Fleetwood Enterprises, Inc. v. Progressive Northern Insurance

ATTORNEYS FOR APPELLANTS

Fred M. Stults, III
Fred M. Stults, Jr.
Gary, Indiana
ATTORNEY FOR APPELLEE

Michael E. Simmons
Indianapolis, Indiana
__________________________________________________________________


                                   IN THE



                          SUPREME COURT OF INDIANA

__________________________________________________________________

FLEETWOOD ENTERPRISES, INC., )
and FLEETWOOD MOTOR HOMES    )
OF INDIANA, INC.,                 )
                                  )
      Appellants (Defendants Below),    )     Indiana Supreme Court
                                  )     Cause No.45S03-0106-CV-265
            v.                    )
                                  )     Indiana Court of Appeals
PROGRESSIVE NORTHERN         )    Cause No. 45A03-9909-CV-366
INSURANCE COMPANY, as Subrogee    )
of Jack Bostic,                   )
                                  )
      Appellee (Plaintiff Below).       )
__________________________________________________________________

                     APPEAL FROM THE LAKE SUPERIOR COURT
                    The Honorable Jeffery J. Dywan, Judge
                        Cause No. 45D01-9611-CP-1133
__________________________________________________________________


                          ON PETITION FOR TRANSFER

__________________________________________________________________

                                June 6, 2001

BOEHM, Justice.
      In Progressive Insurance Co. v. Ford Motor Co., ___  N.E.2d  ___,  ___
(Ind. 2001), we held that the Products Liability Act  does  not  support  an
action based on a defect in a product  where  the  only  damage  is  to  the
product itself.  In this case a defect in the product  is  alleged  to  have
damaged both the product itself and  also  other  property.   We  hold  that
personal injury and damage to other property from a  defective  product  are
actionable under the Act, but their presence does not create a  claim  under
the Act for damage to the product itself.
      On January 6, 1996, the  three  occupants  of  a  motor  home  smelled
something “hot” and fled.  The home had been manufactured by Fleetwood.   It
was quickly engulfed in flames and was  completely  destroyed.   Progressive
Insurance had issued a homeowner’s policy and paid the  owner  $162,500  for
damages to the motor home  and  $6,587.89  for  damages  to  other  personal
property in the home.  As subrogee, Progressive then sought to  recover  its
losses from Fleetwood under a products liability theory.   The  trial  court
refused to give the defendant’s proposed jury instruction that,  “under  the
Indiana Strict Product Liability Law, Plaintiff . . .  is  NOT  entitled  to
recover for any sums it paid . .  .  for  the  Fleetwood  Motor  Home  only.
Instead, the  only  amount  of  damages  you  may  consider  is  the  amount
Progressive  . . . paid . . . for []  loss  of  personal  property  contents
contained within the motor home.”  Instead, the  trial  court  gave  Indiana
Pattern Jury Instruction No. 11.40: “When personal  property  is  completely
destroyed, the measure of damages is the fair market value of  the  property
at the time of its destruction.”  The  jury  awarded  Progressive  the  full
$169,087.89 Progressive had paid its insured,  and  the  trial  court  added
prejudgment interest of $46,881.35, for a total judgment of $215,969.24.
       In  Progressive,  we  reaffirmed  the  rule  that  no   damages   are
recoverable under the Products Liability Act where the  only  damage  is  to
the defective product itself.  ___ N.E.2d at ___.  However, cases from  this
Court and others have discussed that doctrine in  language  suggesting  that
damage to the product  might  be  recoverable  under  a  products  liability
theory if the defective product also causes personal  injury  or  damage  to
other property.  For example, in Reed v. Central Soya Co., 621 N.E.2d  1069,
1074-75 (Ind. 1993), this  Court  held  that,  “where  the  loss  is  solely
economic in nature,  as  where  the  only  claim  of  loss  relates  to  the
product’s failure to live up to expectations, and in the absence  of  damage
to other property  or  person,  then  such  losses  are  more  appropriately
recovered by contract remedies.”  (Emphasis added.).  In  Reed,  this  Court
was presented with a case in which the only claim was for  damage  to  other
property.  In the other leading Indiana precedent, Martin Rispens &  Son  v.
Hall Farms, Inc.,  621  N.E.2d  1078  (Ind.  1993),  the  product—watermelon
seeds—was viewed as  the  same  thing  as  the  resulting  bacteria-infected
watermelon crop.  Accordingly, Rispens addressed only harm  to  the  product
itself.  Thus, this Court has never faced a  products  liability  claim  for
damage to the product where there  was  also  damage  to  persons  or  other
property.  This dispute between Progressive and Fleetwood directly  presents
us with that question.
      Some decisions from other states,  like  Reed,  note  the  absence  of
damage to other property in rejecting claims for  damage  to  the  defective
product, which is sometimes viewed as  a  subcategory  of  “economic  loss.”
However, these decisions, like Reed, typically were not faced with  a  claim
for damages to the product and also to other property.   For  example,  E.I.
Du Pont de Nemours & Co. v. Finks Farms, Inc., 656 So.  2d  171,  173  (Fla.
Ct. App. 1995), addressed a claim for  damage  to  a  tomato  crop  from  an
allegedly defective fungicide: “Where, however, as in the instant case,  the
finished product causes property damage  to  other  property,  the  economic
loss doctrine does not apply.”
      In addition to the absence of  direct  authority  in  this  state,  it
appears that the question whether damage to the product  is  recoverable  in
products liability where it is accompanied by damage to  other  property  or
personal injury has rarely been addressed elsewhere.  However, at least  one
