Court Opinion

ID: 4111223
Source: CourtListenerOpinion
Date Created: 2016-12-27 16:08:12.631994+00
Date Added: 2024-06-11T14:08:58.298108
License: Public Domain

FILED
                                                          Dec 27 2016, 10:14 am

                                                               CLERK
                                                           Indiana Supreme Court
                                                              Court of Appeals
                                                                and Tax Court

ATTORNEYS FOR APPELLANT                                   ATTORNEY FOR APPELLEE
John D. Papageorge                                        Brad M. Gordon
Jeffrey D. Stemerick                                      Grotefeld, Hoffman, Schleiter,
Taft Stettinius & Hollister, LLP                          Gordon, Ochoa, & Evinger, LLP
Indianapolis, Indiana                                     Chicago, Illinois

                                            IN THE
    COURT OF APPEALS OF INDIANA

Watts Water Technologies, Inc.,                           December 27, 2016
Appellant-Defendant,                                      Court of Appeals Case No.
                                                          45A04-1604-CT-831
        v.                                                Appeal from the Lake Superior
                                                          Court
State Farm Fire & Casualty Co.                            The Honorable Diane Kavadias
a/s/o Richard Lucka,                                      Schneider, Judge
Appellee-Plaintiff.                                       Trial Court Cause No.
                                                          45D11-1507-CT-125

Brown, Judge.

Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016           Page 1 of 19
[1]   Watts Water Technologies, Inc. (“Watts”) appeals the trial court’s order

      denying its motion to compel arbitration. Watts raises three issues which we

      consolidate and restate as whether the trial court erred in denying its motion.

      We affirm.

                                       Facts and Procedural History

[2]   Watts and State Farm Fire & Casualty, Co. (“State Farm”) were signatories to

      a Property Subrogation Arbitration Agreement (the “Arbitration Agreement”),

      which provided in part:

              By signing this Agreement, the company accepts and binds itself
              to the following:

              Article First
              Compulsory Provisions

              Signatory companies must forego litigation and submit any
              personal, commercial, or self-insured property subrogation claims
              to Arbitration Forums, Inc. (herein after referred to as AF).

                                                    *****

              Article Fourth
              Non-Compulsory Provisions

              The parties may, with written consent, submit a claim:

                       (a) that exceeds this forum’s monetary limit
                       (b) where a non-signatory wants to participate.

              Once a company gives written consent, all Articles and Rules of this
              forum are applicable, and the company may not revoke its consent.

                                                    *****

      Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 2 of 19
              Article Fifth
              AF’s Function and Authority

              AF, representing the signatory companies, is authorized to:

                   (a) make appropriate Rules and Regulations for the presentation and
                       determination of controversies under this Agreement;
                   (b) determine the location, and the means by which, arbitration
                       cases are heard;
                   (c) determine qualification criteria and provide for the selection and
                       appointment of arbitrators;
                   (d) establish fees;
                   (e) invite other insurance carriers, noninsurers, or self-insureds to
                       participate in this arbitration program, and compel the
                       withdrawal of any signatory for failure to conform to the
                       Agreement or the Rules issued thereunder.

                                                    *****

              Article Sixth
              Withdrawals

              Any signatory company may withdraw from this Agreement by
              notice in writing to AF. Such withdrawal will become effective
              sixty (60) days after receipt of such notice except as to cases then
              pending before arbitration panels. The effective date of
              withdrawal as to such pending cases shall be upon final
              compliance with the finding of the arbitration panel on those
              cases.

      Appellant’s Appendix at 41-42.

[3]   In November 2014, Arbitration Forums gave notice to the parties that it

      intended to amend the Arbitration Agreement. The notification stated:

              Effective January 1, 2015, the following changes to AF’s
              Property Program will be implemented:

      Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016    Page 3 of 19
              A new exclusion to Article Second of the Property Subrogation
              Arbitration Agreement to read:

                   • “No company shall be required, without its written consent, to
                     arbitrate any claim or suit if: (i) it is a product liability claim
                     arising from an alleged defective product.”

                                                    *****

              While the use of the Property Program to resolve disputes
              involving product liability claims arising from an alleged
              defective product will no longer be compulsory as of January 1,
              2015, cases filed prior to January 1, 2015, will remain in
              arbitration’s jurisdiction and will be processed to hearing.

      Id. at 74.

[4]   Effective January 1, 2015, the amended Arbitration Agreement (the “Amended

      Arbitration Agreement”) provided:

              Article Second
              Exclusions

              No company shall be required, without its written consent, to
              arbitrate any claim or suit if:

                                                    *****

              (i) it is a product liability claim arising from an alleged defective
              product.

