Court Opinion

ID: 9599284
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:17:24.616712+00
Date Added: 2024-06-11T09:43:20.372212
License: Public Domain

Justice PLEICONES.
I respectfully concur in part and dissent in part. I agree with the majority that a mere breach of industry standards does not give rise to a tort action, and, further, that the second certified question should be answered “yes.” As explained below, I do not join the majority’s ruling which would extend the narrow exception' to the economic loss rule created in Kennedy v. Columbia Lumber and Mfg. Co., Inc., 299 S.C. 335, 384 S.E.2d 730 (1989) to all tort-based products liability suits where the plaintiff alleges “only the product itself has been injured and [that the] product ... posed a serious risk of bodily harm.”
Three theories of liability are available to an individual in South Carolina who has suffered a loss as the result of a defective product: breach of warranty, which sounds in contract, and strict liability and negligence, both of which sound in tort. Only warranty and negligence are discussed here.
A negligence products liability claim is premised on a breach of a duty of care resulting in damage to person or *197property, giving rise to a claim for restorative money damages. While the law of contracts protects a party’s expectation that a promise will be fulfilled, negligence awards money damages to restore a person who has suffered a loss.
The economic loss rule emerged from modern products liability law and serves to delineate tort and contract law. See Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965). The rule states that a tort action for a defective product does not lie unless there is a claim of personal injury or injury to other property of the plaintiff. Where the damage is merely diminution in the product’s value, the remedy is in contract for breach of warranty, whether the diminished value is the result of inferior quality, unfitness for intended use, deterioration or destruction by reason of the defect. As Chief Justice Traynor explained in Seely:
The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the “luck” of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. He can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety defined in terms of conditions that create unreasonable risks of harm. He cannot be held for the level of performance of his products in the consumer’s business unless he agrees that the product was designed to meet the consumer’s demands. A consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will. Even in actions for negligence, a manufacturer’s liability is limited to damages for physical injuries and there is no recovery for economic loss alone.
63 Cal.2d at 18, 45 CaLRptr. 17, 403 P.2d at 151.
In Kennedy v. Columbia Lumber and Mfg. Co. Inc., (Kennedy ), supra, this Court overruled a decision by the Court of Appeals, Carolina Winds Owners’ Ass’n v. Joe Harden Bldr., *198297 S.C. 74, 374 S.E.2d 897 (Ct.App.1988). In Kennedy, the Court held a cause of action in negligence is available to a new home buyer who has suffered only economic loss to the home itself where the builder has (1) violated an applicable building code; (2) violated industry standards; or (3) constructed housing that he knows or should know will pose serious risks of physical harm. The Court characterized its decision as creating a different approach to the economic loss rule, holding that a builder should be liable in negligence for diminution in value even if only the product is harmed. To date, the Court has not expanded this approach to the economic loss rule beyond the residential purchaser/builder context.11
The present case asks whether the Court will extend the Kennedy exception beyond the home buyer/builder sphere. On its facts,12 this case asks whether the owner (not buyer) of a new commercial (not residential) building may sue a material suppler (not builder or seller) in negligence where only the material has been injured.13
I begin by noting that in the residential home cases, the Court has considered the “product” to be the new home: heretofore, there has been no suggestion that we would entertain a products liability suit by the user against the manufacturer of the product components (i.e. the lumber) rather than against the manufacturer of the product (i.e. the builder). See Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845 (6th Cir.2002) (applying Kentucky law and finding that the wood and fire retardant chemicals applied to it would not be a product severable from the building as a whole).
Second, the plaintiff here is not a new home buyer or even a new commercial buyer but rather a commercial entity which *199commissioned a new building. None of the special policy concerns which underlie the Court’s jurisprudence extending warranties and negligence remedies to new home buyers exist here. Cf. Smith v. Breedlove, 377 S.C. 415, 661 S.E.2d 67 (2008) (declining to extend warranties implied in home sale where seller/builder was not a professional but had acted as his own general contractor in constructing family home).
Aside from the novel policy questions posed by the facts of this case, the actual question posed by the district court is much broader:
Can the user of a defective product recover in tort when only the product itself has been injured and when the product either violated generally acceptable industry standards or posed a serious risk of bodily injury?
To answer this question even partly in the affirmative works a wholesale revision of the law of products liability, and erases important distinctions between contract (warranty) and negligence (tort).
I am not persuaded by the majority’s reasoning that we should effect such a major change in the law of products liability. The majority opinion first focuses on what it perceives as the similarities between commercial construction and residential construction, and next cites three foreign cases to support the extension of the Kennedy exception to the economic loss rule to commercial builders. As explained below, none of the three cases actually support this extension.