court has permitted that recovery in a jurisdiction  that  does  not  permit
recovery for damage to the product alone.   In  Dutsch  v.  Sea  Ray  Boats,
Inc., 845 P.2d 187, 189, 193 (Okla. 1992), the  court  affirmed  a  judgment
under Oklahoma products liability law awarding $181,500 for personal  injury
damages and $115,000 for damages to a boat that exploded.   As  support  for
allowing damages for harm to the product itself,  the  court  reasoned  that
the policy of preserving remedies under the Uniform Commercial  Code  “would
not be furthered by requiring a plaintiff to  proceed  under  two  different
theories to recover two different types of damage  if  one  type  of  damage
claimed is recoverable in manufacturer’s products liability.”  Id.  at  193-
94.  The Court cited four precedents for its view, but a  reading  of  those
cases suggests that there was either no damage at all to the  product[1]  or
extremely minor damage  in  comparison  to  the  personal  injury  or  other
property loss from the defective product.[2]  In any event,  none  of  these
four cases suggested that any part of  the  damages  was  for  loss  of  the
defective product and none mentioned the issue discussed here.
      Here there was damage, although relatively small in amount,  to  other
property.  Plainly that amount is recoverable under the  Products  Liability
Act.  However, we find no persuasive reason to sustain a products  liability
claim for damage to the product if it is accompanied by personal  injury  or
damage to other property when there is no products liability claim  if  that
other damage is  absent.   The  reason  given  in  Dutsch  to  find  such  a
claim—avoidance of dual theory trials—does not seem very forceful.  Many  of
these cases, like this one, present situations where either the loss to  the
product or the damage to other property is by far the largest  component  of
the total claim.  Here the motor home itself is ninety-six  percent  of  the
claim.  In contrast, some fact patterns, like those  described  in  footnote
two, do not expressly address the issue presented here, but involved  severe
personal injury or damage to other property and very minor or no  damage  to
the product.  If either claim is sufficiently large to  warrant  litigation,
it is not too much to demand proof of  the  elements  of  recovery  under  a
products liability or contract theory, whichever is appropriate.  And  under
Indiana procedure, a plaintiff may readily pursue both a contract claim  for
damage to the product itself and a tort claim for personal injury or  damage
to other property under the Products Liability Act.
      More importantly, unlike Oklahoma, in  Indiana  a  products  claim  is
governed by statute.  There is no support in  Indiana’s  Products  Liability
Act for the result reached in Dutsch.  Precedent from  this  Court  has  not
regarded the “product” whose defect gives rise to  liability  as  “property”
whose damage gives rise to a claim under the Act.  Rispens,  621  N.E.2d  at
1089.   That  result,  apparently  accepted  by  the  legislature,  dictates
disallowance of the claim for damage to the defective  product,  whether  or
not accompanied by other damage.   Thus,  for  the  same  reasons  given  in
Progressive, we hold that damage caused to other  property  by  a  defective
product does not create a claim for damage to the product itself.   We  also
think there are other persuasive reasons to  reject  the  Dutsch  rule.   If
recovery hinges on  the  presence  of  other  damage,  many  cases  will  be
launched into quests for some collateral damage.  An oil stain on  a  garage
floor from a failed engine or a burnt blade of grass from a fire should  not
create a claim where none existed.
      We conclude that it was  error  for  the  trial  court  to  refuse  to
instruct the jury that damage to the product itself, i.e., the  motor  home,
was not recoverable under the Products Liability Act.  In reviewing a  trial
court’s  decision  to  give  or  refuse  tendered  instructions,  the  Court
considers: (1)  whether  the  instruction  correctly  states  the  law;  (2)
whether there was evidence in the  record  to  support  the  giving  of  the
instruction; and (3) whether the substance of the  tendered  instruction  is
covered by other instructions which are given.  Wooley v. State, 716  N.E.2d
919, 926 (Ind. 1999).  An erroneous instruction merits reversal if it  could
have formed the basis for the jury’s  verdict.   Canfield  v.  Sandock,  563
N.E.2d 1279, 1282 (Ind. 1990).
      Here, it is clear that Indiana Pattern Instruction No. 11.40 left  the
jury with the mistaken impression that it should award full damages for  the
motor home to Fleetwood if  it  determined  that  Fleetwood  was  liable  to
Progressive in Progressive’s products liability claim, and  that  the  trial
court erred in refusing to give Fleetwood’s instruction.  Ordinarily, a  new
trial would be required.  However, where, as here, liability was  determined
by the jury and the basis of the jury’s damages award  is  apparent,  it  is
appropriate to vacate the portion of the damages award not recoverable as  a
matter of Indiana  law.   See  Ind.Appellate  Rule  15(N)(5)  (now  App.  R.
66(C)(4)) (“The court, with respect to all or some of the  parties  or  upon
all or some of the issues, may order: . . . (6) In the case of excessive  or
inadequate damages, entry of final judgment on the evidence for  the  amount
of the proper damages . . . .”).
      No challenge is raised to the award of prejudgment interest  beyond  a
challenge to the underlying  judgment.   Accordingly,  prejudgment  interest
should be awarded in proportion to  the  amount  of  the  judgment  that  is
affirmed.
                                 Conclusion
      We affirm the jury’s award of damages  in  the  amount  of  $6,587.89,
reverse the damages award  in  the  amount  of  $162,500,  and  remand  with
direction that judgment be entered  for  the  plaintiff  in  the  amount  of
$6,587.89 plus prejudgment interest of $1,826.56.