      Id. at 72.

      Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016          Page 4 of 19
[5]   On July 23, 2015, State Farm a/s/o Richard Lucka filed a complaint against

      Watts alleging that Lucka purchased a water heater with a Watts brand

      connector and that the connector failed on November 30, 2014, causing water

      damage to Lucka’s home and property. The complaint alleged: Count I,

      “Products Liability – Defective Manufacturing;” Count II, “Products Liability –

      Defective Design;” Count III, “Products Liability – Negligent Manufacturing;”

      Count IV, “Negligent Design;” and Count V, “Breach of Implied

      Merchantability.” Id. at 11-13 (capitalization removed). State Farm alleged

      that it was subrogated to the rights of the insured, Lucka, to the extent of its

      payments to or for Lucka. On October 28, 2015, State Farm filed an amended

      complaint correcting the address where the incident occurred.

[6]   On December 17, 2015, Watts filed a Motion to Dismiss or, In the Alternative,

      to Stay Proceedings and Compel Arbitration. On March 22, 2016, the court

      denied Watts’s motion. Specifically, the order states:

                                              Findings of Facts

              1. [State Farm] filed a claim against [Watts] for, among other
              things, a product liability claim.

              2. This cause of action stems from a defective Watts water heater
              connector that failed resulting in water damage on November 30,
              2014 to the home of Richard Lucka, State Farm insured.

              3. The water damaged Mr. Lucka’s home and property resulting
              in State Farm paying $27,805.00 under his insurance policy.

      Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 5 of 19
        4. An engineer inspected the Watts water heater connector and
        determined it was defective on January 7, 2015.

        5. State Farm did not make a final payment to Mr. Lucka until
        January 29, 2015.

        6. State Farm and Watts are members of Arbitration Forums,
        Inc. (hereinafter referred to as AF).

        7. AF has the ability to []make appropriate Rules and
        Regulations for the presentation and determination of
        controversies under an agreement with AF.

        8. AF exercised their right and changed the articles of their
        Property Subrogation Arbitration Agreement that added the
        exclusion and now reads, “No company shall be required,
        without its written consent, to arbitrate any claim or suit if: (i) it
        is a product liability claim arising from an alleged defective
        product.”

        9. This new exclusion was effective as of January 1, 2015.

                                      Conclusions of Law

        10. The determination of whether an enforceable agreement to
        arbitrate exists is a matter of contract interpretation, and most
        importantly, a matter of the parties’ intent. Precision Homes of
        Indiana, Inc. v. Pickford, 844 N.E.2d 126 (Ind. Ct. App. 2006)[,
        trans. denied].

        11. State law governs the initial question of whether the parties
        entered into a valid agreement to arbitrate. Mislenkov v. Accurate
        Metal Detinning, Inc., 743 N.E.2d 286 (Ind. Ct. App. 2001).

Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016      Page 6 of 19
        12. A court may order arbitration of a particular dispute only
        where the court is satisfied that both parties agreed to arbitrate
        that dispute. Granite Rock Co. v. Int’l Brotherhood of Teamsters, et
        al., 130 S. Ct. 2847 (2010).

        13. “An agreement to arbitrate is a matter of contract: ‘it is a
        way to resolve those disputes – but only those disputes – that the
        parties have agreed to submit to arbitration.” Chiron Corp. v.
        Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (9th Cir. 2000).

        14. State Farm and Watts were both members of AF and gave
        AF the ability to make rules and regulations as AF saw fit.

        15. AF wrote a notification about a new policy was [sic] sent in
        November of 2014. The new exclusion was to be effective
        January 1, 2015.

        16. The notification draws the attention of the parties to
        understand that, “While the use of the Property Program to
        resolve disputes involving product liability claims arising from an
        alleged defective product will no longer be compulsory as of
        January 1, 2015, cased [sic] filed prior to January 1, 2015, will
        remain in arbitration’s jurisdiction and will be processed to
        hearing.”

        17. This statement by AF makes the filing date the triggering
        event for the new policy not the date of the injury.

        18. As a part of the AF agreement, participants had a way to
        withdraw from the services of AF.

        19. Neither, State Farm nor Watts withdrew from the AF
        agreement. By not withdrawing from participating in AF, State
        Farm and Watts subjected themselves to the new exclusion.

Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016    Page 7 of 19
      Id. at 7-9.