Two of the cases cited by the majority for the proposition that the commercial plaintiffs were able to recover economic losses in a construction setting are Philadelphia Nat’l Bank v. Dow Chem. Co., 605 F.Supp. 60 (E.D.Pa.1985) and Trustees of Columbia Univ. v. Mitchell/Giurgola Assocs., 109 A.D.2d 449, 492 N.Y.S.2d 371 (N.Y.App.Div.1985). The federal decision in Philadelphia Nat’l Bank, applying Pennsylvania law, contains this concession:
The parties agree that under Pennsylvania law no negligence or strict liability may be imposed for mere economic loss.
In the other case, Trustees of Columbia University, the holding was that while the manufacturer breached its duty to the user under the doctrine of strict liability, the user’s *200recovery for its losses was barred by the economic loss rule. Id. at 376-377. Both cases in fact apply the economic loss rule to bar a tort recovery in a commercial construction setting.
The third case is from Maryland. Maryland, like South Carolina in Kennedy, recognizes an exception to the economic loss rule in a residential construction case. That jurisdiction held that where the builder’s negligent conduct created a clear risk of death or personal injury, an action will lie in negligence for recovery of the reasonable cost of correcting the dangerous condition. Council of Co-Owners Atlantis Condo., Inc. v. Whiting-Turner Contracting, 308 Md. 18, 517 A.2d 336 (1986). In the later Maryland case cited by the majority, the Maryland court did indicate a willingness to extend the economic loss exception and recognize a duty where a defective component in a residential building created a risk of death or personal injury. Morris v. Osmose Wood Preserving, 340 Md. 519, 667 A.2d 624 (1995). The Moms court clarified the threshold for the application of such an exception:
We examine both the nature of the damage threatened and the probability of damage occurring to determine whether the two, viewed together, exhibit a clear, serious, and unreasonable risk of death or personal injury. Thus, if the possible injury is extraordinarily severe, i.e., multiple deaths, we do not require the probability of the injury occurring to be as high as we would require if the injury threatened were less severe, i.e. a broken leg or damage to property. Likewise, if the probability of the injury occurring is extraordinarily high we do not require the injury to be as severe as we would if the probability of injury were lower.14 Id. at 533, 667 A.2d at 631-632.
The Moms court found, however, that the allegations in that case did not pose a serious risk of death and personal injury, and affirmed the dismissal of the plaintiffs’ claims. As in the present case, the Moms suit sought to recover “the cost of replacing roofs that contained allegedly defective fire retardant treated plywood,” and the complaint asserted that the roofs had undergone a chemical reaction, “significantly weakening the roof and resulting in substantial impairment of the strength and structural integrity of the roofs.... ” The *201Morris court upheld the dismissal of the complaint, finding that the roof work did not meet the threshold requirement of alleging “the existence of a clear danger of death or serious personal injury.” Id. As I read these three cases, none support the extension of Kennedy’s exception to the economic loss rule to commercial construction.
After relying upon the perceived similarities between residential and commercial construction, three foreign decisions, and adopting the Maryland court’s balancing test, the majority holds not simply that the Kennedy exception will be expanded to include commercial construction, but rather that “a user of a defective product can recover in tort [even] if only the product has been injured if that product poses a serious risk of bodily harm.” I respectfully submit there is simply no analysis to support this unprecedented decision, which would rewrite the law of products liability.
In my opinion, the extension of the Kennedy exception to the economic loss rule to commercial builders, much less to all manufacturers, is unprecedented, unwarranted, and unwise. I am much persuaded by the reasoning of the late Justice-elect Bell who cautioned against permitting negligence actions where there is neither personal nor property injury because:
(1) it is not a tort to create risk, only to cause damage;
(2) the quantum of damage is unknowable until injury occurs; to allow repair damages in negligence may not represent the true loss if injury were to occur, and is manifestly speculative;
(3) to impose liability without damages makes the manufacturer of the product an insurer against all possible risk of harm; and
(4) there is no principled way to categorize types or degrees of risk for the purpose of establishing liability. To adopt an ad hoc approach is “to abandon the attempt at rule governed decision making ... [t]he calculation of risk is a complex, fact intensive, infinitely varied, and inevitably imprecise process. It is far beyond the competence of judges and juries. Even if all risks could be foreseen and precisely calculated, there would still be no certain, predictable standard for identifying which risks should be actionable. And there is no guarantee that *202tort rules of liability, if they could be fashioned, would redistribute these risks in the most rational, economic way.”
Carolina Winds at 87-88, 374 S.E.2d at 905-906.
For the reasons given above, I concur in the decision which answers question one in the negative, and which answers the second question in the affirmative. I dissent from that part of the opinion which answers question one “yes.”
Acting Justice E.C. BURNETT, III, concurs.

. Both Beachwalk Villas Condo. Ass’n Inc. v. Martin, 305 S.C. 144, 406 S.E.2d 372 (1991) and Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 320 S.C. 49, 463 S.E.2d 85 (1995) are in the nature of design professional "malpractice” cases. See Hill v. Polar Pantries, 219 S.C. 263, 64 S.E.2d 885 (1951).

. As explained infra, the actual question posed, by its express terms, applies to all defective product cases.

.While the facts suggest that more than the FRT has been damaged, the certified question is premised on damage only to that product.

. This balancing test would be used under the majority opinion.