Court Opinion

ID: 9784166
Source: CourtListenerOpinion
Date Created: 2023-08-30 20:39:05.327397+00
Date Added: 2024-06-11T07:35:49.940720
License: Public Domain

KENNARD, J., Concurring.
The majority opinion, which I authored, holds that the economic loss rule does not bar recovery for damages that defective windows cause to other components of mass-produced homes in which they are installed. (Maj. opn., ante, at p. 484.) It does not hold, however, that the economic loss rule can never bar recovery for damages that one part or element of a finished product causes to other parts or elements of the same finished product. I write separately to express and explain my view that the crucial inquiry for applying the economic loss rule in this context is whether the component part has been so integrated into the overall unit that it has lost its separate identity.
The economic loss rule limits tort recovery under strict products liability to damages for physical harm to a person or to property other than the defective product itself. (Maj. opn., ante, at p. 483.) To apply the economic loss rule, therefore, one must first determine what the product at issue is. Only then can one determine whether the injury is to the product itself (and therefore subject to the economic loss rule) or to property other than the *486defective product (and thus subject to strict products liability in tort). Here, defendant window manufacturers have argued that the “product” is the entire house in which their windows were installed, and that the damage caused to other parts of the house by the allegedly defective windows is damage to the product itself within the economic loss rule, thus precluding application of strict liability. For the reasons that follow, I conclude that the windows may be regarded as a distinct product for purposes of the economic loss rule.
The manufacturer of a component part may be strictly liable in tort for physical injuries caused by defects in the component. As the Restatement Third of Torts recognizes: “One engaged in the business of selling or otherwise distributing product components who sells or distributes a component is subject to liability for harm to persons or property caused by a product into which the component is integrated if: ffl] (a) the component is defective in itself. . . and the defect causes the harm . . . .” (Rest.Sd Torts, Products Liability, § 5.) A comment in the Restatement Third of Torts addresses the issue of a component causing damage to the product of which it is a part. It says: “[Wjhen a component part of a machine or a system destroys the rest of the machine or system, the characterization process becomes more difficult. When the product or system is deemed to be an integrated whole, courts treat such damage as harm to the product itself. When so characterized, the damage is excluded from the coverage of this Restatement. A contrary holding would require a finding of property damage in virtually every case in which a product harms itself and would prevent contractual rules from serving their legitimate function in governing commercial transactions.” (Rest.3d Torts, Products Liability, § 21, com. e, pp. 295-296.) Under the Restatement view, in other words, the manufacturer of component will not be strictly liable in tort for injury to other parts of the unit in which it is installed if the component has been so integrated into the overall unit that it has lost its separate identity.
Instructive here is the United States Supreme Court’s decision in East River S.S. Corp. v. Transamerica Delaval (1986) 476 U.S. 858 [106 S.Ct. 2295, 90 L.Ed.2d 865]. There, companies that chartered oil-transporting supertankers brought an action under maritime law seeking to hold a turbine manufacturer strictly liable in tort for income losses and repair costs resulting when a defective part of the supertankers’ turbines damaged other parts of the turbines. (Id. at pp. 859-860 [106 S.Ct. at p. 2296].) Adopting an economic loss rule similar to the one this court had articulated in Seely v. White Motor Co. (1965) 63 Cal.2d 9 [45 Cal.Rptr. 17, 403 P.2d 145], the high court held that “a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself.” (East River, at p. 871 [106 S.Ct. at p. 2307], fn. *487omitted.) The court determined that the defective part of the turbine had been so integrated into the turbine that it lost its separate identity, and thus the manufacturer was not strictly liable in tort for injury that the component part caused to the turbine. The court reasoned that “each turbine was supplied by [the turbine designer, manufacturer, and installer] as an integrated package [and] each is properly regarded as a single unit.” (Id. at p. 867 [106 S.Ct. at p. 2300].) Thus, the high court in East River determined, consistent with the Restatement Third of Torts, Products Liability, that the defective part had been so integrated into the turbine that it could not be regarded as a separate product.
Thereafter, the United States Supreme Court in Saratoga Fishing Co. v. J.M. Martinac & Co. (1997) 520 U.S. 875 [117 S.Ct. 1783, 138 L.Ed.2d 76], addressed a related, yet distinguishable, issue in the context of equipment added to a ship after it had been originally built and outfitted. In Saratoga, the court considered whether a skiff, a net, and various spare parts added to a ship after its original sale were “other property”—that is, property other than the ship itself—so as to allow a second purchaser of the ship to recover in tort from the manufacturer for the loss of these items when the ship caught fire and sank. (Id. at p. 877 [117 S.Ct. at p. 1785].) The court allowed recovery because the extra equipment was “other property.” The court noted that the ship as originally outfitted, without the extra equipment, was the product that was “placed in the stream of commerce by the manufacturer and its distributors.” (Id. at p. 883 [117 S.Ct. at p. 1788].) The high court’s decision is consistent with the view that a nonintegrated component may be a separate product for purposes of strict products liability law. The extra equipment at issue in Saratoga had not been so integrated into the ship that it lost its separate identity.
I would adopt for California the interpretation of the economic loss rule articulated in these two decisions of the United States Supreme Court and in the Restatement Third of Tort, discussed above. Under this interpretation, in determining whether a component manufacturer is strictly liable in tort for harm that its defective product causes to a larger object of which it is a component, the pertinent inquiry is whether the component has been so integrated into the larger unit as to have lost its separate identity. If so, strict liability is improper. But if the component retains its separate identity, so that it may be readily separated from the overall unit, the component manufacturer may be strictly liable for damages to the larger unit.
Windows are not so integrated into houses as to lose their separate identity. Windows can be readily removed from houses and replaced with other windows. A window that has been removed from one house can then *488be installed in another house. For this reason, I conclude that a window manufacturer is strictly liable in tort for damages that defects in its windows cause to other parts of the homes, such as stucco, insulation, framing, drywall, and baseboards.