                                                       Discussion

[7]   The issue is whether the trial court erred in denying Watts’s motion to compel

      arbitration. 1 Watts argues that neither the Amended Arbitration Agreement

      nor Arbitration Forums’ notice terminated its right to arbitrate State Farm’s

      property subrogation claim that accrued prior to January 1, 2015. Watts asserts

      that Arbitration Forums is a nonparty to the Arbitration Agreement and that its

      “take on the subject is simply not relevant to the intent of Watts or State Farm.”

      Appellant’s Brief at 16. Watts contends that this Court should avoid an

      interpretation of the Arbitration Agreement that would render State Farm’s

      agreement to arbitrate illusory. It argues that State Farm is collaterally

      estopped from relitigating the issue of whether the Arbitration Agreement in

      effect when its claim accrued governs the arbitrability of the claim. Watts also

      asserts that State Farm did not allege a product liability claim subject to the

      product liability exclusion.

[8]   State Farm argues that Arbitration Forums, pursuant to the rule-making

      authority expressly granted to it by Watts, clearly made the date of filing

      determinative. State Farm contends that by carving out an exception for only

      claims which had been filed prior to January 1, 2015, the only reasonable

      1
        On July 25, 2016, Watts filed a motion to strike material not in the record. Specifically, it argued that the
      Declaration of Timothy McKernan, which State Farm included in its Addendum, was not filed in the trial court
      and is not part of the record on appeal. By separate order, we grant Watts’s motion to strike.

      Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016                          Page 8 of 19
      construction of Arbitration Forums’ amendment is that the exclusion would

      apply to all other unfiled claims, notwithstanding whether a party could have

      filed a claim in 2014 or earlier. It argues that to extend the Amended

      Arbitration Agreement to include product defect cases filed in 2015 would

      contradict the plain language of the rule and the intentions of Arbitration

      Forums and the signatories it represented as expressed in that language. It

      further contends that Watts’s argument that Arbitration Forums’ own rule is

      extrinsic evidence is mistaken because the Arbitration Agreement expressly

      authorized all rules and regulations issued by Arbitration Forums. State Farm

      also argues that Watts has no vested right to arbitration of any matter until a

      claim is formally filed and that Watts had only a contingent right to arbitrate

      claims based on the parties’ mutual status as signatories. It states that the

      Amended Arbitration Agreement is not illusory because a disputed claim filed

      prior to a revision of the rules must be arbitrated with Arbitration Forums, and

      that it alleged a product liability claim subject to the product liability exclusion.

[9]   Our standard of review in this case is de novo. Showboat Marina Casino P’ship v.

      Tonn & Blank Constr., 790 N.E.2d 595, 597 (Ind. Ct. App. 2003) (citing

      Mislenkov v. Accurate Metal Detinning, Inc., 743 N.E.2d 286, 290 (Ind. Ct. App.

      2001)). It is well settled that Indiana recognizes a strong policy favoring

      enforcement of arbitration agreements. Homes By Pate, Inc. v. DeHaan, 713
N.E.2d 303, 306 (Ind. Ct. App. 1999). Nevertheless, arbitration is a matter of

      contract, and a party cannot be required to submit to arbitration unless the party

      has agreed to do so. Id.

      Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 9 of 19
[10]   Under Indiana contract law, the party seeking to compel arbitration has the

       burden of demonstrating the existence of an enforceable arbitration agreement.

       Showboat Marina Casino P’ship, 790 N.E.2d at 597-598 (citing Wilson Fertilizer &

       Grain, Inc. v. ADM Milling Co., 654 N.E.2d 848, 849 (Ind. Ct. App. 1995), trans.

       denied). In determining whether the parties have agreed to arbitrate a particular

       dispute, the court “will decide whether the dispute, on its face, is covered by the

       language of the arbitration provision.” St. John Sanitary Dist. v. Town of

       Schererville, 621 N.E.2d N.E.2d 1160, 1162 (Ind. Ct. App. 1993). When

       determining whether the parties have agreed to arbitrate a dispute, we also

       apply ordinary contract principles governed by state law. Showboat Marina

       Casino P’ship, 790 N.E.2d at 598 (citing Mislenkov, 743 N.E.2d at 289 (citing St.

       John Sanitary Dist., 621 N.E.2d 1160 at 1162)). “In addition, ‘[w]hen construing

       arbitration agreements, every doubt is to be resolved in favor of arbitration,’ and

       the ‘parties are bound to arbitrate all matters, not explicitly excluded, that

       reasonably fit within the language used.’” Id. (quoting Mislenkov, 743 N.E.2d at

       289 (citing St. John Sanitary Dist., 621 N.E.2d at 1162)). However, parties are

       only bound to arbitrate those issues that by clear language they have agreed to

       arbitrate; arbitration agreements will not be extended by construction or

       implication. Id.

