies for commercial property losses, [3] we will reiterate our response to the same contention by the manufacturer in Phipps. We will also briefly review the development of strict liability principles in the context of commercial property losses. In Phipps, the automobile manufacturer argued that we should not adopt the theory of strict liability in tort because the warranty provisions of the Maryland Uniform Commercial Code adequately protected the interests of consumers and sellers. The manufacturer further contended that the legislature, in enacting the warranty provisions of the U.C.C., had preempted the field of products liability law and that the adoption of strict liability would alter substantially the traditional rights of consumers and sellers. Id. at 348-49, 363 A.2d 955. We rejected the preemption contention, noting an absence of any expression of intent by the legislature to limit the remedies available to those injured by defective goods. Id. at 350, 363 A.2d 955. We acknowledged in Phipps that the requirement of privity, formerly an obstacle to recovery under a contract action, had been eliminated by the legislature in actions for breach of warranty resulting in personal injury. But we recognized that there were other limitations imposed by contract law which did not exist under tort law. We noted the possibility of waiver of warranty liability by a manufacturer's use of a disclaimer. We also recognized the existence of notice requirements for breach of warranty actions by buyers. And we observed that different limitations periods are in effect for tort and contract actions. Id. at 349, 363 A.2d 955. We said: [T]here is no reason why a party injured by a defective and unreasonably dangerous product, which when placed on the market is impliedly represented as safe, should bear the loss of that injury when the seller of that product is in a better position to take precautions and protect against the defect. Yet this may be the result where injured parties are forced to comply with the proof requirements of negligence actions or are confronted with the procedural requirements and limitations of warranty actions. Id. at 352-53, 363 A.2d 955. Prior to the emergence of the theory of strict liability in tort, the principal source of strict liability was the law of warranty. See 5 F. Harper, F. James and O. Gray, The Law of Torts § 28.15 at 444 (2d ed. 1986). See also Comment b to § 402A of the Restatement. The law of warranty developed primarily to protect purchasers from commercial losses caused by the failure of the product to serve their needs. Its shape and form were dictated by commercial rather than safety concerns and its application was extended collaterally to accidental injuries. Harper, James and Gray, supra, at 444-45; Keeton, et al., supra, § 95A at 679-80. Warranties attached to certain sales developed first in the common law. Later, these concepts were codified, first in the provisions of the Uniform Sales Act, and later in its successor, the Uniform Commercial Code. However, both the Sales Act and the U.C.C. contained limitations which made it more difficult for buyers to recover, such as notice requirements and disclaimer provisions. It became apparent that strict liability based on warranty was not adequate to protect consumers and to further the policy that the costs arising from defective products should be borne by those who make and sell them. Keeton, et al., supra, § 98 at 692. Beginning with several landmark judicial decisions, see, e.g., Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 27 Cal. Rptr. 697, 377 P.2d 897 (1963) (the pioneer decision announcing strict tort liability without dependence on warranty), followed by the adoption of § 402A in 1964 by the American Law Institute, the strict liability warranty remedy evolved into the theory of strict liability in tort. Nearly every state has adopted some version of § 402A. Harper, James and Gray, supra, at 445 n. 7; Keeton, et al., supra, § 98 at 694. The Uniform Commercial Code, with its provisions concerning express and implied warranties, which both create and limit liability, also has been widely adopted. However, in situations involving physical injury or property damage resulting from a breach of warranty, most courts have chosen not to limit plaintiffs' causes of action to actions under the statute, which sets forth the above-mentioned limiting conditions and restrictions. Harper, James and Gray, supra, at 450-51. Where a plaintiff seeks damages for a loss of bargain, rather than personal or property injury, many courts have refused to extend the tort remedy. Id. at 452 n. 25 (and cases cited therein). But where products are dangerous, courts have found that social interests transcend business expectations. Id. at 454. Thus, the strict liability remedy is based on public policy that the burden of accidental injuries caused by products should fall on the seller and be considered a cost of production for which liability insurance can be purchased. See Comment c to § 402A; Keeton, et al., supra, § 98. It is beyond question that § 402A applies not only to accidental injuries to consumers or users of a product, but also to injury to the property of the user or consumer. Section 402A(1) sets forth the applicable seller as [o]ne who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property and further provides that such seller is subject to liability for physical harm thereby caused to the ultimate user or consumer or his property ... (emphasis added). Numerous courts, in denying tort recovery based on strict liability for intangible economic loss, have stated that recovery would be available if the loss involved property damage or personal injury. In the classic case denying tort recovery for economic loss, Seely v. White Motor Company, 63 Cal.2d 9, 45 Cal. Rptr. 17, 403 P.2d 145 (1965), the court agreed with the plaintiff's contention that the doctrine of strict liability should be extended to govern physical injury to property, stating that [p]hysical injury to property is so akin to personal injury that there is no reason for distinguishing them. Id. 45 Cal. Rptr. at 24, 403 P.2d at 152. However, in Seely the court found no proof that property damage to the plaintiff's truck was caused by a manufacturing defect. Id. In Moorman Mfg. Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982), the court, in holding that economic losses were not recoverable under a strict liability theory, held nevertheless that when a product is sold in a defective condition that is unreasonably dangerous to the user or consumer or to his property, strict liability in tort is applicable to physical injury to the plaintiff's property, as well as to personal injury. Id. 61 Ill.Dec. at 751, 435 N.E.2d at 448. Accord Consumers Power Co. v. Curtiss-Wright Corp., 780 F.2d 1093 (3d Cir.1986); Miller Industries v. Caterpillar Tractor Co., 733 F.2d 813 (11th Cir.1984); Town of Hooksett School Dist. v. W.R. Grace Co., 617 F. Supp. 126 (D.N.H. 1984); Purvis v. Consolidated Energy Products Co., 674 F.2d 217 (4th Cir.1982); Tourist Village Motel, Inc. v. Massachusetts Engineering Co., Inc., 801 F. Supp. 903 (D.N.H. 1992); Mississippi Power & Light v. Branson Aircraft, 797 F. Supp. 871 (D.Colo. 1992); Airport Rent-A-Car, Inc. v. Prevost Car, Inc., 788 F. Supp. 1203 (S.D.Fla. 1992); Connecticut General Life v. Grodsky Service, 781 F. Supp. 897 (D.Conn. 1991); T.H.S. Northstar Assoc. v. W.R. Grace & Co., 767 F. Supp. 969 (D.Minn. 1991); Frank M. Booth, Inc. v. Reynolds Metals Co., 754 F. Supp. 1441 (E.D.Cal. 1991); Eastern Refractories v. Forty Eight Insulations, 658 F. Supp. 197 (S.D.N.Y. 1987); City of Manchester v. National Gypsum Co., 637 F. Supp. 646 (D.R.I. 1986); Corporate Air Fleet v. Gates Learjet, Inc., 589 F. Supp. 1076 (M.D.Tenn. 1984); County of Westchester v. General Motors Corp., 555 F. Supp. 290 (S.D.N.Y. 1983); Largoza v. General Elec. Co., 538 F. Supp. 1164 (E.D.Pa. 1982); Plainwell Paper Co., Inc. v. Pram, Inc., 430 F. Supp. 1386 (W.D.Pa. 1977); Waller v. Fort Dodge Laboratories, 356 F. Supp. 413 (E.D.Mo. 1972); Kodiak Elec. Ass'n v. Delaval Turbine, Inc., 694 P.2d 150 (Alaska 1984); Salt River Project Agr. v. Westinghouse Elec., 143 Ariz. 368, 694 P.2d 198 (1984); Bates & Associates, Inc. v. Romei, 207 Ga. App. 81, 426 S.E.2d 919 (1993); State v. Mitchell Const. Co., 108 Idaho 335, 699 P.2d 1349 (1985); Nelson v. Todd's Ltd., 426 N.W.2d 120 (Iowa 1988); Oak Grove Investors v. Bell & Gossett Co., 99 Nev. 616, 668 P.2d 1075 (1983); Hagert v. Hatton Commodities, Inc., 350 N.W.2d 591 (N.D. 1984); Oklahoma Gas & Elec. v. McGraw-Edison, 834 P.2d 980 (Okla. 1992); Northridge Co. v. W.R. Grace and Co., 162 Wis.2d 918, 471 N.W.2d 179 (1991). We believe that fairness requires recovery for injuries caused to person or property resulting from unreasonably dangerous products, and that manufacturers should not be allowed to escape liability for such injuries simply because the dangerous nature of the product was undiscovered until after the warranties had expired. The purchaser is not simply losing the benefit of his bargain because of the defective nature of the product, but is sustaining damage to other property because that defect is so dangerous in nature. It would be profoundly unfair to impose the responsibility for the resulting damage upon the purchaser of the property. We do not believe a purchaser should be considered to have bargained for destruction to his property any more than he should be considered to have bargained for physical injury to himself or others. Therefore, we hold the provisions of § 402A to be applicable in situations in which it is alleged that property damage resulted from a defect in the product which rendered the product unreasonably dangerous. Of course, all elements of § 402A must be met. As we stated in Phipps, for recovery it must be established that (1) the product was in a defective condition at the time that it left the possession or control of the seller, (2) that it was unreasonably dangerous to the user or consumer, (3) that the defect was a cause of the injuries, and (4) that the product was expected to and did reach the consumer without substantial change in its condition. 278 Md. at 344, 363 A.2d 955. As to Decoster's claim, we have already determined that the chickens which died when the switch allegedly malfunctioned constitute a property loss rather than an economic loss. As we stated above, in considering the legal sufficiency of the complaint to allege a cause of action for strict liability, we must assume the truth of all well-pleaded relevant and material facts and all inferences that can reasonably be drawn therefrom. Faya, supra, 329 Md. at 443, 620 A.2d 327; Sharrow, supra, 306 Md. at 768, 511 A.2d 492. As earlier noted, in its complaint Decoster alleged that it purchased the switch from Westinghouse; that the switch was released in a defective condition from Westinghouse; that the defective condition rendered it unreasonably dangerous; that the defective condition caused the injury complained of; and that the switch was expected to reach and in fact did reach Decoster without substantial change in its condition. Because Decoster's complaint sets forth allegations in support of a strict liability claim, the trial judge erred in dismissing the strict liability claim.