      SHEPARD, C.J., and SULLIVAN, J., concur.
      RUCKER, J., concurs in result with separate opinion in which  DICKSON,
J., concurs.

















ATTORNEYS FOR APPELLANTS:               ATTORNEY FOR APPELLEE:


FRED M. STULTS, III                     MICHAEL E. SIMMONS

FRED M. STULTS, JR.                     Hume Smith Geddes Green &
The Stults Law Offices                  Simmons, LLP
Gary, Indiana                                Indianapolis, Indiana



                                   IN THE

                          SUPREME COURT OF INDIANA


FLEETWOOD ENTERPRISES, INC.       )
and FLEETWOOD MOTOR HOMES OF      )
INDIANA, INC.,                          )    Indiana Supreme Court
                                        )    Cause No.: 45S03-0106-CV-265
      Appellants-Defendants,            )
                                        )
            v.                          )
                                        )
PROGRESSIVE NORTHERN INSURANCE    )     Indiana Court of Appeals
COMPANY, as Subrogee of Jack Bostic,         )     Cause No.:  45A03-9909-
CV-366
                                        )
      Appellee-Plaintiff.                    )


                     APPEAL FROM THE LAKE SUPERIOR COURT
                              HAMMOND DIVISION
                    The Honorable Jeffery J. Dywan, Judge
                       Cause No.:  45D01-9611-CP-1133


                           ON PETITION TO TRANSFER

                                June 6, 2001


RUCKER, Justice, concurring in result



      Because of the doctrine of stare  decisis,  I  concur  in  the  result
reached by the majority. Both Martin Rispens & Son v. Hall Farms, Inc.,  621
N.E.2d 1078 (Ind. 1993), and Reed v. Central  Soya  Co.,  Inc.,  621  N.E.2d
1069 (Ind. 1993), compel the outcome in this case.

      DICKSON, J., concurs.
-----------------------
[1] In Lee v. Volkswagen of  America,  Inc.,  688  P.2d  1283,  1285  (Okla.
1984), the plaintiff was rendered quadriplegic by an  accident  in  which  a
defective Volkswagen door latch caused his ejectment from the car.   He  was
awarded 1.8 million dollars for personal injury.   There  is  no  suggestion
that the defect in the door caused any  damage  to  the  car.   Dewberry  v.
LaFollette, 598 P.2d 241, 242 (Okla. 1979), involved  a  claim  of  personal
injury from collapsing steps.  There was no claim for the steps  themselves.

[2] In Smith v. United States Gypsum,  Co.,  612  P.2d  251,  252-53  (Okla.
1980), the plaintiff was awarded $600,000 for  personal  injuries  from  the
explosion of solvent-based  adhesive  for  installing  wall  paneling.   The
court does not identify the components of  damage,  but  it  is  clear  that
virtually all, if not all, were for personal injury.  In Kimbrell v.  Zenith
Radio Corp., 555 P.2d 590 (Okla. 1976), a television  was  claimed  to  have
caused a fire that destroyed a home.  If  compensation  for  damage  to  the
television itself was sought, it is not mentioned  by  the  court.   In  any
event, it was trivial compared to the loss of the home.