[11]   Whether the parties agreed to arbitrate any disputes is a matter of contract

       interpretation, and most importantly, a matter of the parties’ intent. MPACT

       Const. Grp., LLC v. Superior Concrete Constructors, Inc., 802 N.E.2d 901, 906 (Ind.

       2004). “Courts in Indiana have long recognized the freedom of parties to enter

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 10 of 19
       into contracts and have presumed that contracts represent the freely bargained

       agreement of the parties.” Id. (quoting Trimble v. Ameritech Publ’g, Inc., 700
N.E.2d 1128, 1129 (Ind. 1998)). Consequently, imposing on parties a policy

       favoring arbitration before determining whether they agreed to arbitrate could

       frustrate the parties’ intent and their freedom to contract. Id. “The Supreme

       Court has made this clear – ‘arbitration is a matter of contract and a party

       cannot be required to submit to arbitration any dispute which he has not agreed

       so to submit.’” Id. (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475
U.S. 643, 648, 106 S. Ct. 1415 (1986)).

[12]   To the extent Watts asserts that Arbitration Forums’ notice regarding the

       amendment is extrinsic or that Arbitration Forums did not have the authority to

       amend the Arbitration Agreement to provide for the product liability exclusion,

       we disagree. Watts agreed to the terms of the Arbitration Agreement, and

       Article Fifth of the Arbitration Agreement stated that Arbitration Forums,

       “representing the signatory companies, is authorized to . . . make appropriate

       Rules and Regulations for the presentation and determination of controversies

       under this Agreement . . . .” Appellant’s Appendix at 42. We conclude that the

       notice and amendment fall within Arbitration Forums’ authority.

[13]   As for Watts’s argument that the language of the amendment did not remove

       the requirement of arbitration from State Farm’s claim, we observe that the

       notice from Arbitration Forums regarding the amendment states: “While the

       use of the Property Program to resolve disputes involving product liability

       claims arising from an alleged defective product will no longer be compulsory

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 11 of 19
       as of January 1, 2015, cases filed prior to January 1, 2015, will remain in

       arbitration’s jurisdiction and will be processed to hearing.” Id. at 74 (emphasis

       added). Further, the Amended Arbitration Agreement, which was effective

       January 1, 2015, provided that “[n]o company shall be required, without its

       written consent, to arbitrate any claim or suit if . . . it is a product liability claim

       arising from an alleged defective product.” Id. at 72 (emphasis added). We

       cannot say that the language in the notice or amendment is ambiguous. The

       notice and Amended Arbitration Agreement indicate that the filing date of a

       claim or suit determines whether compulsory arbitration applies to the claim or

       suit. State Farm filed its complaint against Watts on July 23, 2015.

       Accordingly, it is not subject to compulsory arbitration. See State Farm Fire &

       Cas. Co. v. Watts Regulator Co. (filed September 29, 2016), Ill. App. Ct. No. 2-16-

       0275, slip op. at 7 (addressing an event in which Cecilia Montero’s home

       sustained water damage on September 7, 2013, the Arbitration Agreement, and

       the November 2014 notice regarding the amendment effective January 1, 2015,

       and holding that “[t]he amendment clearly states that cases filed prior to

       January 1, 2015, will remain subject to compulsory arbitration. Necessarily, if

       a claim was filed on or after January 1, 2015, the only reading of the

       amendment is that the claim does not remain subject to the agreement. Here,

       Montero’s claim was filed on April 15, 2015, and, therefore, it is not subject to

       compulsory arbitration through Arbitration Forums”).

[14]   Watts cites Homes by Pate, Inc. v. DeHaan, 713 N.E.2d 303 (Ind. Ct. App. 1999),

       Chesterfield Mgmt., Inc. v. Cook, 655 N.E.2d 98 (Ind. Ct. App. 1995), reh’g denied,

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016    Page 12 of 19
trans. denied, and Nolde Bros., Inc. v. Local No. 358, 430 U.S. 243 (1977), for the

assertion that State Farm’s duty to arbitrate survived the amendment. The

arbitration provisions addressed in those cases did not include language

providing an entity with the authority to “make appropriate Rules and

Regulations for the presentation and determination of controversies under this

Agreement,” language to which the parties in this case expressly agreed upon.

Appellant’s Appendix at 42, 73. Nor do those cases involve such an entity

providing for a property liability exclusion similar to the language in the notice

and Amended Arbitration Agreement. See Homes by Pate, Inc., 713 N.E.2d at

305-306, 309 (addressing a residential building contract and two-year warranty

which required arbitration with respect to disputes as to whether particular

repairs were covered by the warranty and holding that a logical reading of the

warranty led to the conclusion that, so long as a defect occurred within the two-

year period of warranty coverage, any dispute concerning that coverage must be

arbitrated); Chesterfield Mgmt. Inc., 655 N.E.2d at 102 (addressing an arbitration

provision in a lease and observing that the lease’s arbitration clause provided in

part that “[a]ny dispute under any of the paragraphs of this Lease shall be

settled by arbitration”); Nolde Bros., Inc., 430 U.S. at 244, 252-254, 97 S. Ct. at

1068, 1072-1073 (addressing whether a party to a collective-bargaining contract

may be required to arbitrate a contractual dispute over severance pay pursuant

to an arbitration clause of that agreement even though the dispute, although

governed by the contract, arose after its termination, noting that the parties

drafted their broad arbitration clause against a backdrop of well-established

federal labor policy favoring arbitration, and holding “even though the parties
Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 13 of 19
       could have so provided, there is nothing in the arbitration clause that expressly

       excludes from its operation a dispute which arises under the contract, but which

       is based on events that occur after its termination. The contract’s silence, of

       course, does not establish the parties’ intent to resolve post-termination

       grievances by arbitration. But in the absence of some contrary indication, there

       are strong reasons to conclude that the parties did not intend their arbitration

       duties to terminate automatically with the contract”).

[15]   With respect to Watts’s argument that State Farm’s duty to arbitrate is illusory,

       we observe that Watts does not argue that Arbitration Forums’ duty under the

       Amended Arbitration Agreement is illusory. Article Sixth of the Agreement

       allows any signatory to withdraw from the Agreement by notice in writing to

       Arbitration Forums. In addition, other categories of damage to property

       remain subject to compulsory arbitration under the Amended Arbitration

       Agreement. The Amended Agreement and the notice require that State Farm

       arbitrate certain claims asserted before January 1, 2015. The fact that product

       liability claims are not subject to compulsory arbitration under the Amended

       Agreement does not render the agreement illusory. See Watts Regulator Co. (filed

       September 29, 2016), Ill. App. Ct. No. 2-16-0275, slip op. at 8 (rejecting Watts’s

       argument that State Farm could avoid their obligations to arbitrate).

[16]   As for Watts’s assertion that State Farm is collaterally estopped from

       relitigating the issue of whether the Arbitration Agreement in effect when its

       claim accrued governs the arbitrability of the claim, we note that issue

       preclusion, or collateral estoppel, bars subsequent relitigation of the same fact

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 14 of 19
       or issue where that fact or issue was necessarily adjudicated in a former lawsuit

       and that same fact or issue is presented in a subsequent suit. Nat’l Wine &

       Spirits, Inc. v. Ernst & Young, LLP, 976 N.E.2d 699, 704 (Ind. 2012) (citing

       Hayworth v. Schilli Leasing, Inc., 669 N.E.2d 165, 167 (Ind. 1996)), reh’g denied,

       cert. denied, 133 S. Ct. 2780 (2013). Where, as here, a defendant seeks to

       prevent a plaintiff from asserting a claim that the plaintiff has previously

       litigated and lost, the use has been termed “defensive” collateral estoppel. Small

       v. Centocor, Inc., 731 N.E.2d 22, 28 (Ind. Ct. App. 2000), reh’g denied, trans.

       denied. There are three requirements for the doctrine of collateral estoppel to

       apply: (1) a final judgment on the merits in a court of competent jurisdiction; (2)

       identity of the issues; and (3) the party to be estopped was a party or the privity

       of a party in the prior action. Nat’l Wine & Spirits, 976 N.E.2d at 704.

       Furthermore, two additional considerations are relevant in deciding whether

       the defensive use of collateral estoppel is appropriate: “whether the party

       against whom the judgment is pled had a full and fair opportunity to litigate the

       issue, and whether it would be otherwise unfair under the circumstances to

       permit the use of collateral estoppel.” Id. (quoting Small, 731 N.E.2d at 28).

[17]   The parties cite to various trial court orders from multiple states. Some are in

       favor of Watts, and others favor State Farm. Specifically, Watts cites to trial

       court orders from Tennessee, Georgia, Nevada, and Utah. State Farm cites to

       trial court orders from Georgia, Massachusetts, and Minnesota. As these

       orders and decisions produce different results, and under the circumstances

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 15 of 19
       presented, we cannot say it would be fair to permit the use of collateral estoppel

       by Watts.

[18]   We next turn to Watts’s argument that State Farm did not allege a product

       liability claim subject to the product liability exclusion. Watts cites to the

       Indiana Products Liability Act, Ind. Code §§ 34-20, and asserts that State

       Farm’s claims do not constitute product liability claims because State Farm did

       not allege “physical harm” or “sudden, major damage” to Lucka’s property or

       home. Appellant’s Brief at 24-25. Watts asserts that State Farm’s complaint

       alleging that the damage happened “[o]n or about” November 30, 2014,

       suggests gradually evolving damage and not the physical harm necessary for

       product liability claims. Id. (quoting Appellant’s Appendix at 18). Watts also

       argues that the complaint does not allege the nature of any defect in Watts’s

       connector or the nature of the risk the defect presented. Watts also asserts that

       a broad interpretation of the product liability exclusion would swallow the

       general rule requiring arbitration.

[19]   State Farm argues that nowhere is a signatory required to comply with any

       particular state’s pleading standard to meet the exception and that whether or

       not the claim is subject to dismissal under Indiana state law has no bearing

       upon the interpretation of the arbitration agreements. State Farm also argues

       that Watts failed to raise any of the alleged pleading deficiencies to the trial

       court and has waived this issue. In reply, Watts contends that the trial court

       expressly ruled that State Farm’s claim was a product liability claim and that it

       did not waive the argument.

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 16 of 19
[20]   Even assuming that Watts did not waive this issue and that an examination of

       Indiana statutory law regarding products liability is necessary, we cannot say

       that reversal is warranted. Ind. Code § 34-20-1-1 governs the applicability of

       the article addressing product liability actions and provides:

               This article governs all actions that are:

                        (1) brought by a user or consumer;
                        (2) against a manufacturer or seller; and
                        (3) for physical harm caused by a product;

               regardless of the substantive legal theory or theories upon which
               the action is brought.

       Ind. Code § 34-6-2-105 provides that “‘[p]hysical harm’, for purposes of IC 34-

       20, means bodily injury, death, loss of services, and rights arising from any such

       injuries, as well as sudden, major damage to property,” and “[t]he term does

       not include gradually evolving damage to property or economic losses from

       such damage.”

[21]   Ind. Code § 34-20-2-1 is titled “Grounds,” and addresses the grounds for a

       product liability action as follows:

               Except as provided in section 3 of this chapter, a person who
               sells, leases, or otherwise puts into the stream of commerce any
               product in a defective condition unreasonably dangerous to any
               user or consumer or to the user’s or consumer’s property is
               subject to liability for physical harm caused by that product to the
               user or consumer or to the user’s or consumer’s property if:

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 17 of 19
                        (1) that user or consumer is in the class of persons that the
                        seller should reasonably foresee as being subject to the
                        harm caused by the defective condition;

                        (2) the seller is engaged in the business of selling the
                        product; and

                        (3) the product is expected to and does reach the user or
                        consumer without substantial alteration in the condition in
                        which the product is sold by the person sought to be held
                        liable under this article.

[22]   State Farm alleged: Count I, “Products Liability – Defective Manufacturing;”

       Count II, “Products Liability – Defective Design;” Count III, “Products

       Liability – Negligent Manufacturing;” and Count IV, “Negligent Design.”

       Appellant’s Appendix at 18-20. State Farm’s amended complaint also alleged

       that Watts manufactured the connector and/or its components, that the

       connector failed causing water damage resulting in damages to Lucka’s

       property, that damages of $27,805 were incurred, and that the connector and/or

       its components were defective and unreasonably dangerous at the time it left

       Watts. We cannot say that State Farm’s claims did not fall within the exclusion

       in the Amended Arbitration Agreement which stated: “No company shall be

       required, without its written consent, to arbitrate any claim or suit if . . . it is a

       product liability claim arising from an alleged defective product.” Appellant’s

       Appendix at 72.

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 18 of 19
                                                    Conclusion

[23]   For the foregoing reasons, we affirm the trial court’s order denying Watts’s

       motion to compel arbitration.

[24]   Affirmed.

       Robb, J., and Mathias, J., concur.

       Court of Appeals of Indiana | Opinion 45A04-1604-CT-831 | December 27, 2016   Page 19 of 19